UK internal market: initial assessment of UK Government proposals

Initial Scottish Government assessment of the threat to devolution, regulatory standards, businesses and jobs.

Internal Markets

The term “internal market” does not have a fixed or widely accepted single meaning. The regulation of trading activities is unique to each country as it reflects the specific circumstances of a state’s historical development, internal legal and governmental arrangements, and its external relationships and international commitments.  At its most fundamental, an internal market is simply the rules and institutions relating to trade within a state, including trade between sub-state territories if they have the autonomy to set their own rules and standards.   

Trading activities intersect with a large range of other policy considerations that make up the governance arrangements of a state: the civil law to underpin contracts and resolve disputes; product standards for safety and consumer protection; safety in the workplace; employment laws; competition policy; formation of companies, to limit risk and liability; intellectual property; rules for transport and safety of vehicles; environmental standards; promotion of human health; protection of animal and plant health; provision of public services such as health and education; government procurement rules; taxation of trading activities.  An internal market can therefore be seen to encompass many, if not almost all, areas of government and Parliamentary activity and public policy considerations.

The White Paper asserts the existence of a “UK internal market” that has been the bedrock of shared prosperity since 1707, a “centuries old” institution, overlaid between 1973 and 2020 by membership of the supranational European institutions (paragraphs 58 - 64).  This picture of continuity is however seriously mistaken.  The rules, institutions and standards that underpin trade and regulatory coherence in 2020 bear little resemblance to the broad provisions for trade and shared standards set out in the Treaty of Union.    

The framework for executive and legislative decision making in the UK was changed fundamentally by devolution in 1998 which created sources of legislative and executive authority beyond Westminster and Whitehall.  These democratically accountable bodies now exercise functions and responsibilities intrinsic to the functioning of the UK’s trading arrangements, and any proposals for reform on exit from the EU must  not only take account of these functions, but also, and critically, do so in full accordance with the rules of the UK’s constitution.  The Union is subject to the Scotland Act 1998 [Section 37 of the Scotland Act 1998] which reserves some matters which affect trade [Notably in Head C (trade and industry) and some rules in Head A (economic matters) of schedule 5 of the Scotland Act 1998.], with other matters devolved.  These arrangements were put in place by a decisive referendum vote in Scotland in 1997 and no proposals to change it have ever been put to the Scottish people.     Not only do the  UK’s constitutional rules require that under the Sewel Convention, any changes to the powers of the devolved administration and legislatures require the consent of those legislatures, as do proposals for Westminster to legislate for devolved purposes; the nature of the changes proposed is so great that it would require at the very least a manifesto commitment at both a Westminster and Holyrood election from any party proposing it and clear assent by the Scottish electorate for it to be acceptable.  No such steps have been taken or are proposed.  

One reason for the underlying difficulties with the White Paper is its very narrow view of the internal market in the UK, at least for the purposes of its proposals:

The UK’s Internal Market is the set of rules which ensures there are no barriers to trading within the UK (paragraph 72)

In contrast, the EU Single Market recognises that there is a far greater range of legitimate policy goals – for example tackling inequality or environmental protection – that member states can pursue through market regulation  (see paragraphs 46-53 below). 

The Scottish Government has set out its overall purpose and performance outcomes and indicators in the National Performance Framework.  The purpose is:

To focus on creating a more successful country with opportunities for all of Scotland to flourish through increased wellbeing, and sustainable and inclusive economic growth

In considering how to exercise its powers and responsibilities across devolved functions, including those affecting trade, the Scottish Government looks at the effect on these national outcomes as a whole, rather than through a narrow market lens only.  A narrow focus on “barriers” to trade or purely market considerations in considering the rules for internal trading is therefore unhelpful and does not describe the reality of the current trading or indeed any other policy arrangements within the UK.   Those current  arrangements allow for the Scottish Parliament and Government to make policy decisions in pursuit of public health, social or environmental benefits, such as minimum alcohol pricing to tackle health and social harms from alcohol, a ban on the sale of raw milk on health grounds, bans on plastic cotton buds or microbeads in cosmetics, and strict  recycling targets which relate to broader health and social outcomes, rather than on solely market-based or trade considerations. 

The White Paper describes (at Annex B) arrangements in other parts of the world to accommodate differences in policy approaches across other states  with multiple centres of democratic decision-making similar to the UK but which are not reflected in these proposals.

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