Brexit, Devolution and the UK Internal Market
Published: 19 February 2019
Author: Jo Hunt
Over the course of the UK’s preparations for withdrawing from the EU, the issue of the UK’s own internal market has emerged as an issue of concern, and one that has the potentially significant consequences for devolution.
Devolution has taken place within the framework of the UK's membership of the EU, and the dense network of EU laws has provided a rule book to be followed by law makers in London, as well as Edinburgh, Cardiff and Belfast. The central concern of EU internal market law is to ensure the free movement of the factors of production : goods, services, capital and workers, around a commitment to non-discrimination on the grounds of Member State nationality. This focus on managing, and removing national barriers to trade has meant that legislation adopted at the Member State or subnational level which may segment the larger market will need to be justified, or removed. These could include rules banning particular products, or introducing restrictions on products’ sale or use, or price controls. With the discipline of the EU internal market, along with the common EU wide regulations in areas such as consumer and environmental protection, there has been a sufficient degree of commonality in the laws across the UK for concerns with the UK's own internal market not to arise. This hasn’t meant uniformity though, and differences within the UK have emerged and have been accepted in respect to a range of matters, but these are permissible under EU law as long as they comply with the broader non- discrimination principle, or are a proportionate response to achieve a public policy objective, such as the protection of health – think of the Scottish minimum alcohol pricing policy, for example, or Welsh regulations which banned the use of electronic dog collars.
As the structures of EU law fall away, the UK Government has expressed concern about the consequences of possible regulatory divergence across the UK for internal and external trade. With some variation, the devolution settlements now work on the basis of a reserved powers model. All matters not reserved to Westminster fall to be exercised by the devolved institutions. But the degree of policy reservation to the Westminster Parliament and UK government is significant. It covers much that would be considered necessary to be regulated on a UK wide basis in the interests of a UK economic union, in which businesses encounter common regulatory standards applying to trade in goods and services. This includes, with some limited carve-outs, fiscal, economic and monetary policy, the regulation of business associations, consumer protection on the sale and supply of goods and services, and technical standards. In respect to international trade, matters of import and export control are, again, with carve-outs, reserved, along with the regulation of international trade.
Controversially from a devolution perspective, the UK government has argued for additional constraints over the exercise of devolved competence on the grounds that they are necessary in the interests of internal and international trade objectives. Though the power created by the EU (Withdrawal) Act 2018 to effectively freeze competence in areas covered by specific EU regulations has not yet been used, work is underway by government officials from across the UK on the creation of new regulatory common frameworks to replace those previously provided by EU law across matters such as animal health and welfare and food safety.
The approach taken to adopting these common frameworks have hardly provided a masterclass in good governance – the process has lacked transparency and has to date lacked effective stakeholder engagement. And there are additional issues with the common framework approach to ensuring the legal structures are in place to support a UK internal market. It is a partial approach if compared to the EU's internal market, where the common regulations take their place alongside an enforceable, strong, rights-based commitment to non-discrimination and ensuring free movement. Will there be a move to introduce something comparable to operate at a UK level? If so, unless it comes with the countervailing protections provided by the EU's constitutional principle of subsidiarity, which provides that decisions should be taken at the lowest effective level, the impact for our existing devolution settlements could be very damaging indeed.
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