The UK Government Proposals on the post-Brexit UK Internal Market Represent a Serious Threat to Devolution.
Charles Whitmore, Research Associate and coordinator of the Wales Civil Society Forum on Brexit, Wales Governance Centre, School of Law and Politics, Cardiff University.
In what is possibly the next in a series of Brexit related constitutional crises, the UK Government launched on 16 July 2020 a four week White Paper consultation on the UK’s post Brexit internal market. In a strangely familiar case of déjà vu, this story actually dates back to the original Withdrawal Bill pre-intergovernmental negotiations of 2018. With this legislation the UK Government had initially sought to centralise powers returning from Brussels in Westminster because it feared that a raft of new powers exercised in the devolved nations would create an overly fragmented regulatory environment and thereby hinder intra-UK trade.
Understandably this was viewed as a ‘power grab’ in the devolved nations with Wales and Scotland collaborating in defence of their devolution settlements. While Scotland ended up pressing ahead with its continuity legislation, Wales ultimately reached an intergovernmental agreement with the UK Government on how to manage these returning powers, though there is a belief that this agreement has not been fully respected. Despite this, it has led to a body of intergovernmental work on UK wide common frameworks to manage policy areas where returning powers have been found to intersect with devolved competence.
UK Government now views these UK Internal Market proposals as necessary because work done on ‘common frameworks’ is sectoral and cannot cover the entirety of the internal market or account for unforeseen barriers. They fear that left unaddressed this will weaken their position in international trade negotiations because higher devolved standards will prevent the UK Government from being able to guarantee trading partners that imported products of a lower standard can access the entire UK market.
The white paper proposes to address these potential barriers with:
a system of mutual recognition, inspired by the EU’s approach, which states that products lawfully sold in one region, can be lawfully sold in other regions of the market without having to comply with local regulatory requirements.
It also proposes to use non-discrimination in areas not covered by mutual recognition. This would require that authorities regulate in such a way as to avoid differential or unfavourable treatment of goods and services from other regions of the UK.
Under this system a product that is legally sold in one region does need to comply with the other regions’ local product requirements. These typically include rules relating to composition, labelling, production method and packaging but defining the precise scope will be important, as experience suggests that large businesses will challenge any rule that limits their commercial freedom (in the EU – internal market provisions have been used to challenge even fundamental rights).
Overall this is a relatively standard starting point for regulating internal markets. However, in not taking this reasoning any further and leaving many questions unanswered the proposals offer an incomplete and far too absolute version of mutual recognition. As such, they are problematic on at least three levels.
Procedurally the system is heavily reliant on trust and intergovernmental cooperation to avoid and manage disputes, establish common standards where necessary and to monitor and refine the system on an ongoing basis, particularly around justifying requirements. Unfortunately the White Paper gives no indication that this will be the case and the UK Government even disengaged from discussions with the Welsh Government prior to the consultation. The timing of the exercise also feels strategic given that it has taken place in the middle of summer for only four weeks during parliamentary recess while many stakeholders are tackling Covid-19 and in parallel to another short but key Brexit related consultation on EU retained case law.
Substantively the system is lacking in consideration for dispute avoidance and resolution for both traders /regulator situations and between governments as well as for derogation on grounds of for example: public health, consumer safety, animal welfare, human rights, environmental and food standards
These are critical elements for preserving devolved regulatory autonomy, avoiding distortions of competition and triggering a ‘race to the bottom’ through deregulation. This could occur under these proposals because traders in England would be able to bypass higher devolved standards, thereby putting pressure on the devolved governments to lower their requirements.
By way of example – Wales is consulting on a ban on some single use plastic products (a product requirement rule) that is wider than the similar proposals for England and therefore achieves a higher standard of environmental protection. This could lead to a situation where some products are banned in Wales, but not England. However, under these proposals, products that are not banned in England could still be sold in Wales despite restrictions applying to Welsh industry. This would typically be addressed by allowing Wales to invoke an overriding reason like environmental protection to justify applying the restriction to English products or to have robust intergovernmental machinery in place to agree a solution with the other governments.
These proposals are also challenging because of the UK’s unique constitutional setup owing to the disproportionate economic weight of England, UK Government’s role in acting for both England and the Union, the lack of effective formal intergovernmental machinery and the fact that there is no constitutional means of binding the UK Parliament. There is little consideration given to the role of the devolved legislatures, as well as to how parity between the devolved and UK governments would be ensured. It is questionable that this would even be a UK Government objective and this makes the prospect of improving these proposals difficult. Particularly as the current political context of growing tensions between the governments and different visions for devolution, standards and rights suggest a direction of travel unsuited to this approach to the UK Internal Market. From the Welsh perspective, one need only look at the suggestions around state aid which the UK Government confusingly claims is a reserved area while simultaneously stating that it needs to bring in legislation to achieve this. This likely means that they are not confident legally in the argument. It is equally unclear how this system would be reconciled with the Welsh language requirements or the objectives under the Wellbeing of Future Generations (Wales) Act 2015 as these now drive a distinctly Welsh approach to social, economic and environmental policy.
Mutual recognition relies on trust in each other’s procedures and that each member of an internal market is regulating to achieve an equivalent standard of protection. However, Brexit has catalysed a desire for higher standards of protection across Northern Ireland, Scotland and Wales that seems to be anathema to this UK Government. This looks set to become more acute as the UK Government appears to be willing to concede on flashpoints like chlorinated chicken. Brexit has also further highlighted the lack of cultural fluency in devolution from the UK Government and shown that it is willing to legislate in devolved areas without legislative consent.
Legislation is expected in the Autumn and civil society will likely need to steel itself yet again for another rapid joint response to an impending constitutional crisis. This could see a system ordinarily dependent on trust and co-decision forced on the devolved nations when the scale of the problem is not evidenced and thus doesn’t justify a rushed overbearing legislative intervention before the end of transition.
Charles Whitmore is a research associate with Cardiff University’s Wales Governance Centre and Wales Council for Voluntary Action. He currently coordinates the Wales Civil Society Forum on Brexit, a partnership between the two institutions funded by the Legal Education Foundation to provide information on the Law and Policy of Brexit to civil society organisations in Wales. He has an academic background in EU internal market law, having conducted doctoral research on the concept of mutual recognition in EU Law and has worked in the third sector in the field of health and social care.
This blog does not necessarily reflect the views of the Alliance or individual members.