The Internal Market Bill puts a leash on the devolved governments

In August, I expressed concern in an article for Prospect about the impact on the devolution settlement of the government’s proposals set out in the white paper on the UK internal market. These were to impose general constraints on the powers of the devolved governments to legislate in ways that create barriers to trade between the home nations.

Those proposals have now been turned into the Internal Market Bill. Later parts of that bill concern the controversial proposals to give the government powers to breach the Withdrawal Agreement with the EU, on which much has been said. But the earlier parts of the bill turn the white paper proposals into law. Do those parts bear out my warning, or do they, as Business Secretary Alok Sharma claimed in the House of Commons, “support one of the biggest transfers of power to the devolved administrations”?

The “transfer of power” claim relies on the assertion that the bill imposes less significant constraints on the powers of the devolved governments than the constraints imposed by EU law (which certainly limited those powers: see for example the requirement on Scotland to provide free tertiary education to EU nationals as well as to Scottish students, and the plausible though ultimately unsuccessful challenge based on EU law to the Scottish legislation on minimum alcohol pricing). It is then claimed that all the bill does is to retain those aspects of EU law that protected the UK internal market even after EU law itself has ceased to apply at the end of the transition.

At a superficial level, Sharma’s claim appears to be supported by the basic structure of the bill, which is centred around an approach familiar to EU lawyers. That approach is to provide that rules of national law must be set aside by the courts if they contravene “market access principles” of mutual recognition (goods or services lawfully sold in one nation should be allowed to be sold in another) or non-discrimination (you must not treat goods or services from another nation less favourably than those from your own). And any lawyer familiar with European Court of Justice case law on the free movement of goods and services will see language from that case law scattered throughout the drafting.

But the reality is that the bill imposes a much tighter leash on the devolved parliaments than EU law ever did.

The key reason for that is that, compared to EU law, the bill drastically reduces the scope for holding that rules that cut across the market access principles should nonetheless be upheld on the basis of public policy justifications. The European Court of Justice has over the years accepted a wide range of public policy reasons that can justify departures from those principles. But, as explained in detail here, the bill provides only very limited justifications of this kind: in the case of the mutual recognition principle, the only significant public policy bases for rules preventing the sale of something that is lawfully on sale in another part of the UK are concerns about movements of pests or diseases or unsafe human or animal food. The effect is, for example, to prevent Scotland from prohibiting the sale of anything on environmental, public health or animal welfare grounds, if the UK Parliament has decided that it can be sold in England. That is far stricter than the position in EU law. And though the permitted justifications for rules that cut across the non-discrimination principle are a bit wider, they still exclude environmental and (quite possibly) animal welfare concerns. The result is that, for instance, the current Scottish proposals for a deposit and return scheme for packaging—almost certainly consistent with EU law—are at very serious risk of being struck down.

There are numerous issues which will require judicial interpretation of what one might well regard as “political” questions (such as whether regulation is “reasonably justified” in order to meet particular threats). The boundary between the non-discrimination and mutual recognition principles—which have rather different sets of rules—will also be fertile ground for lawyers. Given the current government’s manifesto claim that it wanted to prevent judicial review being “abused to conduct politics by another means,” it is rather startling that the bill sets up so many ways in which businesses who have lost a political battle to defeat unwanted regulation can rush off to judges and ask them to overturn it.

I have described the bill as a “leash” imposed on the devolved governments. But, you may ask, is that fair? Doesn’t the bill apply equally to the UK government legislating for England?

The answer to that question is, however, “no”: the metaphor of putting the devolved governments on a leash is entirely fair. That is because even within the framework of the bill UK ministers, acting of course as the government of England, have huge scope to change the basic rules—and to do so in each case without the agreement of the devolved parliaments, and, in some cases, without even consulting them. So, for example, ministers have a free hand to expand or contract the scope of the market access principles; add to or reduce the list of policy justifications for infringing them; and add to or remove the kinds of goods or services covered. Given those powers, it is hard to see a way in which the bill will constrain the UK government acting for England: UK/English compliance with the principles is essentially voluntary.

And all that is without taking into account the UK Parliament’s ability to amend the bill by further Acts of Parliament whenever it wants to. In this respect, the bill sets a further precedent: it ignores the Sewel Convention (under which Westminster will not legislate in areas within the power of the devolved parliaments without their consent), and does so not just to change the law within devolved competence but also seriously to reduce the extent of that competence. Further, it is worth noting that clause 48 of the bill gives the UK government a freewheeling power to spend money on devolved areas such as economic development and culture (a power that could and doubtless will be used to cut across the policy choices made by devolved administrations), and that clause 50 gives Westminster a free hand to impose whatever rules it likes on subsidies (broadly defined) by the devolved governments.

All that said, critics of the bill have to accept that all federal or quasi-federal systems have to have some rules on the extent to which territorial governments can erect barriers that restrict trade. When devolution was established in the late 1990s, that issue could be ignored because EU law did the job: since EU law will no longer do the job, something has to be done to replace it. But accepting that something has to be done does not mean that bringing forward this bill is the right thing to do. Time could have been taken to think about the right model (the bill does not apply to existing regulations anyway, so its effects will be felt only over time). And if, after proper reflection, the EU precedent was to be regarded as the best one, then other features of that model should have been written in: in particular, provision for a much wider set of public policy justifications for departing from the market access principles, and for a framework for joint legislation, agreed by all the home nations, to set out common harmonising or minimum standards rules for particular sectors.

Instead, the bill makes it impossible to read the 2019 manifesto’s boast that “Conservatives have a proud history of upholding and strengthening the devolution settlement” without hollow laughter. And perhaps most seriously, the introduction of a bill that so significantly reduces the powers of the devolved parliaments in the face of their vigorous and largely cross-party opposition will only affirm nationalists’ claims that Westminster promises to maintain the devolution settlement are worthless, and that the only way of protecting the ability of the devolved nations to make their own choices is to vote for independence. If those claims are to be resisted, those who support the union are going to have to find ways of putting the devolution settlement beyond the reach of whoever can get a majority in the House of Commons.