What is the row over UK internal markets all about?

What is the row over UK internal markets all about?

The Scottish and UK governments are heading into another constitutional standoff over post-Brexit powers and the “internal market” with new legislation passing through Westminster. What is the latest row all about?

The new UK Internal Market Bill has immediately run into controversy over its impact on talks with the EU and on international treaties, given it could re-write parts of the Brexit withdrawal agreement.

The legislation has passed its first hurdle in the Commons, despite criticism from a number of high-profile Tory MPs about the power it gives to UK ministers to bypass international law, and is now being considered by the Lords.

However the core function of the bill is also contentious for what it might mean for the future of devolution.

Parts of this row might seem somewhat familiar, because it’s actually been going on more or less ever since the Brexit vote in June 2016.

The question of how powers currently exercised from Brussels are divided up after the transition period ends on 31 December has been already seen the two governments clash at the Supreme Court.

At its most basic level, this is a row about who gets what.

The Scottish government says a Westminster “power grab” is under way, because anything which is not specifically reserved should automatically come to Holyrood.

But the UK government says what is happening represents “the biggest transfer of powers in the history of devolution”.

You can argue the toss about who is right, but that is perhaps something of a sideshow to the more fundamental conflict – how these powers are used, and what it could mean for the future of regulations and standards in the UK.

Right now, the UK is part of the European single market, with jointly agreed regulations and standards right across the continent.

Post-Brexit, the UK government wants to continue to have a joint market across England, Scotland, Wales and Northern Ireland – the “internal market”.

But instead of the rules and regulations around things like food and air quality and animal welfare being set in Brussels, now they have to be set closer to home – and there is a row over who should have the final say.

Many powers are set to be directly controlled by the Scottish, Welsh and Northern Irish administrations, in fields including food labelling, energy efficiency and support for farmers.

However, the UK government has said the devolved administrations will still have to accept goods and services from all other parts of the UK – even if they have set different standards locally.

This means there would be a level playing field for companies across the “internal market” – so Welsh farmers could sell their lamb in Belfast, Scottish whisky distilleries could buy barley from English farmers, and so on. UK ministers warn that not having this kind of system could cause “serious problems”.

The six Scottish Tory MPs voted for the bill in the Commons on the basis that it is “essential to protect jobs in Scotland that rely on UK trade, and ensure the unrestricted movement of goods across this country”.

The devolved governments are happy to have common frameworks of such rules – and work is continuing to try and agree them – but say the legislation tabled effectively undermines this by giving Westminster a veto.

Because all four nations will have to accept goods at the standards set in any one country, there are fears local quality controls could be dragged down to a lowest common denominator – the Welsh government foresee a “race to the bottom”.

The oft-cited example is that if the UK government did a trade deal with the US which allowed the importation of chlorine-washed chicken to England, the proposed rulebook means it would have to be allowed in Scotland, Wales and Northern Ireland too. UK ministers insist they would not do such a deal, and want to maintain high standards.

Furthermore, under the current proposals any disputes would be settled by a new Office for the Internal Market. This might be envisioned as an independent third party forum, but the devolved administrations see it as being another example of decisions being taken out of their hands.

We have actually seen this row play out once already, and things could easily go the same way again.

Last time around, the Scottish Parliament refused to give devolved consent to Westminster’s EU Withdrawal Act, and passed their own legislation through Holyrood – only to see it struck down by the Supreme Court.

History is already repeating itself. MSPs have once again rejected the idea of giving consent to the UK legislation, and the UK government has again indicated it will likely push ahead regardless.

Later in October Holyrood will debate a bill which would have Scotland “keep pace” with EU rules and regulations. Ministers say they are more than ready to go to court over it.

Questions of legality have of course already been raised, given the UK government has rather starkly admitted that its plans would break international law.

The row over the bill’s impact on the withdrawal agreement could potentially be solved, either via amendments later in the Lords or an accord with the EU – talks over both could reach a head in the coming days.

However the row with the devolved administrations is a more fundamental one, and the chances of it being settled amicably appear slim.

To start with, the governments in Edinburgh and London come from fundamentally different places on the question of Brexit.

From a wider political perspective, polling guru Professor Sir John Curtice has identified angst about Brexit among Scottish Remain voters as being central to the recent trend of rising support for Scottish independence.

The two big constitutional issues have become tightly interwoven, and next year’s Holyrood election will provide a perfect stage for these rows to play out very publicly.

Nicola Sturgeon has already drawn the link between the three, saying the SNP will be campaigning to demand a new independence referendum as “the only way to protect the Scottish parliament from being undermined and its powers eroded”.

The Conservatives meanwhile will undoubtedly be campaigning in May to keep the UK – and its internal market – intact.

The UK may be exiting the transition period on 31 December, but the rows over Brexit and powers look set to rumble on for some time to come.

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