Everything you need to know about the UK Internal Market Bill

Sunday National, 13th September 2020.

Consider, if you will, the fate of a rubber chicken. During the brief and steroidal first weeks of its life, this unfortunate bird is raised to plumpness in a dank shed in the United States. Having hit its desired weight, the chook is throttled and processed with a view to being transported on to hungry consumers. This bird is earmarked for export to the new market of Brexit Britain. After a quick dip in the chlorine bath, the poultry is packaged and pushed out to sea.

In all of the justified heat which has followed the UK Government’s publication of its UK Internal Market Bill, what has often been missing is light. What will the bill actually do? Concepts such as non-tariff barriers to trade aren’t exactly household talking points. The significance of this legislation, particularly for devolution, risks being lost in the technical detail or caught up in slogans. This column will try to set out, in a reasonably digestible way, what the bill does and why you might find this concerning.

The backlash against this legislation has often been framed in terms of clawing back devolved powers. Mark Drakeford, the Labour First Minister of Wales, described it as “an enormous power grab – undermining powers that have belonged to Wales, Scotland and Northern Ireland for over 20 years”. But if you dig into its detail, the bill is even more sleekit than Drakeford suggests. It superficially leaves existing devolved powers in place, largely untouched, allowing the UK Government to protest devolved powers aren’t being diminished. But practically? It guts them, effectively creating new reservations in devolved areas.

The bill contains what it calls two “market access principles”. The first is the principle of “mutual recognition”. The second, of “non-discrimination”. Let’s take mutual recognition first. What the bill says is that if goods have been produced – or critically, imported into – one part of the UK and “can lawfully be sold there, because the goods comply with the relevant requirements that would apply to their sale” then they can be sold in any other part of the United Kingdom, whether or not they meet local standards.

Go back to our rubber chicken. Say she has finally landed in Blighty. Say the new English food standards regulations laid down by Whitehall say “if chlorinated chicken is good enough for the diners in Denver, it is good enough for the diners of Dover”. Say Holyrood takes a different view. MSPs opt to keeps animal welfare and food standards high – prohibiting Scottish farmers from vulcanising their own hens or giving them a brisk rub down in the swimming pool. Under this bill’s mutual recognition principle, none of this Scottish regulation will matter.

If our hypothetical chicken finds herself packed up in the back of a lorry and sent north, if she ends her career on a supermarket shelf in Kilmarnock – the Internal Market Bill effectively says Scottish consumers need to get used to a chlorinated roaster, whatever view Holyrood takes. If the imported meat is good to go in England, it will automatically be good to go in Scotland too.

The second major feature of the bill is the principle of “non-discrimination”. Here things get a little more complex. There are different ways governments can restrict the free movement of goods. Some are more obvious.

You can have import quotas, limiting the total value or quantity of particular goods you allow into your country. Alternatively, you can impose tariffs. In 2019, the Trump administration slapped a 25% tariff on imports of single malt whiskies from Scotland and Northern Ireland. These customs duties give a price advantage to local producers. Although a Kentucky bourbon is no Islay malt – you’ll almost certainly be able to get a bottle of the former cheaper, thanks to the US government’s protectionism.

There are also questions of discrimination in buying goods and services – directly and indirectly. This is what the Internal Market Bill is concerned with. “Direct discrimination” happens if goods or a business is treated less favourably “expressly on the grounds of residence or geographical origin”. If you want a smashing example of the kind of discrimination this bill will outlaw, consider Douglas Ross’s wizard plan to give priority to Scottish firms over their English and Welsh competitors in the distribution of the £11 billion worth of goods and services the public sector buys up every year. Under his Government’s bill, this policy would be clearly unlawful.

The prohibition on indirect discrimination is at once more subtle, and much more wide-ranging in its implications for devolution. To explain the idea of indirect discrimination, we can take a real-world example. In 2017, the Scotch Whisky Association took the Scottish Government to court, arguing that minimum alcohol pricing was incompatible with EU law. Their argument shifted during the course of the litigation, but one strand of it was that imposing per unit pricing would distort the single market.

How? Imagine two wine producers. Our first is a thrifty French vineyard, able to pump out vast quantities of vin ordinaire, generic red, and to sell if profitably at £3 per bottle to the thirsty Scottish consumer. Our second Austrian producer has higher staffing, production and transportation costs, meaning they need to sell their bottles of Riesling for £6 a pop. Assuming both bottles contain the same quantity of alcohol, minimum unit pricing would prevent our French producer from taking full advantage of their low costs of production and indirectly discriminate against them by forcing them to sell high.

But under EU law, indirectly discriminatory measures can be justified. Article 36 of the EU Treaty allows states to justify proportionate restrictions on a very wide range of grounds. On minimum alcohol pricing, the Scottish Government’s argument was rooted in public health, and trying to curb the country’s relationship with the bottle.

As the EU court recognised, it was about “reducing, in a targeted way, both the consumption of alcohol by consumers whose consumption is hazardous or harmful, and also, generally, the population’s consumption of alcohol”. The lawfulness of the measure was ultimately upheld. Could a policy like minimum alcohol pricing survive under the new UK market regime, and for how long?
Under the bill, if any measure of any of the devolved parliaments make it “in any way more difficult, or less attractive, to sell or buy the goods” which originate from or have been imported into another part of the UK with an adverse market effect, it is potentially discriminatory.

The UK Government give this example: “If Wales specified that milk cannot be transported more than a certain distance which meant that in effect most milk from England, Scotland and Northern Ireland could not be sold in Wales, this could be viewed as a case of indirect discrimination.”

This will be unlawful under the new proposals, unless it can be justified on the grounds of “the protection of the life or health of humans, animals or plants” or “the protection of public safety or security”. But the new bill also gives UK ministers the power to knock out legitimate grounds for this kind of measure with the strike of a pen.

The final controversy in the bill concerns state aid. Side-stepping the Barnett formula, and the principle that the Scottish Government and Parliament are responsible for making determinations about how public money should be spent in devolved areas, the bill gives sweeping powers to UK ministers to dole out cash to pet projects in the field of economic development, infrastructure, cultural and sporting activities, and even educational activities anywhere in the UK.

Realising a long-standing dream of Michael Gove, this clause will give this Tory Government greater scope to slap a Union flag on interventions north of the Border, as if the cash splurged on them wasn’t ultimately raised from Scottish taxes.

The UK Government justifies this bill on the basis that if the hated European Union operates a single market, the UK must have its own. But a Welsh Government paper homed in on the critical point here: the UK is not like the EU. People who argue against that don’t understand how the EU works, how the UK works, or are being deliberately obtuse.

“By legislating in this way,” the Welsh point out, “the UK Government would be imposing a model of mutual recognition and non-discrimination on the three other nations of the UK, whereas the EU single market is a result of member states voluntarily coming together to negotiate and agree a set of rules to which they are all bound.”

This is Scotland’s future, if we stick with Brexit Britain, sailing off into the Atlantic under a Tory regime with no instinctive feel for the value of devolution, preoccupied by national sovereignty, contemptuous of law and convention, driven by the impulse to accumulate as much power and authority in London as possible. You’ve got to ask yourself: when you choose to stay in bed with an elephant, who’s really to blame when you wake up squashed?

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