Hansard

I begin by thanking all the committee members for their hard work and commitment in completing so many reports this week. I also thank our clerks for the significant help and advice that they have provided in our work.

It is with some regret that I speak on behalf of only eight members of the committee this afternoon. As members know, I have always sought as convener to try, where possible, to reach a consensus on committee reports, and in the main we have managed to do that. However, there is a clear division of views on the United Kingdom Internal Market Bill between the majority of the committee and our Conservative Party colleagues. That is disappointing, given that the other eight members of the committee have agreed that the bill undermines the whole basis of devolution.

Our view is that devolution cannot work if the Westminster Government simply imposes its view of how the UK’s constitutional arrangements should evolve following Brexit. Unfortunately, the bill aims to do just that, both in its substance and given the way that it has been handled.

Our most significant concern is with the market access principles of mutual recognition and non-discrimination. The mutual recognition principle, in particular, is potentially much more far reaching than the equivalent EU principle, for three primary reasons. First, the list of exclusions from the application of the principle on public interest grounds is much narrower. Secondly, UK ministers have the power to amend that list without a requirement to seek consent from or consult the devolved Governments. The third reason is the asymmetrical structure of the UK internal market.

Given the relative size of the English economy and population, it will inevitably be market forces that determine regulatory standards. Why, then, would any devolved Government want to potentially put its economy at a competitive disadvantage by seeking higher regulatory standards that could then be undermined by imports from other parts of the UK that did not need to meet those standards? In reality, that would mean that regulatory standards that were agreed by the UK Parliament would, in effect, be imposed on the devolved nations.

The committee heard that that approach is significantly different from the approach that is taken in the EU and in other internal markets. Dr Emily Lydgate from the University of Sussex told us:

“The core of any approach to an internal market that is as integrated as the UK’s has to be harmonised rules that have a strong ... consultative process underlying them. The rules cannot be set by one of the countries.”—[Official Report, Finance and Constitution Committee, 23 September 2020; c 4.]

The committee’s view is that it is unacceptable that the UK Government should seek to impose, in effect, new reservations on the devolved competences through the bill. This is not “myth-making”, as the Chancellor of the Duchy of Lancaster would have it, but a clear consequence of the proposed market access principles in the context of the relative size of England’s population and economy.

The UK Government has argued that the agreement of common frameworks means that the market access principles will apply only in a limited number of policy areas, but it is not clear how common frameworks can address the threat to devolution in the bill. In areas where the devolved Governments may wish to have higher standards than the minimum standards that are agreed in frameworks, they will potentially be rendered ineffective by the market access principles. Consequently, there needs to be far greater clarity about how both statutory and non-statutory frameworks would interact with the market access principles.

The committee also considered the provisions in the bill to reserve state aid. The committee agrees with the Scottish Government and the Welsh Government that state aid is a devolved matter. Any future legislation on subsidy control should be agreed between all the four Governments and legislatures across the UK through the common frameworks process. The committee therefore recommends that the reservation of subsidy control is unnecessary and should be removed from the bill.

Part 6 of the bill will provide the UK Government with a single, comprehensive statutory power to provide financial assistance across a range of policy areas throughout the whole of the United Kingdom. The committee’s view is that it is regrettable that part 6 has not been subject to any public or parliamentary consultation. It is also regrettable that the views of the devolved Governments were not sought.

We reiterate the findings of our report on structural funds post-Brexit—in particular, that any UK-wide replacement for EU structural funding should replicate some aspects of the current structural funds approach. We consider the decision-taking powers that the Scottish Government currently exercises under structural funds should not be reduced under any future UK approach.

The committee previously recommended that there is an onus on all four Governments and legislatures in the UK to work constructively together to seek a solution to the complex and challenging issues arising from leaving the EU internal market. The committee recommended that that must be achieved through mutual trust and respect for the UK’s existing constitutional arrangements. The committee concludes that it is highly regrettable that, in relation to the internal market bill, that has not happened. The committee is dismayed that the UK Government has instead adopted a hierarchical approach, through which its default position is to impose new limitations on devolution that go way beyond the previous limitations of EU membership.

The committee’s view is that devolution cannot work on the basis of the Westminster Government imposing its view of how the UK’s constitutional arrangements should evolve following Brexit. The committee therefore recommends that the Parliament does not agree to consent to the United Kingdom Internal Market Bill.