The devolution debate at the heart of the UK Internal Market Bill

Published 24/09/2020   |   Last Updated 27/05/2021   |   Reading Time minutes

The UK Government says Brexit represents a ‘power surge’ for the devolved governments, with new powers transferring from the EU to the devolved institutions. They argue that the UK Internal Market Bill is needed to protect trade and manage divergence after Brexit. However, the Welsh and Scottish Governments disagree about what happens to devolved powers after Brexit and say the Bill amounts to a ‘power grab’ that undermines devolution.

This debate comes down to fundamental questions about what happens to devolved powers and how regulatory divergence in devolved areas should be managed once the Brexit transition period ends.

Brexit: A power surge?

The UK Government has argued during scrutiny of the Internal Market Bill in the House of Commons that Brexit represents a ‘power surge’ for the devolved governments and parliaments. It says that after 31 December, new powers previously held in Brussels will flow to the devolved governments. During the committee stage, UK Minister Paul Scully said:

So when we leave the transition period at the end of this year, and the laws made in Europe can now be made across the UK, hundreds of powers will flow from the EU to the devolved nations and the UK Government in an unprecedented transfer of powers. It is really important to remember that we are devolving powers down to those devolved nations.

The Welsh and Scottish governments disagree with this view. They have argued that the devolved institutions always had powers over areas such as agriculture, food standards and the environment - they were just constrained by EU law.. In evidence to the Senedd’s External Affairs Committee in 2017, Mark Drakeford – then Finance and Local Government Minister – said:

Those competencies are here now. We choose to exercise them at the European level. When the European level isn’t there, we will still be here and the competencies will be here as well.


[W]hat sometimes appears to be a rather different view of the world at the Westminster end—that post Brexit, these competencies are free-floating and they could grab them first, is not our view of the world.

For example, the UK Government has said that the devolved governments will get new powers over policy areas such as air quality. Air quality isn’t reserved, so the Senedd can pass laws in this area already. However, when the UK was a member of the EU, the Senedd could not pass a law that would contradict EU law on air quality. At the end of transition period, the Senedd would be able to pass a law without having to ensure it met EU requirements.

The Internal Market Bill itself does not give the devolved institutions any new powers. It reserves subsidy control to Westminster, but otherwise leaves devolved powers untouched. What the governments of the UK disagree about is how the Bill will affect devolved laws and policy in practice.

The UK Internal Market Bill: A power grab?

The UK and devolved governments agree they will have more freedom to make different laws after the UK leaves the EU single market, so they will need to find new ways to manage divergence and protect internal trade. However, they don’t agree how they should do this.

In 2017, the UK and devolved governments agreed to work together to manage regulatory divergence in devolved areas by establishing common frameworks. These would set out some minimum standards and the parameters within which divergence could develop. However, the UK Government now says common frameworks won’t do enough to “guarantee the integrity of the entire internal market”. It argues that the Internal Market Bill is needed to “guarantee companies can trade unhindered in every part of the UK”. The devolved governments disagree.

The Bill would establish new rules to govern goods, services and qualifications in the UK in all policy areas, including devolved ones. It does this by putting two key principles into law: mutual recognition and non-discrimination. In essence, this means that any good or service that meets the required standard in one part of the UK will automatically be able to be sold in other parts of the UK without having to meet the standards in force in those other parts.

So, for example, if it was legal to sell foods from genetically modified crops in England without labelling them as GM foods, they could also be sold in Wales despite what the law on labelling GM foods said in Wales. The Senedd and Welsh Government could (subject to the tests for legislative competence, including human rights) introduce a ban, but they could only apply it to Welsh producers and couldn’t discriminate against English producers if they didn’t meet Welsh standards. The Welsh Government and Senedd would have to decide whether they wanted to risk putting Welsh producers at a competitive disadvantage before introducing such a ban, as they couldn’t prevent GM goods not labelled as such being sold in Wales

The Bill’s Explanatory Notes acknowledge that these provisions place a “new limit” on the effect of devolved laws, but say this is offset by mitigating the risk that increased divergence could lead to additional barriers for business. The UK Government’s impact assessment for the Bill assesses the economic benefits of the Bill “compared to a counterfactual scenario of unmanaged, separate regulatory regimes”. However, the Welsh and Scottish Governments say they are still committed to agreeing common frameworks and argue that these would provide a sufficient mechanism for managing divergence. You can find out more about common frameworks in our briefing from July this year.

Comparing the internal markets

The UK Government’s view is that the UK internal market will be more democratic than the EU Single Market, because the UK and devolved governments will be able to exercise responsibilities that formerly rested with the EU. In evidence to the Welsh Affairs Committee on 10 September, the Secretary of State for Wales argued that the UK internal market would be a step forward “in democratic and economic terms”. However, the Welsh Government disagrees. The Welsh Government argues that in the EU Single Market, Member States make the rules jointly. Under the Bill, only the UK Government and Parliament would make the rules.

The Welsh Government also argues that the EU Single Market protects governments’ autonomy to make their own policies by allowing governments to introduce laws that prevent the free movement of goods and services, provided these can be justified on proportional public interest grounds such as environmental standards or consumer protection. Under the Internal Market Bill, governments would only be able to justify exclusions from mutual recognition and non-discrimination for limited reasons, such as public health or animal and plant health emergencies. This paper by Dr Kathryn Wright from York University produced for Senedd Committees summarises the exclusions allowed under the rules of the EU Single Market. It explains why the Scottish Parliament was able to legislate for a minimum unit price for alcohol, even though it contradicted some of the rules of the Single Market

Going further back in time, the UK Government argues that the Bill’s approach is consistent with how the internal market used to work before the UK ever joined the European Community. However, the devolved governments contest this too. In its response to the White Paper, the Scottish Government says:

The framework for executive and legislative decision making in the UK was changed fundamentally by devolution in 1998 which created sources of legislative and executive authority beyond Westminster and Whitehall.

Next steps

The Welsh Government’s Counsel General has said that he believes there is ‘no prospect’ of the Senedd granting its consent to the Bill. To find out more about the Bill and how it would affect devolution in practice, you can read our research briefing.

Article by Nia Moss and Lucy Valsamidis, Senedd Research, Welsh Parliament