The UK Labour Government is committed to resetting relations with the devolved institutions. Yet, in its manifesto, Labour made no mention of any plans to reform the United Kingdom Internal Market Act 2020 (UKIMA) – regulating intra-UK trade post-Brexit – to deliver that commitment. In government, Labour now appears reluctant to engage directly with the Act, preferring to work around, rather than with it (Horsley, 2024). In a new report on the operational impact of the UKIMA on devolution, we call on the UK Government to change tack and address the Act directly in collaboration with the devolved institutions. We conclude that reform is essential to restore intergovernmental trust – the desired ‘relations reset’ – and rebalance the authority of the UK and devolved institutions with respect to regulating intra-UK trade.

Our Report, published on 3 October 2024, provides the first assessment of the UKIMA’s operational effects across the four territories of the UK. It analyses the impact of the UKIMA market access principles (MAPs), especially the principle of mutual recognition, on devolved policymaking in Scotland, Wales and Northern Ireland as well as the effects of regulatory developments in England. Our Report is data-rich and draws on discussions with stakeholders from UK and devolved institutions, industry and civil society. Our research maps the expanding list of regulations introduced and proposed by the devolved governments and, regulating for England, the UK Government that intersect with the UKIMA MAPs. We unpack the significant practical effects that the MAPs are already having on devolved policymaking in key areas including environmental policy, agriculture and public health, particularly in Scotland and Wales (Report, Part 3). Our Report also explores how the intergovernmental agreement governing the exclusion of specific devolved policies from the MAPs is functioning in practice. Here we reveal continued disagreement between the UK and devolved governments on matters of scope, timing and process. We are grateful to the Economic and Social Research Council and UK in a Changing Europe for funding the research underpinning our report. The views expressed in the report remain our own.

In this post, we focus on reform proposals (Report, Part 4). Readers are referred to the full report as well as earlier summaries of the UKIMA (e.g. Dougan et al, 2022 and Horsley, 2022) for detailed analysis of the MAPs and their practical effects on devolved policymaking. Only a brief restatement of our conclusions is presented in the next section. What follows thereafter is a summary of the legislative and non-legislative changes that we argue could be made to the UKIMA to help restore intergovernmental trust and, crucially, rebalance the authority of the UK and devolved institutions (Report, Part 4). Whatever option(s) is (are) preferred, we emphasise that UKIMA reform should be undertaken jointly by the UK and devolved institutions, with a meaningful role for all four UK parliaments. It is also crucial to consider the position of Northern Ireland, and all reforms need to have special regard for the unique circumstances of Northern Ireland and its place in the UK internal market alongside the requirements of the Protocol/Windsor Framework (see Report, Part 2).

The UKIMA and Devolution: Practical Effects; Emerging Trends

As our Report outlines, the UKIMA and the application of the MAPs pose significant challenges for the devolved institutions. The MAPs exert a powerful ‘chilling effect’ on devolved policymaking. This is visible, for example, in unsuccessful efforts by the Scottish and Welsh governments to legislate to tackle single-use plastics ahead of the UK Government’s plans for England. The principle of mutual recognition precludes the devolved institutions from applying devolved policies to incoming goods and services, which significantly erodes the rationale for innovating in the first place. Put bluntly, the devolved governments are unlikely to legislate where doing so would simply place ‘home’ traders at a competitive disadvantage. 

Our Report also demonstrates the operational challenges that confront the devolved governments when they seek to exclude specific devolved policies from the application of the MAPs. The UK and devolved governments concluded an intergovernmental agreement to manage this process back in December 2021, but the process remains ultimately subject to UK Government control – as our detailed analysis of the Scottish Government’s request for an exclusion to cover its Deposit Return Scheme shows. 

Our review of the UKIMA’s initial operation also evidences intergovernmental cooperation alongside continued underlying political tension. In particular, we track a recent shift on the part of the devolved governments in favour of policy coordination with the UK Government and other devolved governments to manage the practical effects of the MAPs on devolved competences. This, of course, presents its own challenges, not least the erosion of parliamentary input into, and scrutiny of, policymaking in devolved areas. But it does point to a new appetite for improved intergovernmental relations among all concerned. Effective intergovernmental relationships are vital to developing a model of governance for the internal market that relies on more than just the relative strength of the UK Government. 

Reforming the UKIMA: Four Options

Option 1: The Status Quo

Option one is to do nothing. This may be tempting. After all, the UKIMA is a rather technical piece of legislation of relatively low political salience. Under this first option, UKIMA structures would therefore continue to operate in their present form, perhaps bolstered by improved intergovernmental relations between the governments. The new Council of the Nations and Regions which met for the first time this month might be given a mandate to oversee the operation of the domestic market, especially if proposals for greater devolution in England increase the likelihood of regulatory difference within the UK internal market. 

While we would welcome further improvements in intergovernmental relations, maintaining the status quo carries considerable risks, particularly for the devolved governments. The design of the UKIMA remains fundamentally antagonistic towards devolution, with the UK Government (now and in the future) retaining a powerful gatekeeping role over how the devolved institutions exercise their policy and law-making powers. The reliance on political relationships to lubricate the operation of UKIMA structures and principles is a weak safeguard for the effectiveness of devolved government under the UK constitution. The fact that the UKIMA has strengthened the UK Government’s position vis-à-vis the devolved governments also acts as a barrier to sustaining improved, productive and collaborative intergovernmental relations. Moreover, the UKIMA was imposed on the devolved institutions, despite consent being withheld according to the Sewel Convention. They remain strongly opposed to its practical effects on devolution, particularly in Scotland and Wales. Governing without underlying consent carries significant risks.

Option 2: Repeal the UKIMA

At the other end of the spectrum, the UKIMA could be repealed. This second option remains the favoured course of action of the Scottish Government and Parliament. In a symbolic vote on 3 October 2023, every party, except for the Scottish Conservatives, supported a motion to repeal the Act. But repealing the UKIMA would not resolve the underlying problem that it was designed to address: the risk of regulatory difference between the four administrations creating new barriers to trade and mobility. It would also place a heavy burden on a machinery of intergovernmental relations that is, as yet, ill-equipped to cope. It could further risk destabilising the delicate balance of giving legal underpinning to Northern Ireland’s role within the UK domestic market whilst implementing the access to the EU single market for goods given by the Protocol/Windsor Framework. 

Repealing the Act would also raise questions for UK trade policy, and there appears little political willingness in Westminster and Whitehall to reopen contentious Brexit-era debates. In particular, repeal may necessitate a review of recently concluded trade agreements, for example, between the UK and Australia and the UK and New Zealand. Repealing the UKIMA would also require the UK Government to surrender its ultimate gatekeeping functions in relation to intra-UK trade management and rely either on trust, goodwill and best endeavours, or more potent means to assert its authority (e.g. parliamentary sovereignty).

As with doing nothing, the prospect of repealing the UKIMA would appear therefore both unlikely and suboptimal. For that reason, we focus attention on the range of legislative and non-legislative changes that could help foster a more consensual approach to governing the UK internal market under devolution. 

Option 3: Legislative Reform

Legislative change represents a third option, or more properly a set of options. We focus here on two ways in which the UKIMA may be significantly modified, especially with respect to the scope and impact of the MAPs: first, using existing delegated powers and/or secondly, through new primary legislation at Westminster. 

UK Ministers may modify aspects of the UKIMA using existing delegated powers. Consider, for example, sections 10 and 18 UKIMA which empower UK ministers to modify Schedules 1 and 2 of the Act excluding the application of the MAPs with respect to intra-UK trade in goods and services, respectively. Similarly, Sections 8(7) and 21(8) UKIMA provide that UK ministers may add to the list of legitimate requirements justifying indirectly discriminatory measures in the regulation of goods and services, respectively. Such delegated powers remain limited. Further, their exercise does not require UK ministers to obtain the consent of the devolved institutions. The UK Government must seek the consent of devolved ministers but may proceed after one month if this is not secured. Relying on these powers, therefore, would appear an insufficient mechanism for addressing the grievances and concerns that the UKIMA has posed for devolution, unless the decision to make changes via this route was the outcome of an agreed intergovernmental process, backed by the consent of the devolved governments and legislatures.

Given the limitations of existing delegated powers, the new UK Government may consider – as an alternative or an additional option – bringing forward primary legislation to modify the UKIMA more radically. Various aspects of the UKIMA could be amended through primary legislation, including controversial provisions that are, at best, only tangentially related to the internal market and not addressed in our report (e.g. UK Government spending powers). We draw attention to changes that could modify the impact of the market access principles. Such modifications might include the introduction of additional principles that help to redress the balance between market access and policy-making autonomy. Advocating the introduction of new principles to manage the MAPs aligns with recent calls to bolster intergovernmental cooperation more generally through, for example, the adoption of a new principle of positive engagement (see Tierney 2024). In the context of managing the UK internal market, two principles should be considered: proportionality and subsidiarity. Both are familiar to trade lawyers and may operate independently or in combination to support the effective coordination of regulatory powers in systems of multilevel governance.

Introducing a proportionality test would require decisionmakers to balance the effects of regulatory variations on trade across the UK’s borders with the protection of recognised public interests. This would require the UK and devolved governments – and in the event of a challenge, the courts – to scrutinise whether: 

(a) the specified public interest requirement is sufficiently important to justify the potential limits it poses to intra-UK trade; 

(b) the regulations are designed to address this public interest; and

(c) the same objective could not be achieved using a measure less restrictive of intra-UK trade.

The onus would be on the government seeking to defend legislation that adversely affects trade to demonstrate that the relevant measure meets the requirements of the proportionality test and is not a disguised restriction on trade. A proportionality test could be introduced into the UKIMA framework in tandem with legislative changes to expand the set of legitimate public interest requirements justifying restrictions on intra-UK trade (option 2, above); for example, to recognise considerations such as environmental protection, public health and animal welfare. Taken together, this would create additional space to moderate the impact of the market access principles on a case-by-case basis through a structured, evidenced-based assessment.

Primary legislative change could also include the introduction of a subsidiarity test into the UKIMA framework. Subsidiarity protects the regulatory authority of lower-tier bodies in a system of multi-level governance from overreach by decision makers and lawmakers at the centres of power. It does so typically by restricting the adoption of common or ‘harmonised’ standards to situations where the absence of common approaches (i) is likely to have an appreciable distorting effect on cross-border trade and (ii) where the added value of adopting harmonised regulations is clearly evidenced. 

The subsidiarity principle can help to rebalance the commitments to market access alongside the principles of devolution. The presumption would be in favour of maintaining the authority of the devolved legislatures to pass laws as they see fit, removing the veto power that the UKIMA gives to the UK Government over the exercise of those law-making powers that intersect with the market access principles. It would leave open the possibility of common standards and harmonised regulations, but the burden of proof to demonstrate the necessity of these would fall to the UK Government, should they face resistance from one or more devolved governments.

Option 4: Procedural Changes

A final set of options may supplement or act as alternatives to legislative change. These concern the procedural workings of the UKIMA that have been found wanting in the early years of its implementation. We offer two suggestions here, neither of which is dependent on legislative change.

Our first proposal is to reform the existing process for agreeing additional exclusions from the MAPs. The process was agreed by the UK and devolved governments in December 2021. Our analysis of its initial operation reveals significant differences in understanding between governments regarding the nature of the process, its timing and triggers. In our Report, we consider, for example, the political wrangling and claim and counter-claim between the administrations in relation to the Scottish Government’s attempt to secure an exclusion for its Deposit Return Scheme (see Report, Part 3.3.). 

A clearer exclusion process could be developed, including the introduction of an exclusion request form, submitted to an impartial body, alongside requirements for timing and format in which the relevant parties are required to respond. This could be accompanied by an agreed evidence base required to evaluate decisions to grant or withhold an exclusion. The Office of the Internal Market could potentially expand its role to include assessing proposed exclusions alongside its existing powers to assess regulatory proposals and adopted legislation. Alternatively, the independent secretariat established recently to support intergovernmental relations – and accountable to the UK and devolved governments – could commission evidence to support the exclusion process in a way similar to its role in resolving intergovernmental disputes. Such evidence should be published and reported to parliaments, to aid the transparency of the decision-making process. A similar process could also develop to accompany the operation of the subsidiarity principle, suggested above.

One of the most contentious aspects of the exclusion process has been around the timing of decisions. In previous instances, the UK Government has awaited the completion of devolved legislative processes prior to making decisions, on the basis that only then can an assessment of their impact on the internal market be made. This is clearly unsatisfactory and has increased uncertainty among businesses and other stakeholders. A parallel can be made here with the process of seeking legislative consent under the Sewel Convention. When the UK Parliament intends to pass a law that affects devolved matters, by convention, it (normally) seeks the legislative consent of the devolved legislatures before doing so. Those legislatures are required to make that decision before the law has gone through all of the law-making stages in Parliament – in other words, before the final details of the law are known. 

It is not unreasonable, in our view, to expect a decision to be made with regard to a proposed exclusion from the market access principles whilst the legislation is underway within the devolved parliaments. Indeed, it is arguably vital to enable parliamentarians, and other stakeholders, to make informed decisions on the Bill or regulations before them. 

Our second proposal for procedural change is to improve legislative tracking. Advanced notice where future regulatory difference is intended, either at a UK-level (legislating for England) or within the devolved legislatures, is essential to the proper functioning of the UK internal market. Yet, the present approach relies on political commitments on information sharing set out in intergovernmental agreements, rather than on any formalised framework. 

A new framework for legislative tracking would support coordination and planning between the UK and devolved governments. It could provide a platform for increased intergovernmental coordination in areas of shared regulatory concern at an early stage of policy development and encourage cooperation and shared learning; for example, through agreements on joint consultations. 

We suggest a role for the Office for the Internal Market as a suitable repository for legislative tracking. The OIM operates as an independent regulatory body. Its statutory functions already include monitoring the operation of the UK internal market. The OIM could manage legislative tracking independently of its statutory mandate to provide expert technical and independent advice to the UK and devolved governments. The OIM is already mapping regulatory divergence in its Annual Reports.

Alternatively, the UK and devolved governments could charge the IGR Secretariat with responsibility for legislative tracking. The Secretariat is committed to serving the four governments equally and acting impartially in the exercise of its functions, and legislative tracking would sit well with its mission to promote transparency and accountability in inter-governmental relations. A further option would be to engage parliamentary mechanisms, specifically the Inter-Parliamentary Forum. The Forum’s opening statement of priorities referenced oversight of the UK internal market, including the UKIMA and the Common Frameworks.

Confronting the UKIMA Challenge

Reforming the UKIMA should not be for the UK Government alone to determine, nor a matter for UK Parliament alone. The UKIMA was a unilateral intervention by a previous UK Government, backed by the UK Parliament, in the face of considerable opposition from the devolved governments and most opposition parties in the devolved legislatures. Collaborative working across the four administrations – with the engagement and oversight of the four parliaments – will be central to securing consent for the way ahead. As our Report highlights (Report, Part 3), despite continued disagreement on foundational issues, intergovernmental cooperation has improved in recent months. This is visible, for example, with the increased use of joint consultations and intergovernmental agreement on joint regulatory approaches (e.g. on tobacco and vaping). This provides a platform for more ambitious reform to deliver a meaningful resetting of relations with the devolved institutions.

Our thanks to the editors for their helpful comments on an earlier draft of this post. All errors remain those of the authors.

Thomas Horsley is Professor of Law at the University of Liverpool.

Coree Brown Swan is Lecturer in Politics at the University of Stirling, and Director of the Scottish Political Archive

Nicola McEwen is Professor of Public Policy and Governance and Director of the Centre for Public Policy, University of Glasgow.

Lisa Claire Whitten is an interdisciplinary Research Fellow in Politics and Law at Queen’s University Belfast.

(Suggested citation: T. Horsley, C.B. Swan, N. McEwen and L.C. Whitten, ‘Westminster Rules: The United Kingdom Internal Market Act and Devolution’, U.K. Const. L. Blog (17th October 2024) (available at https://ukconstitutionallaw.org/)