Internal tension: Government plans for the UK internal market

Former Cabinet Office Special Adviser Fraser Raleigh explains the Internal Market Bill, and what battles lie ahead with the devolved administrations and the European Union.

The Government will today publish the United Kingdom Internal Market Bill, which sets out a plan for how the four nations of the UK will trade with each other after the end of the EU transition period.

The Bill had already set up a fight with the devolved administrations, but with confirmation this week that it will be used to unpick aspects of the Northern Ireland protocol - something the government accepts would break international law - the Bill has also been thrust to the centre of the EU negotiations.

But what exactly does the legislation do?

The fundamental purpose is simple: new rules for trade within the internal market of England, Scotland, Wales and Northern Ireland when the UK is no longer part of the EU single market.

During the UK’s membership of the EU, the single market meant the overarching rules affecting business and trade were the same across the UK. After the transition period, however, powers from Brussels will return to a mixture of Westminster and the devolved parliaments. 

And without those EU rules to keep things the same, the government says new UK-wide rules are needed to replace them.

The Bill will implement plans outlined in the Internal Market White Paper published in July, with mutual recognition and non-discrimination clauses that ensure each of the nations of the UK must accept the others’ standards and cannot make changes that would restrict trade between them.

The Government sees this an essential part of its efforts both to provide certainty to business and to strengthen the Union, but it also removes an important potential stumbling block to future trade deals by ensuring they can be applied on the same terms across the whole of the UK.

The devolved administrations are strongly opposed to these changes, arguing the Bill rewrites the devolution settlements by restricting the power of the devolved administrations in areas such as state aid - which the Bill explicitly reserves to Westminster - and expanding the power of the UK Government to spend money in devolved areas. In response, the Government points out that a number of powers previously held in Brussels will pass directly to the devolved parliaments, not Westminster, after the transition period.

The SNP in particular will resist the Bill at every stage, and - with an eye to next year’s Scottish Parliament elections - cast it as a Westminster power grab and force the UK Government to push it through without the consent of Holyrood.

It is the clauses on Northern Ireland however that are most contentious. The Government confirmed it will use the Bill to unilaterally set out how it will approach trade between Great Britain and Northern Ireland in the event of no deal, circumventing the process for seeking agreement with the EU outlined in the Northern Ireland protocol of the EU Withdrawal Agreement, an international treaty which Parliament has already signed up to

While the Government has played down the significance of the changes on Northern Ireland, the resignation of the Government’s top lawyer in protest at what Ministers have publicly accepted would be a breach of international law, combined with criticism in Parliament from the Chair of the Justice Select Committee, Bob Neill, and from former Prime Minister Theresa May, highlights the scale of the challenge ahead.

The decision to press ahead with the Bill during this week’s fresh round of negotiations with Michel Barnier has also cast further doubt on the chances of a deal with the EU.

What’s not in doubt, though, is the importance of the Bill, which the government sees as essential to protect the internal market - and the Union - and to ensure the UK can strike free trade deals with the rest of the world.