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This briefing paper sets out the background to the UK Internal Market Bill, introduced in the House of Commons on 9 September 2020.
Commons Library - Internal Market Bill (2 MB , PDF)
This briefing refers to the UK Internal Market Bill as introduced, before amendments made during its Committee consideration and its adoption as an Act of Parliament.
At the end of the transition period, the UK will leave the EU single market. The EU legal underpinnings for free trade in goods and services between the four nations will fall away. To prevent new barriers to intra-UK trade from emerging the Government has proposed a new legal framework: the United Kingdom Internal Market Bill. The Bill was introduced into the House of Commons on 9 September 2020.
The overarching policy objectives of the Bill are to provide continuity for businesses and citizens and improve competitiveness and business environment across the UK. The Government says that the Bill would contribute to general welfare and prosperity in all nations of the UK. The Government has also argued that a UK internal market would help the UK in reaching international trade agreements and allow the benefits of those agreements to extend to all parts of the UK.
The provisions of the Bill set out general principles for market access and support, affecting trade in goods and services. The UK internal market principles would apply to all nations of the UK equally.
Taking into account that trade in goods between Northern Ireland and the rest of the UK is subject to the Northern Ireland Protocol in the Withdrawal Agreement, the Bill introduces special provisions to avoid that goods travelling from NI to GB are discriminated against and can gain unfettered access to the rest of the UK.
The clauses with regard to Northern Ireland (market access for goods and state aid) have attracted considerable attention because of their impact on the UK and EU negotiations on their future relationship. The issue of state aid/ subsidies, which is also regulated under the Northern Ireland Protocol, and addressed by this Bill, has become one of the most contentious areas in the negotiations.
The proposals set out in the Bill have proven controversial with the Scottish and Welsh Governments. They have repeatedly raised concerns about the impact of Internal Market legislation on their respective devolution settlements.
The Bill proposes to change the “competence” of the three devolved legislatures by adding a reservation on the provision of subsidies, and by protecting the Act itself from modification by the Scottish and Welsh Parliaments or the Northern Ireland Assembly.
The Bill sets out two principles that will govern access to the UK market for goods and services. The principles aim to allow people and businesses to trade across the UK without having to face different barriers in its different nations.
The first principle means that if a good or service can be legally sold in one part of the UK (as it meets the relevant regulations) then it can be sold in any part of the UK. This is the principle of mutual recognition.
The second principle prevents parts of the UK treating goods coming in from other parts of the UK less favourably than local goods. This is the principle of non-discrimination.
The Bill provides some exclusions to these principles. For instance, taxes are excluded from both mutual recognition and non-discrimination.
This part of the Bill introduces a unified system for the recognition of professional qualifications across the UK for professions that are regulated by law (regulated professions), such as architects or accountants. Professionals regulated in one part of the UK will be able to seek recognition of their qualifications in another, allowing them to provide services. The principle of equal treatment is introduced to protect practitioners qualified in one part of the UK from less favourable treatment than locally qualified providers.
The Government intends to establish an independent Office for the Internal Market (OIM) within the Competition and Markets Authority (CMA). Part 4 of the Bill (clauses 28–29) would give new powers to the CMA to monitor, advise and report on the internal market, supported by enforceable investigatory powers.
The reports and advice of the CMA are the non-binding. The Government would be for the respective legislatures and administrations to resolve disputes through existing intergovernmental processes.
The Northern Ireland Protocol, an integral part of the Withdrawal Agreement, sets out how goods will be traded between Northern Ireland and Great Britain (the rest of the UK) after the transition period ends. It applies the EU’s customs code (the rules on how goods are traded in and out of the EU) to Northern Ireland. Despite also containing a principle of unfettered market access for goods moving from NI to GB, the application of the customs code means that certain checks and processes will be required when moving these goods.
Part 5 of the Bill empowers Ministers to prevent the application of, and unilaterally re-interpret and disapply parts of the Protocol, as well as ignore their legal obligations under both domestic and international law to enact the Protocol. Specifically, Part 5 does this by:
Clause 45 deals with the incompatibility with domestic law and international law that might arise from the inclusion and exercise of powers under clauses 42 and 43. It does this through a series of extraordinary measures that build upon one another. The Clause
The Bill creates a new power allowing ministers to provide financial assistance for a wide range of different purposes. This power is intended to be used to replace the funding that the EU currently distributes within the UK. It seems likely that funding provided under this power will come directly from the UK Government rather than via the devolved administrations, as is often the case at present.
The Bill also contains provisions on government financial assistance and clauses that in effect give the UK Parliament the exclusive right to legislate on how subsidy controls will work in the future.
On 16 July 2020 the UK Government published a White Paper seeking views on its proposals to legislate on the operation of the UK Internal Market. The consultation raised various issues, for example if the proposed framework would help maintain existing standards when the UK signs new free trade agreements with other countries. A concern was also raised that the size of England relative to the other nations could mean that standards adopted in England would dominate throughout the UK.
Section 3.6 of this briefing was updated on 14 September 2020 to include recent commentary and help ensure clarity.
Commons Library - Internal Market Bill (2 MB , PDF)
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