WIREDGOV

This paper presents the Scottish Government's position on the Internal Market Act (2020), noting the UK Government is currently undertaking a statutory review of the Act, due to conclude in 2025.

Introduction

The Internal Market Act (IMA) was imposed by the previous UK Government without the consent of any devolved legislature. It remains the single greatest impediment to more effective and respectful intergovernmental relations. It is unnecessary for – and indeed works against – a transparent, proportionate and workable system of regulatory co-operation. It has the potential to impede both policy innovation and the ability of Scotland’s Parliament to tailor legislation to deliver better outcomes in areas like public health and environmental protection.

The Scottish Government notes that the new UK Government was elected last year on a manifesto commitment to reset relations with the devolved governments. The failure to even consider repeal within the terms of the statutory review suggests this ambition may be more difficult to achieve than it would otherwise be.

This paper sets out the Scottish Government’s position on the Act. First, it outlines the IMA’s far-reaching effect on the devolution settlement.

Then it examines how the Act compares with the European Single Market (ESM) and the differences between the Act’s effect and what we enjoyed as an EU member state.

It then explores how the IMA interacts with Common Frameworks, demonstrating the incompatibility of the Act with the principles and approach these frameworks seek to foster and how that has already affected business, trade and regulatory policy.

The paper also considers a range of international comparators, demonstrating the extent to which the IMA is an international outlier in its design and effect. The principles of balance, proportionality, transparency and the ambition to operate based on agreement and consent are achievable outcomes in other parts of the world and should be here.

In preparing this paper, the Scottish Government has engaged with a wide variety of stakeholders: business and industry bodies, environmental campaign groups, public health charities, farming and crofting organisations, and academic authorities on the UK’s territorial constitution.

From these discussions, we remain in no doubt of the importance of ensuring businesses in Scotland face no unnecessary barriers to trade with the rest of the UK.

It is equally clear from stakeholder engagement that the IMA is not a necessary or proportionate means of achieving this outcome.

Indeed, it has the potential to promote regulatory uncertainty, as well as inhibiting productive and respectful co-operation on regulatory policy, which is what business organisations want to see.

We have a better model on hand, in the form of Common Frameworks, and the Scottish Government welcomes UK ministers’ ambition, as set out in the consultation document, that these should be the ‘key mechanism’ for managing policy divergence and managing regulatory co-operation. However, the IMA does not allow Common Frameworks to perform this role – the automatic application of the Market Access Principles in the Act, in nearly all relevant cases, conditions and undermines the operation of Common Frameworks.

The Scottish Government recognises stakeholders’ concerns over the visibility and transparency of Common Frameworks; we would note though that the imposition of the Act, without consent, has greatly impeded both the technical operation of Common Frameworks and the principle of respect for devolution on which they are founded.

The Scottish Government’s position is clear, in line with two votes in the Scottish Parliament in October 2023 and February 2025: we must see the full restoration of the powers of the Scottish Parliament. The IMA should be repealed and replaced with an equitable, co-designed system built around the Common Frameworks approach.

The unilaterally determined terms of the statutory review are unlikely, in the Scottish Government’s view, to deliver the change necessary. We hope that the UK Government will acknowledge the arguments set out in this paper, and work with the Scottish Government to deliver an agreed and workable alternative to the IMA.

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