United Kingdom Internal Market Bill

Lord Hain Excerpts

Committee stage & Committee: 2nd sitting (Hansard) & Committee: 2nd sitting (Hansard): House of Lords
Wednesday 28th October 2020 Lords Chamber

[Lord Hain (Lab) [V]]

My Lords, as so often, my noble friend Lord Wigley has spoken for the wide consensus on this question in Wales. I will speak specifically in support of Amendments 74, 75 and 99, which seek to ensure that the Henry VIII powers of the Secretary of State to amend the Bill’s provisions relating to market access on mutual recognition, non-discrimination and the “legitimate aim” of regulatory requirements are referred to the devolved Administrations for their consultation and consent. I do so following a series of excellent opening speeches, notably by the noble Lord, Lord German, and the noble and learned Lord, Lord Hope.

The Bill has been justified on the basis that it is intended to support the UK internal market for goods and services once EU rules no longer apply after the transition period ends on 31 December. These rules, derived from EU law, place constraints on the ability of government institutions within the UK to impose constraints on the free movement of goods, as well as people, and significantly reduce the scope for measures that would restrict intra-UK trade. One reason that the UK Government wish to constrain the autonomy of the devolved Administrations in this area is that countries with which the UK is trying to negotiate trade deals may wish to clarify that they have access to the whole UK market, or Great Britain market if the Northern Ireland protocol survives, as it must do.

A White Paper published by the Government in July 2020 claimed that the Bill would provide “frictionless trade”, “fair competition” and protection for businesses and consumers within the UK. To achieve these aims, two market access principles were identified, namely mutual recognition and non-discrimination, which would constrain the ability of all relevant actors within the UK, be they regulators, local authorities or devolved Administrations, to impose new regulations on goods and services. These limit the ability of devolved Governments to regulate economic activity far more than did their EU predecessors. So much for taking back control. Obviously, that does not apply to devolved legislatures, which will lose control under the Bill—to Whitehall.

The UK internal market was initially seen as one strand of work, begun in October 2017 by the four Governments within the UK, to establish a common approach in key policy areas of returned EU rule, referred to as common frameworks, about which I spoke in the last Session. However, it is generally agreed that, by removing the internal market from these discussions and pushing ahead without the agreement of the devolved Authorities, the common framework approach is being completely undermined by the UK Government.

In response to the White Paper, the Welsh Government insisted that any new system must have independent oversight and dispute resolution, and that common rules must be agreed by all four Governments. When the Bill was published, Jeremy Miles, the Welsh Government Counsel General, called it an “attack on democracy”, and the Scottish Constitution Minister pointed out that the concept of mutual recognition could mean that Scotland, for example, would be forced to accept lower food standards—an area that is currently devolved—against its express wishes.

The mutual recognition provisions would, therefore, effectively prevent one part of the UK unilaterally imposing and enforcing requirements, for example for the presentation or characteristics of goods, which are covered by this principle, which also applies to services. There are exceptions under the Northern Ireland protocol. “Manner of sale” requirements, on the other hand, for example governing to whom products may be sold or their price, would not be covered by mutual recognition but by the non-discrimination provisions of the Bill. The exclusion of price from the mutual recognition principle was driven, in part, by arguments in the other place about what the Bill might mean for Scotland’s minimum alcohol pricing regime—subsequently adopted in Wales, more or less—in response to the public health challenge from excessive alcohol consumption.

Schedule 2 contains lists of services that are excluded from the principles of mutual recognition and non-discrimination, such as healthcare, transport and water supply, as well as some privately provided services. Amendments 74 and 75 require the Secretary of State to consult and/or seek the consent of the devolved Administrations before making changes to Schedule 2.

If there is wariness about enabling any one of the devolved nations to exercise a veto—for example, the Scottish nationalists simply refusing to consent to something which would benefit the rest of the UK —leading to deadlock, why, as I have suggested several times in recent debates in your Lordships’ House, do the Government not adopt the Welsh Government’s proposal for a Council of Ministers-type model with a form of qualified majority voting, in place of the current Joint Ministerial Committee, which has been dysfunctional and, frankly, worse than useless? I specifically ask the Minister to respond to this suggestion of the Welsh Government to have a Council of Ministers-type model with qualified majority voting, which could overcome many of the issues involved. This model would require the UK Government, since it represents England with its disproportionately large population and share of GDP, to secure the agreement of at least one devolved Administration before overriding any devolved Administration that wanted to exercise a veto.

The Bill prohibits both direct and indirect discrimination. The latter is permitted if it can reasonably be considered a “legitimate aim”, as defined in the Bill. However, with the Bill as it stands, the Secretary of State can redefine that term by regulations, subject only to an affirmative resolution procedure. Amendment 99 rightly seeks to ensure that there is consultation and consent from the devolved Administrations before doing so. I cannot for the life of me understand why the Government or the Minister, for that matter, would object to that.

New functions will be bestowed on the Competition and Markets Authority—the CMA—to monitor and report on the impact of specific regulations that are considered to potentially have a detrimental effect on the internal market. The Bill also proposes to establish an office for the internal market within the CMA to oversee the application of these principles and the functioning of the internal market. Expert analysis has shown that, whereas EU law had a symmetrical effect upon the UK Parliament and devolved legislatures, the Bill will have an inherently asymmetrical effect as it will become a protected enactment, which the devolved legislatures will be powerless to repeal or modify.

The Bill will also narrow the territorial scope of devolved legislation. Regulations relating to goods, passed by the Senedd, for example, will apply only to goods produced in Wales or imported directly into Wales from outside the UK. They will not apply to goods imported from the rest of the UK. This, as acknowledged by the business department’s impact assessment of the Bill, would reduce the ability of local legislatures to produce targeted social and environmental objectives, so that the intended societal—[Inaudible.]

[The Deputy Chairman of Committees (Baroness Pitkeathley) (Lab)]

We seem to have lost connection with the noble Lord, Lord Hain, so I call the noble and learned Lord, Lord Mackay of Clashfern.

--- Later in debate ---

[The Deputy Chairman of Committees (Baroness Pitkeathley) (Lab)]

My Lords, I am told that we have the noble Lord, Lord Hain, again.

[Lord Hain (Lab) [V]]

Thank you, my Lords. I suddenly expired by unilateral mute for reasons that neither the broadcasting hub nor I could understand. I was about to complete what I said so, with the leave of the Committee, I will briefly do so.

The Bill will also narrow the territorial scope of devolved legislation. Regulations relating to goods passed by the Senedd, for example, will apply only to goods produced in Wales or imported directly into Wales from outside the UK. They will not apply to goods imported from the rest of the UK. This, as acknowledged by BEIS’s impact assessment of the Bill, would reduce the ability of local legislatures to pursue targeted social and environmental objectives so that the intended societal benefits “would be forgone”.

It is therefore clear that the market access principles of mutual recognition and non-discrimination set out in the Bill would present a significant threat to the purposes of devolution, which have been democratically established now for nearly two decades. Surely it is not too much to ask that, at the very least, the devolved Administrations should be consulted and their consent sought on the relevant measures in this Bill, as set out in these amendments?

[Lord Liddle (Lab)]

My Lords, there have been many excellent speeches in this debate and I doubt that I have anything much to add.

I commend to the Government that they take note of what was said by the noble and learned Lord, Lord Mackay of Clashfern. This is potentially a critical issue for the future of the United Kingdom. I want to see a United Kingdom survive; I am a passionate supporter of that. That means we must have a well-functioning internal market. However, the Government are making a great meal of this issue, building it up into a much bigger conflict than it needs to be. I urge them to follow the route of reviving and working through the common frameworks that I remember David Lidington proposed as part of the European Union (Withdrawal) Act. I do not see why this new Conservative Government have apparently abandoned the approach that David Lidington took then and are seeking to create a confrontation between the principle of consultation, which they favour, and the principle of consent favoured by the devolved Administrations.

The present Government seem to see Brexit as an opportunity for the assertion of the UK as a unitary state. This is very dangerous for the UK’s future. Take, for example, the structural funds, which play an important part in the Welsh and Scottish economies. Under the devolution settlement, the devolved Administrations were responsible for how structural fund money was spent in their areas. This Government are trying to take that away, establishing new powers to direct investment in Scotland and Wales. The Government are trying to reassert a unitary state. This is the wrong path to be following.

The person I think speaks the most sense on these questions is former Prime Minister Gordon Brown. I want to see us evolving in a federal direction and we cannot do that if we are going to tear up principles that have already been agreed. We are on the verge of making the mistake that the Conservative Party made in the 1880s when it rejected Gladstone’s visionary plan for Irish home rule and we will pay very heavily for the consequences.