State aid and the union state

Defending the Union is not the same as owning the Nats. Tory disdain for devolution post-Brexit endangers it even further

Constructing a UK internal market needs time and attention too

Some nationalists claim the United Kingdom has no such thing as an internal market. Granted, it has no formal project branded ‘UK single market’. But its four parts have sent MPs to Westminster longer than modern regulatory states have existed. Britain built an integrated domestic market long before it joined the then EC. Until 1999, EU law played no specific role in preventing divergence. And the UK has an unusual lack of internal barriers for a large state.

When devolution arrived, a mix of reservations to the UK Parliament and EU law served to keep it together. That EU framework ceases to bind the UK from 1 January 2021, leaving our internal market vulnerable to erosion. In areas which are within devolved competence but constrained by EU law, ever more barriers could result.

As Canada shows, states can easily end up with major internal economic barriers, which you then have to try to negotiate away. In the UK this would do great economic damage, at least outside of England. Scotland, Wales and Northern Ireland all have the rest of the UK as their main external market, and we are all deeply integrated.

Data from the Scottish Government, Northern Ireland Statistics and Research Agency and UK Government Internal Market White Paper. Figures do not add to 100% due to rounding. Flag images from Wikipedia.

So the issue is serious, as all three devolved administrations say they accept. It’s hard to see how you address it without action at a UK level. So far, so reasonable: hence a White Paper. It’s also true that even with common frameworks, many areas currently regulated at EU level will fall entirely to the devolved legislatures.

Nonetheless, powers devolved within an EU framework aren’t the same thing as reserved powers. Constitutionally, the UK Government wants to reserve some things which are currently devolved. The Sewel convention is clear: the UK Government shouldn’t do this without consent. That convention is core to making devolution work. Parliamentary sovereignty and decentralised power don’t easily mix. Sovereignty needs self-restraint for them to rub along.

Further, the EU doesn’t work in the same way as the UK. EU lawmaking is far more consensual and member states are part of the process. EU law is also likely to give member states more room for manoeuvre than UK replacements. The UK has no equivalent to directives as opposed to regulations, for instance. UK institutions are likely to be far more single-minded and far less prone to compromise. That means an ‘equivalent’ reservation in any given area could well mean less devolved autonomy in practice.

The principle of agreeing common frameworks with the devolved administrations isn’t new or controversial. Reserving subsidy control (state aid) makes sense in policy terms — though that doesn’t let us off the constitutional hook of consent. But the White Paper proposes new cross-cutting constraints on devolved policy:

the Government now proposes a Market Access Commitment, which will enshrine in law two fundamental principles to protect the flow of goods and services in our home market: the principle of mutual recognition, and the principle of nondiscrimination.

I don’t necessarily oppose some version of this. But it has major implications, depending on how it’s drafted and which sectors are excepted. It could well mean major new constraints, over and above EU-derived ones, in devolved areas. We’ve always had regulatory divergence within the UK in some areas. Building regulations differ in Scotland and England, for instance. Will changes now be subject to a market access test?

The White Paper also takes a profoundly asymmetrical approach, with policy in England as the implicit norm. The legal market access commitment will only apply to devolved policy. But policy in England (or England and Wales, or Great Britain) in the same areas could create market barriers too. How far will the UK Government constrain its own approach, and proposals to Parliament, in these areas? Could ministers at least have to certify whether such proposals discriminate against other parts of the UK, for instance?

Would this mix — some EU constraints gone, some powers reserved, a new general constraint — mean more or less de facto power for devolved institutions? I don’t know. I don’t think anyone can know without seeing the actual drafting. Even that’s not enough to gauge how the market access commitment will pan out in practice. I do know that it has huge implications for how devolution works. It’s a big constitutional change: it merits proper discussion. And in our system, convention is quite clear that consent is required.

So the Scottish and Welsh Governments have every right to be outraged by the idea of imposing it upon them. And to consult upon it for a mere four weeks (a third of the time to consult on a reformed judicial pension scheme, for instance) is outright farcical. The problems with devolution and our home market have been discussed for over four years. And the Brexit cliff-edge on 31 December is of the UK Government’s own (perverse) making. Yes, the SNP always takes any excuse to invent grievances. That doesn’t make it right, or good for the Union, to give them real ones.

This isn’t a first, either. Since 2016, the Sewel convention has been ignored several times, and not just for Scotland. Whatever you think of the arguments for an exception in any given case, it’s becoming a pattern. Among multinational states, the UK seems unusually willing to just override devolved competence. At the same time, secession is unusually — possibly uniquely — easy to seek. In a union state where a British nation overlaps with several other, older nations, that’s a strikingly unstable mix.

The mix is particularly dangerous to the Union in Scotland. Much of independence’s appeal comes down to agency — speaking to a view that Scotland has no real say in Britain. In response, UK governments yo-yo between ever-looser union and centralising confrontation. Neither works. On the one hand, there’s a limit to how far you can or should devolve within a state. On the other, preserving the Union and owning the Nats are not the same, though a certain sort of Tory seems unaccountably convinced that they are. If you don’t want the UK to break up or become a constitutional God of the gaps, you need to make its central institutions more legitimate in Scottish eyes.

Brexit has damaged support for the Union in Scotland. But it offered a chance to grapple with a more shared approach to governing the UK. The Welsh Government is the most sensible and least heard of the four administrations on constitutional issues. It made proposals for a UK Council of Ministers to decide on common frameworks. More recently, it has called for the successor to state aid rules to be enforced by a neutral body.

Whatever the detail, the principle is clear. Devolved governments need a real say in this area, and the UK Government can’t be both party to and arbitrator of shared rules. Yes, that will slow some UK decision-making down. It would be no bad thing if some UK decisions had to take some more time and be a bit more considered. But for good or ill, it’s part of the price of sustaining a complex union state.

The internal market debacle provides a good example of a core problem with how the Union currently works. Federal systems usually involve some element of shared rule as well as self-rule. The UK, unless and until it finds ways of dealing with the English Question and dividing legal sovereignty, can never be a true federation. But in practice, devolution often raises federal questions, and so does Scottish discontent.

When required to think about Scotland, English commentators often get worked up about money. In doing so, they miss the point about voice. Somehow, the British central state has to find a way to make itself more palatable north of the Border. It has to satisfy enough Scots that Britain as a state isn’t England-Plus with unreliable Scottish opt-outs.

If it can’t, the end of the Union of 1707 is only a matter of time. The Conservatives may think they’re standing up to the SNP. They’re actually dancing to its tune.

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