United Kingdom Internal Market Act 2020

Policy background

2. In January 2020 the UK left the EU. Following the end of the Transition Period this year, the way we regulate labour, capital, goods and services in the UK will no longer be decided by the EU. Instead, we in the UK will be able to regulate our trade in goods and services in a tailored manner, specifically designed to benefit our businesses, workers and consumers, while maintaining our high regulatory standards.
3. To ensure businesses can continue to trade freely across the UK as they do now, the Government set out on 16 July 2020, in the UK Internal Market White Paper (https://www.gov.uk/government/publications/uk-internal-market ), its intention to establish a market access commitment in legislation - to preserve the UK internal market.
4. As outlined within the White Paper, proposals for the UK internal market are driven by three overarching policy objectives:
   1. to continue to secure economic opportunities across the UK;
   2. to continue to increase competitiveness and enable citizens across the UK to be in an environment that is the best place in the world to do business; and
   3. to continue to provide for the general welfare, prosperity, and economic security of all UK citizens.
5. The Government ran a consultation on the proposals between 16 July and 13 August, inviting views on key questions related to the non-discrimination principle and independent monitoring and advice functions. Businesses showed support for the measures in order to avoid trade barriers and provide certainty for firms.
6. Additionally, respondents raised concerns on the need to: protect regulatory autonomy; protect Northern Ireland’s place in the UK internal market; and provide an independent insight into the UK internal market’s functioning.
7. The measures in this Act are therefore designed to create a coherent approach to market access and support for the UK internal market.
   1. The principles of mutual recognition and non-discrimination of goods and services form the market access principles. These allow people and businesses to trade as they do now, without additional barriers based on which nation they are in.
   2. The market access principles will give effect to providing unfettered access of qualifying goods from Northern Ireland to Great Britain.
   3. The measures on the recognition of professional qualifications allow professionals qualified in one of the four parts of the UK to access the same profession in a different part without needing to requalify if new qualification or experience requirements are introduced, or existing ones are changed, in any part of the UK.
   4. The Office for the Internal Market (OIM) within the Competition and Markets Authority (CMA) will monitor the health of the internal market and advise and report on proposals and regulations and their potential or actual impact on the UK internal market.
   5. The provisions ensure a uniform approach across the UK to the application of EU State aid law under Article 10 of the Northern Ireland Protocol.
   6. The power to provide financial assistance allows the UK Government to provide financial assistance for a number of priority purposes across the whole of the UK.
   7. The reservation of subsidy control allows the UK Government to regulate the effects of distortive or harmful subsidies, whether that is in relation to international trade or the UK internal market.
8. As part of its vision for the UK internal market, the Government is also engaging in a process to agree a common approach to regulatory alignment with the devolved administrations. The Common Frameworks Programme aims to protect the UK internal market by providing high levels of regulatory coherence in specific policy areas through close collaboration with devolved administrations.
9. The Act is a key part of the Government’s coronavirus recovery plan. It provides important regulatory stability for businesses and consumers as the UK responds to and recovers from the pandemic.

Mutual recognition for goods

10. The Act introduces a principle of mutual recognition to underpin the operation of the UK internal market for goods.
11. Mutual recognition means that any good that meets relevant regulatory requirements relating to sale in the part of the UK it is produced in or imported into, can be sold in any other part of the UK without having to adhere to additional relevant regulatory requirements in that other part. For example, a bag of flour made in one part of the UK that met the relevant requirements in that part (for example on the composition of the flour) can be sold in any other part of the UK without having to meet any other relevant requirements that apply there.
12. The UK government and the devolved administrations retain the capacity to enforce their own requirements on goods produced in that part of the UK or imported into that part of the UK from outside the UK, within their areas of legislative competence. This means that local producers must comply with local regulation.
13. Requirements are "relevant requirements" for the purposes of the mutual recognition principle if they prohibit a good being sold or prohibit a good being sold if not complied with, and if they are in scope of the types of requirements listed in section 3(3). Requirements in scope of section 3(3) include those relating to the production, characteristics and presentation of goods, and requirements relating to the assessment, authorisation and documentation of goods, among others.
14. Regulatory requirements not in scope of the mutual recognition principle may instead be covered by the principle of non-discrimination. The requirements covered by non-discrimination are set out below.
15. Requirements in areas where there is existing regulatory difference across UK (the day before the relevant provisions entered into force) are not retrospectively subject to mutual recognition. A substantive change to such existing requirements will bring them into scope.
16. The definition of "sale" for the purposes of mutual recognition and non-discrimination (section 15) excludes sales that are not made in the course of a business, and sales which are made in the course of a business but only for the purpose of performing a public function. Sales by public bodies will be excluded from the definition of sale unless they are made for purely commercial purposes. For example, the supply of medication by the NHS to a patient through a prescription would not be covered as it is a sale made by a public authority fulfilling a public function.
17. Additionally, there are requirements that are explicitly excluded from the application of the mutual recognition principle. These are set out in the section of the policy background on exclusions.

Non-discrimination for goods

18. The non-discrimination principle means direct or indirect discrimination based on differential treatment of local and incoming goods is prohibited.
19. Direct discrimination is where an incoming good is disadvantaged compared to a local good because it originates from another part of the UK. For example, a requirement that incoming produce must be chilled but local produce does not.
20. An incoming good is a good that is either produced in, produced by a business based in, or that comes from or passes through a part of the UK (the "originating part") that is not the "destination part" of the UK where they are to be sold.
21. Indirect discrimination is where incoming goods are not directly discriminated against, but where regulation disadvantages incoming goods and has an adverse market effect.
22. Indirect discrimination can be justified if it is necessary to achieve a legitimate aim:
    1. the protection of the life or health of humans, animals or plants, or
    2. the protection of public safety or security.
23. The non-discrimination principle for goods applies to certain types of statutory provision ("relevant requirements").
24. This includes requirements on the manner of sale of good (e.g. when, by whom, to whom or the terms on which they may be sold). Non-discrimination also covers certain other requirements, to the extent that they do not constitute requirements that need to be complied with to lawfully sell a good. This includes: requirements on the transportation, storage, handling or display of goods; requirements relating to the inspection, assessment, registration, certification, approval or authorisation of the goods; and, the conduct or regulation of businesses that engage in the sale of certain goods or types of goods.
25. Relevant requirements that exist on the day before the day on which the non-discrimination principle came into force are not be subject to the principle. A substantive change to an existing requirement after this point will bring it into scope.

Exclusions from mutual recognition and non-discrimination for goods

26. There are certain specific exclusions from mutual recognition and non-discrimination for goods. An exclusion is a policy area, area of regulation or type of relevant requirement that is not subject to the principles. The Act provides the Secretary of State with a power to amend these exclusions to retain flexibility for the internal market system in response to changes in market conditions. There is a requirement on the Secretary of State to seek the consent of the devolved administrations before exercising this power. If consent is not given by any of the devolved administrations within a month, the Secretary of State may still exercise the power, however, before doing so, the Secretary of State must publish an explanation for proceeding in the absence of consent.
27. Tax, rates, duties and similar charges are explicitly excluded from the market access principles.
28. There are certain other areas which will be excluded from the scope of mutual recognition but included within the scope of non-discrimination. These are:
    1. Chemicals in relation to authorisations and restrictions under the UK Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) regime;
    2. Legislation aimed to prevent or reduce the movement of unsafe food or feed that poses a serious threat to the health of humans or animals;
    3. Pesticides in relation to the authorisation for sale of products and approval of active substances; and
    4. Fertilisers in relation to safeguarding measures taken by each administration.
29. Certain sanitary and phytosanitary (SPS) measures relating to animal and plant health serious threats are excluded from mutual recognition and non-discrimination. This ensures that the sanitary and phytosanitary measures can be implemented, effectively taking account of differences in pest and disease prevalence across the UK, and in a way that prevents the spread of pest and disease in practice. Any measure falling under this exclusion needs to be supported by a risk assessment demonstrating the measure was reasonable and justified.
30. A relevant requirement made by an Act of Parliament, or under an Act of Parliament, which has effect in more than one part of the UK is excluded from the principle of indirect discrimination where the place of origin and place of destination are both covered by the relevant requirement. For example, a relevant requirement under Act of Parliament that applies to both England and Wales will be excluded from indirect discrimination if the good originated in England and was destined for Wales, or vice versa.
31. See Schedule 1 for the full list of goods exclusions.

Services

32. The Act establishes two UK market access principles to protect the flow of services in the UK: the principle of mutual recognition, and the principle of non-discrimination.
33. A service provider for the purposes of the Act is a person that provides, or intends to provide, a service in the course of their business and who has a permanent establishment in the UK, through which the business is wholly or partly carried on.
34. The mutual recognition principle provides that a person authorised to provide services in one part of the UK is not required to meet additional authorisation requirements to provide those services in another part of the UK. An authorisation requirement is a legislative requirement (a requirement imposed by, or by virtue of, legislation) that a service provider must have the permission of a regulator to provide services.
35. This mutual recognition principle ensures that a service provider who has been authorised to access or exercise a service activity by a regulator whose functions relate only to a part of the UK, is able to exercise that service activity throughout the whole of the UK. The principle of mutual recognition will not apply to the extent that can reasonably be justified in response to a public health emergency. It also does not apply to authorisations that are only issued in relation to a particular premises, place, or piece of infrastructure.
36. The principle of non-discrimination provides that a regulatory requirement will be of no effect in relation to an incoming service provider where it discriminates against that provider directly or indirectly. The non-discrimination principle applies to regulatory requirements. A regulatory requirement is a legislative requirement (made by, or by virtue of, legislation) that would, if not satisfied prevent a service provider from providing services.
37. The non-discrimination principle applies to both direct and indirect discrimination. Direct discrimination is only permitted to the extent it is a reasonably justified response to a public health emergency and indirect discrimination is only justified if can be reasonably considered a necessary means of achieving a "legitimate aim".
38. Both the mutual recognition principle and non-discrimination principle do not apply to relevant requirements for the purposes of the mutual recognition principle for goods in Part 1 of the Act (section 3) or to provisions of the sort described in section 24(1) and 28(1) in Part 3 of the Act in relation to Professional Qualifications. They do not apply to requirements that apply to both service providers and non-service providers. Notwithstanding the principles, regulators may also still require that service providers notify or register with them.
39. Existing requirements are excluded from the scope of the principles of mutual recognition and non-discrimination for services. This means that any requirements in force (or otherwise having effect) before the entry into force of the relevant provisions of the Act are not within scope of the principles, provided they are not later substantively changed. Similarly, provisions that come into force after the Act but simply re-enact or replicate pre-existing requirements without substantive change, will not be brought within scope of the Act.
40. The principles will apply to all new or substantively changed requirements.
41. For mutual recognition, if a corresponding authorisation requirement in another part of the UK is substantively changed, that will also bring an existing provision into scope of the Act.
42. Some services sectors and requirements will, by virtue of being listed in Schedule 2 to the Act, be outside either or both of the principles in the Act. The Secretary of State may, by regulations subject to the affirmative resolution procedure, amend Schedule 2 of the Act.

Professional qualifications

43. The Act introduces a system for the recognition of professional qualifications across the UK internal market. This will allow professionals qualified in one of the four parts of the UK to access the same profession in a different part without needing to requalify. These provisions will only apply in relation to professions for which new qualification or experience requirements are introduced, or existing ones changed, in any part of the UK.
44. This Part of the Act is concerned with access to professions that are regulated in law. This is where access to a profession, including undertaking certain activities or using a specific professional title, is limited by legislation to individuals who hold specific qualifications or experience.
45. Often, access to a profession or occupation will require specific professional qualifications (such as a degree, diploma or award) attesting that an individual has attained a certain level of competence, training or knowledge relevant to that profession. Examples include a Bachelor of Medicine degree or a Postgraduate Certificate in Education. There may also be requirements to hold more general qualifications to a certain level (such as a requirement to have a certain number of A levels), or to have undertaken certain types of experience.
46. Although beyond the scope of this part of the Act, in addition to professionals regulated in law, some professions are voluntarily regulated by professional bodies without underpinning legislation. Such professions include those regulated through voluntary membership of a professional body, including chartered professional bodies, which often require compliance with certain requirements and qualification standards, but do not restrict access to the profession generally.
47. There is currently no overarching system or consistent approach for the recognition of professional qualifications between the four parts making up the UK internal market. Therefore, if professional divergence increases across the UK, professionals could have greater limitations on their ability to practise across the UK than exists currently.
48. Accordingly, the main objective of this part of the Act is to avoid new barriers to the movement of professionals within the UK internal market, by making provision for an overarching system of mutual recognition of professional qualifications that applies across the UK.
49. This part of the Act establishes that an individual who is qualified to practise a profession in one of the four UK nations will be automatically recognised in respect of the equivalent profession in another part of the UK, without needing to requalify. This principle will only apply to a profession when a new provision in respect of qualifications or experience is introduced, or when there is a change made to existing qualification or experience requirements for a profession which results in a limit to the access to a profession in a part of the UK.
50. This Part of the Act also allows for the disapplication of the automatic recognition process, provided that an alternative process for recognition is instituted that complies with specific principles set out in the Act. The process will have to have legislative backing and will be administered by the relevant professional regulator (or, if there is not one, whichever of the UK Government or devolved administrations is responsible for the profession).
51. The principles that must be complied with for the alternative process include that: for the purposes of accessing a profession, qualifications or experience obtained in another part of the UK have to be taken into account and are to be treated the same as ‘like’ qualifications or experience obtained in the relevant part (where the individual is seeking recognition). If the qualifications or experience do not meet the required standard, an assessment should be offered to allow the professional the opportunity to demonstrate the required knowledge and skills. If the knowledge and skills required can be demonstrated either by qualifications or experience or the assessment, the individual must be recognised and permitted to practise that profession in the relevant part of the UK.
52. Professionals also benefit from provisions ensuring equal treatment in respect of the ongoing practice of a profession under this part of the Act. Professionals qualified in another part of the UK cannot be treated less favourably in respect of ongoing practice requirements than those qualified in the relevant part, based on where in the UK their qualifications or experience were obtained or the type of qualifications they have (unless this is justified). This means that professionals cannot be required to meet higher ongoing requirements than locally qualified professionals as part of their ongoing practise, such as continuing professional development or insurance requirements.

Independent monitoring and functions of the CMA

53. To ensure that there are independent arrangements to support the smooth operation of the UK internal market on an ongoing basis, this Act provides for a set of reporting, advisory and monitoring functions supported by information gathering powers.
54. The Competition and Markets Authority ("CMA") was chosen by UK Government Ministers as the most appropriate body to operate these new UK internal market functions. The Office for the Internal Market ("OIM") will be established within the CMA to carry out these responsibilities, ensuring that necessary functions are carried out with sufficient independence, impartiality, and visibility.
55. The CMA was established in 2013 by the Enterprise and Regulatory Reform Act ("ERRA") as a non-Ministerial department which performs its functions on behalf of the Crown. Competition law functions were transferred to the CMA on 1 April 2014. Under section 25(3) of ERRA the CMA has a statutory duty to seek to promote competition, both within and outside the UK, for the benefit of consumers.
56. The Act will confer new functions on the newly established OIM within the CMA to cover monitoring of the ‘health of the market’, as well as the reporting and advice on the economic impact of proposals and regulations on the UK internal market, including their impact on intra-UK trade, investment, and competition. The exercise of these functions will provide all administrations, legislatures, and external stakeholders with published reporting on developments and trends in the UK internal market. The CMA’s existing information gathering powers in section 174 of the Enterprise Act 2002 have been modified to apply to UK internal market functions.
57. The Act will establish an Office for the Internal Market panel and task groups to carry out the CMA’s independent functions. The Secretary of State will appoint an OIM panel Chair and panel members following a fair and open recruitment process, with the panel Chair also being a member of the CMA Board. The Secretary of State will be required to obtain the consent of the devolved administrations prior to making appointments to the OIM panel. If consent is not received from one or all administrations to one or all appointments following a one-month consent period, the Secretary of State can proceed with the appointment with a requirement to give the administrations which did not give consent the reasons for doing so.

Northern Ireland Protocol

Northern Ireland’s place in the UK internal market and custom territory

58. The UK left the European Union ("EU") on 31 January 2020 following the conclusion of an agreement ("the Withdrawal Agreement") under Article 50 of the Treaty on European Union (TEU). The Withdrawal Agreement included the Protocol on Ireland/Northern Ireland ("the Northern Ireland Protocol").
59. The Northern Ireland Protocol provides that certain EU customs legislation applies to and in the UK in respect of Northern Ireland, not including the territorial waters of the UK. This includes administrative requirements in relation to the movement of goods between Great Britain and Northern Ireland.
60. Section 46 will streamline the movement of goods between Great Britain and Northern Ireland by placing a duty on all UK authorities, including relevant devolved authorities, administering the Protocol to have the highest possible regard to: (i) Northern Ireland’s integral place in the UK’s internal market as set out in Article 6(2) of the Protocol; (ii) Northern Ireland’s place in the UK customs territory; and (iii) the need to facilitate the free flow of goods between Great Britain and Northern Ireland. It thus seeks to support the streamlining of trade in line with the obligations set out in the Protocol.
61. Article 6(2) of the Northern Ireland Protocol provides that "[h]aving regard to Northern Ireland’s integral place in the UK’s internal market, the Union and the UK shall use their best endeavours to facilitate the trade between Northern Ireland and other parts of the UK, in accordance with the applicable legislation and taking into account their respective regulatory regimes as well as the implementation thereof".

Unfettered access

62. Section 47 requires appropriate authorities not to exercise their functions in a way that would result in a new check, control or administrative process on the movement of qualifying Northern Ireland goods from Northern Ireland to Great Britain. Additionally, an exercise of function should not result in an existing check, control or administrative process being used for the first time, or for a new purpose or to a new extent.

State Aid and the Northern Ireland Protocol

63. Article 10 of the Northern Ireland Protocol provides that EU State aid rules will apply in relation to trade in goods and electricity between Northern Ireland and the EU. Such EU State aid law will apply in domestic law via section 7A of the European Union (Withdrawal) Act 2018. Section 48 provides that the Secretary of State must publish guidance on the practical application of Article 10. Public authorities will be required to have regard to the guidance, helping to ensure a consistent and uniform application of Article 10. Finally, section 49 stipulates that only the Secretary of State may give the European Commission a notification or information related to aid where Article 10 applies. EU State aid law requires notification or information relating to aid to be provided to the European Commission. At present, this function is performed by the Secretary of State for Foreign, Commonwealth and Development Affairs via the UK Mission in Brussels.

Power to provide financial assistance

64. The general power to provide financial assistance within this Act provides the UK Government with the ability to provide financial assistance for the purposes of economic development, culture, sporting activities, infrastructure, domestic educational and training activities and exchanges, and international educational and training activities and exchanges.
65. The power to provide financial assistance in this Act is intended to enable the UK Government to provide funding to local authorities, sectoral organisations, community groups, educational institutions and other bodies and persons in order to support and promote these policy areas across the UK.
66. The UK Government has a number of existing statutory powers to provide financial assistance in various policy areas. For example, the Industrial Development Act 1982 allows the Secretary of State to provide financial assistance to industry in relevant circumstances. The powers under the Industrial Development Act 1982 may be used by UK Ministers to provide funding in any part of the UK (the powers are also exercisable concurrently with UK Ministers by Scottish and Welsh Ministers by virtue of the devolution settlements in Wales and Scotland).
67. Other existing statutory powers to provide financial assistance extend to some but not all of the UK, for example section 31 of the Local Government Act 2003 which only extends to England and Wales, or section 126 of the Housing Grants, Construction and Regeneration Act 1996 which does not extend to Northern Ireland.
68. UK Ministers have general common law powers to provide financial assistance, which are exercised by Ministers in accordance with the 1932 Public Accounts Committee Concordat and HM Treasury guidelines. Common law powers, however, are subject to HM Treasury limits. In addition, under the devolution settlements, common law powers in devolved areas have been transferred to the devolved administrations (although in Wales many of these powers are exercisable concurrently with UK Ministers).
69. The general power to provide financial assistance in the Act is exercisable alongside the existing statutory and common law powers currently available to UK Ministers. The purpose of the power in the Act is to provide UK Ministers with a single, comprehensive power to provide financial assistance in all parts of the UK across a range of policy areas.

Subsidy Control

70. This Act reserves to the UK Parliament the exclusive ability to legislate for a UK subsidy control regime once the UK ceases to follow EU State aid rules at the end of the Transition Period.
71. This legislation means the UK Parliament can legislate for a UK wide regime to regulate the effects of distortive or harmful subsidies, whether that is in relation to international trade or the UK internal market. Any future regime will be subject to Article 10 of the Protocol on Ireland/Northern Ireland in the Withdrawal Agreement whilst it applies to the UK.
72. The areas that have been and will be exclusively reserved to the UK Parliament in respect of each of the devolved nations are set out in three main pieces of devolution legislation. These are the Scotland Act 1998 (see Schedule 5 ‘Reserved Matters’), the Northern Ireland Act 1998 (see Schedule 2 ‘Excepted matters’) and the Government of Wales Act 2006 (see Schedule 7A ‘Reserved Matters’).

Constitutional embedding and devolved competence

73. Parts 1 to 3 of the Act operate so that any requirements created after its entry in force that would impede the operation of the UK internal market will have no effect. It will therefore no longer be possible to enforce requirements that would interfere with the operation of the principles outlined in the Act.
74. The devolved administrations were restricted in their ability to legislate by the UK’s membership of the European Union single market. Leaving the single market removes those restraints and sees new powers flow to the devolved administrations. But there do need to be rules that govern how all the legislatures of the UK legislate to ensure the UK’s internal market is not disrupted. Those rules the Act puts in place are only those required for the effective functioning of the internal market.
75. This affects legislation in areas of devolved competence made by the Scottish Government, Welsh Government or Northern Ireland Executive, or passed by the Scottish Parliament, Senedd Cymru or Northern Ireland Assembly. In this way, the Act’s provisions create a new limit on the effect of legislation made in exercise of devolved legislative or executive competence. For example, section 2(1) disapplies any legislative requirements that do not comply with the mutual recognition principle.
76. The same is true of secondary legislation made by UK ministers after the Act’s entry in force.
77. It remains possible for a future Act of the UK Parliament to expressly disapply the operation of the Act in future.
78. Part 4 of the Act confers on the CMA, acting through the Office for the Internal Market task groups, advisory, reporting, monitoring and intelligence-gathering functions to assist with the effective operation of the UK internal market. These sections provide that the Scottish Ministers, Welsh Ministers and Northern Ireland departments may request that the CMA exercise its functions in relation to a particular matter, just as the UK Government may do so. Where the CMA provides a report at the request of one of the devolved administrations on the impacts of a regulation implemented by another administration, there is a duty on the administration to make a statement before its legislature.
79. Part 5 requires public authorities, including the devolved administrations, to have regard to the need to maintain Northern Ireland’s integral place in the UK internal market, when dealing with matters arising from the Northern Ireland Protocol. It also prohibits such authorities from imposing new checks, controls or administrative processes on goods from Northern Ireland. It prohibits any public authority other than the Secretary of State from making a State aid notification to the European Commission under Article 10 of the Protocol.
80. Part 6 grants power to a UK Minister of the Crown to provide funding across the following range of purposes: economic development, infrastructure, culture, sporting activities, and international educational and training activities and exchanges. These purposes fall within wholly or partly devolved areas under the Scotland Act 1998, Government of Wales Act 2006 and Northern Ireland Act 1998. The new powers sit alongside the existing powers by which the UK Government can fund in relation to devolved matters across the devolved nations, in particular the Industrial Development Act 1982. This creates a means for the UK Government to provide funding across a range of largely devolved areas that would sit alongside any funding provided by the devolved administrations in those areas.
81. Part 7 amends the Scotland Act 1998, Government of Wales Act 2006 and Northern Ireland Act 1998 in order to make clear that the regulation of distortive or harmful subsidies is a reserved matter. The scope of the new reservation will regulate the effects of distortive or harmful subsidies, whether that is in relation to international trade or the UK internal market.
82. The Act will be a protected enactment under the Scotland Act 1998 and the Government of Wales Act 2006. It will be an entrenched enactment under the Northern Ireland Act 1998. This means that it cannot be modified by the Devolved Legislatures, and so it will not be open to those legislatures to disapply the provisions of the Act or modify their effect.