UK Internal Market Bill: Lords amendments explained

This briefing refers to the UK Internal Market Bill before its adoption and becoming an Act of Parliament (United Kingdom Internal Market Act 2020) on 17 December 2020.

The UK Internal Market Bill 2019-21 was introduced in the House of Lords on 30 September and completed its passage through the Lords on 2 December 2020. The House of Lords made significant amendments to the Bill.

Many of the debates returned to two key themes as summed up by Conservative peer Lord Garnier in the concluding debate on the Third Reading: the rule of law and “the maintenance of the United Kingdom”. Significant amendments were made to address the effects of the Bill on these two areas. This paper summarises the central issues and the reasons for the amendments.

Rule of law

The Lords Second Reading debate focussed on the principle of upholding the rule of law. Lord Judge, Convenor of the Crossbench Peers, moved a motion to express regret that the Bill’s Part 5 (which concerns the implementation of the Northern Ireland Protocol) would "undermine the rule of law and damage the reputation of the United Kingdom." Lord Judge said that by supporting it, Parliament – which is responsible for making the law and expecting people to obey the laws it makes – would be knowingly granting power to the Executive to break the law. The amendment was approved on a division by 395 votes to 169. A regret motion does not prevent a Bill from receiving its Second Reading. However, it was an indication that the Lords would seek to change the Bill in fundamental ways.

Northern Ireland Protocol clauses removed

At Committee stage, the Lords resolved to remove clauses that would enable a breach of international law by allowing the Government to interpret the Northern Ireland Protocol and override parts of the UK-EU Withdrawal Agreement. Members voted by 433 to 165 to remove clause 42. According to the House of Lord’s Library, this vote was the largest in terms of turnout since remote voting was introduced in the Lords, and the third largest since the House was reformed in 1999.

Members also voted by 407 to 148 to remove clause 44. Further clauses of Part 5 were removed by an agreement through the usual channels. As a result, the rest of Part 5 was also deleted without further votes.

The Government has said that it will reinstate the clauses when the Bill returns to the Commons.

Devolution aspects

The Internal Market Bill’s perceived threat to the Union, that is, the United Kingdom, was a prominent theme of Lords’ debates and amendments.

Peers were concerned that Part 5 (on the Northern Ireland Protocol) weakened the Union, while the Government argued that its intention was to safeguard it.

Concerns were also expressed about intergovernmental relations between the UK Government and devolved administrations. Peers wanted stronger commitments to consult with the Scottish and Welsh Governments and Northern Ireland Executive, and a stronger emphasis on the Common Frameworks programme. Peers were unhappy with the extent of restrictions planned for devolved matters.

At Report Stage, Lords Amendments 1, 19 and 34 related to the Common Frameworks programme were passed, meaning that an agreement reached through this programme, which permits policy divergence, would be excluded from the UK market access principles.

Under the Common Frameworks programme, the UK Government and the devolved administrations have agreed to work towards common approaches in areas that are currently governed by EU law, but that are otherwise within areas of devolved competence. The Lords amendments would, in the words of Baroness Finlay of Llandaff (crossbench), make the market access principles of the Bill “the fall-back, not the default.” All three amendments were opposed by the Government.

Market access principles

Various government and opposition amendments were made to parts 1, 2 and 3. These parts set out how the market access principles of mutual recognition and non-discrimination would apply to trade in goods, services and the recognition of professional qualifications.

A significant group of opposition and crossbench amendments removed the delegated powers of Ministers to make regulations regarding market access principles. Primary legislation would instead be required whenever the scope of application of these principles is to be changed.

Whereas previous amendments removed delegated powers, further amendments were made to require the Secretary of State – to differing extents – to consult the devolved administrations before amending the scope of market access principles using these delegated powers.

Government amendments were made to introduce new clauses, which would require the Secretary of State to carry out a review of, and report to Parliament, about, the use of amendment powers.

Government amendments and amendments moved by opposition and crossbench peers were made to Part 4 on Report. The amendments related to the role of the devolved administrations in the governance and processes of the Office for the Internal Market (OIM), and the position of the OIM within the Competition and Markets Authority (CMA).

Financial assistance powers and harmful subsidies

Finally, the Lords resolved to remove Part 6 of the Bill, which was intended to give the UK Government the power to provide financial assistance to any part of the United Kingdom for a wide range of purposes. The main arguments against granting those powers were the effects on the devolution settlement. Also, clause 50 was removed, which would have made subsidy control a reserved competence – making this issue the responsibility of the UK Parliament alone.

Bill page on Parliament’s website

Commons Library briefing The United Kingdom Internal Market Bill 2019-21 (14 September 2020) describes the Bill as it was introduced in the Commons.

Lords Library Briefing United Kingdom Internal Market Bill HL Bill 135 of 2019-21 (9 October 2020) covers the amendments to the Bill during the Commons stages and summarises the Bill as it was laid before the Lords (Bill 135)