The authoritative source for independent research on UK-EU relations

02 Jun 2023




Alex Walker examines the dispute between the UK and Scottish governments over Scotland’s deposit return recycling scheme, exploring what it tells us about the functioning of the new system for managing UK intergovernmental relations.

Late last week the UK government issued a policy statement saying that the Scottish government’s flagship ‘circular economy’ policy – a deposit return scheme (DRS) aimed at boosting recycling rates – would have to be watered down.

Scotland’s DRS would see a deposit of 20p added to the price of single-use drinks containers which will be refunded if the item is returned for recycling. The scheme has been in the works for some time and was due originally to begin in August 2023, before being pushed back to March 2024.

However, it ran into difficulty in the form of the UK Internal Market Act 2020, which established ‘market access principles’ designed to prevent new trade barriers emerging across the different parts of the UK post-Brexit. Given that the DRS would mean different trading requirements in Scotland, it fell afoul of the rules which prevent regulations that discriminate between goods in different parts of the UK.

The Scottish government had been seeking an exemption which would have allowed it to pilot the scheme ahead of the launch of similar schemes planned for the rest of the UK in 2025. While the UK government has now officially granted one, it has said that this will not cover glass, citing business concerns and the fact that glass is not due to be included in the schemes planned for England and Northern Ireland (proposals in Wales currently include glass – but an exemption is yet to be applied for).

Perhaps unsurprisingly, this has provoked the ire of Scottish ministers, who have accused the UK government of effectively trying to sabotage the scheme at the 11th hour. The Scottish government is now assessing whether their scheme is still viable.

Although not as explosive as the UK government’s blocking earlier this year of Scottish legislation on gender recognition, London and Edinburgh have again failed to reach an agreement over a policy difference that is acceptable to both sides. Up until this point, it looked like a dispute might be avoided – with dialogue taking place and progress being made in the relevant forums.

New structures for managing relations between the central and devolved governments were announced in January 2022. Observers were quick to note that to work effectively there needed to be culture change too – away from the mistrust and antagonism that characterised relations in recent years.

Some saw the advent of Sunak’s premiership as a positive step in this direction – on the day he took office he at least picked up the phone to speak with his devolved counterparts, unlike his predecessor Liz Truss.

But do these latest rifts suggest that beyond the moderately more friendly exterior, a more substantial shift in approach remains elusive?

Despite a long wait, the overhauled IGR machinery was more ambitious than many had anticipated. It now consists of a three-tier system of forums, with the ‘Prime Minister and Heads of Devolved Governments Council’, which meets annually, at the top; two interministerial standing committees in the middle; and various Interministerial Groups (IMGs), focused on specific policy areas, at the bottom.

According to the joint agreement establishing the new system, it is ‘built on principles of mutual respect and trust’ and ‘will provide a positive basis for productive relations, facilitating dialogue where views are aligned and resolution mechanisms where they are not.’

When the heads of government met for the first time under the new arrangements in November 2022, a Scottish government spokesperson called the talks ‘constructive and cordial’, while Sunak emphasised ‘teamwork’ and ‘collective effort’.

But only two months later the major rift emerged between the UK and Scottish governments over Sunak’s decision to block the Gender Recognition Reform (Scotland) Bill. An opportunity was clearly missed for a high-level dialogue on the policy, which – as so often – will now be resolved via the courts.

Dispute resolution and avoidance are meant to be a central function of the new IGR structures. The 2013 Memorandum of Understanding on devolution states that the UK government sees its powers to intervene in devolved matters – including the section 35 power to block legislation – ‘very much as a matter of last resort’.

Given the lack of top-level dialogue on the issue, it’s questionable whether the power has been used as such in this instance. As Philip Rycroft has written, the sad truth is that ‘a noisy public stand-off on this most sensitive of issues rather suits the political interests of the main protagonists.’

Constructive dialogue is still being subordinated to point-scoring on the constitutional question forever lurking in the background of the relationship.

This said, it looked like a similar dispute over the DRS might be avoided. The Environment, Food and Rural Affairs IMG discussed the issue in March and April, noting that the agreed processes for pursuing an exemption were being followed – primarily through the Resources and Waste Common Framework.

Common frameworks are the other mechanism for managing the UK internal market post-Brexit. Processes and policies are agreed between the UK and devolved governments to avoid internal trade barriers emerging in the areas that used to be regulated at EU level. Under the Internal Market Act an exclusion from its encompassing market access principles can be granted if agreed through a common framework.

The Scottish government made the case for an exemption for the DRS through the relevant common framework and IMG. But the final decision as to whether divergence can go ahead and on what terms rests with the UK government. Last week it granted the exemption, but on more limited terms than those proposed.

Although not an outright rejection of the DRS scheme, it serves to reinforce the asymmetry of the relationship, with the UK government setting the final parameters of the policy.

Common frameworks have been praised as ‘innovative mechanisms for developing UK-wide policy by collaboration and consensus.’ They are intended to establish common approaches, while ‘acknowledging policy divergence’. But the outcome here has not been one of consensus, on either a common approach or Scottish divergence.

While the post-Brexit system for managing intergovernmental relations and the UK internal market is still relatively new, it is starting to be tested – and there is clearly still work to be done.

The governments need to commit to using the new forums to head off or resolve disputes if they are to have any real usefulness.

And the UK government needs to do more to demonstrate that it can work as a team with the devolved governments – otherwise, they may lose faith in the new processes before they’ve had a chance develop.

By Alex Walker, Research and Communications Officer, UK in a Changing Europe. 


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