The Deposit Return Scheme
The Scottish Government’s quest to introduce the beleaguered Deposit Return Scheme (“DRS”) appears to be like trying to catch lightning in a bottle. Originally, Scotland was due to launch the UK’s first DRS for drinks containers from July 2022, but the Covid-19 pandemic delayed the launch initially until 2023. The DRS would mean consumers pay a refundable deposit of 20p when they buy a single-use drinks container made of plastic, glass or steel/aluminium. The deposit can then be redeemed when the consumer recycles the container.
The Scottish Government made a request to the UK Government for an exclusion for the DRS from the UK Internal Market Act 2020 (the “2020 Act”) in 2021. After a number of further delays and false starts, the UK Government announced in May 2023 that it would agree to a temporary exclusion under the 2020 Act for Scotland’s DRS but crucially it would not extend to glass products. This would bring the scope of the DRS in line with the UK Government’s plans for England. The UK Government said it wants there to be “maximum alignment and interoperability between schemes”.[1]
After initially asking the UK Government to reconsider its decision, the Scottish Government has now announced that the DRS launch will be delayed yet again until at least October 2025, which will align with the launch of a DRS in England.
The decision of the UK Government to refuse to grant a broader exclusion to include glass in the scheme has been met with bitter indignation by the Scottish Government. The First Minister, Humza Yousaf MSP, lamented that the UK Government is “trying to scupper the DRS – they’re trying to undermine devolution time and time again.”[2] Meanwhile, Deputy SNP Leader, Keith Brown MSP, accused the UK Government of “sabotage”.[3]
The fallout from the UK Government’s recalcitrance has not been limited to Scotland. Only last month, the First Minister of Wales, Mark Drakeford MS, waded into the political furore surrounding the DRS in Scotland declaring that he would “dispute” the UK Government’s invocation of the 2020 Act to block glass being included in the scheme and made clear that the Welsh Government will retain glass in the equivalent DRS in Wales.[4]
The political row that has erupted over the DRS reveals important insights about the current state of the Union, devolution, and the functioning, or more precisely the dysfunction, of our constitutional settlement post-Brexit.
Most obviously, the episode has demonstrated the fractious and frayed relationships that exist between the UK Government and the devolved nations. There are clearly deep-rooted divisions over the unresolved and apparently intractable questions of who decides what in post-Brexit Britain.
It has also played into the narrative of a power-hoarding executive in Westminster dictating policy by edict to the rest of the UK, following the pattern of refusing to allow the Scottish Parliament to hold a second independence referendum and blocking the Gender Recognition Reform (Scotland) Bill from receiving Royal Assent.[5]
Any imperiousness from the UK Government can be seen most evidently in the way Westminster has chosen to regulate the UK internal market outside the EU. The DRS saga has demonstrated that the 2020 Act is operating (as it was feared it would) as a centralising and anti-devolutionist device that has concentrated power even further into Westminster, to the detriment of the devolved nations, in a British state that was already one of the most centralised in the Western world.
The Internal Market
In part, it is a question of markets. The Treaty of Union of 1706 created for the first time a UK single market that came into being in 1707. When the UK joined the EU in 1973 (then known as the European Community), this UK internal market was subsumed into the EU single market. Following Brexit, the UK’s own internal market came back online.
However, a principal difference between 1973 and today are the devolution settlements in Scotland, Wales and Northern Ireland, which did not exist when the UK joined the EU. The establishment of the Scottish Parliament, the Welsh Senedd and the Northern Ireland Assembly, with their own executives with responsibility in devolved areas of competence, has created an additional layer of complexity to the UK internal market that did not exist before. The regulation of the UK internal market may fall under both reserved and devolved areas of competence, and some areas may straddle both.
The UK Government recognised this and in July 2020 started consulting on the introduction of what became the UK Internal Market Bill. After a blisteringly fast consultation process and the Bill being rammed through Parliament, the United Kingdom Internal Market Act 2020 made it onto the statute book by December the same year. Both the Scottish Parliament and Welsh Senedd withheld legislative consent to the Bill.[6]
The 2020 Act introduces two market access principles. The first, the mutual recognition principle, means that if a product or service is freely marketed in one of the constituent parts of the UK then it is entitled to unrestricted access to the markets of the other constituent parts, subject only to a restricted range of exclusions.[7] The second, the non-discrimination principle, requires that each constituent part of the UK shall treat goods or services arriving from another constituent part in the same way as it treats locally produced goods and services.[8]
In respect of the DRS, the issue is that the scheme may fall foul of these market access principles. For example, the proper functioning of the system will likely depend on the ability to identify regulated containers in some way, via a label or barcode. Since there is currently no DRS in the rest of the UK, producers in other parts of the UK outside Scotland could argue that they are entitled to sell their products in Scotland without making such alterations pursuant to the market access principles, thereby making the Scottish scheme unviable (especially since most producers are likely to be south of border). An exclusion from the UK Government from the 2020 Act is therefore required to make the DRS workable.
One of the principal reasons that the Scottish Parliament and Welsh Senedd withheld legislative consent to the Internal Market Bill was that no obligation was imposed on the UK Government to agree common frameworks to regulate the UK internal market. In the absence of any such agreement, the market access principles would take full effect without any modification to account for differences and sensitivities in the devolved nations.
While this may sound a technocratic point, it’s in fact hugely significant. The EU Withdrawal Act 2018 provides that control of areas where EU law and devolved competence overlap pass by default to the devolved institutions post-Brexit; but the 2020 Act places significant restrictions on how those powers can be exercised in practice by the devolved bodies, even in areas of devolved competence. This is because they must comply with the market access principles outlined above.
Ensuring compliance with the market access principles also means that regulatory divergence may be more restricted than within the EU single market. While there are some statutory exclusions under the 2020 Act such as threats to human, animal or plant health, the space for giving preference to devolved regulatory autonomy over the market access principles is strictly limited.[9]
The sting was supposed to be taken out of the market access principles by the introduction of common frameworks. However, the 2020 Act is structured such that market access principles are displaced only if the UK Government makes secondary legislation to give statutory effect to a common framework.[10]
In other words, the UK Government calls the shots, and the devolved institutions have little or no say. The market access principles will have full force and effect unless the UK Government unilaterally decides to grant an exclusion or to give statutory effect to a common framework. The omission of glass in the DRS exclusion and its knock-on effect for the scheme’s overall viability are the result of this command-and-control legislative landscape.
However, the parable of the DRS in Scotland may also provide us with a clue as to why the regulation of the UK internal market has been structured in this way and as to the way it is likely to operate in the future. The 2020 Act is not only highly centralising but also adopts a radical deregulatory model for the UK internal market.
Pursuant to the mutual recognition principle, stricter standards in one part of the UK may be maintained and applied to locally produced goods and services, but they are disabled in application to goods and services coming from another part of the UK where regulation is more lenient or non-existent. Since England is by far the largest part of the UK and where most producers are based, the devolved nations are likely to be reluctant to impose stricter requirements in terms of environmental standards, for example, on their domestic producers lest they be put at a significant disadvantage to their competitors in England.
As a result, the 2020 Act encourages a race to the bottom on standards and every part of the UK is likely to be brought down to England’s level on regulation. Maximum regulatory alignment, then, appears in reality to be a euphemism for maximum deregulation.
The legislative regime does not centralise power for power’s own sake. Rather it allows the UK Government to promote a free market fundamentalism by controlling what happens across the UK internal market and by incentivising deregulation in the devolved nations. There is no cognisance of the local regulatory cultures, needs and sensitivities in different parts of the country. Devolution is sacrificed on the altar of perceived “economic efficiency”.
Conclusion
The arguments over the implementation of the DRS underscore the need for a more democratic and inclusive mechanism for managing the UK internal market. For example, more exclusions could be added to the 2020 Act to make the market access principles more flexible and a strengthened commitment to common frameworks would inject a different and more co-operative dynamic.
Making and managing common frameworks might then tie into broader constitutional reform. A UK Council of Ministers and Senate of the Nations and Regions as a replacement to the House of Lords might be better placed to manage common frameworks and facilitate co-operation between the nations of the UK. The UK might codify parts of its constitution with minimum standards in relation to the environment and other protections to guard against deregulation and a race to the bottom. Whether there is political appetite for this kind of overhaul remains to be seen, but one thing is certain: little is now separate from our constitutional dilemmas, least of all a deposit return scheme for glass containers.
Seán Patrick Griffin.
Seán is a Scottish solicitor with experience practising in constitutional law and human rights. He has written widely on constitutional reform and has been published in a number of books and journals on the subject.
The Constitution Society is committed to the promotion of informed debate and is politically impartial. Any views expressed in this article are the personal views of the author and not those of The Constitution Society.
[1] https://www.gov.uk/government/publications/scottish-deposit-return-scheme-uk-internal-market-exclusion/policy-statement-scottish-deposit-return-scheme-uk-internal-market-exclusion
[2] https://www.bbc.co.uk/news/uk-scotland-65731807
[3] https://www.bbc.co.uk/news/uk-scotland-scotland-politics-65808060
[4] https://www.bbc.co.uk/news/uk-scotland-scotland-politics-65783480
[5] The Bill was prevented from receiving Royal Assent by the Gender Recognition Reform (Scotland) Bill (Prohibition on Submission for Royal Assent) Order 2023
[6] https://ukandeu.ac.uk/reshaping-devolution-the-united-kingdom-internal-market-act-2020/
[7] United Kingdom Internal Market Act 2020, ss. 2-4
[8] Ibid., ss. 5-9
[9] United Kingdom Internal Market Act 2020, Schedule 1
[10] Ibid., s. 10