 Good morning, and welcome to the 15th meeting in 2019 of the Finance and Constitution Committee. I remind members and witnesses to put their mobile phones in a situation that does not disturb the proceedings of the committee meeting. The first item on our agenda this morning is to take evidence from a panel on the internal market from Professor Eileen McCarr, Professor Michael Keating, Dr Vivian Gravey, Professor Michael Duggan. I warmly welcome our witnesses to the meeting, and thank you for providing us with written submissions. I think that it was very helpful, which means that I don't think that we need to go into any opening statements because we've got something prepared from you already. If I could just kick off with a very general question. The question of the internal market first arose in our inquiry into common frameworks when the point which is made that there never needed to be a definition of the UK internal market because of our membership with the European Union. In the report on common frameworks, we noted that the UK internal market is not defined in law. Given that, do we need to have it defined in law, or given common frameworks, trade deals and the like, is an internal market something that may just evolve? What might be the impact of having no internal market clearly defined? For example, would it make it harder or easier for the UK and devolved Governments to challenge each other over the perceived unfair use of economic policies to support local business conditions, or are there no others who are interested in state aid issues later? There is a very general but, probably, quite an interesting question to begin with, so who would like to kick off? There are arguments on both sides as to whether we need to define it. Obviously, it's difficult to define it and the process of reaching an agreed definition is going to be quite tricky. There are dangers if it isn't defined. Obviously, there are dangers about a lack of principled approach, different approaches in different contexts, which don't necessarily make sense compared to one another. The biggest risk is that if we don't have a clear idea of what the UK internal market is and what its limits are, which is probably the key thing, then we run the risk of it being defined by default by the UK Government and the UK Parliament. It gets to decide what the appropriate balance is between central control and local autonomy. It gets to decide when it's acceptable to depart from free trade principles to promote other values. There are undoubtedly risks to the devolved Governments and devolved Parliaments from an overly expansive definition of an internal market, but the situation that we're in is that the devolved institutions are vulnerable anyway. Having an agreed principle framework could produce some sort of constraint or at least set of standards against which to measure the UK Government's actions. I think that that's probably important. I'd be worried about putting it into law because this is a contested concept. It's open to challenges. It's highly politicised, highly challenged, and many of the decisions should be taken in some kind of political forum. The other danger in putting it into law is that it may be used as a mechanism for centralisation, particularly if it's Westminster that's the custodian of it, as Alien was saying just now. The experience in the European Union is that the courts might tend to expand the definition of what is meant and take it into unanticipated areas. What is more important is to have some kind of forum or central place representing all the Governments where the notion of the internal market can continually be reviewed and redefined in practice. Such a mechanism should not be hierarchical, it should involve the UK Government, the devolved Governments, somebody representing England. There should be scope for some expert advice to go into there, not to take the decisions but to provide some advice as to what the implications of the internal market could mean, and then these things would be resolved within that intergovernmental forum as far as possible, keeping these things out of the courts. I think the key difference with European Union internal market would be, of course, that no single member state of the European Union can just change the definition of the EU single market. With the situation as it is in the UK, you would have a possibility for the UK Government not only to first set the definition but for every Government coming after it to just change the definition. I think there is an issue about whether the best way of making sure that one of the four Governments cannot just change the definition of the single market for everyone and whether that is going through a legal process, setting a clear definition somewhere, and that is very complex, or whether it is having some kind of much stronger intergovernmental structure, but the way that the UK constitution works is not, it is going to be very difficult to hold the UK Parliament and the UK Government to some kind of commitment of not changing the rules in a way that benefits England mostly. I would agree that there needs to be some sort of definition for the reason that Eileen gave that I think you need to provide a degree of coherence to what would otherwise be quite a disparate range of regulatory problems and policies, which are potentially in conflict or intention with each other. I suppose I would also agree with Michael's point very much that if this is not done, if you do not have your horizontal principles that help to define and articulate your trading relationship between the constituent territories of a state like the UK, there is a risk that it happens by default, not just by Westminster but by the courts, and I think that that is one of the main experiences of the EU, is that the courts can easily step in and provide the type of horizontal internal market principles that politicians feel to articulate. I suppose the main thing that I would add to what has been said before is that I find it much more helpful to think in terms of an internal market as a process and a set of institutions rather than as a simple definition of a statement of policy. Really what internal markets are, I think, are ways of managing trade relationships between territories with regulatory autonomous powers such as the UK post withdrawal from the EU. If you think of internal markets as a set of institutional arrangements which constantly address new problems, which try to find solutions to trade barriers, which try to define and address distortions of competition in a way that you do not need to worry so much about the definition of a barrier to trade or a distortion of competition because you are constantly refreshing your political and institutional understanding of it through your institutional framework. If you think of internal markets more as a process than an end state, it becomes particularly important to try and define what the institutional framework should be for managing these problems rather than give a set solution that will last forever, because we know that internal markets do not really work like that. Thank you for those very helpful opening comments. I know that you have got a sub, I don't know when you go. Oh, thank you. Good morning, everyone. I just want to write at the very beginning to address this question ahead on that Professor Duggan was just talking about in his very helpful remarks there about keeping the courts out of it, which is something that Professor Keating said. I did not interpret what Eileen McCugg said in quite the same way as I think you did, Michael, in that Eileen said that the danger is if we don't define this, it will happen by default, and if it happens by default, it will happen in courts. Is that right? No. The opposite. The danger is if we don't define it, it will happen by default, as Vivianne said, by UK Government, UK Parliament decisions on an ad hoc basis changing over time because there's no way to constrain them. There's no way of legally constraining them, but some sort of statement of principle, at least, gives you a reference point at which to say, well, please justify that decision in accordance with this set of principles, or an institutional framework that allows decisions to be argued out, so no. The question I wanted to ask was this. Is it either possible or desirable to keep the courts out of this? When we look at the EU, as Professor Duggan says in his written submission to us, we've got something like 6,500 legal instruments on the EU internal market, and yet some of its most important rules were written in judgments, not in legislation at all, and he cites the famous example of the Cassie's de Dignan decision in the late 1970s. If we look at both Canada and the United States, a huge amount of the federalism case law in both Canada and the United States is about the commerce clause, about economic regulation, about their internal markets. Is it even possible to keep the courts out of this? If it is possible to keep the courts out of this, why would you think that that was desirable? One reason for that is the asymmetrical nature of our constitution, because if we were to have the courts in it, the courts would presumably have to be able to strike down English provisions as well as Scottish Welsh and Irish provisions, and that's simply not going to happen. That would be a federal system and that might be desirable, but it's not going to happen, so there's no asymmetry there. The fact that it's the court that has made a lot of the running, as you say, in the European internal market has been subject to a lot of criticism. This is precisely because something had to be done to create an internal market, and that's why you had qualified a majority of voting, you had a role for the court, because to overcome all these veto points with 27 countries, here it's more a question of preserving an internal market that already exists, so you wouldn't need that kind of degree of initiative and momentum to create an internal market. I suspect that the number of issues that would arise in the UK would be much fewer than they would in the European Union, and therefore being able to be manageable through a political process. Generally, in keeping with the way that devolution has been handled, I think there's been a general consensus that it's been fortunate that we've kept a lot of this out of the courts, that matters that are political have been resolved through the political process rather than having excessive recourse to the courts. You mentioned Canada, I could have the case of Spain and Italy where the courts have been overburdened with jurisdictional disputes, and thankfully in the UK we've managed to avoid a lot of that. I'll take a slightly different perspective from Michael on this question. I think to say that the EU internal market had to be created and the court played a role in it, it's true to say that the UK internal market is already quite well established. It's also true, but I'll come back to what I said before. Internal markets aren't about a destination, they're about the constant process of managing relationships between territories, and from that point of view it doesn't matter whether the EU's internal market had to be created over 40 years or whether the UK's internal market is a particular starting point. From the very moment of withdrawal from the EU, the UK internal market will face identical problems to the EU internal market, which will need to have some sort of response. The main question is whether that response is going to be provided primarily by politicians and legislatures who have consciously set out to think about its design and its co-ordination, or will it be effectively done by courts because nobody else has really provided an answer? The Cassie's to Dijon judgment is worth mentioning in a little bit more detail here. The day before the judgment in Cassie's to Dijon, the rule was across Europe that if you made a good or provided a service within your own territory, you couldn't automatically assume that you could just sell it or provide it in any other territory without meeting its own regulatory standards, so the markets were highly compartmentalised. The day after the judgment in Cassie's to Dijon, if you made a good or a service in your territory, you could sell it anywhere across Europe, provide it anywhere across Europe and the burden was suddenly upon the host country to demonstrate that its rules were actually needed in the public interest and could be justified. That isn't just a minor development, that is a total transformation of the way that the entire European economy functioned, and that was done in the space of a couple of paragraphs in a single judicial decision. Really, the UK, I suppose, is going to face the same type of challenge because if we get a couple of weeks after withdrawal and the Scottish Parliament enacts legislation, which is capable of creating a barrier to trade or a distortion of competition for English or Welsh or Northern Irish goods and there is no political legislative framework for managing that, you can bet it won't take very long before someone goes to a court and says, either the Scots have tried to stop me selling my English good in Scotland because it doesn't meet their new regulatory requirement or the Scots are allowing these English goods into Scotland and I think it's distorting my competition because I have a higher regulatory burden. It would then only take a bold set of judges to say, Cassie's to Dijon, and that's it. The UK internal market has been created and it's been created by judges, it's not been created by a legislature. It's important to think that we're talking a lot about intergovernmental processes here, but Cassie's to Dijon was a private actor going to court. It's also about citizens, it's also about businesses and whether they'll have similar kind of rights to go to courts and have similar legal remedies in the UK system that they have in the EU and that's going to be extremely important that the internal market is not just a question about the four Governments, it's about everyone living in these countries. Michael said it would only take a bold court to give us a UK Cassie's to Dijon, but it would have to be an extremely bold court because on the current state of the devolution legislation, there is no obvious way in and we only have very limited provisions in the existing devolution settlements which have any relevance to a general concept of a UK internal market. There's the Secretary of State for Vito Power in Northern Ireland, never used, if it was used it could be judicially reviewed, but until it's used it can't be judicially reviewed. In the Scotland Act but not in the other devolutions statutes you've got protections for the trade provisions in the Acts of Union but in Imperial Tobacco the courts have already told us those are very limited in their effect so those are not particularly promising. More generally of course there's interpretation of the existing reserved matters but the approach of the court so far has been that those are to be interpreted relatively narrowly but interpreted in line with normal principles of statutory interpretation so not in light of any overarching idea that these are intended to protect the UK internal market. It would require a great deal of judicial creativity to get us to that same position. In the EU there's a set of treaties which provide a hook on which the court can come in and develop a jurisprudence but I just don't see where the hook is in the domestic legal system unless there is some amendment of the the devolution statutes and then in any case as Michael said that would only constrain the devolved level. We've still got the problem of the UK level. Yeah, I just said that. I agree with what Eileen said but I'd add to that the fact that there are very many many fewer issues in the devolved settlements that are likely to raise internal market issues because most of those issues are actually reserved. Devolved is agriculture environment yes these are important issues but it's not as broad imagine it wouldn't be as broad as the internal market provisions in the European treaties which potentially cover a huge range of things. Michael sorry I think I disagree with that if you look at the kind of cases that are ongoing between the UK and the commission from a court of justice if you look at the history of the cases in the last 15-20 years environmental cases have been there at very very highly ranking and the UK has lost on most of these cases compared to other areas where the UK has actually been found on the winning side and others so I'd say actually you know these areas of environment of agriculture and if you look at the Welsh UK relationship around agriculture a lot of the cases between the Welsh Government and the UK one have been on agriculture subsidies these areas will actually come and perhaps be very very important. That's why I said agriculture and environment but outside that it's difficult to see. Yes but this will be extremely important. I think I don't disagree at all about what Eileen said in the sense that if you focus on institutions if you focus on the devolution settlement then it's very difficult to see the hook for where a court could develop a default system of internal market rules but I think this comes back to the really important point that Vivian made about the rule of individuals here because this isn't about the interpretation of the devolution statutes or this is about an individual finding a way to persuade a court to articulate some sort of internal market principle and I know that I've given this a degree of thought one of the easy routes in would be the human rights act all you need to do is say I have a freedom of property and a freedom to trade and a freedom to run a business and the Scottish Government and Scottish Parliament are inhibiting that freedom me as an English trader by refusing to allow me to sell my good within Scotland because it doesn't meet their local regulatory requirements that's enough of a hook for a court which is minded to do so to create a Cassie's to Dijon because all they have to do is say prima facie Scotland has infringed your right as an English trader to run a business make a profit your freedom of property now we have to consider how that can be justified how it can be reasoned through from a legal point of view and then you have your Cassie's to Dijon so I think the hooks exist they're just waiting to be exploited I think the real question is do we set a line which says that these issues have been thought about and designed politically which is basically saying to the courts you now follow what we have decided as legislatures or do we not provide any solutions and we continue talking about these things for many years and in the meantime individuals and businesses will push the courts to provide an answer and I think that that's again one of the key points there has to be an answer to this problem that you know the day will come and it might be a few weeks it might be a few months when Scotland decides to exercise its devolved part in a way that creates a barrier to trade or a distortion of competition for an English manufacturer or service provider and you can bet that from the moment that happens that English service provider or a manufacturer of goods will say where is my hook to find an answer to this question and if the legislatures haven't provided an answer they'll want the courts to do that and it might well be that the courts answer is to say well we won't have any cassies to Dijon but that in itself is a really important decision because that's basically a decision to compartmentalise the UK markets as between each other there is no right to trade in effect within the UK so whether you have a cassies to Dijon or whether you don't is equally important because one says we'll have an expansive UK internal market the other says we'll have quite a restricted and compartmentalised internal market but they're still equally valid answers well that's a truly fascinating beginning to this discussion genuinely and we'll just try and bore down into some of this a bit more willy I think you wanted thanks miss I was hoping to just take you back a little step if you don't mind the colleagues from the dispute resolution discussion they are just slightly back a wee bit what kind of processes should there be in place to enable somebody of people or otherwise to establish what an internal market in the UK should look like so that we don't get it defined by default so we don't get it imposed upon us by the UK Parliament what should it be professor Keaton in your paper you talk about a council of the UK's working in similar lines to the council of the EU what kind of systems and measures and institutions or bodies are otherwise can you envisage being brought about to begin with to avoid these these situations and do you see any progress towards that no I don't see any progress towards that but yeah the principle is that the internal market is something that changes over time it's a living principle things come up that perhaps anticipated but there should be some baseline against which we shouldn't measure these and some appreciation of what really matters and what really doesn't matter one of the things is about the border between public services and the markets and the extent to which public services could be projected from market competition that's a really big one another one is about proportionality what really matters does it really matter if Scottish sheep farmers are getting direct production listed collected payments as they are at the moment and the Welsh farmers don't like it but is that big enough is that really worth making a fuss about so working through those kinds of issues laying down these baseline principles and then when something does come up because as Michael said something can come up in a court and come up anywhere going to that body which would represent the the Governments the four nations plus the UK to try and find some political resolution of it assisted by people working through the principles assisted by advice from business civil society what whatever to try and find a solution before things get to the courts and again I think if you put this into law without properly defining it just in inviting people to continually come up and make cases a lot of that has happened within the European Union so I think it's better to start off with these basic principles and then have a place where they can be applied in individual cases rather than setting up a rigid legal framework in advance and what they're doing at the moment such as say we've got sectoral frameworks being negotiated we've got discussions going on about the internal market we've got sectoral bills in agricultural environments so on we've got competition policy coming on and then we've got the trade bill and trade policy and all these seem to be separate processes at the moment before we've even got to the to the point of Brexit without any consistent principles across them and that that I find quite troubling what worries me about about entrusting this into an intergovernmental process which is of course is crucial so if we're talking about if we're talking about UK way principles there has to be buy-in from all levels of government so that's that's important but something that is purely an intergovernmental process risks history tells us risks being a very untransparent process and this is really important you know the kinds of decisions you make about the internal market principles that are to be applied really matter they have significant implications for the ability of parliaments and governments to to make decisions to to pursue their policy objectives and that can have an impact through time so I think there is a there is a real danger of a of a stitch up you know which nobody has had any opportunity to comment on the advantage of a legislative approach is that at least it does at some point come into a public forum where where there is an obligation to justify decisions that are made there's an opportunity to amend now the end point of that might be problematic in terms of what you get but the process is at least to some extent a more transparent one so so I would like to see whatever process is adopted be one that is subject to proper consultation proper scrutiny perhaps some form of parliamentary confirmation in this parliament and the UK parliament and the other devolved legislatures and not simply well you know we've had a JMC and here's the set of principles that we produced I think when we talk about learning from the experience of the European Union and having some kind of council of ministers we keep on forgetting that legislation decisions in the EU are not made by the council of ministers they mean jointly by the council of minister and the european parliament most of these rules will be and we keep on not talking about the role of parliaments in any kind of future discussion around the internal market now there's different ways of doing it you could say okay it will be mostly integral but let's see for example what the danish parliament does for when the danish government goes through Brussels the minister has to go in front of parliament say these are my objectives do you agree do we have a vote do we have support from the legislature and then you go and have your intergovernmental discussion you could have as well an inter-parliamentary forum that would sit alongside any kind of intergovernmental forum and have that discussion or you could have if you have an intergovernmental political agreement then pass legislation in all the four legislatures right now what we're seeing with the uk welsh agreement like it's we're talking about something decided by governments government to government and the welsh assembly getting 40 days to consent 40 days is you may be extremely quick in setting up you know inquiries and getting input from civil society and all that but it's very short in terms of weighing the pros and cons and that means you basically trust the governments to have done all of that consultation work correctly and you really limit your work as a parliament because these inter like this internal market principle will constrain the action of all the four parliaments in this country so i think it's very important to not just think in terms of is it the court is it the ministers it's where are the parliaments in all of this i agree with everything that's been said i'll just add a couple of other points i think it's probably worth recognising that the challenges that we're talking about now are not new challenges they're challenges which other countries all over the world have had to tackle with before and in a way the the challenge is the same in each case it's hard to find institutions which are independent and impartial of the constituent territories that are going to be subject to this internal market and that does cover legislation it covers executive action and it covers the courts we should of course be aware that the courts have a very legitimate role to play in any internal market the legislation needs to be interpreted it needs to be enforced the question is what what scope they'll have so i think the challenge is always the same how do you create independent and impartial institutions that will help manage and administer your internal market for the benefit of its constituent territories i think in the UK context there are at least two real challenges to creating that independent and impartial governing system one is constitutional and one is much more empirical i think the constitutional problem is one that's been mentioned several times before parliamentary sovereignty of Westminster and the lack of any distinct english parliament separate from the Westminster parliament that means inherently that the sort of on the on the legislative side of this internal market there is never going to be independent and impartial in a way that would be recognised for example in the in the EU so i think that's a real constitutional challenge that has to be grappled with and worked around the empirical challenge though is just as important and it's the simple fact which in an internal market really matters that the size of the English economy is vast compared to the size of the the Scottish of the Welsh of the Northern Irish economies and that does matter it matters because it means that what england decides to do for example in regulatory terms could empirically have an incredible effect on the regulatory choices of the other territories for example if you do have a Cassie's a Cassie's to Dijon which basically says you make your goods somewhere lawfully in the UK you can sell them lawfully everywhere in the UK that basically means that that it's very difficult for Scotland say to have highly divergent regulatory standards from england because production will just happen in england and the goods will flood into Scotland and there's nothing you can do about it um so i think empirically this really really matters as well but those are the two i think quite difficult challenges we have to get to grips with the constitutional challenge of parliamentary sovereignty but the empirical challenge of the size of england and its economy all of that of course depends on how much there's going to be divergence between the UK and the EU after Brexit because if by a backstop for any kind of logical economical reason UK regulations remain very similar to EU regulations then you won't have that kind of pressure you will what matters will be of course that you'll have the much bigger EU economy compared to the much smaller UK economy you have similar kind of similar things but a different level can i ask just to bore down in this even a bit more and use an example that may or may not become a live example in the future reporting the media this morning on minimum pricing and alcohol sales in scotland at their lowest levels as records began now that might or might not be to do the minimum pricing but there's some evidence to suggest it might be so i'm a i'm an english strong sider maker and that's one of the areas where obviously minimum pricing has had the biggest impact in future if we don't have some sort of rules written down and the courts have to decide upon this does that begin to raise the prospect that some english strong sider maker decides to take the scottish government to court because of a process and procedure it's brought into being that's prohibiting sales if that's a that's and if that's the really where we are that's quite challenging and interesting at the same time exactly the type of situation that we're talking about the the example i was used i've been using in my head and sometimes to illustrate it outside my head um is single single use plastics now i'm going to admit immediately that i'm not very aufe with the detail of the UK constitution and the devolution settlement so this is a purely hypothetical example but if we accept that it's within the devolved competence of Scotland if we accept there's no common framework on this if we accept that this is just a situation where you have a regulatory autonomy for Scotland which is capable of diverging from the regulatory standards in the rest of the UK if let's say that the scottish parliament proposed a ban single use plastics in scotland well then you've got two main choices either the whole of the UK has a similar ban so everyone has the same rule so you don't need to worry about barriers to trade distortions of competition but that obviously requires some degree of co-ordination either a centralised legislature or co-ordinated legislation between the four legislatures or you don't have any centralised intervention in which case you have to have some sort of default rule what does it mean for english single use plastics that want to enter the scottish market either you have a rule which says that they can't or you have a rule which says that they can't but you need to have a rule you can't you know there has to there can't be a vacuum of of law here and if you have a rule a cassie style rule which says anywhere any good lawfully produced anywhere in the UK can be sold across the UK then you immediately are saying to english manufacturers you have the potential to challenge these scottish rules via the courts or via another institution depending on the framework that you establish but i think it's a perfect illustration of the type of challenge that we're talking about it's also incidentally why i feel that the debate about common frameworks is a relatively narrow one within the broad context of this whole UK internal market debate because of course that so much of the attention at the minute is on okay what regulations exist at the minute from Europe and how do we stabilise them and fix them at this point in time at the point of withdrawal or the end of the transitional period but the real challenges are actually beyond the common frameworks it's the things which aren't subject to EU rules at the minute or the things which aren't subject to a common framework in the future and that might be minimal alcohol pricing it might be recycled packaging it might be new digital services it could be anything within the competence of the Scottish Parliament which is capable of creating a barrier to trade Michael that is precisely the danger of having a rule that is statutory but very generally framed than people can go to courts and play with it i think it's more important to have some principles to ensure that there's a balance of the boundaries between economic consideration social considerations environmental considerations public health considerations if it's simply a single market clause and market competition trumps everything and that's a problem that's occurred within the european union now it's very difficult to write all of those competing considerations into a law and give it to the courts it's not the job of the judges to make that decision i think these are essentially political decisions they are going to come up as as Michael says they are going to come up in all kinds of unexpected ways but then we should be prepared and when they do come up be prepared to have these principles against which we can judge individual cases really yeah thanks i think that the alcohol minimum pricing example is is a good one of illustrating the importance of principles because of course the minimum pricing legislation was challenged in the scots-wisdy association case on grounds of breach of EU free movement law but it was ultimately held to be proportionate as a measure to to protect public health so the role of the proportionality principle there was really important in balancing trade objectives versus social policy objectives but the problem in which could have been more important than it turned out to be in practice in scots-wisky association was the devolution dimension was not actually properly dealt with one of the judges referred to the elephant in the room in the proportionality assessment which was that if there was a choice between minimum alcohol pricing and raising alcohol duties well of course the scotish parliament didn't have the option of raising alcohol duties because that was a reserved matter so if we were to be addressing that in a purely domestic context we would not only need the equivalent of the proportionality principle but we would need some sort of internal subsidiarity principle to to help us negotiate that difficult question of divided competence as well I've got a couple of supplementaries from Angela and Tom but I'm also conscious that Murdo may have to go sometime soon to deal with amendments at another committee so Murdo I don't know how closely your question is in this area is it actually I think time wise we're okay for now okay in that case I'll go to Angela and Tom and take a couple of supplementaries in this area and I'll come back to you I suppose in essence I want to know if we can recreate an internal market in the UK you know with a new set of arrangements that's actually as good as what we've got given that in the paper submitted to committee by members of the panel I've spoke about how there is nothing comparable to the current EU arrangements you know anywhere in the world it's the most you know comprehensive and integrated internal market and so how could we recreate something as good or on a par but actually without downgrading devolution can I just take start on that one I think there is a danger of exaggerating the impact of EU internal market law because it doesn't completely protect the internal market it doesn't doesn't give us a right of internal free movement for instance which is why for instance Scottish universities have to take EU students without paying fees but they can charge fees to English students because you know English students cannot benefit from the free movement rights or non-discrimination rights that EU students can so EU internal market law does the job well enough for us to not have had to talk about this before but it doesn't do the job perfectly and if you were starting from scratch in terms of protecting a UK internal market you wouldn't simply adopt EU law you would have to do something different that actually addressed the conditions of our internal market and the rights of citizens within the UK to move freely okay we don't exactly have a right to do that it's just we haven't really tried to stop people doing it which is a different thing go back to what michael was saying I think it it is much more about having institutions and processes where you have trust between the parties and where they're all working towards a similar goal and I think you know what we are seeing right now is a process where everything is happening in parallel and which is no discussion between between the different bits apparently discussion framework discussion on the agriculture bill discussion on jamesy and you can see all of this different elements have different interpretation of the powers for the devolved administrations now that's not a very good basis for a discussion because of course then you know depending on who you speak you're going to get way more powers or actually you're going to get less powers so the big issue here would be I think in I think the big problem here is that in many ways Westminster has just been running ahead with delivering Brexit or trying to and trying to start a lot all of these issues I'd like to find an answer on all of these issues without taking the time to actually work with the other parties now Westminster doesn't have to legally do that but if you want to have a UK internal market that work well where you don't have to use formal mechanism a lot of time and most of these issues can be dealt informally you need to build trust and we've seen that trust has been eroded and the best way to build trust again is for Westminster and the UK government to hold back and to not use all the power it has and to say you know we are going to be partners on this I just add one thing we also need institutions to work when there's no trust and when there are different goals that's the real test of institutions and I think we got off to a really bad start and this was the original version of the draw bill where the answer was taking back powers there are still bits of that in the final withdrawal act I suspect that's never going to be used so why why leave it there in the first place why is this fall back that the answer if all else fails take powers back to Westminster to recognise the division of competencies may not be perfect but but it's something that was agreed on in a political process on on three occasions three different acts and therefore that that the different levels of government have their own powers they own those powers they're theirs and that therefore any process for negotiation must be amongst equals and of course I just picking up Eileen's earlier point of course we need transparency and all of this I think we need these processes to be open to scrutiny by the parliaments as well and by the general public I'll come back to something that I said before but I think is particularly important in answering your question again we shouldn't think of internal markets as static endpoints where we find the solution to a regulatory problem and we're going to live with it forever that they are about managing constant relations and facing new challenges and update in the solutions that we thought we'd found five or ten years ago but which are no longer appropriate because science and technology and consumer behaviors have changed and I think if we think about internal markets in that dynamic institutional way a lot of the answer to your question comes about you know for example Eileen's completely correct to say you know the EU internal market isn't perfect well it's not perfect in the sense that it provides answers to some of those questions which some people don't like but that's always going to be the case but it does provide answers and it's very frustrating I suppose as an EU lawyer to hear people say you know the the internal market isn't complete they haven't finished it yet it's like well no they've just provided a particular set of answers to the problems which they're dealing with at the moment and those answers have to evolve and change internal markets are never complete they're never finished so I think I think this is really comes back to what I said before there's the constitutional challenge of Westminster and there's the empirical challenge of England and I think if we wanted to recreate a functioning internal market which isn't the same as the EU because of course it's a totally different context the challenges are the same but the context is very different I think we've got to face up to those two facts those two challenges how do we constitutionally create a system which recognises the equality of the governments and the parliaments and allows for the independent and impartial management of the internal market because at the minute that institutional framework just doesn't exist and how do we actually find a way of recognising that the English economy the English population is overwhelming compared to the populations and economies of the others and what's the best way to manage that in terms of the substantive policy choices that are made and I think if we got those two challenges sorted it would be a well-functioning internal market but I recognise that's quite a big challenge. Tom Arthur. Thank you convener. Professor Duggan your last remarks effectively summarise the point I was wanting to raise with you. I appreciate that it's a very difficult question but for the benefit of the committee and the record what would an answer to these questions of parliamentary sovereignty in the empirical reality that Scotland has a population of five million and England has a population of 55 million. I appreciate that these are hypotheticals laced with political difficulties that some might even categorise as impossibilities but what would it look like in practice? Could you possibly sketch that out? Sure, I mean I think this is where the EU example does actually come in useful because in the EU context you have Germany with its population of 85 million and you have Malta with its population of half a million I think so the EU is very familiar with these vast discrepancies of population and economy this is where the council plays such an important role because of course population is relevant in the council to many decisions but there are also things where population is simply irrelevant so when it comes to fundamental treaty change, when it comes to designing the rules of the system all member states are equal and all have an equal voice and none cannot vote the others, when it comes to particularly sensitive policy areas such as taxation all member states are equal and none of them can out vote the others so I think you can imagine a system where all four of the UK governments and legislatures are treated on an equal basis when it comes to the fundamentals of how the internal market is managed but also population is relevant to certain other types of decisions but that does require a total rethinking of the UK constitutional framework so I think that's probably the challenge that we're talking about the gap between what your aspiration might be for independent and impartial governing structures meets the reality of parliamentary sovereignty in Westminster and the lack of a distinct English Parliament and I think with those two things we either we can either say we need to work around them in which case it's probably much more about building collaborative fora in which the Parliament's agree that they're to be treated as equal the government's agree that they will have an equal voice even though constitutionally we know that's simply not true or we have to fundamentally reimagine the UK constitution maybe it's one of those moments of genuine national crisis we're fundamentally rethinking the UK constitution as possible but but it is a fundamental rethinking of the UK constitution I mean I think I'm really appreciating that we're talking about bringing the cassis de gisio and now the Luxembourg compromise I mean as someone who studied EU law and politics it's fascinating of course we have to think of the commission as well if we're talking about then you have you know one commissioner for each member state and it is a commission that proposes policy for the whole EU interest common interest and I think that's where we have the tensions that we do not have a body in the UK that would be able to propose common frameworks for the whole UK interest because the whole UK interest is assumed to be represented by the UK government not by a representative of England Wales Scotland in Northern Ireland so that's also one of the missing point yeah I think this business of parliamentary sovereignty of course is never going to be resolved but I think we can get around it and my interpretation of parliamentary sovereignty I'm skeptical of it but let's just accept that it exists it is a principle it doesn't mean that Westminster always has to have supremacy over everything you can have a federal understanding of the UK constitution in which the legislative consent convention is seen as part of the constitution and that doesn't resolve all these problems but it changes the bargaining dynamics of it all so that Westminster can't just always at the last resort overcome the objections of the of the devolts you want to make any point just to point out that you know whilst federalism with our legally or conventionally entrenched is of course a theoretical answer we have to bear in mind that there is no federation anywhere which has such an imbalance between its federal units I mean Germany is very very much larger than the Malta California is very very much larger than Maryland but neither of these cases do they account for 84% of the population of the whole and that really changes the the balance of the arguments in terms of you know when it is acceptable to have equal equal status in decision making versus population based decision making because there is a you know there is a genuine question about democratic fairness in terms of allowing 84% of the population to be outvoted by 16% no I'm conscious that both I think Angela and Tom both had further things you wanted to ask it kind of come back to you later if there's if you still want to do that but I need to let others come in murder yes thanks convener I mean to an extent the question we had from Angela and Tom went into the territory I was interested in pursuing but I'm particularly interested in looking at the parallels between the EU single market and its institutions and the UK internal market and you make a comment in your submission Michael Keating about the the the contrasts between the two different models so you know the EU single market has been created by treaty it's sovereign countries coming together creating something new the UK internal market is quite different it's something that existed before now parts of it have been devolved so power has been passed down by the centre so I'm wondering in that context how much really can we learn from the creation of the the EU single market and how much of that is transferrable into the situation that we have in relation to the UK well I've argued that that it's very difficult simply to download the UK internal market system into the UK devolution settlement because we just don't have the institutions and as you say the history is very different what we can learn from it is something about what an internal market means it's flexibility the fact that it can extend in unexpected directions so we can learn about the advantages and disadvantages of having a strong role for the courts in in in that which is much stronger than the role of the courts in the internal devolution settlement in the UK in fact the courts mostly interfere in the internal settlement of the UK through European law rather than through other kinds of law and the principle of subsidiarity and proportionality I think is important it's difficult to put that in in law but it's a working principle that really is quite important it's they've tried to put it in the EU law but it's a slippery idea but it's built into the political process and the idea that there is horizontal cooperation there that there's no element of hierarchy there's a hierarchy of laws but there's no hierarchy in decision making there through through the council we can't reproduce something that looks exactly like the council of the european union it'd be a refusal but the principle the notion that policy is jointly made I think these are things that we can learn from and we can also learn from the some of the the downsides of the european system as well the the problem of transparency the problem of accountability the excessive judicialisation of some kinds of things the role of private actors to intervene in the process that may have its advantages may have its disadvantages that's what I'm interested in learning but we can't simply transfer that system and that's why right at the beginning I was rather critical of the use of this term of internal market single market from the european context as though it would be the same thing and and we can also learn that the internal market we've all said this at one point or another is is a very flexible living concept there's no such thing as a perfect internal market it's just a principle that needs to be interpreted in different circumstances and we have to have our own interpretations of it indeed the different parts of the UK may have their own different interpretations of it we've seen all of that in the european experience and we can learn from it very interesting that of course different parts of the UK risk to have very different interpretation of it because there's a good chance that northern Ireland will have a much closer relationship with the EU single market than the rest of the UK and if under the next conservative government the unilateral promises that have been made by this government to northern Ireland that basically if northern Ireland has to change its rules to adapt to new EU rules the UK government will make sure that the rest of the GB that GB follows then you know this is going to come into play as well and so you could end up actually through the backdrop through northern Ireland basically following on a huge but quite large range of EU rules basically still the EU single market so following through that argument then if that actually becomes the reality a lot of this discussion isn't as necessary because effectively we're going to follow what the rest of european union does anyway i think it's it would be nice if you think of you know brexit about about taking back control that you do not end up having the UK single market just defined by the EU so it would be nice you know to do some kind of homegrown work on this and because of course UK actors will not have access to the same kind of EU remedies most likely and so you will need some domestic rules and domestic ways of dealing with it even if you're under that influence sorry them they just want to respond to murder's initial question could i just follow up on on on the point about sort of will this all be a theoretical discussion in the end i think even if we even if we see the northern Irish backstop come into effect and even if northern Ireland remains aligned with dynamically aligned with evolving EU legislation and the UK government and parliament would make the decision that the rest of the UK would do the same that that's still only a relatively small part of the overall single market really it's it's a relatively small part and certainly a small part of the economy i think the only way in which this would become a genuinely more theoretical discussion is if we were to follow for example a norway style european economic area agreement if that happened then this discussion would could more or less melt away because not very much is actually going to change in practice other than that the UK will do what the EU says it should do without having a voice at the table which is effectively the norway option but otherwise but you know if we look at the political declaration as it stands at the moment in the level of economic ambition that the UK government in the EU have agreed in that political declaration it falls far short of the european economic area model and this will become a very live issue that has to be dealt with so i think we should probably keep that in perspective i'm sorry mardod you got a supplement yes i do actually but it's probably moving on slightly from what we've just been talking about and picking up points you made earlier around the resolution of dispute and if you were suggesting we need the ideal solution is to find a political and or governmental solution to this but if we're not getting there not getting there quickly would you foresee a large number of court cases coming to this presumably to the supreme court around the operation of the UK internal market post brexit um i mean we might draw an analogy with with the devolution jurisprudence generally it took a long time to build up any significant body of of case law um it took a long it took a particularly long time for any cases to arise on the division between reserved and devolved competences most cases were were about human rights so why was that well nobody's very clear but at least part of the the answer was that there's you know there are effective um internal checks which prevent the devolved legislatures um straying significantly beyond the the scope of their powers and then you know sometimes the incentives aren't there for people to challenge decisions maybe arguably unlawful but really it's a no one's interest to challenge um the difference with the internal market stuff i guess is that it will be in people's interest to challenge because because you will be talking about powerful um organisations with significant amounts of money um at stake um so i guess some of these potential disputes can be headed off um but probably probably not all um and i think probably enough uh precedents have been set up of the resort to courts to just to solve these these matters that that we probably could expect of reasonable cases i agree completely with with Eileen and i think there's another factor which i've sort of hinted at in my written evidence which makes quite a big difference as well is that that for 45 years pretty much every lawyer in the UK has been trained in how the EU internal market works you know find me a lawyer who doesn't know Cassie's to Dijon find me a lawyer who doesn't understand um how this system works so so actually a lot of this is entirely familiar to lawyers it's entirely familiar to the people who would have the incentive to make their careers out of bringing these cases all of the principles are there like a toolbox waiting to be waiting to be picked up and i think when you add that on to the economic and commercial and financial incentives for businesses which feel that the UK internal market is not working the way they would like it to i think you've got you do have a combination of factors which could make this quite a potent source of litigation and quite rapid well just to add and prefacing that i'm not a lawyer but so the impression i have is that the Welsh experience of this is quite different through different evolution settlement and there's lots of lack of clarity sometimes where the power is light and so in that lack of clarity you had many more cases between the UK and the Welsh governments so having lack of clarity around the division of power would i think lead to many more cases ema centralisation issues i'm interested in that the submission from Dr Vivian that says in devolved polls areas with directory duplication such as agriculture on-going legislative developments and Westminster appear to point towards greater centralisation we've talked a wee bit about agricultural and environment already but it says here in clause 28 in the agriculture bill it gives central government powers previously held by the devolved administration so we have different farming practices in scotland 85 less favoured areas we need to do things different with our beef and our sheep so i'm interested in how would centralisation or further centralisation impact farmers in scotland and you know what are the threats if this taking back control means agriculture will not be devolved so in this written evidence i refer to the work that other colleagues in the same brexit environment network have done and i'm very happy to provide supplemented written evidence on that to go into more detail but that clause in the bill is around world trade organization agreement on agriculture and it's about the UK Government deciding basically looking at the different instruments used by the different administration and deciding in which box they would fit and so and potentially then limiting the ability of the different administration to use more or less market distorting instruments now this is something that normally was done at EU level and so and there was actually quite a lot of flexibility as long yeah so there's a fear there and this has been pointed out and the Welsh assembly has done lots of work on this has they've done a lot of work on that agricultural bill and that specific bit of it so i'm sure i'm sure you can you can look at this but yes there's a key concern there and the obvious place where you have that tension between trade and agriculture would be around GMOs where we know that England and the UK Government is the only part of the UK that has not availed of its ability to opt out of GMOs under current EU law and you would have of course with a push towards any kind of trade agreement with the US there will be a lot of American companies really you know and they've clearly listed and the trade department has clearly listed you know they really hate the EU policy on GMOs and of course the UK market would be very interesting for that so you would have you would end up with exactly what Michael was saying you could have you know English producers growing GMOs they would have maybe access directly to the Scottish market or perhaps the English ones would not but the American ones would so you could have American GMO products having access to the Scottish market because of trade bills and then then they would they would have of course a knock on effect on farmers so i think lots of this discussion and that's where i think the UK government has missed a trick lots of these discussions are on common frameworks all that all about having some kind of control local government central government control over devolved administration the way for me i think to make this politically palatable is to give devolved government a seat at the trade negotiation table or at least at the trade negotiation preparation table because we know with the EU example it is not all the 28 member states negotiating it is the European Commission negotiating for but the agreement on what to get and what to negotiate for is agreed by the old 28 countries and it would be an easy way to reassure the devolved administration to say we will of course pursue a trade policy that works for the whole of the UK and we will make sure it does so by involving the government in preparing all position papers and of course having then that discussed in parliament as we can see because if you do not do that you end up with a t-tip situation with lots of opposition and lots of fears and Michael on that centralisation bit there's an important difference between the strategy of the Welsh government and the Scottish government with regard to this intergovernmental system that the Welsh government is quite happy on having joint frameworks indeed joint policies as long as the devolved have a say in that whereas the Scottish government puts more emphasis on doing their own thing and that's a philosophical difference but it conditions an awful lot of this and so for that reason plus the dispute over the withdrawal act the Welsh government has bought into some of these sectoral bills like the agricultural bill the Scottish government has not you know that's problematic it means that you've not got a UK wide system the Northern Ireland administration isn't able to do anything because it's not working at the moment so that's just an English and Welsh process there with this little bit stuck in that Vivian mentioned about the WTO rules which effectively says that the UK can control direct payments now in agriculture there's quite a lot of scope for policy divergence and pressure for policy divergence England is also Wales is pretty much lined up with England quite surprisingly but they did on the issue of direct support for farmers whereas Scotland wants to keep direct support for farmers England and Wales have decided to phase that out now that raises all kinds of internal market considerations if there are subsidies in one part of the UK not in the other that already exists at the moment by the way it's just it may it may become greater and then there's the question of the balance of considerations in agriculture in England it's about the market it's also about environmental considerations in Scotland and Wales it's about social considerations it's about maintaining the population in fragile communities it's about geographical balance so the circumstances are really quite different so we can see a lot of pressure for divergence there then the other big problem in agriculture of course is money because the money we don't know what's going to happen to the money but we do know there will be less money it's not going to be barnatised but there will be an agriculture formula but since direct support is coming down in England that will drive down support here so I can see a lot of controversy about agriculture it may be a small economic sector but it's important socially and for other environmentally and it's very politically salient. In which case I'm going to move on to the state aid area now and James I'm going to let you kick this off. Sure thanks a lot convener one of the issues of you know potential inconsistencies around state aid rules and the interpretation of state aid rules within the different you know governments within the United Kingdom so what do you see is the the issues there which could potentially arise in conflict and how how might that be resolved? I think we're seeing so we just had this discussion before before the committee we're seeing what's happening right now in the US with amazon trying to establish a second headquarter and you can see different cities in the US all really being in very fierce competition and just increasing the amount of public money they're spending and public rules they're willing to bend to help and to secure amazon coming there and you could end up with a situation you would you have the four nations competing to make sure that you know that big plant is in their jurisdiction and not in another and of course first that will be a big waste of public money and second the one of this nation with a bigger purse will be able to get it anyway so you have a clear risk that you know having loser competition rules moving away from EU state aid rules would have would lead to just spending public money and putting businesses putting the four nations in competition with each other and that would be very problematic. I agree with that and I think it's inevitable that we will end up with some kind of UK state aid framework but I think we have to be aware that the ability to spend public money is an important policy tool for for the devolved administrations and it's one which the Scottish Government in particular has used extensively to extend its policy competence beyond beyond the strict limits of the Scotland Act. So there are very sensitive issues to be addressed there. There's also the underlying question about where does state aid currently lie in terms of the reserved devolved boundary so I think that's I think I think we will end up with some kind of UK framework but I would expect there to be rather significant disputes and tensions. I think this is probably one of those areas where we probably don't have to worry quite so much because I think in in any trade agreement with the EU the EU will insist that the UK has a state aid regime which is roughly comparable to the one which exists today. I think the main issue will probably be less the substantive rules which I don't think will diverge very much from the existing EU substantive rules. I think the real question will be again coming back to the thing that we keep talking about which institution interprets and enforces those rules and how independent is it of any one of the four Governments or legislatures which make up the UK's governing system. So my concern would not be the substance of the state aid rules, it would be the institutional question of who administers those state aid rules within the UK and just how independent and impartial are they really. I just point out that this then links into competition policy and what competition policy we have in the UK and how that will be regulated, the role of the competition in markets authority for example, how that would link into other regulatory agencies that we might have to deal with other things. Just to add that of course under the backstop EU competition policy, EU state aid rules would still apply in Northern Ireland, so you could end up with an interesting situation there. Okay, then Alex. Thank you for your point, so I was going to ask you where it had been covered. Thank you. I wonder if we could just drill down a little bit further. Perhaps this is too difficult a question, either politically or legally, I don't know. There is a live dispute, as I understand it, between the UK Government and the Scottish Government about where state aid fits in terms of the division between devolved and reserved competence in the Scotland Act and perhaps indeed in other devolved statutes. What are your views? My view is that it is devolved. The reason for that is because the UK never had its own state aid regime, so it has never been part of domestic competition law. The wording has a technical meaning within competition law, which would not, as far as I am aware, extend to include state aid. If we go by the standard approach to interpretation of devolution statutes, I do not think that a court would interpret it as including state aid. Does the same follow for competition policy? The competition policy is reserved, isn't it? The competition policy is reserved, yes, but the way in which it is defined, I cannot remember off the top of my head what the definition is, but the wording that is used has a technical meaning within competition law, which does not encompass state aid. State aid control is a different element of competition law. State aids were definitely reserved in the 1978 act, and they weren't in the second one. Somebody must have known what they were doing. I noticed that right away. There was a difference. That is entirely consistent with the difference between the two statutes, and the way that the 1998 act was much more generous than it defined the reserved powers and not the devolved powers. It was within European context. My writing is that I have pointed out that difference between the two acts, because it seems to be quite significant. Michael Duggan might be right that it is never in practice arises, because it might well be that, in any future trading relationship that we have with the European Union after Brexit, that the European Union insists has a condition of entering into that future trading agreement, that the UK state aid policy is broadly similar to perhaps exactly the same as I think your expression was dynamically aligned with the EU rules on EU states. But just assuming for the purposes of argument that it does arise as a real issue, and assuming again without conceding anything, assuming that Professor McCarg is right that state aid is devolved and competition policy is reserved. Given what you have said about the close practical interaction between competition policy and competition regulation and state aid, how is that going to work? What it means is that any UK framework would require devolved consent. That is what it would mean, but whether devolved consent would be insisted upon is a different issue in the new constitutional disposition post-EU withdrawal act. Even if Michael is right and I think he is right about the fact that we won't have much choice over the content of the rules, that question about who will enforce will be a really important decision to be made and a decision on which you can anticipate there might be differences of views between the devolved and the UK administration. The question of where competence lies there and whether the civil convention is engaged is really important. The civil convention applies to legislation and does not apply to regulatory authority. If the CMA, the Competition and Markets Authority, is the regulator that is charged with the primary responsibility for enforcing whatever UK competition and state aid policy looks like post-Brexit, and if that is an agency that is created by active UK Parliament, accountable to UK Parliament or to UK ministers, then the civil convention won't feature in that, will it? Well, it depends how the Competition and Markets Authority is to acquire the enforcement powers here. If it is done via statutory instruments under the EU withdrawal act, then no, Sule will not be engaged, although there are obviously equivalent non-statutory consent principles that have been agreed and which are being applied to EU withdrawal act statutory instruments. But if it is done by primary legislation, then Sule would be engaged. That raises a broader question about regulatory authorities in general. The environment and how they are going to tie in with the devolution settlement. I have seen very little about that coming from government. Patrick, before I go back to Tom and Angela, I want to ask any of the remaining questions. I was going to touch on the issues around democratic accountability. I think that several of the witnesses have already spoken about that earlier. I think that more in relation to the idea of a legislative model and the problems of the inability to constrain the UK Government, its existence both as the UK Government and as the Government on what we would call devolved issues for England. We didn't really talk about the idea of an inter-governmental model and how accountability works there. We can see right at the moment the mess that a Government could get into if it makes an agreement with another Government or Government body and then cannot get that through its own Parliament. We are in a situation where you would have separate political jurisdictions almost inevitably with different political balance between them and an expectation that Governments resolve how to make these decisions, but no mechanism to achieve parliamentary engagement in that. Is there a mechanism that any of you can point to that would be functional there to achieve accountability in the appropriate places on matters that are here devolved and elsewhere not? What I was saying about how you lay down these general principles and where you do it, it wouldn't be a closed door meeting necessarily of ministers. I said that there's got to be some other kinds of input into that, and I mentioned maybe people who are specialists in areas that could lawyer or economist or whatever, but that's not all because stakeholders are the general public. That would have to be a political decision. These are very political decisions, the boundaries between the market and the environment and social policy and so on. I see no reason whatever to have that sewn up between Governments. That could be an open and accountable process because these are highly politicised issues. Then, with walking out the details of it, it would be up to the various Parliaments to make sure that Governments reported to them regularly and before, as well as after meetings and before after making commitments, so that Parliaments got the opportunity to contribute to their understanding of what the internal market means. There's been no body other than the UK Parliament, which is also the Parliament for England on devolved matters. There's been no other body that can hold a UK-wide common decision-making arrangement accountable. Where is the opportunity for citizens as voters to know who they are holding accountable for decisions that are being imposed through these common frameworks to implement an internal market? That is a key issue right now around agriculture and the environment. Stakeholders don't know who they are supposed to go and talk to. It is really problematic if that were to continue. To a certain extent, we need to think that the Council of Ministers is the least transparent of the European institutions. If you think of the Parliament as much more transparent, to a certain extent, even the Commission is more transparent. It is so much more transparent that the JMC is. We know when there's going to be meetings. It is not just one of the countries that decides when meetings are happening or not. You have part of it that is now yet that you can watch online. You've got lots of text coming out and not just one-page paragraphs. These are all things that can be improved. Of course, as Michael was saying, having Parliament talk to the Ministers before and after would be a good way of doing it. There are also other ways of doing it. You can think creatively about you could have a political agreement on broad principles, similar to what you'd say, I guess, a European Union directive. What we have is an agreement on the end game, but you can arrive at that objective in different ways. You could have Westminster legislate for England and the other Parliament legislate for the rest of the UK, as long as they were all working towards the same agreed political aim. You would not necessarily need to have always UK-wide legislation, but that would require… If the political balance in those different jurisdictions varies, it may be democratically impossible to achieve the same outcome passing through the different legislatures. You look at the voting… There's very little voting actually happening in the Council of the European Union or the Council of Ministers. Most of that decision making is done on a consensual basis because ministers are on the table and they know they're going to have to go back to their countries and explain what happened. It's much harder to bound a country to common rules if you've been in minority too often. You need good will and taking the time to build consensus on those instead of rushing through. It is because we're rushing through a lot of this that we're not able to find a consensual position. I'll come back to you one more time. I'll just build a little bit on what Vivienne says. If we accept the Westminster problem, is it a problem that isn't going anywhere short of a constitutional revolution? What we're really talking about is creating a buffer between what the constitutional theory is and how the system might actually work in practice and how to make it more collaborative, a system of equals and so on. Having said that, there are different things that we can learn from the EU experience about how you increase the scope for democratic accountability and legitimacy. Vivienne mentioned before the system of mandates, which is used in certain member states, whereby the Government representative has to have a parliamentary mandate in order to agree to something in advance at whatever collective body is making those decisions. We also have in the EU context the yellow card system, which could easily be an orange card or a red card whereby national parliaments are able to flag up serious issues and objections, which then have to be taken into account by whichever centralised decision body is involved. I think that what Vivienne mentioned is very important and worth elaborating a little bit on. Remember that there's no inherent reason why an internal market needs to be highly centralised. It's completely agnostic about what methods you use to manage the market. It's the methods that count not the end result. In the EU context, we have various sectors where the EU does adopt purely outlined principles, which the member states then go ahead and implement in whatever way they see fit within their own territories. You have minimum harmonisation only whereby everyone agrees a certain level playing field standard, but each territory is completely free to go beyond that, as it wishes. We have systems of derogations where you say, well, you can specially have exemptions from these rules. These are all things that are up for negotiation. I would be worried, I suppose, of equating an internal market with centralisation. That's one way of doing an internal market, not necessarily a very good way, but it's only one way of doing an internal market. You can certainly have a well-functioning internal market, which is based on a much more decentralised model and a much more co-operative model. Just to point out that, despite the disagreements over the EU withdrawal act, discussions over common frameworks are proceeding rather well, rather consensually, without any need for resort to the statutory mechanisms. It may be that we haven't got to the bits at which consensus breaks down, but, nevertheless, consensus is taking us a long way, even in this rather fraught political situation. Those issues about political divergence don't have to become sticking points. It is quite possible for people to accept the legitimacy of divergence in the creation of the common frameworks. I suppose that that comes to the last thing that I wanted to ask. Professor McHarg's comments there sounded more optimistic than I was expecting, to be honest, because we are all very grateful for the work that you have put into advice us and to give us briefings on that. The way I feel is that we have been going around the houses on that quite a lot. It is clear that significant constitutional innovation is required, but I do not see any evidence that the UK is ready for significant constitutional innovation. We are now nearly three months out of the original leaving date. It is completely implausible, surely, that significant constitutional innovation will cut through those problems by October. I see a lot of people agreeing with you, Patrick. Are those things beforehand? I would say that there are quite a few Tory MPs talking about abolishing the House of Lords, so you do have appetite for constitutional revolution. The whole concept of the Westminster Parliament being sovereign was put at a real challenge during the process as well. Angela, did you have any in Elshamene that you wanted to come back to? I mean, just briefly, whatever we do about the internal mark, I wonder if the panel thought that constitutional change is inevitable. An awful lot of it is taking place. The question is, can we understand it? Can we anticipate what the real issues are going to be? We spent the best part of two hours talking about the internal mark and we do not really know what is likely to come up. As Alien has said, there are a lot of discussions about detailed issues and they have been put aside. That is going to be a problem. On the other hand, as Michael has said, all kinds of things can come up there. The danger, of course, is not making a constitution up as we go along. We all do that and that is how constitutions are always made. It is not knowing where we are going. It is making decisions that will affect future decisions and getting ourselves into dysfunctional things. I thought that it was an unfortunate process after the Scottish referendum with the Smyth Commission, which was given between what St Andrew's Day and Burns' Night to come up with a new settlement, which was far too short. That was a totally artificial deadline. Now we have deadlines that are not artificial, they are real, and the danger is that we will stumble into things that are going to cause problems for the future. We need to sit back occasionally and think about the implications of all of this. We are never going to have a grand bang constitutional reform in the United Kingdom. That is not the way it works, but we can stumble into dysfunctional things that we are not careful of. I see a lot of people agreeing with that, just so that I can put that on the right of such. I would suggest that you should have a revolution. Well, I would not say a revolution, but I think that there is something very healthy about changing constitutions every few decades. We just like doing that. I think that we are probably living in the middle of constitutional upheaval, which will lead to something more fundamental. I think that my main worry is that all of this is being done in a state of heightened crisis management, and it is not necessarily being done under the types of circumstances that you would want to make such important decisions with such long-lasting consequences. We know that bad decisions made in a crisis can lead a very long-term impact and shape fundamentally how those issues are dealt with and governed long after the crisis itself has passed by. I think that that is my main concern, as the legacy that we are going to end up living with once the complete mess has passed us by, if it ever passes us by, because it sometimes feels like it won't. Thank you. I guess that that would be irrevocable decision making that is going on a fair bit at the moment. That was an absolutely fascinating form of enjoyable session. Thank you for coming and contributing the way that you have. It is going to help us significantly, and I am very grateful to you. I now suspend this session for a few moments to allow a change over witnesses. The second item on our agenda today is to take evidence in a round table format on the funding of EU structural fund priorities in Scotland post Brexit. I welcome our witnesses to the meeting. A couple of members of the committee have already had to go off to other committees that are involved in legislation this morning, so Murdo Fraser and Adam Tomkins are both away at other committees. Sorry, Patrick Harvie as well, so there are three of them. But this particular discussion is intended to allow us free flowing of discussion as we can possibly manage. It is informal, so please feel free to, if you want to contribute, let myself or Jim Johnson or Clark know and we will try to get you in as soon as possible. The discussion that we are having this morning is based around three different themes, and a different member will lead different elements. We will have a discussion on the allocation of funding, process and administration and outcomes. To kick us all off, I am going to ask Emma Harper to begin that discussion on the allocation of funding. As I say that, we have been already involved in a similar session to this, and we have also been around the country talking in Paisleydon, filming in Inverness to people who are very interested in EU structural fund. Some of what you will be telling us will not be new, but much of it will also be new to us, so we are looking forward to this discussion. Emma, over to you. I am interested in how allocation of future funding will work. Earlier in the session, Michael Keating said that it will not be barnitised, but how would future funding be allocated and what level of funding should Scotland receive? He is a starter for 10. Who wants to kick it off? Roddy, you went to it. Do you feel fear of that? That is a great question. I think that natural quantum is important. I do not believe that you should have a penalty. How do you think—is that for the whole of the UK? Do you want to break that down? What does that mean for Scotland? I think that for Scotland it would be meeting the monies that we have from the previous fund. Having the exact same quantum is very important. The UK Government has indicated that the SPF will be about the same size as existing EU structural funds. My paper shows that that is still a relatively small proportion of total government spending. Indeed, it is relatively small compared with the amount of spending that Scotland does on its own account for economic development and skills development. If you think of it first at the UK level and you think that it is going to be based on the allocation of the SPF, it is going to be in some way like the way that it is currently done, which is essentially a needs assessment rather than through the Barnett formula. On needs assessment, most Scotland would come out at about its population share, because most indicators you could take, you could take a duty paper head, you could take unemployment, you could take a list of different indicators. Scotland does not tend to be that far away from the UK average. What that would mean is that the funding per head in Scotland—and I will show that in one of my figures—is pretty close to the UK average. You would have to manipulate the way that you assess needs quite dramatically in order to find ways of giving Scotland a higher proportion than its population share. That is so long as you are using something like GDP per head or a standard economic statistic to base your needs assessment on. I think that absolutely the quantum should not be less. It is important to bear in mind the principles of EU funding, the level playing field and the cohesion elements. We would certainly hope that those would be retained. They have been immensely beneficial. Distribution should of course be based on need. I am sure that how need is defined will be the subject of argument, but need has always been the basis of EU cohesion policy against those principles. Local Government would very much hope that acceptable measures for need could be devised that would enable that quantum to be distributed equitably. I agree with most of what Malcolm has said. It should be based on need. It is important to remember that we are a transition region. There has been a theoretical projection by the committee of peripheral maritime regions to say that in the next funding area, if we were still to be in the EU, we would still be a transition region. In terms of what we use, I think that GDP has been mentioned as well, that is a bit of a blunt instrument. We would be looking for things like peripherality, rurality. I know within the islands bill there is talking about island proofing, and obviously part of our area has got a significant role. All the islands in fact are probably looking for something like that to deal with the highlands and islands. I think that the gentleman here will be sure that we have that right. Just to add from Roddy's point, the Scottish cities feel quite strongly that the value of the fund should not be reduced. The second point in terms of that value is that this should all be money that is not currently available. We know that there are, at a UK and a Scottish level, funds available to us. We do not want to see those funds absorbed into a UK-shared prosperity fund because that would actually be an overall reduction in the funds that are available. Both Malcolm and Angus, we are talking about need. Something that we need to consider when we talk about the need for funding is the purpose and the intention of those funds, things like innovation. We want to encourage innovation and we want to see innovation. We need to make sure that the criteria that we employ to determine how we allocate that funding needs to consider things like that as well and not just need in the sense that those areas are classed as transition areas, for example, and should therefore automatically receive that funding. Angus mentioned about the rural areas and representing cities. I wholly agree with that. I think that rural areas need to have a consideration. I also think that, in the same aspect, urban areas need to have that too. What some of the Scottish cities have been able to do is to work together and to identify ways in which cities can act as drivers for economic growth. We believe that that creates an opportunity and that the fund, although it may have more of the social aspect that we see within the European social fund at the moment, to support areas of need. We also want to see areas that will support growth. That comes in more closely aligned to the ERDF programme. We want to make sure that both of those things are not lost within the new programme as well. I agree that it should be needs, but how you determine needs is another thing. Whether the national performance framework, for example, if that could be used in some way to assess needs, we have had European money to accelerate resource efficiency and circular economy. We have seen from the European money that we have been able to create a fund, create a business service for circular economy business models that are very innovative, not only in Scotland but across the world. They have really changed leaders for across the world. Because of the nature of these organisations and that they are innovative, the speed of it has been slow, but it is gaining traction, and we would want money to continue so that we were able to further accelerate the circular economy. I think that as well as the actual quantum being a red line for us in the ICA in terms of what Scotland needs. I certainly do not think that Scotland should have a penny less than it currently gets, but I think that all that is important is a multi-annual period of funding. That will give a consistency and a confidence. It will allow the money to bed in to the communities that we all serve. Another critical point that came from my member of the Industrial Coins Alliance was about when it is operational. It really has to be fully operational from January 2021 to ensure that there is no hiatus in any regeneration activity in Scotland. The quantum, the multi-annual and it is operational, hitting the ground running when it has to hit the ground running. Gill, I think that you wanted to contribute as well. I certainly agree with everything that has been said so far. Your point about being multi-annual is hugely important. I can only speak from the leader funding point of view that most of the rural businesses that we have supported through leader funding are micro-businesses and SMEs at the biggest level. Those businesses need to have the knowledge that there is support out there for them on a more than just a year-by-year basis. I think that that is the thing that I would like to press most. I have quite a few eyes. I will come back to you, Emma, once I have got around everybody. Malcolm. I emphasise, Chairman, that the truly transformational nature of this funding and the multi-year point is absolutely essential. As public sector funding varies in other areas and capacity to match fund projects is not there particularly within local government, having the security of multi-year funding that allows a bit of strategic planning in an era when both Scottish Government and local government has been on one-year budgets, I know that we hope all that will change for the next financial year, but having that multi-year security, if you like, and to permits proper strategic planning is absolutely essential, because those projects are not just transformational, although they are. They are now part of the fabric of the delivery of services to people and particularly the development of employability and skills. David? I can just remind everyone the statement around when Theresa May introduced the SPF was around reducing regional inequalities or spatial inequalities, which have grown and are in the UK bigger than they are in any other European country. A success in her terms would be judged if the level of inequalities measured, say, in income per head was narrowed as a result of the exercise of the funds. Now, it does not seem to me that the size of the funds is in any way going to make a significant difference to spatial inequalities, but it seems to me to be really important that, if they are having significant effects, that has to be demonstrable. There has to be a significant part of the budget set aside for evaluation, so that you can show that there is genuine additionality coming from spending of public money. In your view on that, David, where do you think that that focus would need to be to achieve the aims that were set out by the Prime Minister? I think that that is important. We are talking about as if we are certain that Scotland would be able to determine the formula whereby the different levels of need are assessed within Scotland. That is not entirely clear. It is possible that the UK Government may take the view that it is up and down to it in the same way that the EU made the decisions around the transition regions and so on. I think that that is a very important consideration. I think that Scotland could do it better if it was allowed to make those decisions on its own behalf. I think that my paper sort of tries to illustrate the kinds of trade-offs that you have to make. You have to decide whether you are going to go into some areas much more heavily, because they, for example, are areas of high deprivation or loss of population or whatever. You trade that off against more mild interventions across a wider area. There are a lot of trade-offs that have to be addressed. It is a multidimensional problem. The content might be the same, but how we end up, how this is distributed, could change significantly. I know that Angela Watt wants to come in. As I said, I will come back to you. A few things, convener. I wondered what people have said about the quantum and how that shouldn't be in any way diminished. I wondered if people had views about what level decisions should be made about particular aspects of the funding and in terms of how it is distributed, should that be a UK level, a Scottish level or a more local level. When we talk about multi-annual funding, we talk three years, seven years, 10 years, 15 years, we are an economy committee looking at the bill for the Scottish national investment bank. A lot of people are saying that you need to be patient with your investments, that we all need the courage to look to the longer term. How likely is the new scheme? How likely is it to be fully operational by January 2021? There are a couple of things that have been said, chairman, that I think we have to be very careful. Again, I have to stress that I am speaking from experience of the leader fund that it cannot simply be measured on the income per head. Life in the rural areas is about much more than earning money and it is much more about the quality of life. The other thing is that the leader funding was based on a variable scoring, which was developed by the James Hutton Institute, which brought in the level of population area, remoteness, all those things. So that there was a greater emphasis placed on what life was like in rural communities. I certainly believe that there should be a strong element of the funding that should come back down to the leader lag system, because it is local people who are giving decisions on local projects. My feelings are to keep things as for the leader type of funding as local as possible. There are a lot of questions in there. To answer one of them, you asked about the length of time that funding should be. The current ERDF programme was from 2014 to 2020, but in reality we are looking at extending to 2023. That is a good period of time, because any new fund will need time to be established. We all hope that we can learn from the experience of previous funding and incorporate that into any new fund that has come up. The multi-year aspect is really helpful, particularly because there has to be focus on partnerships because it is transformational, rather than individual lead partners looking to individual companies. It is about how public sector and private sector all collaborate to work together to come up with transformational projects. The eight-year or the ten-year aspect is good. What also means is that, when you go out to talk to partners, you can say with certainty what your funding is, which is really helpful for everybody strategically. The best means of distribution is a mix. I think that there is a place for Scotland-wide programmes, but our experience over 30 years has been that probably the most effective programmes have been delivered either regionally or locally. There is a place for national programmes unquestionably, but I would suggest that there is a place for the regional, particularly around transport and infrastructure. There is also a place for the local there, and indeed the islands act will require islands proofing of any criteria in any case. Culture and heritage, particularly, benefits from a local intervention. We have an opportunity for a fresh start in any case, but we also have a lot more developed community planning. We have local outcome improvement plans, which should recognise Scottish Government's national priorities as well as local priorities. I would suggest that there is a better base for local structures, as well as regional and national. I think that the final question that you asked was about the level of confidence that the fund can be operational from 2021. Quite clearly, there is very little confidence in that. We have seen the current programme that we are in, which was not a dramatic change from the previous programme to that, and it encountered delays. The scale of change that may happen here in terms of a fresh, a new fund, I genuinely cannot see how that can happen prior to 2021, and that, as someone mentioned before, will create a big problem, because we are going to have this hiatus, this gap between the funds, where activity will cease unless there is funding made available to continue that. On the question about the levels of accountability and decision making, having seen the impact that the leader fund can have at a community level, I think that it is essential that there is the flexibility to be able to have decisions at that level. For me, it is less about taking a view that the decisions must be made at this level, and it is more about trying to determine what you want the fund to deliver and what the most appropriate level for the decision making would be. In the current programme, a lot of the decision making or the accountability has been shifted to the lead partner, and some of the lead partners have taken on the role almost as a mini-managing authority. That is a huge burden for those organisations to try to manage that in addition to supporting the delivery and dealing with the compliance aspects. It is about the right level. We spoke in the room before we came through about the impact at community level and so on. Those funds, although they have an impact at community level, are so complex at the moment that community groups will really struggle to get involved. Part of that decision making process has to be about making it more accessible for those communities where we can have an impact. We are going to come on to process and administration, so we are leading us there. Angus. Yes, thank you. Just picking up on the multi-annual financial framework, we have been supportive of the seven years. It offers that stability element, and it also allows you to make long-term strategic planning so supportive of that. Picking up on how far it should be devolved, we would certainly look for it to be devolved to the Scottish Parliament but also further devolution into the Highlands and Islands. What I mean by that is that some of our most successful use of European money has involved a Highlands and Islands body that has existed. That is lacking in the current programme. It is probably not served as well as other European programmes have. We look to be involved with a lot of expertise and we look to have some involvement as stakeholders in how that money gets involved. I am not precious about the name, but I think that a joint regional board has been discussed along those lines, so that is what we look for. Emma, you began this conversation. I was just to pick up on the issue of, like, leader funding is really, really important. Last week at the rural policy cross-party group there were presentations about what would happen if there was a lag in the expertise of making applications. There are already people who are very knowledgeable about it, so that is just a question of concern. Leader funding has been fabulous for rural areas, and in my area, Dumfries and Galloway, £20 million has contributed. What are your concerns about transition if there is a lack of expertise when we move forward? We understand where you are coming from with that. I am not sure that I can give you any particular answers, because I do not work at that level, but to me losing the expertise of the staff, the members of staff that have worked through the complicated leader process, which Stuart has mentioned already, has been an absolute nightmare, and it has certainly put off people applying. Losing a core of staff members who have understood this and have grown up with countless leader programmes throughout the year, since the early 90s, that system of funding has produced some really worthwhile projects and staff skills. Neil Gow, on you go. It was just to bring something else in, if you wanted to follow that. No, I just wanted to bore down a bit further on that job, because people talk to it 2021, as we need some assurance of what happens after that. In terms of whether it is in leader or other programmes that exist in Scotland, there must come an earlier date when decisions about whether we are not clear of what the future is looking like, and how that begins to impact on people who are involved in those organisations. For your own organisations, when does that become the alarm bell that starts ringing that you are going to have to say to people, I am sorry, that we are issuing you a 95-day notice? That is really what I am getting to, so that we can understand how soothing those decisions need to be made before they start to impact on human beings that are working in that sector. The alarm bells are ringing already, Chairman. We have staff who are looking to their future as to where they are going to go after that has happened, after the leader programme finishes in December 2020. There is nothing at the moment that we can offer our local projects, our local groups, our local communities that can fully support the leader process or fully replace the leader process, should I say. I am afraid that the alarm bells are going off right now. I agree with that. If I can use the experience of the current ERDF programme, it probably took a couple of years, because it was a new ERDF programme—it is the European Regional Development Fund that Zero Waste Scotland has access to. It was new to us as an organisation. We had never done European funding before, but it was also new to the Scottish Government and the Managing Authority. The systems were still developing. I know that we are going on to administration, but I think that it is important in this context. Systems were still being developed, the rules were still being developed, the rules were changing. Because there had been a previous European programme, things such as staff had been timesheet based before, and then it moved to 100 per cent allocation. Organisationally, we had to move things around in order to make sure that staff that we are working on the ERDF programme were 100 per cent, and that reflected in structures. Going on to your question about how would that impact, we do have staff that are working 100 per cent on the European programme just now. We would want certainty. There is not any certainty just now really in what is happening, so the sooner that we have that, the better. We would be beginning these discussions in this financial year with a view to making unpalatable decisions in the next financial year. That is simply because councils and other partners cannot fill those gaps in a way that might have been possible in years gone by, so that is our duty. However, it is the problem of the lack of clarity following the lack of consultation on the future and post-Brexit funds. That is the problem. If we knew what the criteria were, we could plan for those and work towards those. In harmony with the Scottish Government and others, work to keep people and give some continuity to employees and those who are retained by other organisations. That is the problem. David, what is the scale of this across Scotland in terms of the number of people that will be affected? I am not expecting anybody to answer that just now, but it is something that we need to get a grip off and begin to understand. It occurs to me that there is a principle that I had not really thought about before, which is that I am very sympathetic to the idea of having multi-year fund. However, essentially, if we move from EU funding, which is typically a 2014-2020 budget, that is so alien to the Treasury that they will struggle to cope with that as an idea. We have a two-yearly spending review. That is the way that public spending is allocated in the UK. If you want to go outside that framework, then a special case is going to have to be made for this. I would support that case, but it is a function of what will happen post Brexit, the move from one kind of funding model back to the UK funding model. David Neill. In terms of allocating funds within Scotland, on how we put the funds that we are talking about today alongside all the other funds that local communities and local authorities get, for example, when you are talking about the local government budget, you are talking about £10 billion. There is obviously a difference of opinion among local authorities as to who gets a better deal out of that. Other funds, for example, that struggle with population growth, feel that they are punished by the local government formula as is, obviously some areas will conversely benefit. I am not suggesting that we change that formula. I have a debate about the local government formula, but I wonder what kind of licence should we give to the other funds that local authorities and local communities are getting if we want them to tackle poverty and regional inequalities? Mike Malcolm, you are in the lines then on that one. I would first of all say that it is a fiendishly difficult job to find a funding formula for the whole of Scotland. I think that that would apply across local government. We cannot apply simply mechanistic formulae such as Scottish SIMD index of multiple deprivation. Good though it is, it does not work for all parts of Scotland. There needs to be a combination of GVA, GDP—none of those are perfect—income per head—population issues—remote and rural factors, island proofing—it is not going to be easy. The principles of EU cohesion funding should not be lost in that calculation. It is about equivalence, it is about a level playing field, and it is about diminishing structural disadvantage. That should always be the main criteria, but it is absolutely relevant to look at factors in which other funding formula do not, because it is new funding, it is additional funding, it is there to give equivalence, and it is not there to bolster existing funding mechanisms. I have been told that we are now in crisis because of the timescales. How are we going to do all that work to create all those new formulas, all those new ideas and the timescales that are available to us to make sure that if we are going to continue, that we can get that as seamless as we can, I think that trying to reinvent something at this stage is going to be a bit of a challenge. Therefore, that is up with the national performance framework in terms of the overall focus of what those funds should be about, should be the driving force in terms of how we allocate the money. David, I am looking at you to try to help and pick some of that before I move on to the next bit in process administration because that is a big question to resolve in such a short space of time. I very much agreed with Neil's point about there are so many different funds out there at the moment. You have got the city's initiatives, you have got a variety of different things going on, and what worries me about it all is that money is being spent with the best will in the world, but how does it actually fit and mesh with the national performance framework and the things that the Scottish Government overall sees as being important? I am very sympathetic to the idea that the actual distribution should be as low a level as possible and that might well be community level. In my paper, because if you start looking at a number of indicators, what you end up with is huge arguments about how you weight those indicators. How much weight do you put on GVA per head and so on? I certainly can go down that road and then the geography also becomes important because Glasgow does not turn out too bad, but Glasgow has areas that are severely deprived. How do you choose to allocate or to determine the geography is also important. The things that I thought aside from income growth were around deprivation and population decline, because I am not entirely clear that we are thinking all that clearly about how to deal with population decline. There was a night in Good Morning Scotland last Saturday about caithness and the very rapid decline in population that it is facing. As a result, public services are collapsing and so on. That is just a personal view on my part, but population adjustments that are taking place also seem to me to be should be somewhere in the mix when we are deciding what to do. All that says, it is just very complicated. That is a good opening. We will move on to process and administration and I will go to ask James Kelly to begin that area of the discussion. In the previous session, Stuart and Lynn spoke about the complexities of the current process, and Stuart in particular touched upon how that could be a constraint for some people, some groups accessing the funds. One of the themes that we picked up on in the workshops that we have had around the country is the complexity of the process. Obviously, that is public money and the public of a right to ensure that that money has been allocated and spent correctly. You need a proper compliance check to ensure that that is happening. One of the feedbacks that we were picking up was that it was overly complex and onerous. In some cases, people were spending too much time administering the process as opposed to dealing with the work and the groups that they were supposed to be helping. There is clearly an issue there. Moving forward to the shared prosperity fund, we are interested in how that process could be shaped so that it is streamlined and efficient, but it obviously has the correct compliance and monitoring in place to ensure that the public is getting value for money and that the money has been spent properly. Thank you for introducing it, so well, James. That is exactly what we need to hear about. So, we would like to take that on. I guess to see you, Stuart I mean, to see you eager. I mentioned it earlier and you will not be surprised to hear that I am quite keen to contribute to it. The disappointment with it is that there are limited funds available within the programme. When you access those funds, you want them to have an impact within your locality. You want them to benefit those individuals who require the support. What we are finding more and more is that the compliance requirements are disproportionate to the support that we are trying to provide. We are trying to support individuals who are quite hard to reach in the sense that there is not an abundance of people requiring support, but those who have very complex needs. In order to satisfy the audit and the compliance requirements, we spent a huge amount of time from the point of view of, is that person eligible to receive support? The physical data that we have to hold for that is onerous. The conditions in which we can hold that data with the GDPR are also onerous. We then try to move to the point of being able to support that individual. You can imagine that there is further documentation that we require to hold. When it comes to the process of submitting a claim, all of this information has to be made available to an auditor who will then determine if we hold sufficient evidence and so on. We go through pre-verification checks, all of our procurement documentation is checked as well. I am not saying that we are afraid of the accountability. To some extent, we appreciate the fact that this is public money and we should be held to account for it, but the proportionality needs to be right. If the level of focus is higher on accountability and compliance than what it is on delivery and support in those individuals who require the support, something has gone wrong and that balance has to be addressed. I agree about proportionality. Our fund is mainly geared to SNEs. Managing authority from the start said that we take risks on the project but not on the record keeping. It took a bit of time to understand what the requirements were and to make sure that the evidence and the records reflected that. Our strategic intervention also wanted to provide support to community groups, but that was proven really difficult because the difference between the ERDF fund and a lot of other funds was to evidence disbursement. When you are working with community groups, they can prove that they have paid for something because they have a receipt. Often a person will go into a shop and they will get the receipt and that will be the evidence and that will be the proof. For ERDF, it is disbursement that you have to prove and that provides really onerous. The level of administration that was required in auditing—I am exaggerating but a £2.50 receipt—was really out of the counter. The fact that you have however many levels of audit as well, auditing the same thing. Each level of audit that is audited by another level of auditor is also very onerous. I am listening to my colleagues in Wuseff and local authorities. It is quite clear that this new fund offers an opportunity. What they are telling me is that the current administrative, like Brynton, mechanism stifles innovation, stifles flexibility, stifles delivery of the programme itself. I think that this new fund provides an opportunity to get people around the table who are working day-to-day with these funds and listen carefully to the lessons that have to be learned. We are not saying that we do not want to be audited. We are not saying that we do not want to be accountable. What we are saying is that we do not want the auditing and accountability to get in the way of delivering for our communities. It is a key balance, but we have not got the balance right just now. The new fund perhaps gives us opportunities to say that these are very positive things that have come from European funds. These are issues that we think should still be maintained and should still be part of the new order. Surely to goodness, having spoken to people, I am sure that you have as well across Scotland, the current system is not working. I know from personal experience with the leader programme in Ayrshire that the staff themselves work really hard. They engage with community groups as best they can, but the community groups themselves are finding it really hard to cope with the amount of accountability that is involved in programmes. If we are going to make a step change and make the new funds better for our communities—that is who it is for—we need to find ways to minimise the unnecessary administrative burdens and maintain those that we require for legal purposes and scrutiny. The cabinet secretary needs to be more outcome focused. Are the outcomes being achieved? Sometimes when we are talking about aspirational programmes, all reasonable efforts have been made to achieve those outcomes. Have they even been achieved in a different way? The problem with the current system too is that it is labyrinthine, but it is also ambiguous. There is nothing wrong with a rigorous system. If I can turn to one of my other hats as returning officer, the election rules are rigorous and complex, but they are unambiguous. The current system is neither. It is both labyrinthine and unambiguous, and that is what needs to change. What does a new process look like then? I think that there are lessons that could be learned from how Audit Scotland goes about its work on auditing outcomes across the public sector, which are proportionate but rigorous. Some people told us in previous evidence-taking sessions that the Scottish Government obviously dispersed lots of money to many organisations across the country and there is a normal process within the Scottish Government to do that. Obviously, when those funds no longer operate, would it not just be sensible to default to a system that we already have in Scotland where the Government disperses money and there is an audit process involved, and that would save us something to reinvent the wheel? I am throwing that out there, not saying that is the right solution, but what are people's thoughts on it? I am just really looking at our submission. That is the very point that we made in order to avoid duplication of processes that use our existing internal and external processes, and that would avoid any duplication. Just picking up on some of the other points, it is quite important at the very outset to have clear and consistent rules from the outset. What we are experiencing is now some retrospective application of rules, which is causing some difficulties in the access of organisations. Just in terms of the process itself, it would be quite useful to have a fallback system, a paper-based system, and not rely singley on a system that depends on broadband access, because some of our leader areas are some of our most remote and rural, and it is causing unnecessary stress trying to fall out of an application form online. I was thinking earlier about one of the comments that David Bell made in the context of talking about a proportionate system. I wondered whether there was a real role for proper evaluation of outcomes, as opposed to the monitoring of minutia around data and cumbersome verification processes. I am also aware that there was a very small fund, but the Scottish Government had introduced a community fund small-scale project, a community fund that was a bit of experimentation. The community's alliance managed it, and it was to enable small amounts of money to be dispersed at a very local level. Minimum bureaucracy, if people could demonstrate a solution to a local need, and it might be quite interesting to look at how that process is developed or the outcomes involved with that work. I would also be interested to hear folks' views on the pros and cons of match funding. I am sure that the cities have a particular view on how that could be all better done, if I have that right from your paper. On which part, sorry? Particularly around how the city funds have been used in terms of the city deals. Can you give us some of that experience? I think that it will be helpful, because we have heard quite a lot about it, understandably, from the rural perspective leader in the Highlands and, obviously, the western areas. I think that from the perspective of a city, a slight bit back then to this, we feel at the moment that the level of evidence of payments, of dispersement through to bank statement, is overly bureaucratic. Where we have, for example, the city region deals and so on, in place, local outcome improvement plans as well, they are very outcome focused. It makes no sense that we are outcome focused and we are trying to deliver those things, but the evidence that we are asked to present is not on the achievement of those things, but on how and what we spent the money on. Do not get me wrong, we are happy to provide some evidence on that to the levels that are required, but it needs to be balanced in terms of the achievement of the outcomes. At present, we have a situation in which we could totally fail in terms of what we are trying to deliver. However, if we can evidence everything that we spent the money on, and that is all eligible, that would be acceptable. I have an angelis point in particular on getting money into communities in the way that was described. I do not know who to build on that. Stewart of Emdy also relates to pick-up on that. In terms of the intervention rate from what I understand, the Scottish Government cannot by year regulation exceed 50 per cent in Scotland, and that appears to be factual. Certainly a lot lines Scotland in consultation with its members has certainly come to the view that the 50 per cent rate should be adopted as a minimum, not a maximum. We think that that would help and assist communities and community groups to go about their business in a rightly supported way. The current intervention rate is not helpful, and we would recommend that for any new funding system that comes into play with the EU, that Scottish Government would give serious consideration to the 50 per cent rate being the minimum, not a maximum. Malcolm. Can I support that very strongly? The chairman is coming from a council whose match fund is virtually committed halfway through the term of the council. As public sector funding falls, particularly Scottish Government and hence local government, has capital pressures, particularly the capacity to match fund, as we used to do, is seriously reduced. Some councils have reserved funds and access to other means, others do not, and it has to be looked at with greater flexibility in what Roddy has suggested there. I think that the intervention rate is one way of doing that. Just one word, if I may, in response to Ms Constance's question about outcomes. We had a situation whereby a greater number of people were helped to achieve the outcomes, which were the objective of the funding, but the original client group was drawn so narrowly that rightly, in audit terms, we did not meet the criteria. It helped a very small number of people caught within the definition, but a great number of people benefited from that money. We ended up repaying some of that, and I am not criticising anyone in that process, but that is the point about outcomes. The outcomes were achieved for the community. The absolute letter that the client group was just drawn so tightly that it would never have been possible, I think, to meet those outcomes with that narrow focus. Before I move on to my outcomes, because we are going there anyway, is there any other change that you want to pick up on? No, I will pick up on that. I will pick up on that. Well, sorry, Angus, before we go to Willie. That is a very brief point, chair. I had a conversation with a colleague on Monday who advised me that private much funding had not been written into the current programme, and that seems an oversight. Willie, we have strayed fairly much into the tough view that we are being on anyway, but can you see where you can take that conversation as we begin to come to an end of this session? Okay, thanks, Bruce. It was to try to get your views and thoughts on outcomes in general, and whether there is a new opportunity, a fresh opportunity to think afresh, to think anew about what outcomes should be. It was interesting in your comments, the amalgam of how you found particular outcome, therefore it is pretty restrictive in practice. So generally speaking, what are your views on what the new outcomes should be if these funds continue? Should we change the models of what they are and what they are supposed to deliver? Should we apply the national performance framework that comes from Scottish Government? Should we be expecting outcomes to fall out of the shared prosperity fund? What should we do in your view to make things better, to truly deliver benefits for the communities in Scotland that we represent? My bureaucratic answer has to be that it depends on the criteria that come through for funding and what Scottish Government and others are able to do within those criteria, but that is the obvious answer, although it has to be stated that we do not know what the criteria will be. We are all worried about the burden that is going to fall on us when all of this comes, as we hope it will. There is a wealth of material out there. You mentioned the national performance framework. There are local outcome improvement plans. There is a great deal of work through COSLA, SLED and all sorts of other criteria. I do not think that it would certainly not be beyond us, although we will be pressed for time to work out outcomes that are suitable for regions and localities. The focus in my area, for example, would be population retention. That is about skills, housing and infrastructure. That is about jobs. In other areas, it might be more about innovation and the infrastructure that supports that 5G. I do not think that that is beyond us at all, but it must be focused on outcomes. Have the Western Isles slowed as we have our rate of depopulation still a concern? When jobs are created, and I echo Jill's point about micro-businesses, small numbers of transformational have the people who would be employed in them got a place to stay. Those are the questions. Among the public sector in Parliament of Scotland, there is quite a capacity to derive and define measurable and useful outcomes. I want to control that, Linda. Do you want to, from a Zero-Way Scotland perspective, give us what you think might be? I agree that the national performance framework for Scotland is overarching, and that any local authorities or any public sector organisation should be linking up to the national performance framework. In theory, that would be a good basis. How you weight different aspects within that national performance framework is questionable, but it needs an economist to look at that. I agree that it should be outcome-based. Given that an economist has been talked about, David, do you want to contribute in at this stage? I generally agree that we could have a set of outcomes that vary by different parts of Scotland but are still consistent with the national performance framework. I have talked in my paper about population decline, and I think that that is a significant concern. It is quite difficult to measure, but a lot of recent work seems to be moving towards trying to ensure that you maximise the amount of social capital in communities, which is their cohesion. Some work is being done on that. It relates a bit to the work on wellbeing, and it is interesting that New Zealand is now seeking to maximise wellbeing rather than GDP. I do not think that this is something that can be answered off the cuff, but it seems to me that that fund would be an interesting exemplar if we want to have a national conversation about what are the key elements, locality by locality, that fit within the national performance framework but which have the particular weight that is appropriate for that locality. Do you think that in terms of the share prosperity fund, however, that is going to be operating at a UK level or a Scottish level from what I hear from the table, that seems to be the preference, that we need to begin the discussion before we start designing something. Actually, we need to decide what the outcomes we want are before we start to create the architecture to deliver. I just want to get a reflection on that. I tend to agree with that. Also, how are we going to evaluate the outcomes? There are different levels that you can have outcomes. Did the project achieve the stated outcomes that were written into it at the outset? That is one level of evaluation, but, although that is important, there are overall evaluations that are generally done a bit after the event. For example, I recently saw a paper that looked at regional selective assistance, which is still available in Scotland, to support companies that the Scottish Government, for whatever reason, has decided to support. The argument was that the RSA had been a successful policy that it typically added to growth in particular areas. We have to think about all the outcomes and layer them into what and figure out how they fit within the Scottish and national performance framework. From a local authority perspective, we have, certainly within the cities that are city region deals and local outcome improvement plans. I think that it would be a bad idea to introduce something additional to that. If we could use those outcomes that we have as the outcomes that we demonstrate that we would like the UK-shared prosperity fund to help us to achieve, that would help us to deliver some of the priorities at a Scottish level. It is a fair amount of work to be done, but if we use some of those existing models, it would reduce the amount of work that we are doing and we would not try to create something new. A movement away from relying on figures and numbers and all graphs of all sorts would be welcome by all. I think that a key aspect is about the software elements of what changes communities and how communities feel involved. What are their views about how funding should be spent in the areas? What is important to them—not simply if they are in the county buildings in the air or if they are in the city chambers in Glasgow—what is important to those communities? The piece of legislation, the community empowerment act, is a really interesting piece of legislation, because it starts to open up the box about letting people get on with things themselves. Governments, councils can only do so much. The communities themselves are really that X factor that can make a real difference to funding. One of the areas that I would like to see opened up as we go forward here would be to talk to people about what is happening in communities and where do they see funding being necessary and how can we help them to spend money in a way that is fundamentally transformational for them. I agree that we need to be focused with big money on figures and all the rest of it, but there is also this very important soft element about ensuring that we are just not spending the money for spending sake. How do you spend it and how do you engage with people in the communities to ensure that their community is actually benefited to the optimum from that funding? I feel that that is a really, really important consideration as we take any funding options—what difference, what ownership—how are those communities being engaged? I think that Rory has really hit the nail on the head as far as I am concerned. Again, I have to stress that this is leader funding. We were asked at the start of the leader programme to start and work through local development strategies, which were policies that were very much focused on each leader lag area. Those brought in community consultations with all sorts of different groups. One group in particular was migrant workers in Angus, but it brought out a whole lot of different issues at that local level. That is one point that I was wanting to make. On evaluation, it is easy to follow the stated outcomes of jobs created or anything like that, but what I feel is something that is missing through and through is that the social outcomes from projects take a while to come through and become invisible. One of the things that the leader groups are trying to do over the coming weeks is to focus on some of the more long-term gains that have come through the different projects, whether they have been project supporting community, village halls or tourism facilities or industrial facilities. We are going to try to evaluate some of the softer things that you mentioned. That work is on-going at the moment, so there might be something that we can take out of that in a later date. I am building on the local and regional elements here. The Hylins and Islands European Partnership has produced a regional policy position paper that highlights some of the themes that we would like to explore with the new funding and where we would like the region to go. In addition to that, we have got the convention of the Hylins and Islands as well, which highlights a number of priorities. They are not too different to what Malcolm has suggested, but there is tall detraction, housing, digital, physical infrastructure, marine, building capacities in communities. We can utilise the existing documents that are there, the existing organisations that are there to help to build on what our priorities are going to be. I want to make one point and understand that the UK share prosperity fund is linked into the industrial strategy. That sits quite uncomfortable with our part of the world in relation to that rural. I do not really necessarily see how that fits in that well with us. It is just making that particular point. Will the minister want to pick up on that? I am very encouraged by what I am hearing here. I represent Cymar at Nervyn Valley. You could pick any point in the past that you would like to go to 10, 20 years. Our indicators always seem to be behind the Scottish figures. You could say that for any community of Western Isles rural, communities in our city of Glasgow, there is a deprivation. If that kind of money and that kind of investment is not turning these things around, we are entitled to be held to account and asked why not. I quite like what I am hearing in terms of localising priorities and making sure that what matters for the various communities in Scotland is what this money is aimed at delivering. If that is an opportunity to rethink about what really outcomes should be for the communities of Scotland, that is a great service that we will deliver to the people that we represent. Thank you very much, everybody. It has been a very useful session from our witnesses this morning. We will be pulling to a report together. A aim is to try to publish it in the autumn. That might depend on other things that are on our work programme. Thank you very much for coming in today and contributing to our process. I am very grateful to you. I now close this meeting of the Financial and Constitution Committee.