Devolution overhaul essential because of Brexit, experts warn

It also said the UK Government's drive to “keep powers at the centre" could cause "irreparable harm" to the relationship between the devolved administrations and Westminster.

The think tank identified cooperation over fisheries, the environment, and agriculture, particularly farm payments, as the biggest areas of disagreement facing ministers.

Revealed: SNP's new blueprint for independence

It identified eight key challenges to overcome to create a stable system for the future, including new UK-wide frameworks, new regulators, and mechanism to resolve disputes.

Failing to secure new ways to cooperate between the four nations would disrupt the economy and harm the environment, it said.

However the Institute said trust and co-operation would be vital, qualities which have been in short supply in recent months, as Edinburgh and Cardiff have accused the UK government of staging a centralising “power grab” under the cover of Brexit.

Westminster had also soured relations by largely keeping the devolved administrations “in the dark” over the Brexit process, the thinktank warned.

In its Devolution after Brexit report, published today, the Institute said Brexit had put a “serious strain” on devolution, and exposed a “stark divide” between how the devolution settlements were interpreted in Westminster compared to Scotland and Wales.

Paul Hutcheon: Yes movement is heading for a rift on the economics of independence

A central problem is how to distribute two dozen devolved policy areas which have been exercised by Brussels since the start of devolution in 1999, but will be repatriated next year.

Until now, EU membership has kept these aligned, but Brexit means there is now the potential for dramatic policy variation inside the UK.

Westminster fears that could lead to the fracturing of the UK internal market, obstacles to trade and unfair competition, and make the UK less attractive to international trade.

It wants to “ring-fence” powers temporarily at Westminster to legislate for UK-wide frameworks, most covering agriculture, fisheries and the environment.

The devolved administrations reject this plan, and are demanding changes to the EU Withdrawal Bill in the House of Lords, failing which they will try to use their own Brexit Bills to take control of devolved EU law, teeing up a fight in the UK Supreme Court.

The Institute for Government warns all the nations involved will have to strike a careful balance between centralising powers for ease of legislating and conducting international relations, and devolving powers in order to respect the devolution settlement.

Calling for a comprehensive review of the existing relationships, it said the joint ministerial committee system bringing the four governments together should be beefed up, made more frequent, and include a formal mechanism for settling disputes.

Another key challenge is to agree post-Brexit funding deals across the UK, with farm subsidies a crunch issue.

Common Agricultural Policy (CAP) payments to the UK are around £3.5bn a year, with Scotland, Wales, and particularly Northern Ireland, getting far more per capita than England.

Although this will initially stay the same, the four nations must decide a new formula for the medium-term, and whether funding is ring-fenced or part of the Barnett formula block grant.

David Torrance: Sturgeon faces some hard choices at home when selling Scotland abroad

The former is more appealing to farmers, but the latter is better for devolved governments.

Scotland’s role in future fishing talks also needs to be clarified.

The SNP government wants Scotland to have “the lead negotiating role” in UK talks, but the report says this would be “very unusual” and “unlikely to be acceptable to UK ministers”.

Other problems to be addressed include new regulators - the report suggests jointly-funded and jointly-staffed UK-wide watchdogs - and how to involve outside stakeholders in UK-wide decision making.

Jill Rutter, the Institute’s Brexit programme director, said: "The past year has shown the strain leaving the EU is placing on devolution arrangements designed on the assumption of UK membership. It is time for an overhaul.

“It is in the interests not only of the UK government, but also the devolved governments, to develop firm foundations for future joint working - to promote collaboration and innovation.

"Only then will we have the right environment, agriculture and fisheries policies for the whole country after Brexit."

The report said Westminster's parliamentary committees should hold joint probes with Scotland, Wales and Northern Ireland in relevant areas, with public bodies that are created to replace EU institutions being “four-nation by default”.

SNP MSP Joan McAlpine said: “The SNP has been clear that we are open to establishing common frameworks, but this must be done in a way that is compatible with devolution.

"This report highlights the urgent need for the UK government to recognise the importance of working with devolved administrations, rather than imposing a power grab."

READ MORE: Pete Wishart appeals for respect and unity amid Yes movement split

Scottish LibDem MSP Tavish Scott said: “Instead of megaphone diplomacy based on the maxim of who shouts loudest will win the PR war, the governments of the UK need a structure that sorts policy disagreements.

“There is no point in waiting for the Tories or the SNP to propose such sensible measures - it suits both of them to play these debates out in public.

“Sensible reform and a dispute resolution system is long overdue and even more necessary given the chaos imposed decision by Brexit.”

Labour MSP Neil Findlay added: "The Tory government's handling of Brexit has been a shambles from day one.

"Not only does it appear unlikely that Theresa May will secure any kind of decent deal with Brussels, but her government has also put devolution in jeopardy.

"By refusing to engage properly with devolved administrations, the Tories have played into the SNP's hands and given them cause for yet another constitutional grievance."

A Scottish Government spokesperson said: “Our position is clear – the devolution settlement must be respected. The people of Scotland voted in favour of devolution and against Brexit.

“We note the Institute’s report endorses our view that any new UK frameworks must be the result of agreement between the four UK administrations - they must not and cannot be imposed.”

A UK Government spokesman said: "We have undertaken a great deal of work to strengthen our relationships with the devolved governments as we prepare to leave the EU.

"The Government recognises the need to review the existing intergovernmental structures and that is why at the most recent Joint Ministerial Committee the Prime Minister put forward a proposal to do just that.

"The UK Government will work in collaboration with the devolved administrations to review our structures and make sure they are fit for purpose in light of our exit from the EU."