Brexit and Local Government – what next?

Devaluations

All councils would be well advised to consider their Medium-Term Financial Strategy, and the assumptions that underlie it, to see if some adjustment is required. For example, one of the major issues that some councils will face is the possibility of a fall in house prices. Whilst in some ways this might be seen as a good thing, with a partial return at least to housing becoming more affordable for first-time buyers, those councils who have decided to invest in housing as an income stream may be adversely affected. Shares in house builders fell sharply with the news of the Brexit vote, although they have started already to recover, with the biggest issue likely to be a curtailing of new build where it’s possible to do this. It’s unlikely that the expected, and hoped for, boom in new house building will stop altogether. However, it may well slow down before it had really taken off, and the rates of return may very well be lower than anticipated. It’s unlikely though that this will become negative and the rate of return should still be relatively healthy. Councils in rural areas will want to consider the impact of the loss of CAP subsidy for farmers, which accounts for around 50% of farmers’ incomes (although that didn’t stop most rural areas voting to leave), and the potential knock-on effect of tourism.

Change of sentiment

Councils who have projects funded by EU funds will want to ensure that the Government will pick up any gaps if EU funding does not continue. This may be more of a problem for councils who have projects in the pipeline dependent upon future EU funding. The European Investment Bank (EIB) has stated that its policy towards the UK remains unchanged pending the details of the withdrawal settlement, but it’s not difficult to suppose that future EIB funding may be more difficult to obtain where the UK has left the EU and is no longer a shareholder, as opposed to the current position when it is one of the main shareholders of the Bank. The downgrading of the UK credit rating will also have an effect on councils  and is likely to hit the major cities especially hard. All councils will have to find ways to encourage investment in their areas, especially with the changes proposed to council funding from 2020. The uncertainty about the details of the Brexit are already giving rise to some investors suggesting that they will prefer to put future investment inside the remaining EU countries because of the more favourable trading conditions this will have, but once again, writing less than a week after the Brexit vote, it’s impossible to know what the real implications will be, how many high-paying jobs will be lost in some of the financial centres, such as London and Birmingham, and if those can be easily replaced if they do go?

Government policy change

The certainty of a new Prime Minister and Government, and possibly even a general election, will be bound to lead to changes in policy. The current chancellor has, for example, been the champion of the devolution agenda, and especially the Northern Powerhouse. Will this be paused, or has it gone too far to stop?

Part of this will lie in the debates around how the country feels after the referendum, and if it really has caused not just a retreat from Europe, but also emphasised the desire to move away from a centralised UK approach, where there is a vast gulf between the man and woman in the street and the politicians who govern their lives. If this is so, it could mean that there is resurgence in local democracy and a real interest in local government as a result. Councils will be very well placed to take advantage of this and to renew civic pride in their place. Finally, many of the laws that originate from the EU are critical to core services provided, and regulated, by local councils, such as waste and environmental issues. As the UK Government starts to consider what will happen to this legislation, it is important for proper consideration to be given to the views of local authorities about what should replace the legislation, as councils are best placed to advise upon what has worked, what is a failure, and what frankly is just not worth bothering with. Councils may also want to give their views on matters such as employment rights, procurement, and state aid, with a view to trying to ensure that the legislation reflects what is needed to allow them to maximise growth.

Leadership

Councils are likely to be at the heart of implementing the changes that will happen, some earlier than others, around the Brexit vote. There will be implications for staff, both in-house and those staff who deliver council services via other providers, for service users, and for the wider populations they serve. For staff, many of whom may have come from other EU countries, there will be the need to reassure them that they are wanted and their status will not change for some time (if at all). For all staff, reassurance that terms and conditions of employment are, once again, unlikely to change in the near future (or possibly not very much at all) will be a helpful message. Similarly, service users will need reassurance that, in the short term at least, things will stay the same. For the wider community a message of leadership that addresses the vile rise in hate crimes and makes it clear that such behaviour will not be tolerated, is essential. Finally, being clear that whilst many things remain the same in the short term, the council is considering how to identify, plan for and manage the implications of the Brexit vote on the economy of its area and the way in which it may need to change its operations is an important message for the future.

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