The public sector will pay the price for a botched Brexit

January 16, 2019   By Adam Lent, Director, NLGN

This article was first published in the LGC on the 15th of January.

The current Westminster conniptions are so often presented as a debate about the long-term future of the United Kingdom that it is easy to forget that Brexit is happening now in the world as it currently is. Recall it we must though because two very apposite but often overlooked conditions mean that if MPs do not find their way out of the current mess, the consequences for our public services, and as such the UK as whole, are grim indeed.

The first condition is the state of the world economy. So consumed have our leaders been by the variable merits of May’s deal versus Norway + versus Canada + + + (and so on ad infinitum) that they have failed to notice that the rest of the planet’s main preoccupation is its immediate economic future. A combination of chaotic protectionist policy in the US, a slowdown in China and rising interest rates has led economists to predict that the world is heading for a sustained period of stagnation or worse. This means that the UK will be taking a massive leap into the economic unknown just at a time when investors’ appetite for risk will be dwindling.

Given this, it is highly likely that Brexit of any form will weaken UK economic performance. But a botched Brexit – one which drags on for months without resolution or involves a chaotic withdrawal from the EU – could drive the economy into much darker territory.

One could look on the bright side – as many of our MPs are wont to do – and foresee this as short-term pain which will ultimately lead to long-term gain. But this is where the second condition comes into play: the state of the public sector.

If tax revenues dropped as a result of a shrinking economy, a Chancellor would, as usual, be under enormous pressure to cut public spending to maintain market confidence in the public finances. But as last week’s report from the Auditor General concluded, the public sector is finding it almost impossible to absorb the cuts put in place by the Coalition Government let alone a whole new round. There is a real risk that it will be healthcare, social care and a wide range of other services that will fall over in the wake of a new economic shock rather than the financial institutions that faced collapse in 2008.

The implications of multiple bankruptcies, redundancies and withdrawn services across the UK’s public sector are horrible to contemplate. They would also be long term. People who would go untreated or uncared for would die or face chronic ill-health. The damage to troubled families and communities losing vital services would not be easily undone. And the anger felt by voters would likely translate into support for some of the less savoury political forces already finding the UK increasingly fertile ground.

As such, there is a very heavy obligation now resting on our political representatives to find a solid way forward after today’s vote. Chaotic exit or rudderless drifting must be ruled out. If this is not achieved, then MPs will soon discover that while the banks may have been too big to fail, public services are simply too important to die.

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