What would No Deal mean for councils?

September 20, 2018   By Charlotte Morgan, Policy Researcher, NLGN

What would a No Deal Brexit mean for the UK? With only six months remaining until the UK leaves the EU on 29 March 2019, this is the burning question currently preoccupying the UK Government. At the time of writing, 52 papers outlining the likely impact of No Deal on various aspects of UK economy and society have been published, with a further 32 papers expected to follow shortly. Last week, Theresa May convened her Cabinet for a summit to discuss the UK’s preparations for No Deal.

Given that the potential implications of Brexit for local government have been overlooked by the UK Government throughout the Brexit process, we can surmise that one of the questions least likely to have been on any Minister’s lips at last week’s summit was: what would a No Deal Brexit mean for councils?

Based on the information on No Deal currently available in the public domain, here is what No Deal could mean for councils:

  • Direct increases in demand for councils’ ports and trading standards services
    It is expected that a deal on the terms of the UK’s withdrawal from EU membership would include an agreement on the immediate post-Brexit trading relationship between the UK and the EU. No Deal would therefore see new requirements in place for UK-based organisations to trade with the EU.

    For many councils, this could mean a significant increase in workload for trading standards teams checking EU imports at ports and for environmental health teams issuing health certificates for certain goods to be exported to the EU (such certificates are not currently required for EU exports).

  • Indirect increases in demand for councils’ wider services
    No Deal could also indirectly contribute to increasing demand for services that councils provide to vulnerable people and families. With food prices reportedly set to rise and smaller businesses whose contracts and customers are mainly based in the EU likely to struggle in the event of No Deal, councils could face a spike in demand for already hard-pressed services such as adult and children’s services and support for people at risk of homelessness.
  • A new wave of austerity cuts
    In August 2018, the Chancellor indicated that No Deal could result in further cuts to public spending across Government departments to plug the £80bn hole that he estimates No Deal will punch in the UK’s finances.

    Central government grants to councils in England have been reduced by 49.1 per cent in real terms between 2010/11 and 2017/18. Another sharp drop in central grant funding, combined with further increases in demand for services and the UK Government’s continued unwillingness to consider more fundamental fiscal devolution to local government, will surely place more councils at serious risk of joining Northamptonshire in filing for bankruptcy in the months following the UK’s exit from the EU.

  • EU-funded projects guaranteed until 2020, but uncertainty beyond
    The Treasury announced in July 2018 that funding secured by councils and other UK organisations from EU programmes will be guaranteed until the end of 2020, even if the UK leaves the EU without a deal.

    It is much less clear what will happen from 2021. The consultation to inform the design of the UK Shared Prosperity Fund (UKSPF – which will replace EU structural funding programmes in the UK after Brexit) has still not been published, and it is still unclear how much money will be available under UKSPF and how it will be allocated.

Regarding the potential impact of No Deal on local communities and workers, councils will welcome that Brexit Secretary Dominic Raab has sought to reassure EU nationals living and working in the UK that the UK Government would “move swiftly” to “secure their position” under a No Deal Brexit.

Nonetheless, it is questionable whether councils have the capacity to prepare their area for No Deal and manage any post-No-Deal rise in demand for key services. Recent ONS figures show that the total number of people employed in local government is less than 2.1million, the lowest figure since 1999. Meanwhile, the number of staff employed in central government reached a new record high of 3.11million in June 2018, with the Treasury signing off plans for an additional 9,000 civil servants to be recruited to work on Brexit preparations.

Councils looking to MHCLG for support in the Brexit process will have been disappointed. MHCLG was one of the few Government Departments that did not bid for any of the £1.5bn made available by the Treasury to help Departments prepare for Brexit. MHCLG belatedly set up a Brexit Board in July 2018 to engage with representatives of the local government sector on domestic Brexit preparations, but the full membership and terms of reference for the Board have still not been published, let alone the minutes of the Board’s meetings to date.

The increasing levels of ‘No Deal’ rhetoric may be seen by the UK Government as a tactical ploy to achieve their preferred deal with the EU, but with only six months to go until the UK leaves the EU, No Deal now has to be regarded seriously as a possible outcome of the Brexit negotiations. Councils will be profoundly affected by No Deal and are having to plan for this eventuality in the dark, while the UK Government continues to be oblivious to the challenges that local government could face under a No Deal Brexit.

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