Danielle Cudby considers some of the challenges that Brexit poses on local government and how they could be successfully handled. She argues that despite the risks and the uncertainty, Brexit can provide a platform for local councils to advocate for greater powers and better funding deals

Cudby, Danielle

LSE Research Online

2/15/2017Brexit and local government: the implications and theopportunitiesblogs.lse.ac.uk/politicsandpolicy/local-government-and-brexit/Danielle Cudby considers some of the challenges that Brexit poses on local government and howthey could be successfully handled. She argues that despite the risks and the uncertainty, Brexit canprovide a platform for local councils to advocate for greater powers and better funding deals.The UK’s decision to leave the EU has had a momentous impact on the political and economiclandscape of the country. With Article 50 set to be triggered in March, a number of large questionsloom over the future of the United Kingdom such as its position in relation to EU law, its future tradeagreements, and the prospect of diminishing EU funding. Such large policy decisions will shake upthe governance framework and will have a significant impact on local government, including funding, the legalframework and the progress of devolution deals.FundingThe most pressing matter for local government is funding. Under current arrangements, local councils enjoy EUfunding packages from a multitude of sources – including the European Structure and Investment Fund and theEuropean Regional Development Fund, allocated towards investment and development projects. Another key fundis the European Social Fund, which provides funding for employment initiatives and economic prosperity.Local authorities have made good use of these funding pots. Cornwall Council has secured a £132m grant of EUfunding towards a superfast broadband project, whilst Transport for London has secured £7.5m for the EmiratesCable Line over the River Thames. The £7.2m of European Social funding within the South East has led to thecreation of the ‘Job Deal’ project in Hampshire – a 4-year employment project, focused on getting ex-offenders backinto work.But this funding is in jeopardy; there is no guarantee that local government can continue to tap into such EU sourcesonce the UK’s departure from the EU has been initiated. The government has signalled that whilst they are planningto supplement funding to projects signed off by the time the UK exits the EU, there is no assurance that projects willcontinued to be funded. In terms of opportunity cost, there is also no guarantee that the UK government will makefunding available for future projects.The prospect of diminishing EU funding, coupled with the continuation of local government cuts confirmed within the2016 Autumn Statement, will further stretch local government budgets. This will be particularly hard-hitting forcouncils located within the poorer areas that heavily rely on EU funding – this includes West and East Wales, theScottish Highlands, Tees Valley, and Cornwall.Funding: Foreign Direct Investment Local authorities have also greatly benefitted from Foreign Direct Investment (FDI) from the EU, which concerns theestablishment of businesses or acquisition of business assets by foreign investors. Under current estimates, nearlyhalf of the FDI stock in the UK originates from the EU, while many European firms that have operations within the UKpay substantial sums to local authorities via business rates. FDI also brings other benefits to regions within the UK,including increased productivity, increased wages, employment opportunities and new technologies.1/3After Brexit, there is a good possibility that Europeanfirms will be deterred from investing in the UK. The UKcould be perceived as more isolated and less open toforeign investment. This development will be worsenedwhen the UK leaves Single European Market –European businesses will be susceptible to trade tariffs.In the face of this future uncertainty, local councils inconjunction with Local Enterprise Partnerships will haveto double their efforts to attract and support businessesfrom the EU. This may require re-evaluating policies andtools to attract international businesses.This point is especially important considering theproposed changes to business rates. Under current plans, local government is to become more economically ‘self-sufficient’, with the government planning to terminate local authorities’ Revenue Support Grant by 2020 andimplementing 100 per cent business rates retention. This will mean that local councils will directly rely on thebusiness rates from local businesses.Devolution DealsOne of the most significant and current changes within the local government landscape is devolution. UK centralgovernment is currently processing the devolution agenda, delegating power from central government to localauthorities. So far, devolution has been dealt with on a case by case basis; local authorities have been encouragedto work together to formulate devolution deals, which are in turn reviewed by central government for approval. Thisprocess has overseen the creation of combined authorities such as the Sheffield City Region and GreaterManchester.The devolution agenda is, however, now threatened by the prospect of leaving the EU. The UK government iscurrently inundated with shifting through Brexit-related legislation and policy implications. As a result, the negotiationprocess with the EU has become a priority of the UK government whilst policies such as local governmentdevolution have been placed on the back burner. Faced with the current circumstances, it is highly probable thatlocal authorities will find it more difficult to have their devolution packages reviewed and accepted by centralgovernment. In addition, with the high degree of uncertainty surrounding the future of the UK, central governmentcould be less willing to devolve more powers to local authorities. This could stifle emerging devolution deals such asthe East Anglia devolution deal between Cambridgeshire and Peterborough.Whilst the prospect of Brexit creates ominous complications for the devolution process, there are some potentialbenefits for local government. The Brexit process is creating a platform for local government bodies to advocate fortheir own opt-out deals. The Local Government Associations of England, Wales, Scotland and Ireland have urgedcentral government to make further constitutional arrangements for local authorities – suggesting that more powershould be transferred to local authoritiesPossible legal impactsLocal government currently complies with a plethora of EU legislation. This encompasses procurement, localeconomic development, waste collection and employment legislation. But following Brexit, the supremacy of EU lawwill no longer apply. With no obligation to follow EU legislation, the government will have the jurisdiction to amend orrepeal EU laws. For example, a key piece of EU legislation for local government is the EU Waste Collection andDisposal Directive. The legislation, which has been incorporated into domestic law, sets out a specific frameworkregarding the management of waste and imposes recycling targets to be achieved by 2020. After Brexit has beeninitiated, there is a possibility that the government could amend or repeal the UK law which gives effect to thisdirective. This could potentially remove or alter recycling targets and waste management duties arising from the2/3legislation.Local government now has the task of steering through all these challenges, whilst facing a future of uncertainty. ButBrexit can be used as a platform to advocate greater powers for local government and advocate fairer fundingdeals. So, as well as considering how Brexit can work for Britain, we also need to ensure that Brexit can work forlocal government._____About the AuthorDanielle Cudby has worked as a Graduate Management Trainee with the Local GovernmentAssociation. She holds an MSc in International Relations from the LSE.  3/3

Brexit and local government: the implications and the opportunities

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