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What the Brexit vote means for local government finance

Paul Dossett, partner and head of local government at Grant Thornton UK, looks at the implications of the Brexit vote on local government finance and what needs to be done to rise to the challenges ahead.

While the implications of the recent Brexit vote are still unclear, voices in local government have been quick to express concern around what it might mean for the sector, and in particular its finances. However, if there is anything that the previous six years have demonstrated, it’s that local government organisations can cope well with funding cuts and financial uncertainty. 

As negotiations around the UK’s exit from the EU begin, these are characteristics that will serve the sector well. The vote offers similar challenges in terms of uncertainty, and will bring specific risks for some localities that draw heavily on EU funding. While the government has guaranteed that this will be in place until 2020, many in the sector will be concerned around what happens beyond this date, as well as whether the broader macroeconomic picture, which is the key determinant for all public spending, will stabilise, decline or improve. 

Beyond dealing with short- to medium-term uncertainty, local government faces another less tangible challenge. How does the sector engage with the disaffected and disempowered population, many of whom expressed their dissatisfaction on 23 June? For many, there will be difficulties in addressing the cultural heritage aspects of the Brexit vote. How does the sector engage effectively with those in our communities that feel that ‘Britishness’  and sense of local identify is being changed in a way they can neither understand nor engage with effectively? 

While I’m sure that local government will rise to the challenge, it will need to plan carefully to achieve the best outcomes for communities up and down the UK. Instead of suggesting that we need a radical overhaul of how local government works, there are some key points that need to be considered and addressed in the run-up to Article 50 being triggered, and beyond. 

We must remove organisational silos 

The UK’s ageing population is our greatest challenge. Instead of demanding that we see huge structural changes in organisations like the NHS, which faces its own funding challenges, we need to work better as a whole. Ensuring that local government can take full responsibility for commissioning adult social care and health services should be a first step, which the sector needs to push for rigorously. And as part of the move towards devolving responsibility to a local level, all the governmental departments, such as DWP and the parts of Department for Business, Energy & Industrial Strategy that are relevant locally, should be absorbed in the local government commissioning framework. We must remove organisational silos to see real progress on this issue. 

Secondly, economic development needs to be planned more carefully. Economic growth is important and council tax and business rates are crucial to the health of local government finances. However, we must ensure that in the dash for growth, new developments are not at the expense of the people, businesses and communities that have grown up in an area. This will only exacerbate the problem for those people feeling dissatisfied and disempowered, who often view local government as pandering to big businesses over the needs and wants of local communities. 

Reviewing policies and attitudes 

Now is the time to review policies and attitudes that have become enshrined in local government. Green belt development and infrastructure challenges are just two examples. On the latter, we can take advantage of the low cost of borrowing and ensure that we take advantage of the cash that is already invested in the sector, some of which, if invested wisely, can help address shortfalls in revenue. By improving infrastructure, we can ensure that new arrivals into regions, be it people or businesses, are well integrated. We have to make sure that perceptions around overcrowding don’t worsen, and that we have the right facilities in the right places. That means improved public transport and more schools, social housing and care homes. 

Community engagement needs to be more real. While many councils do this well already, there is often too much focus on the vocal middle class. Engaging with hard to reach groups in a meaningful way, that doesn’t involve lectures on healthy lifestyles or putting on sun cream when it reaches 30°C, is vital. Everyone should have a voice in how their community runs and councillors need to be given the right training and support to ensure they can become great community advocates as well as the strategic thinkers they are now required to be. 

Continued focus on sound finance and governance will remain critical. There are numerous statutory reasons why local government is required to set and meet balanced budgets, but there is also a local political and cultural reason. 

Most public spending takes place many miles away from politicians in Westminster. Those people given the power to spend have no local political accountability or direction, so it’s not surprising that there is a complete disconnect between politicians and, say, doctors or college lecturers or DWP workers. Local politicians provide a rudder by which officers steer the local government ship. They know full well that most elected members see themselves as advocates for their wards and that most people understand from their own lives the crucial need to spend within your means. 

And finally, we need to consider local government reorganisation, which will be a prerequisite for much of the above. We have to ask ourselves why Scotland and Wales have 54 councils between them, and England has 351. If local government is going to address some of the challenges that became obvious from the referendum vote to leave, we need to make sure our councils are at the scale to take on wider commissioning and development activity. 

Whatever happens post-2020, we know that local government is a resilient sector with local leadership rooted in the heritage of its communities. I’m confident it will be able to rise to the challenges of Brexit and continue to be the local face of the UK’s public sector.

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