CIPFA (the Chartered Institute of Public Finance and Accountancy) highlights that, as Brexit will have profound legal, technical and financial implications for public services, the impact on the sector must be kept in the foreground as the UK renegotiates its relationship with the EU.
The Institute gathered the concerns of leading experts for the latest publication on Brexit as part of CIPFA’s Public Finance (PF) Perspectives Series. Titled ‘The Brexit Balance Sheet: Weighing Up the Public Sector Costs’, it has been launched today at an exclusive debate event in London.
The public service and Brexit experts highlighted that leaving the EU will have an immeasurable impact on all aspects of UK public services, including areas such as staffing, funding and procurement. Therefore, it is critical that the most effective negotiation choices are made to ensure the sector’s sustainability is not undermined.
They also identified that Brexit will provide a catalyst for much-needed public service reform, and so, during the disentangling process, exploring the opportunities for the sector must be given equal ministerial consideration as efforts to avoid the risks.
Experts identified the following concerns and priorities for public services during the Brexit negotiations:
- Given Brexit, many policies and regulations are being closely scrutinised for the first time since their inception. The scope to look at policy afresh may present opportunities for public services. More expensive and complex regulations, such as ones that govern waste collection and procurement, may be adapted to become more efficient.
- Post Brexit, higher, not lower, rates of immigration could ease pressures on public finances. Evidence shows immigrants pay more in taxes than they take in services and benefits. If the UK adopts policies that limit immigration, such as a system based on permission to work, then there will likely be economic trade-offs for the public sector.
- The UK must examine regional funding to see whether it is meeting its objectives and boosting local economies. Any scheme that is introduced to replace the EU model of funding could seek to reduce existing regional disparities.
- In order to ease any fluctuations in the economy during the Brexit negotiation process, it is likely that investment in public services will continue to be low. This will challenge the financial model of many services that are already struggling to cope with the strain of tightening budgets, including the NHS.
- Public services will have a significant vested interest in the new trading and migration relationship with the EU. To overcome any loss of income due to negative economic consequences and a decrease in capacity due to loss of EU staff, there must be a radical increase in public expenditure on infrastructure.
In order to promote and protect the interests of public services during the Brexit negotiation process, CIPFA has launched an independent Brexit Advisory Commission for Public Services. The group will be chaired by Julia Goldsworthy, former MP and Treasury Special Advisor in the Coalition Government.
Rob Whiteman, Chief Executive of CIPFA, commented:
“As we begin to unwind a 40-year-old trading and political relationship, we must ensure that all negotiators, despite their political differences, are singing from the same hymn sheet – that any deal must strengthen and not weaken public services.
“Ensuring the sustainability of public services isn’t a choice, it’s a necessity. Brexit will be the largest-scale policy and legislation exercise we’ve undertaken and will inevitably change the delivery of public services. We must make sure that this is a positive, and not a negative, change.
“Public service leaders must assert themselves throughout the Brexit process and play a visible role throughout the negotiations. CIPFA’s Brexit Advisory Commission will provide the means to do so by representing the interests of the sector.”
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Notes to editors
The leading experts that contributed to the latest PF Perspectives publication on Brexit also identified the following:
- The EU has supported the UK to improve environmental outcomes, such as protecting water quality and powering recycling. In order for the UK to open up its markets, there is the potential that the UK’s current environmental standards will be compromised. Therefore, public services must look at how best to fill inevitable policy and regulatory gaps.
- Mobilising Brexit requires resources and capacity, but data shows the civil service is 20% smaller than it was since austerity measures were introduced in 2010. A failure to adequately support and resource Brexit may lead to poor implementation and bad decision-making. Therefore, the government must understand what is and isn’t realistic and should be prepared to concede in some areas.
- Due to disparaging views on Brexit across the devolved nations of the UK, there will likely have to be compromises during the renegotiation process. This may include concessions on access to the single market. In order to avoid constitutional crises, devolved nations must be fully consulted and their concerns given significant weight.
- Continuing the rights for EU students to study in UK universities will ensure the higher education sector is able to sustain its capacity in key areas where there is deficit in domestic demand. Any new infrastructure policies must look at how to boost engagement among the UK population in STEM subjects at a higher education level.
- Once the UK is outside the EU, the country may have more opportunities to introduce tax incentives for research and development and new enterprise zones or other location incentives. However, a sustainable and steady tax strategy will be important to ensure the UK tax system does not become more complex and unfair.
About PF Perspectives
PF Perspectives is produced by CIPFA and Public Finance. It is a collection of essays that are designed to stimulate discussion on key public finance and policy issues. This edition weighs up the benefits and costs of Brexit for public services. Please call Saskia Black for a copy.
- Tony Travers, Director, Institute of Public Affairs, London School of Economics (LSE)
- Paul Johnson, Director, Institute of Fiscal Studies (IFS)
- Jonathan Portes, Professor of Economics and Public Policy, Kings’ College London (KCL)
- Warwick Lightfoot, Director of Research, Policy Exchange, member of Economists for Free Trade and Cabinet Member of Kensington and Chelsea Royal Borough
- Joe Owen, Researcher, Institute for Government (IFG)
- Alan Bermingham, Policy and Technical Manager, CIPFA’s Devolved Administrations Faculty
- Mary Craegh, MP and Chair of the Environmental Audit Committee
- David Bell, Professor of Economics, University of Stirling
- Saffron Cordery, Director of Policy and Strategy, NHS Providers
- Peter Scott, Professor of Higher Education Studies, University College London (UCL)
- Colin Cram, former director, North West Centre of Excellence
- Judith Freedman CBE FBA, Pinsent Masons Professor of Taxation Law, University of Oxford.