CONSERVATIVE HOME, U.K: Will Brexit put council budgets under more pressure?

Cllr Stephanos Ioannou is a councillor in Enfield. He is studying Public Policy at King’s College London.

Forget which side of the argument you reside on… now is the time to start asking yourself what impact Brexit will have financially on local authorities.

Everyone has seemed to have been caught up in the national funding problems post-Brexit. Whilst the NHS, national infrastructure, policing and all other major services are important, why haven’t we spared a serious thought for the impact on local authorities? People have forgotten about the importance of maintained pavements, keeping our areas clean, and the need for improving local services.

It is likely that most council leaders across the UK believe Brexit will damage their local economies, putting them under greater pressure to push up council taxes and cut more services. In a survey last year by the Local Government Network, only 12 per cent of 185 respondents believed it would have a positive impact on their economies, while 26 per cent felt the impact of leaving the EU would be neutral. Thus a majority believe that council services and funding will suffer due to the impact of Brexit.

It’s hard enough for us councillors to fight for funding in our wards, and even more difficult when the budget is being reduced and efficiencies are being made. In light of these problems, logically, we must be prepared for the issues ahead.

The first problem we must tackle is the funding-match by UK government to replace prior funding from the EU. This according to the Local Government Association amounts to around £8.4bn, and government are yet to confirm they will step in on this. But why so important? To put it into perspective, structural funds have become increasingly important to local governments around the UK as central government has reduced their funding. Councils have used EU funds to help new business start-ups, create thousands of new jobs, roll out broadband, and build new roads and bridges. Although government has promised to honour all agreements made for EU funded projects before we leave, this does not go far enough, and I’m sure many councillors would feel more assured with a long-term commitment to at least match funding.

Local authorities have also greatly benefitted from Foreign Direct Investment (FDI) from the EU, which concerns the establishment of businesses or acquisition of business assets by foreign investors. Under current estimates, nearly half of the FDI stock in the UK originates from the EU, while many European firms that have operations within the UK pay 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.

After Brexit, there is a good possibility that European firms will be deterred from investing in the UK. The UK could be perceived as more isolated and less open to foreign investment. This development will be worsened when the UK leaves the Single European Market. In the face of this future uncertainty, local councils in conjunction with Local Enterprise Partnerships will have to double their efforts to attract and support businesses from the EU. This may require re-evaluating policies and tools to attract international businesses. This point is especially important considering the proposed 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 and implement 100 per cent business rates retention. This will mean that local councils will directly rely on the business rates from local businesses.

There is the prospect of increased council borrowing in order to increase investment spending, and to continue to provide services to the current levels at which they operate. I’m confident in saying that no Conservative would want to jeopardise their council’s financial discipline, and break the ethos of ‘value for money’ by being led to the temptation of increased borrowing.

We need to lobby the Government for reassurances of our local authority funding, and that it must match current EU funding. That way we have the ability to continue to provide for our local communities, and look forward to a less bureaucratic and more organised local authority funding structure. We must also look for new markets, and reach out beyond the EU, so that we secure long-term funding and investment in our communities that generate the vital income.

We must remain committed to financial discipline and not let the temptation of increased spending dominate us should Brexit give a hit to local coffers.

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