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Brexit costs could lead to more government outsourcing

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Brexit costs could lead to more government outsourcing

After Brexit, the UK and devolved governments will need to carry out many of the functions that are currently the responsibility of Brussels. These include everything from customs checks to determining agriculture subsidies. Before that happens, much of the civil service will be consumed by managing the leaving process between now and the end of any transition period. The National Audit Office has published a report highlighting the scale of this task.

Ultimately, the UK is undertaking an administrative challenge “more complex than the first moon landing” within a very short space of time. The government is reportedly seeking to employ an extra 8,000 staff by the end of 2018 to help manage the process, with departments recruiting heavily in recent months. However, it is starting from a very low base. Public sector employment as a share of people in work was below 17% in June 2017 – its lowest level since records began in 1999. This suggests that the civil service will be unable to manage Brexit alone and therefore need to rely increasingly on external actors to undertake many of its functions.

Learning from the local government experience

The experience of English local government in recent years shows what can happen when public bodies are given greater freedom but don’t have the resources to take advantage of it. The 2011 Localism Act introduced a “general power of competence” for English councils. This enabled them to carry out any activity that is not expressly forbidden in law. Before the act came into force, local government was only allowed to undertake functions that were explicitly set out in legislation – such as providing social care, education, public transport, or cultural and leisure services. If they stepped over the line, they could be prosecuted and fined – and some were. The act also gave councils more flexibility to decide how to spend the money they received from Westminster.

Local government had lobbied for these changes for many decades, arguing that individual councils were better placed than central government to decide how to respond to local issues. Ministers said the reform represented “a major turning point in the balance of power” and included “new rights and freedoms for communities to take back control”. The immediate parallels with Brexit are fairly obvious.

David Davis: can he afford to take back control? EPA

However, you’d be hard pressed to find many people in local government who think the past six years have been cause for celebration. Most councils have been far too concerned about austerity to enjoy their new found freedoms. Central government funding has been cut by 40% since 2010 at a time when demand for expensive services such as social care is increasing rapidly. Crucially, the increased autonomy handed to councils doesn’t include the right to levy additional taxes. They can also only raise council tax by a significant amount if residents vote in favour in a local referendum.

With limited ability to raise money for the services they are expected to provide, councils have tried out a variety of service delivery arrangements to try and reduce their spending. These include outsourcing, establishing joint ventures with private businesses, or sharing responsibilities for service delivery with other public bodies.

The result of this “austerity localism” is that local government actually has less control over decision-making and service delivery than it did before. Instead, private and voluntary actors have become more influential. As a result, services are more complex and fragmented, and citizens struggle to hold anyone to account for poor performance.

Grenfell Tower is the most high-profile example of how complex contractual arrangements can blur lines of accountability. There have been others however – not least the 25-year contract between Sheffield City Council and Amey to improve the city’s roads. Amey’s decision to fell 6,000 trees as part of this deal has led to widespread local opposition. However, because exiting or changing the contract would be prohibitively expensive, the council has supported Amey’s actions.

Taking back control?

Nearly all of the expert analysis suggests that leaving the EU will cause a major shock to the UK economy, which will result in lower tax revenues for the government. This will mean that resources will be even scarcer than they are at present, at a time when the civil service faces a major increase in demand. Like English councils, therefore, it will struggle to undertake all of this work in-house.

The democratic accountability implications of this are quite profound, if and when outsourced services fail to meet public expectations. For example, if 3m EU nationals apply to remain in the UK after Brexit takes place, and these applications are not processed properly by a private contractor, who will be held accountable when people are wrongly forced to leave? Similarly, who will be responsible if outsourced border protection and customs checks fail to stop terrorists, weapons, drugs or criminals entering the country?

On top of this, the sheer complexity of the Brexit process means that there will be a range of convenient scapegoats whom the government could blame when things go wrong. Rather than “taking back control” of public services, therefore, Brexit is likely to result in more of them being run at arms-length from directly-elected politicians, who will seek to avoid being held responsible for poor performance.

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