Implications of a Brexit for UK National Governance & Local

LSE Commission on the Future of Britain in Europe | 1 European X xxxx Institute

Implications of a Brexit for UK National Governance and Local Government

Report of the hearing held on 31st April, 2016

LSE Commission on the Future of Britain in Europe

Rapporteur: Tony Travers 2 | Implications of a Brexit for UK National Governance & Local Government

Foreword

This is the report of a hearing on 13 April 2016 at the LSE. Participants were invited for their expertise in relation to the governments of Scotland, Wales and English local authorities. In all cases, they were asked to provide neutral and objective views, rather than any they held personally.

We are grateful for the friendly and constructive discussions that took place on the subjects raised. Some participants wished not to have their views cited, so the entire event was treated as being held under the ‘Chatham House Rule’. Accordingly, contributions by individuals have not been attributed nor should any be assumed. The purpose of the hearing was to uncover the key issues likely to be salient to devolved and other sub-national units of government, whether or not the United Kingdom remains in or leaves the European Union. LSE Commission on the Future of Britain in Europe | 3

Contents

1. Introduction ...... 4

2. Summary...... 5

3. Scotland, the EU and the referendum...... 8

4. Wales, the EU and the referendum...... 12

5. Local government, the EU and the referendum...... 16

6. A wider discussion of key issues...... 18

7. Conclusion...... 21

Participants list ...... 22

Further reading ...... 23 4 | Implications of a Brexit for UK National Governance & Local Government

1. Introduction

The EU referendum debate is, understandably, much concerned with the UK’s existing and potential future international relations. Trade, the economy and diplomacy could be affected by a decision to leave the EU. Equally, if the UK votes to stay, there are likely to be implications for the country’s future external links. But the outcome of the referendum will also have domestic effects on the UK’s nations, city-regions and local authorities. It is impossible to predict with certainty what would happen to the governance of the UK if the country left the EU. Nonetheless, there will certainly be implications for the relationship between the Scottish government and Westminster, and possibly implications for the path of devolution within England. The UK is a remarkably centralised country. A vote to leave the EU might trigger a longer-term change to the constitutional arrangements of the UK, or might further centralise power. But it is certain that the EU referendum will affect internal UK government and politics just as much as the country’s relationship with the rest of Europe and the world. LSE Commission on the Future of Britain in Europe | 5

2. Summary

Scotland There has also been substantial financial support for Wales, much of it decided for Scotland’s position within the UK means the unfortunate reason that it reflects the that it is able to have a voice within the needs of the Welsh economy, which has European Commission and the other faced increasing de-industrialisation institutions of the EU. Scotland supports since 1945. the UK position where it suits Scotland, but it also enjoys an independent voice and Wales has been engaged for many years may take contrary positions to those of in the use of EU regional and agricultural the UK government. funds. It has been a major beneficiary of structural funds. It is likely that Wales The differences between the UK and is a net recipient of EU funds. Research Scotland in relation to the EU have institutions are particularly concerned at both material and symbolic importance. the prospect of the UK leaving the EU, Fisheries, for example, are of material since significant funding for Wales would importance. Symbolically, the denial of be at risk and there is no guarantee such Scotland’s voice within the EU, as it would funds would be replaced by new resources be portrayed after Brexit, would be of from the UK government. enormous political importance, though it clearly varies in practice, depending on There are a number of similarities the UK ministers involved. between Wales and Scotland in terms of negotiations and the role of Welsh A vote to leave the EU would certainly ministers in the EU, though in Wales there not make the union stronger or happier. is no push for independence. A key issue, It would excite some elements within however, is the EU money spent in Wales the SNP and would likely cause, then and the extent to which it is perceptible. have a significant impact on, the Such resources used to be highly visible, timing of a second referendum for but they are less so today. Money used to Scottish independence. Yet, there is be spent on easily visible infrastructure no automaticity. A second Scottish projects, while today funds are mostly referendum is unlikely, unless and spent on more ‘invisible’ provision, such until public opinion is consistently as education and skills training. and overwhelmingly in favour of independence. Northern Ireland Wales For Northern Ireland the implications of leaving the EU would be substantive, not Economically, Europe is a very important least because of the border between what dimension for the Welsh economy. may be a member state and another that Many firms export to the EU and many is leaving the EU. Some politicians in the EU companies have offices in Wales. Republic of Ireland and Northern Ireland 6 | Implications of a Brexit for UK National Governance & Local Government

are concerned about the unpredictable Financial benefits received by local scale of the impact if the UK left the EU. authorities have been important in terms A narrow result might be unstable. of the direction of local government’s It might not provide an outlet for any plans for economic development. latent political energy. The issue is unlikely In a context of budgetary and policy to be solved by the referendum. Indeed, restrictions by central government, many in Northern Ireland the vote might have local authorities have managed to follow implications for the post-peace process an expansionary economic development settlement. path by using structural funds and other EU funding. Leaving the EU could lead Local government to a hollowing out of environmental protection or social protection, from Local government’s influence on policy maternal leave to working regulations. development is quite substantial, though Having said this, the UK has generally it is not formal or treaty-based. There are adopted the minimum level of such many informal lobbying activities between regulation as possible. local government and the European Commission. These bypass national Local authorities’ offices in the EU government, and very often they are engender relationships with Commission effective in developing regional policy officials allowing informal lobbying and and the direction of structural funding. the creation of relationships with other cities. Scotland is particularly effective There are nonetheless legal imperatives for at creating such links, while the Mayor local government to be engaged with the of London has an office in Brussels to EU. The implementation of the 70 per cent promote the UK capital’s agenda and of legislation affecting local government vision. and requiring local government implementation originates in Brussels, Wider observations but if EU directives affect to a significant extent local councils, influencing their The outcome of the referendum may affect negotiation is much easier in Brussels than UK nations’ and regions’ relations with in Whitehall. each other and with the UK government. The UK’s EU membership has allowed devolved nations to ‘play off’ UK and Leaving the EU could lead to a EU policies. Devolution has created an hollowing out of environmental alternative platform to elaborate and protection or social protection, develop alternative policy to that proposed by Whitehall. Nevertheless, devolved from maternal leave to working authorities have proceeded in a relatively regulations. cautious way, because of uncertainty LSE Commission on the Future of Britain in Europe | 7

about how the changing nature of the balance of power within the UK. Devolved No national politician can governments might become more critical of, or even antagonistic to, the UK any longer truly speak for government if one or more of the UK’s the United Kingdom. constituent nations voted in a different way from the UK as a whole. border. Local government has developed There was consideration of the question of its own relations with the EU, often in an the possibility (if the UK remained within attempt to create an alternative power the EU) of the EU imposing a level playing source outside Whitehall. field and a one-size-fits-all solution. This is precisely what local government The governments of Scotland, Wales and might be expected to oppose. Nobody Northern Ireland all have reasons to carry disagrees with the view that if central their own views into the debate about the government in Whitehall decides what UK’s future in relation to the EU. Inside or local government can and cannot do, this outside the Union, the devolved nations is a bad thing. But when such policies are have significant power to change the decided in Brussels, local influence is quite constitutional settlement. England lacks small and perhaps even smaller than at a single voice, at least for the present. Whitehall level. Why would EU rules be Indeed, the electorate can be segmented better than central government rules? in many ways, not only by geography. EU-wide procurement rules arising from Gender, race, ethnicity, age and geography single market requirements were cited as are some of the sub-sets of the electorate an example. whose views will be differently expressed in the referendum. Perhaps the most The EU referendum will take place against striking conclusion to be drawn from this the backdrop of continuing constitutional hearing was the diffusion of impacts across uncertainty within the UK. The UK has the UK. No national politician can any been attempting for years to develop new longer truly speak for the United Kingdom. constitutionally evolved links between In approaching the referendum, all British both the constituent countries of the politicians probably need to bear this UK and also within England. It is widely fact in mind. Decisions about the UK and accepted that if the UK votes to leave the the EU will likely feed back into domestic EU there may be pressures within Scotland politics for years to come. to re-visit the question of independence. Wales, because of its reliance of EU funds, would face significant financial uncertainty if the UK left the EU. In Northern Ireland, there are issues related to the peace process and, more complicatedly, to the 8 | Implications of a Brexit for UK National Governance & Local Government

3. Scotland, the EU and the referendum

The initial discussion suggested three independent Scotland would not have a questions needed to be addressed: louder voice, but it is important not to first, how the EU relates to the political diminish the value of the leverage Scotland economy of Scotland. Second, where the already enjoys. This context explains (in EU sits in the case made for independence part) the consistent support in Scottish made by the SNP, and third, the opinion polls for the ‘remain’ position. consequences for Scotland of a Brexit vote. Continued membership of the EU is a Scotland, it was argued, is an open fundamental pillar in the SNP’s case economy on the periphery of the EU with for Scottish independence. It lies at the a significant industrial legacy. As such, core of the SNP view of a viable and the degree of fit with what the EU has on thriving independent Scottish state, and offer is immediately apparent. There is is perfectly parallel with the proposition now a consensus on what can be termed of independence from the UK. This an ‘inclusive growth model’. The EU independence has always been a call for a has embraced this consensus, accepting shared sovereignty model in relation to the OECD-type notions, for example that UK. And Scotland is already used to ‘shared there is no trade-off between a vigorous sovereignty’. The SNP seeks independence drive for growth and social inclusion: within the EU and thus adopts an the one reinforces the other. This has internationalist posture. It really does want broad support in Scotland. There is no Scotland’s closest neighbour to remain a traction for a vision of a ‘neoliberal’ member of the EU, so Brexit would add a Scotland. In this view of the world, there series of undesirable complications for the are no conservatives, no Thatcherism. independence proposition. The Conservative Party is markedly less A Brexit vote would in any case certainly Eurosceptic in Scotland than south of not make the union stronger or happier. the border. In the longer-term, both It might excite some elements within Conservative and Labour votes have the SNP and certainly have a significant fallen in Scotland. At the same time there impact on the timing of a potential is almost no support for Brexit among second referendum for independence. Scottish businesses, as there is in other There is, however, no automaticity, parts of the UK. however, and a second referendum is Scotland’s position within the UK means highly unlikely, unless and until public that Scotland is able to have a voice opinion is consistently and overwhelmingly within the Commission and the other in favour of Scottish independence. institutions of the EU. It supports the UK Polarization is the last thing the SNP needs. position where it suits Scotland, but can The economic case for independence also also have an independent voice when needs to be reassessed now oil prices are taking contrary positions to those of the no longer at $100 per barrel. While oil UK government. This is not to say that an may no longer contribute much to the LSE Commission on the Future of Britain in Europe | 9

overall budget, it remains very present Discussions led to the question of whether in debates about the economic case for there were examples of how the Scottish independence. Its iconographic, symbolic government aligns itself with the UK significance remains high. But ultimately government, and how it manifests its voice the structure of the Scottish economy independently of the UK government resembles that of the UK in general, as within the EU. Expert evidence suggested the SNP has endeavoured to point out. that there was a case of common interest between Scotland and UK in Ultimately, Scottish independence is higher education policy, where Scottish probably too bold a move immediately universities have benefited significantly after a Brexit vote, not least because it from, for example, Horizon 2020. Where is unlikely that the UK would support there is a split between Scotland and the a second referendum. Such support is UK is, for example, in terms of fishing, necessary if only in order to avoid the where the industry has large influence legal challenges of a second referendum. on the government. To a lesser extent, We may thus expect a cautious line from but still importantly, the same can be said the SNP. Movements for shared sovereignty of agriculture in general. When the SNP arrangements rest essentially upon came to power it worked hard to create consent, and both parties must be willing coalitions of interests and cooperative to envisage this. relationships across the spectrum, but There was discussion of the fiscal balance nowhere as much as in relation to fishing, arrangements between the EU and agriculture and rural interests. This plays Scotland. The hearing discussed whether out in EU policy-making, where others Scotland was a net contributor or net have real differences with Britain; most importer of finance. What was the general prominently in relation to priorities with perception of this issue? Expert evidence regard to ranking, for example, to the suggested it was not completely clear Common Agricultural Policy. whether Scotland is a net contributor or If there were a vote to stay, would there beneficiary, but the perception was that be calls for a reconfiguration of the Scotland clearly benefits from Horizon relations between central and sub-national 2020, structural funds etc. Moreover, the government? And conversely, would there EU’s visibility in Scotland is relatively high. be calls for further devolution of power As far as overall EU funding is concerned in case of a Brexit? And could Scotland it was suggested that between 2007 and then take control, for example, of its 2013 the UK had been a net contributor, fisheries policy? though two areas within the UK were net beneficiaries: Cornwall and West Wales. The expert response suggested that Scotland considers itself a net contributor, the differences between the UK and though, importantly, in social terms a Scotland are both of material and net beneficiary. symbolic importance. Fisheries would be 10 | Implications of a Brexit for UK National Governance & Local Government

of material importance. Symbolically the Opinion polling currently suggested that denial of Scotland’s voice within the EU, 58% of the Scottish public would vote as it would be portrayed, would be of to stay and 30% would vote to leave; an enormous symbolically political importance. interesting difference with the English In practice, it varies depending on the UK polls, where 47% would vote to stay and ministers involved. The more confident, 42% would vote to leave. Where there is a ebullient ministers are happy to give a voice similarity between Scotland and England is to the Scottish minister of the day. on the issue of public services where 30% in both countries think the EU has had a Would it change in the event of a vote to positive effect on the delivery of public remain? It is changing anyway, since the services. But in terms of pressure on public political weight of Scotland has continued services 28% of people in England think to increase since the referendum on the EU puts pressure on public services Scottish independence, and Scotland has whereas only 14% think so in Scotland. been taken increasingly seriously within the UK. The manifestations of this are Would Scotland want a voice in the a more fluid approach to those kinds post-Brexit negotiation process? It was of issues. In case of Brexit, the idea of a suggested that Scotland would continue disaggregation of Scotland’s share of the to argue that it has distinctive interests UK budget in relation to the EU would that resonate in the relevant issue areas. actually take about a decade to reorder, The expert evidence suggested there might and development of an agricultural and be a legislative consensus to force the fisheries policy would be crucial, yet UK government to consult properly with without any certainty as to the extent of the Scottish government. The meeting money to be made available. Negotiations certainly discussed strengthening devolved would be likely to prove very difficult. powers, and whether in certain policy Yet, in the end, devolution would probably areas such powers might be weakened. happen. Nonetheless, at the same Leaving the EU might involve, for example, time Scotland would likely try to form a hollowing out of devolved competences, independent links with the EU. since in some areas, e.g. the environment, policy has been operated both at Scottish and EU level. Scotland’s approach to in terms of pressure on public environmental issues ties in well with the services 28% of people in EU’s sustainability approach, which has often differed from the UK government’s. England think the EU puts Brexit would cut off the oxygen for this pressure on public services policy area in Scotland and Wales, and this whereas only 14% think so would likely be strongly perceived as a in Scotland diminishing of devolved competences. LSE Commission on the Future of Britain in Europe | 11

If there were pressure (after a ‘leave’ vote) Expert evidence suggested that after a in Scotland for a second referendum, vote to leave the EU, the Scottish polity it would require support from the UK would seek a proposition from the UK in government. What would be the likely order to stop the material conditions in outcome in a scenario where the UK votes the UK turning to Scotland’s disadvantage. for Brexit, opinion polls in Scotland show There would then be demands to know support for independence, but the Scottish how Scotland might pay its way and government is overruled within its own how it might relate to the remaining party and seeks independence. If the and continuing EU. The questions would (possibly new) UK prime minister distances remain posed, and the deeper the crisis the UK government from David Cameron’s after Brexit, the less easily would a proper earlier support for a Scottish referendum, plan reach fruition. what might happen? Scotland could hold an unofficial referendum, but could the UK then ignore the Scottish people’s vote? 12 | Implications of a Brexit for UK National Governance & Local Government

4. Wales, the EU and the Referendum

Wales is a different nation from England in Higher education in Wales, for example, many ways, though it has had a very long receives substantial funding from the relationship with the EU. Like Scotland, EU. Research institutions are particularly the country is peripheral; it lies on the concerned at the prospect of leaving the edge. Neither the Thatcher nor the Blair EU, and significant funding for Wales governments had much impact on Welsh would be at risk in the case of Brexit. political life, and the Welsh government Moreover, there is no guarantee such is not neutral about EU membership. funds would be replaced by new resources Indeed it is very pro-EU. In the same way from the UK government. The impact Wales was pro-Union during the Scottish on Wales of leaving the EU would thus referendum. The referendum was thus likely be greater than in other parts of challenging for Wales because of the the UK, precisely because of the scale of Welsh Assembly election in May. The EU receipt of regional funds. The table below referendum thus muddies the waters in summarises the position of Wales and what is already a complex election. other UK nations from 2014 to 2020. Economically, Europe is a very important dimension for the Welsh economy. Many firms export to the EU, and many EU Structural Funds, 2014-2020 EU companies have offices in Wales. €m There has also been substantial financial England 6174 support for Wales, much of it decided for the unfortunate reason that it reflects the Wales 2145 needs of the Welsh economy, which has Scotland 795 suffered de-industrialisation since 1945. In the early years of the 20th century, Northern Ireland 457 the Welsh economy was contributing Source: Department of Business, enormously to the UK economy (largely Innovation & Skills press notice, because of its vast coal and steel output). 26 March 2013 It thereby underpinned the UK economy in many ways. Yet this was subsequently reversed as the country’s economy Welsh government EU interests are often generally became relatively weak in relation to ‘social chapter’ impacts. compared to many other parts of the UK. Expert evidence suggested there would Wales has benefitted from EU regional be a hollowing out in the case of Brexit and agricultural funds and has been a with regard to environmental issues, major beneficiary of structural funds. employment rights and equality issues. It is likely that Wales is a net recipient of These are all areas driven by EU policy EU funds. and unlikely to have risen to their current position in Wales without EU influence. LSE Commission on the Future of Britain in Europe | 13

One big difference compared to Scotland the Highlands of Scotland, which are not is that there is no call for independence disadvantaged. The hearing noted that the within Wales. Support for independence is salience of the EU is palpable in economic around 6 or 8% of the population. development and farming etc., all highly A second difference stems from differences visible as part of what is on offer. between the economic performance of EU support has proved a binding agent Wales and Scotland’s. There is no material linking economy and society. basis for independence in Wales, simply In Wales voters in poor areas often turn to because the resource base is relatively UKIP, whereas in Scotland they vote SNP. weak. The annual fiscal gap hovers around The leader of the Welsh Conservatives is £14bn-£15bn. Thus, people in Wales are in favour of leaving the EU, though many unlikely to want to leave the UK given in the Assembly wish to remain in the this context. EU. There might be a substantial number There is thus a broadly pro-UK stance of Brexit voters within the Conservative within ‘official’ Wales, but where does base, but not so many in an Assembly this leave the country in terms of the EU strongly in favour of the EU. Those wishing debate? The answer is: finely balanced. to leave the EU tend to argue that the Polling at the moment suggests that there UK will replace the funding that the EU is a balance between voters intending currently provides, though this can only be to vote ‘stay’ and those decided to vote a hypothetical argument. It might and it ‘leave’. Ironically, the balance in favour might not. of Brexit is probably strongest in areas in Considering the differences in how receipt of the most EU support. different parts of the UK might vote, There are a number of similarities one contributor noted that Scotland is between Wales and Scotland in terms clearly in favour of remaining, while of negotiations and the role of Welsh Wales and the rest of the UK are quite ministers in the EU. Yet, given the absence evenly split. There might be a tendency of a push for independence, Wales to make the four nations the units of probably has less influence with the UK comparison, though there are significant government. One issue is the EU money differences within England. How does the spent in Wales and the extent to which spread of opinion map out in the political it is perceptible. One expert witness geography of Wales and Scotland? There suggested EU support used to be highly was consideration of the possible reaction visible, though it is less so now. Resources in Scotland and Wales if ‘remain’ wins, spent on visible infrastructure projects merely because of votes in Scotland and could be easily identified, while today London, though if the UK stays in because funds are mostly spent on more ‘invisible’ of Scotland and London, it was suggested policy areas, such as education and skills Wales might accept the outcome. training. Comparison was also drawn with 14 | Implications of a Brexit for UK National Governance & Local Government

The question of how the individual parts leading up to the election. The coincidence of the UK are likely to vote and whether of the two elections played into UKIP’s the variation is what might lead the UK to agenda with UKIP pouring huge resources remain in the EU was deemed important. into Wales, where it stood to gain a The Brexit vote is different in different number of seats through the proportional parts of the UK and potentially seriously representation element of the electoral problematic in Northern Ireland. system. So there was something to play for The Scottish position, it was argued, is in both elections. different from the Welsh position, because As to the impact on the assembly elections the Scottish government is stronger in in Wales, expert evidence suggested many ways. It has been able to act as that interviews with party leaders, and a counter-force to a UK government particularly with the UKIP leader, focused dominated by the Conservatives, and this on immigration and European issues, provides a frequently negative narrative both of which are not within Welsh about the EU. Northern Ireland and Wales government competence. Yet, based on are thought the least likely to be affected the EU referendum debate within Wales, by such intra-UK power play. UKIP might achieve a stronger position in For Northern Ireland the implications the Welsh election. There is a feedback are enormous, it was argued, not least loop between the Assembly election and because of the border between what the EU referendum. There is also likely may be a member state and another to be a period of uncertainty between leaving the EU. Some politicians in the Assembly election and after the the Republic of Ireland and Northern referendum. There are thus constraints Ireland are concerned about the entirely on Welsh government and legal issues to unpredictable scale of the impact if the sort out. Indeed, subsequent events left a UK left the EU. A narrow result might deadlock in Cardiff Bay in relation to the cause instability. It might not provide an office of First Minister. outlet for latent political energy. So the Might there be an emergency situation issue is unlikely to disappear with the vote. in Wales because of a withdrawal of Indeed, in Northern Ireland the vote might substantial EU resources from the Welsh have further implications for the post- economy, as expert evidence seemed peace process settlement. to indicate? The UK government would In Wales the media has been extensively thus have to decide how to replace concerned with the EU referendum; the the relatively large Welsh receipt of EU Welsh election not even receiving the same funding, as indeed it would to a lesser airtime. Unlike in Scotland, most people in extent in other parts of the UK in receipt Wales get their news from general British of substantial EU resources. not Welsh media. The EU referendum also played in with the political debate LSE Commission on the Future of Britain in Europe | 15

The impact of Brexit on policy coherence in the UK was thus considered. Although There is likely to be a period the devolved authorities engage actively in capacity-building for policy making, there of uncertainty after the has not been a clash of policies between Assembly election until the four countries within the UK. This is after the referendum usually explained by the coincidence of Labour governments in the UK, Scotland and Wales in the early years after develop policy to more restrictive policy devolution. A potential in Whitehall. Nevertheless, devolved culture of deference should also not be authorities have proceeded in a relatively overlooked. Looking specifically at the cautious fashion, though anxious to devolved authorities’ relationship with retain their European platform, which, EU policy, account needs to be taken of if removed, might imply a changing the constitutionally contingent power of balance of power within the UK. devolved authority within the UK. Devolved governments might even become more antagonistic to the The UK government may affect sub- UK government. There has been a national government access to the EU. development of an increasingly formal Because the devolved authorities have network of communication between the valued their European position, it has devolved authorities for information allowed them to play off UK and EU sharing. This could be developed as a policies. Devolution has created an more challenging position in the future alternative platform to elaborate and if the UK left the EU. 16 | Implications of a Brexit for UK National Governance & Local Government

5. Local government, the EU and the Referendum

Expert evidence suggested that local EU is likely to lead to a hollowing out government’s influence on policy of environmental protection or social development is relatively substantial, yet protection, from maternal leave to not necessarily formal. There are many working regulations. The UK has adopted informal lobbying activities between local the minimum level it possibly can. government and the European Commission Local authorities’ offices in the EU were that bypass national government. Very traditionally significant in number. often these processes are effective in The UK had 52, but this reduced when developing regional policy and influential budget cuts affected councils. They are in setting the direction of structural beginning to rebuild and play a useful role. funding. Sometimes, Scottish interests These offices may engender relationships even counter what the UK government with Commission officials allowing has actually been seeking to achieve. effective informal lobbying and the There are also legal imperatives for local creation of relationships with other cities. government to be engaged with the Scotland is particularly effective at creating EU. The implementation of EU directives such links. London has even created two happens to a large extent through local Brussels offices; the first set up by local councils. 70% of legislation affecting government worked democratically, while local government originates in Brussels. after the 33 local authorities set objectives Influencing that kind of legislation is and funding objectives, that office much easier in Brussels than in Whitehall. closed in 2004. An office very specifically Brussels is a much more open bureaucracy. promoting the London Mayor’s agenda Commission officials recognize their and vision in Brussels continues to exist. ignorance of how a policy directive might The City of London also has an office play out if and when implemented, so in Brussels, focussed on regulation of the EU in fact seeks advice from local the financial sector and protecting the government in formulating directives. interests of the square mile and the As to financial benefits received by local financial sector in general. London is authorities, these have been important in probably now in a considerably weaker terms of the direction of local government position in terms of influence on general economic development. In a context of policy issues and indeed on funding issues big budgetary and policy restrictions than it was 5-10 years ago. If the UK leaves by national governments, many local the EU, there is of course a significant governments have managed to follow funding loss, probably not to be replaced an expansionary economic development by the national government for the sort path by using structural funds and other of activities for which local government EU funding. Local authorities often find uses EU funding. In many cases, local a way around problematic relationships government pursues a different economic by looking towards Europe. Leaving the development agenda from Whitehall. LSE Commission on the Future of Britain in Europe | 17

Local government would also lose access to and, behind the scenes, close cooperation influencing policy development and thus with its opposite numbers in Paris and the possibility of extending local political Frankfurt, became more intense. Under influence. the post-1997 Labour government, the Treasury stepped up its interest in EU Local authorities used to have a closer financial services regulation, with the City relationship with the EU in relation to of London working closely and in parallel funding for particular projects. More with them. The City assisted the UK recently, English local authorities government, sharing its contacts within have been required to bid via central EU institutions. government. The local authorities may have to re-establish more direct What impact, therefore, might Brexit have relationships whether or not the UK leaves on local politics? UKIP has already begun the EU. More broadly, cities will continue to gain a larger share of the ‘protest vote’, to have strong direct relationships with but would it be undermined if the EU issue cities within Europe even after Brexit, were finally settled? And how would that since these relationships are outside the change politics? formal EU institutions. In relation to migration, a reduction of One expert explained that the City of people from Europe could imply some London had an unusual approach to the local authority services, notably social care, EU: a ‘love-hate’ relationship, which began experiencing difficulties recruiting workers in the days of the Major government, as the result of a reduction in migrant when links to Europe were few. Realising workforce. As to EU procurement and the EU was gearing up to take action in state aid rules, it is unclear whether there relation to the City economy - broadly would be a relaxation or a need to retain in financial and business services - the single market rules after Brexit. The impact City became involved directly with EU on local services and economies is difficult Commissioners, working directly with them to predict. Directives are implemented in to deliver on its own objectives. This was UK law, so these would need to be re- without the official backing of Whitehall, considered by government after Brexit. notwithstanding the government’s However, the future of procurement informal support. The increasingly special and state aid rules would be tied to relationship with the EU led to the creation the question of the future of the single of an office, providing direct access market. The UK might have to comply to the EU’s agenda on the regulation with EU rules after leaving the EU in order of financial markets and assistance in to gain access to markets, thus indicating drafting directives. As the European limited independence from the EU in Parliament achieved greater power, so this area. this work became more complicated, and the City’s significant amount of lobbying 18 | Implications of a Brexit for UK National Governance & Local Government

6. A wider discussion of key issues

The Commission heard of the enormous the London mayoral election. The great variations between different areas and unravelling of our identity is likely to groups within the UK. Independently of continue, and constitutional issues are the EU referendum, there is a noticeable one part of this. Others will include the unravelling of the sense of UK identity, extent to which we share economically likely to continue over the next 20 or 30 and culturally across what is becoming a years. There is thus an existential argument very diverse and varied polity. The Dutch about ‘who we are? Who do we belong referendum showed how an electorate to? Who are we against? Who are we might use a vote of this kind to express angry about? Who are we angry with?’ views about other issues. The Dutch referendum, ostensibly about a trade 40% of all private sector jobs within agreement, was about identity. Finally, the last 6 years, according to Sheffield outside London views are totally different University, were created in London. from those in the rest of England. Yet the capital is only 15% of the population. So there is a big issue about Several participants agreed that the London. It is a highly concentrated, identity issue is actually underpinned by highly emotive subject in terms of jobs, strong material factors, such as changes in winners and losers. This may not be the labour market, signifying substantial geographical. It may not be reflected in change in the conditions for a significant regional government. It may play out proportion of the population. The more differently in the periphery and the centre. important dimension concerns whether The main issue is geography of identity people are able to control the future and emotion; both linked to the places or are angry about what power holders where people live, with many other issues are doing. This is not about party or thereby amplified. The EU referendum geographical lines, which may have must be seen against this backdrop. implications, but these are not the most important factors. Polls must be treated with caution. Public interest in London in the referendum There is not the same passion for place- is high. There were more requests for based politics in the English debate as referendum voter registration than for there is, for example, in Scotland. The city-regional deal for Greater Manchester was the result of a negotiation between If Britain leaves, substantial the council’s leadership and Whitehall. numbers of jobs are expected There is no attempt to get local public to be lost in ‘City’-type support for that kind of initiative, and it is unlikely there will be substantial or occupations, owing to loss of rapid devolution in England. Significantly, access to the single market. though, London is different. LSE Commission on the Future of Britain in Europe | 19

If Britain leaves, substantial numbers of jobs are expected to be lost in ‘City’-type The structures of production occupations, owing to loss of access to the single market. Unemployment and the economy of the nation may rise significantly in London, and if state are being hollowed out London were then to lobby to keep its by the underlying economics tax resources (to re-invest in its weakened of globalization. economy), that would likely stoke a debate on the role of London within the UK. If London had (like Scotland) voted that the EU might be seen as erecting to stay, while England voted to leave, the barriers to small businesses and local outcome might be London demands for powers, a process that limits freedom and much more extensive devolution than is leads to a concentration of power away contemplated at present. from localities. The EU potentially imposing a level playing There followed a discussion of how many field and a one-size-fits-all solution is issues associated with the EU, such as precisely what local government should migration, international investment and oppose. Nobody disagreed that if central so on, are woven into the fabric of the government in Whitehall decides what most basic functions of the UK economy. local government can and cannot do, The structures of production and the this is not welcome. But when it is done economy of the nation state are arguably in Brussels, local influence must be being hollowed out by the underlying quite small. This is a strange argument. economics of globalization. This, in turn, Why are EU rules better than central is leading to the unravelling of political government rules? Single market demands representation. In that sense the people for EU-wide procurement rules were cited are beginning to be ungovernable. as an example. Seemingly, when local government Was sub-national government about cannot get what it wants from national the ability of local administrations to government it looks elsewhere, and the express their political personality? EU has been a very convenient source of This is sometimes better accommodated allies in other cities and the Commission. in Brussels. Yet, there are different issues Indeed, this is even more important here. Procurement is different. Indeed, with the impact on local government decisions in Brussels are made by national of austerity. Local government now governments. Policy decisions may be seeks money wherever it can be found. made at the EU level, as can mechanisms Brexit implies the UK may need a new for delivering the goals formulated at the constitutional settlement between local level. This process is transparent in national government and local authorities, the EU. Against this view, it was suggested because the need to rearrange post-Brexit 20 | Implications of a Brexit for UK National Governance & Local Government

financing of the constituent parts of the winner, because currently the UK is a UK will rise in importance. Local authorities net contributor, but this may not be may demand a new constitutional the case if the UK decided to stay in the settlement on finance and possibly far single market, when it would still have to more devolution. This is particularly contribute resources. It was nonetheless important in England, where London will accepted that there are many unknowns be at the forefront. in any such future calculation. The ‘leave’ campaign argues nothing will change. It was stressed that the EU budget is a This was the case in the argument for redistributive mechanism. Replacing it Scottish independence. The tactics of both inevitably implies a new redistribution the ‘remain and ‘leave’ campaigns in the mechanism - with winners and losers. EU referendum are strikingly similar to Wales seems particularly exposed. It may those used in the Scottish referendum. be possible that everyone will be a LSE Commission on the Future of Britain in Europe | 21

7. Conclusion

The EU referendum will take place against The governments of Scotland, Wales and the backdrop of continuing constitutional Northern Ireland have reasons to carry uncertainty within the UK. The UK has their own views into the debate about the been attempting for years to develop new UK’s future in relation to the EU. Inside or constitutionally evolved links between outside the Union, the devolved nations the constituent countries of the UK, and have significant power to change the also within England. On 23 June 2016, the constitutional settlement. England lacks EU referendum will create new pressures a single voice, at least for the present. on the British system of government. Indeed, the electorate can be segmented Scotland held a referendum on its future in many ways, not only by geography. within the UK as recently as September Gender, race, ethnicity, age and geography 2014. It is widely accepted that if the are some of the sub-sets of an electorate, UK votes to leave the EU there may be whose views will be differently expressed pressures within Scotland to re-visit the in the referendum. Perhaps the most question of independence. Wales, because striking conclusion from this hearing was of its reliance on EU funds, would face the diffusion of impacts across the UK. significant financial uncertainty if the UK No national politician can any longer left the EU. In Northern Ireland, there truly speak for the United Kingdom. are issues in relation to the peace process In approaching the referendum, all British and, more complicatedly, for the border. politicians probably need to bear this fact Local government has developed its own in mind. Decisions about the UK and the relations with the EU, often in an attempt EU will feed back into domestic politics to create an alternative power source for years to come. outside Whitehall. Discussions at the hearing stressed the remarkable uncertainty facing the future not only of funding, but also of British identity. Any change in the relationship between the UK and the EU will create backwash into the British political system; a system already facing multiple threats. The traditional political parties face internal struggles, while trust in national politicians is low. British national identity has been challenged in a number of ways. Longer-term global economic change affects both Europe and the UK. 22 | Implications of a Brexit for UK National Governance & Local Government

Participants List

First Surname Title Jeff Andrews Former Special Advisor to Welsh Government Finance Minister Brendan Donnelly Director of the Federal Trust; former Member of the European Parliament Tony Halmos Director of the King’s Commission on London; Visiting Professor at the Policy Institute, King’s College London Robert Hazell Professor of Government and the Constitution, University College London Patricia Hogwood Reader in European Politics in the Department of Politics and International Relations, University of Westminster Peter Housden Former Permanent Secretary, Scottish Government Stephen Hughes Interim Strategic Director of Resources, London Borough of Brent; former Chief Executive, Birmingham City Council Gregg Jones Head of EU Office, National Assembly for Wales Judith Mayhew- Senior Adviser, Chatham House; Trustee of The Jonas Imperial War Museum; former Deputy Chairman of the London Development Agency Akash Paun Fellow, Institute for Government Don Peebles Head of the Chartered Institute of Public Finance and Accountancy Scotland Barry Quirk Chief Executive, London Borough of Lewisham Alex Thomson Chief Executive, Localis; former Conservative Party's specialist policy adviser for decentralisation and local government Madeleine Williams Director, Access Europe Network; former Deputy Chief Executive of the ALG LSE Commission on the Future of Britain in Europe | 23