Brexit and Public Policy Capacity

The post was written with Des McNulty and is also avaialble on the Policy Scotland website.

In the shock and uncertainty following Thursday’s vote, the focus has primarily been on the constitutional, social and economic questions that flow from disengaging with the EU and on the political fallout. Important as these questions undoubtedly are, there is an underlying problem with policy capacity, not just because of immediate political vacuums in Westminster or the lack of a plan amongst those calling for Brexit about what that might mean beyond a few slogans. 

The challenge for both the UK and devolved governments is to carry on their normal work (and do so competently across their range of responsibilities), while urgently building up capacity so they can understand EU disengagement and thereby negotiate effectively. And at the same time they are having to manage and ride out downside economic risks (which will inevitably impact on their ability to balance these tasks). 

The scale of the challenge ahead is unprecedented. Following the 2016 Scotland Act, the Scottish Government is presently faced with implementing tax powers and the delivery of elements of social security. These are the biggest technical, policy infrastructure, scrutiny and personnel challenges since devolution was enacted in 1999. But they are as nothing compared to the requirements for expert analysis, negotiation and co-ordination across the thousands of often inter-related substantive areas affected by EU withdrawal. This is not just a challenge for Whitehall – there are huge implications for the devolved governments also. 

At this point, no-one really knows how big or complex a job this will be – we don’t know what objectives of any of the negotiating parties are likely to be, what the processes are or who will be at the table. This may be one reason why the UK Government wish to slow down the Article 50 decision (even if at the expense of the negative consequences of short run economic uncertainty). We do know that a co-ordinating body is being hurriedly established across all Whitehall departments to start this work. But one consequence of deficit reduction policies since 2010 has been the winnowing out of analytical expertise in Government departments (in Scotland and Wales as well as at UK level). 

The Scottish Government faces complex and in some respects contradictory pressures. First, they need to deliver competent government across their portfolios, at a time when local government and many public agencies are dealing with severe real terms reductions in their running costs budgets, which are likely to continue for years to come. Second, they have difficult choices to make about how to use their new fiscal and welfare powers, given expectations and the resources required to build the infrastructure needed to implement e.g. new social security arrangements. Third, they need to shift personnel and undoubtedly bring in people from outside to advise and assist on options in future EU/UK/Scotland negotiations. Fourth, alongside all of that, if the SNP administration wishes to put forward a new independence referendum proposal, they will want to provide a credible blue print that addresses the issues on which the Yes campaign was weakest, most notably the currency question.

Perhaps one of the lessons of the last few days is the danger of assuming that ‘other things do remain equal’. The leadership of the ‘leave’ side were wrongfooted by the prime minister’s resignation. They didn’t expect to win or to have to lead the implementing of Brexit, at least not the immediate stages hence the lack of a plan. In advance of the vote, economists identified turbulence caused by short run uncertainty, including inflationary devaluation and stock market reversals as risks. They also pointed to the longer term insidious effects of investment postponed or displaced, jobs moved abroad and longer lasting uncertainty associated with the trade deals that we may eventually secure (e.g. what kind of market relations including labour movement can be secured with the EU). In the EU referendum there was a wholesale rejection of expertise and evidence per se (when it does not suit) with decisions ultimately resting on attachment and perception (arguably something similar happened in the Scottish Independence referendum). But governments can’t work in that way – there is surely now a belated realisation of the need to strengthen government capability by reversing the hollowing out of analytical capacity.

The probability of a Brexit-induced recession or economic reversal is a significant constraint on capacity building for negotiation and analysis of EU disengagement, something that we see as vital if government, the civil service and other sources of expertise such as the universities are to rise to the complex multi level challenge that UK and devolved governments now face. At present the markets are discounting our ability to reduce the public deficit and at the same time expecting lower economic growth. Other forward indicators like bank and property sector shares are also uniformly negative. 

The fiscal stance of the UK Government in terms of deficit reduction may have to be relaxed in order to mitigate the consequences of economic slow down. But further austerity can also be anticipated, given the impact on government revenues. The pattern over the last few years has been to prune back civil service numbers and analytical capacity has taken a particularly heavy hit. But given the scale of the changes and pressures on government there is an urgent and continuing need for expertise if we are to properly understand the options that new circumstances confront us with and provide the information necessary to make properly informed choices. 

The EU referendum outcome is not one that most of the experts, whether in academia or government, would have preferred. Surely any implementation and other adjustments arising from the referendum must however be informed by available evidence and draw on relevant expertise, some of which is in short supply inside government itself. It is now up to the public policy community to mobilise and engage in a way it has not done before and to government to open out so that the challenges we all face are not met because we fail to provide or apply knowledge which would be helpful and relevant.