Hard, soft or somewhere in the middle: the effects and implications of Brexit in the Public Sector

The effects of Brexit on social housing, and the public sector workforce, shared services and the environment, are broad and uncertain. What will…

Hard, soft or somewhere in the middle: the effects and implications of Brexit on social housing, and the public sector workforce, shared services and the environment, are broad and uncertain. Since the UK voted narrowly to leave the European Union on 23 June 2016, the Media, not to mention schools, universities, pubs, clubs, shops, streets and workplaces have been riven with debate and discussion about what Brexit might mean. 

The focus of much of the speculation has been on the ‘big issues’: free movement, control over borders, trade relationships, staying in the single market (or not), the jurisdiction of the European Court of Justice and the size of our ‘Brexit bill’. But there are numerous other important areas of our lives that will be affected by our final departure from the EU. In this article, the focus is on social housing and future migration, the environment and public sector workforce issues. 

Free movement and migrant workers 

If Brexit means a major reduction in EU migration, future housing demand will change. Currently, in any given year, around half of new migrants come from the EU. In England (in contrast to the rest of the UK), net migration (the difference between those arriving and leaving) makes up 37% of the projected growth in the number of households over the next 25 years, with a corresponding requirement for more houses. These figures however were calculated before the referendum and are now, effectively, useless until we know what future migration levels look like. 

Current free movement rules give workers and other EU citizens both the right to move around the EU and to claim benefits. Eligibility regulations and entitlement are complicated however and are based on membership not of the EU but of the European Economic Area (EEA). This is all EU countries, plus Norway, Iceland and Lichtenstein. While nationals from these countries can usually enter the UK freely and apply for social housing, there are exceptions, such as job seekers. If the eventual deal means the UK remains in the EEA for trade reasons, and part of that deal is continued free movement, the rules may stay the same. 

In the event that free movement ends, issues to be resolved would include:

  • Rules around EEA citizens already in the UK
  • The cut-off date(s) which would apply
  • Whether there would be a transitional period with more limited immigration: with, therefore fewer people eligible for housing and related services.
  • A plan for the long-term: would the same rules apply to all EU countries or might the future be a number of bespoke agreements? 

An end to free movement generates enormous uncertainty on future migration to the UK. The new entitlement rules are likely to be more complex, and may even be impacted by the terms of trading agreements negotiated with individual countries. One option includes a points-based system allowing entry for those with pre-arranged jobs in some areas of skilled work, debarring many current EU migrants whose work falls outside those categories. Numbers would depend on caps set. Arrangements could be made for unskilled workers in sectors heavily dependent on migrant labour, such as agriculture. Here, entitlement is likely to be based on the employer providing accommodation but what about rules on visitors, students, family members and new spouses? One of the most vexed questions of the Brexit debate has been around what will happen to the 1.2 million UK nationals living in other EU countries. If significant numbers of them decide to return to the UK it will put significant additional burdens on housing and related services here. 

Any changes are likely to take several years due to the time to produce new immigration rules once the ongoing political negotiations are concluded. In the meantime EU citizens can continue to enter the UK and remain eligible for benefits and housing or homelessness help. 

The effects of the Brexit vote on the public sector workforce, hospitals, nursing homes and other adult care services already show staff losses, according to unions, and NHS and social care providers. 

Over the last eight years the number of non-British EU nationals in health and social care has risen significantly. In 2016, 209,000 people working in the UK sector were EU nationals, a rise of 72%, according to the Office for National Statistics (ONS). However, ONS figures show that the number of non-British EU nationals saying they worked in the public sector fell by 27,000 between January and March 2017

Although early days, this decline is already being felt by public services affected by staff shortages and increasing dependency on EU migrant labour to fill vacancies. In the last three years the number of EU nationals working in the social care system increased by more than 40%, while the Royal College of Nursing (RCN) warned earlier this year of a worst case scenario shortage of more than 40,000 nurses by 2026 2

Digging a little deeper into the reported figures, EU nationals make up 7% of the adult social care workforce (90,000) in England, with the highest proportion in London (13%), the south east (10%) and the east of England (8%), according to figures published by Skills for Care 3. They are most prevalent in care worker roles (7%) and as registered nurses in nursing homes (13%), with 5% in social work. A record number of EU nationals are also working in hospital and community health services (61,934), up from 57,604 12 months before, according to NHS Digital figures for March 2017 4

In July 2017 figures from the Nursing and Midwifery Council 5 showed that for the first time in recent history, far more nurses and midwives are leaving the profession in the UK than joining. The numbers of EU registrants leaving has also increased, with Brexit one of the top three reasons cited for leaving. The number of EU nurses registering to work in the UK has also plummeted by 96% and while stringent new language tests may not have helped, it seems very likely that a major part of that drop is due to short-term concerns and uncertainties around the detail of rights to remain post-Brexit, notwithstanding Government commitments around ‘settled status’. 

Analysis from NHS Digital shows that despite this drop in official registrations with the nursing regulator and the increase in EU nurses leaving, there are actually more EU staff working in the NHS. While 9,419 EU workers have left the NHS since March 2016, 13,480 have joined 4. This apparent contradiction could be explained by the fact that while more EU nationals are leaving nursing and fewer people are registering, those staying are switching from agencies to direct employment with NHS bodies, helping hospitals cut their own staff costs. What is clear is that more human capital rather than less is required, now and in the future, in the health and social care arenas. 

Shared services 

Shared services are hugely important across the public sector and beyond. As with everything else which is affected by Brexit, the detail will only be known when the nature of the final deal is concluded, disseminated and understood. Factors relating to shared services which may be affected include:

  • Business structure: depending on what Brexit looks like, businesses may restructure, with changes to locations and supply chains, among others.
  • Economic uncertainty could also impact on business confidence, which in turn could affect investment in both capital and improvement projects.
  • Immigration: perhaps the greatest source of uncertainty.
  • The long term effect on sterling remains fiercely debated. We have seen deflation since June 2016 against the US Dollar and the Euro. The implications for both import and export of goods and services are huge. Inflation rates here in the UK are creeping
  • The extent to which the UK’s tax and regulatory environments will diverge from the EU are also unclear. 

All the factors identified above could affect a typical shared services business case. The pound’s deflation could undermine the benefits of services delivered to UK customers from overseas, while domestic inflation, lack of availability of human capital and potential changes to tax and regulatory structures could also have significant effects. A relatively consistent tax structure has meant that cross charging of services between entities within the EU has been fairly straightforward, however if that changes, UK users of outsourcing where pricing has not been contracted in pounds, may need to look again at contracts. Potential redesign of processes and systems should also be considered in view of prospective moves away from standard EU procedures and practices. Even though the detail and consequent effects are unclear at the moment, it really is not too early to start thinking about these issues now. 

Environmental directives 

Of all the EU regulations, environmental directives have been some of the most significant, particularly around the key themes of green energy, recycling and air quality. On green energy, the EU Renewable Energy Directive (RED) requires the UK to generate 15% of its energy from renewable sources by 2020, up from 3% in 2009 when the directive was adopted. To meet this, it is anticipated that the UK needs to generate 30% of its electricity and 12% of its heating energy from renewable sources. The UK resisted efforts to continue with binding targets for renewable energy sources to 2030 and the EU has instead agreed a target for cutting European carbon emissions by at least 40% from 1990 levels by 2030. 

In heating and transport the UK’s ability to reach the targets, or the overall RED target, seems less certain. Renewable heating typically involves replacing gas boilers with biomass burners, or pump systems that draw heat from the air or ground. In transport, around 5% of road fuels currently come from biofuels. The Government has been considering an increase, but is also pursuing electrification policies. Longer term, the 2030 targets will need both a continued move to low-carbon energy sources and greater efficiency. 

While not needing to meet RED targets may appear to make life easier post-Brexit, long lead-times to build new wind farms mean that most of the projects required to hit the renewable electricity 30% goal have already been granted planning permission and subsidy contracts. Local authorities have been involved in community green energy projects since 2010 and are investing in renewable energy businesses to create new income streams, so will hope for some stability from existing legislation. It seems unlikely that Brexit will make much difference to energy policy as the Climate Change Act 2008 mandates tougher requirements for cutting carbon emissions. Under the Act the UK must cut its carbon emissions by 80% on 1990 levels by 2050. 

On recycling all EU states have a target of recycling 50% of household waste by 2020. The EU is considering imposing recycling targets of 65% by 2030, about which the UK Government expressed reservations. In England, recycling has increased from around 10% in 2000 to about 44%. This increase has slowed more recently however, impacted by an unstable waste market. It is anticipated that local authorities will be required to do more, with increased waste separation. The Brexit effect would have little effect in Wales and Scotland as both devolved governments have already set even more challenging targets than the EU ones. In England, however, leaving the EU could mean less stringent targets. 

The EU's Ambient Air Quality Directive set a series of targets to limit the levels of dangerous air pollutants. These targets require a major reduction of air pollution in British urban areas, many of which exceed legal pollution limits. This will happen through cleaner specifications of new vehicles as well as restrictions on the most polluting old ones. As well as setting the targets, EU laws also empower campaigners to challenge the UK Government in the courts over its failure to meet those targets. Following a legal challenge by ClientEarth, the Department for Environment, Food and Rural Affairs (DEFRA) implemented a new strategy to try to improve air quality with new clean air zones in five UK cities. London already has a similar plan under which old diesel lorries, vans and taxis will face charges for driving in these zones, with further clean air action promised by the Mayor. 

Due to The Great Repeal Bill, EU air targets would at least initially remain in UK law, having been incorporated through air quality standards regulations, but the EU would no longer have an enforcement role. The Government could repeal those laws, as it could with any EU legislation transferred into UK. 

One of the most frustrating aspects and biggest challenges of Brexit, even 18 months since the vote to leave and now just 15 months until the date by which, barring truly exceptional circumstances, we will leave the European Union, is the fact that so much of the detail around what the UK will look like outside the EU – and hence the real, tangible effects and implications that will flow from that blueprint – remains either unclear or uncertain, not specified, not agreed upon or simply the subject of increasingly heated debate between both the UK and EU negotiating teams and indeed the UK Government itself. Planning for the future is difficult enough, but when that future currently resembles a jigsaw with perhaps just a third of the pieces in the right places and joined together, it becomes almost impossible. For all those seeking to make sense of the current mass of uncertainty, we have little alternative other than to watch, wait and hope. 

This article originally appeared in the Winter edition of Public RM, the journal of Alarm: risk excellence

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