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Mike Emmerich: Hammond must call out buccaneering Brexiteers

Mike Emmerich
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There was an influential paper – well one that influenced me quite a lot as an undergraduate – entitled Local Economic Policies: Trying to Drain an Ocean with a Teaspoon.

It has loomed large in my mind after LGC asked me to write this piece ahead of the Budget, on what should be the sector’s ask of Philip Hammond. That’s because the longer the dithering and uncertainly of the Brexit negotiations goes on, the more I worry that so much of the good work we’re all trying to do seems at risk of being completely undermined by the growing likelihood of a bad Brexit. Even a better Brexit – a negotiated one – looks likely to cost £40bn-60bn, leaving us poorer for the foreseeable future. And that means less and not more money for the services and projects of every reader of this publication. As to the cost of bad one: who knows?

The context for the article I cite was the local socialism fashionable with many councils at the time as a way of staving off the worst impact of rapid industrial decline and the policies of the Conservative government of the early 1980s that did quite a bit to precipitate it. Councils tried lots of activity to stimulate demand, but the prevailing economic circumstances in many areas rendered even the best of innovation if not worthless, then certainly of limited value. The futility of so much local policy back then could yet be repeated in Brexit Britain.

There was a theoretical possibility that Brexit could be delivered without major short-term (and possibly long-term) damage to the UK economy. However, even the architect of the Brexit vote, Vote Leave campaign director Dominic Cummings, recently acknowledged the scale of the challenge we face resulting from the early exercise of Article 50 and the less than compelling leadership we’ve seen from SW1 since. He described it as “a shambles” and a “historic, unforgivable blunder”. If so, the hard Brexit of World Trade Organisation terms awaits. In that eventuality, the cash cost may be lower than a £40bn-60bn deal, but only the most reckless gambler would bet on higher growth and a more stable pound as the barriers to trade to our biggest trading partners are suddenly imposed. Both these outcomes, which are the two most likely if the whole thing isn’t paused, look like bad news for local government, which tends to bear a disproportionate share of any fiscal tightening.

The person whose fiscal plans we will see in the Budget and which stand to be wrecked by bad Brexit is surely the one to do the job of calling this out. Much of what we’re all trying to do would be undermined by a bad Brexit. We would be the latter-day holders of teaspoons. To us would fall the task of using them to drain oceans. That prospect is why local government’s number one ask of Philip Hammond should at least be to argue for the extension the period of Brexit transition and to bring some of his more enthusiastic and buccaneering colleagues to heel. Their careless talk will cost lives in public service cuts if they aren’t all together more careful in the future than they have been in the past.

This isn’t to argue the chancellor is powerless in other respects; far from it. We will only meet the challenge of raising the now stagnant level of UK productivity, as well as dealing with the worst effects of falling migration, if we are able to invest more heavily in the skills of our workforce and put them to work in business. The great cities of our country all need better transport systems and connectivity. The daily commute within too many cities is a disaster. So, there is plenty of scope for transport investment too. In every major city, adaptation to climate change offers huge opportunity but also cost to the exchequer. The new metro-mayors, as I have argued here before, all need to be cut some financial slack if they are to be able to fulfil their mandate to raise the trend rate of growth in our major cities. Support for metro-mayors would not go amiss either. In housing, the government’s ambition will not be matched by reality without investment in opening up the complex sites in many urban areas and stimulating the development sector to grow the capacity to develop them.

Every service in local government that has borne the brunt of austerity needs an injection of cash.

There really is no shortage of things the chancellor could do but the point is this: if the Brexit gamble goes wrong, there will be less cash to fund any of them. Promises made now might not be deliverable. Those dependent on the services provided by the readers of this paper will bear the brunt and the chancellor needs to do more than dish out teaspoons.

Mike Emmerich, director, Metro Dynamics. He writes here in a personal capacity

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