CABINET

Thursday 13 December 2018

PREPARATIONS FOR EXITING THE EUROPEAN UNION

Report of the Strategy Lead for Environment

Recommendation:

It is recommended that Cabinet agrees to the following:

(1) Commitment to cover registration costs for all Non-UK EU staff and provide HR additional support

(2) Arrange a workshop and provide additional support for local business(3) Contact the Highways England and the Department for Transport (DfT) to seek

confirmation that contingency plans are in place for all Brexit scenarios, with particular focus on works planned in March 2019

(4) Set up a Cabinet/Management Brexit working group to monitor key risks and ensure that contingency plans are in place.

Summary

In October 2016 the UK Parliament enacted the European Union (Withdrawal) Act. Repealing the European Communities Act 1972, and for Parliamentary approval of the withdrawal agreement being negotiated between HM Government and the European Union. As things stand, without further parliamentary intervention at 11pm on the 29th March the UK will leave the EU, with or without a deal or transition period in place.

This document sets out the Council’s activity to date, highlights key risks and areas where the Council has begun and will continue to develop further contingency plans.

Statutory Powers

Localism Act 2011

European Union (Notification of Withdrawal) Act 2017

1. Strategic Implications

1.1 A broad range of Issues relating to Brexit have been identified across all areas of Council activities; it is therefore considered that it is likely to have a significant impact across all of the Council’s Corporate Priorities.

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2. Introduction

2.1 Following the result of the EU referendum on the 23rd June 2016, in October 2016 the UK Parliament enacted the European Union (Withdrawal) Act. This act put processes in place to repeal the European Communities Act 1972, and for Parliamentary approval of the withdrawal agreement being negotiated between HM Government and the European Union.

2.2 It is now more than two years since the Referendum and the Government has still to present to the public an approved deal with the European Union, with the meaningful l vote on the 11th December now postponed, there is still a great deal of uncertainty. As things stand, without further parliamentary intervention, at 11pm on the 29th March the UK will leave the EU without a deal or transition period.

2.3 Given the high degree of uncertainty over whether a deal would be secured and approved before 29th March 2019, and without having clarity over what the future arrangements would be, it is difficult for the Council to produce a detailed risk assessment, nor to draw conclusions about the most likely impact of Brexit.

2.4 Despite still being within the EU ,Brexit is already having a profound impact on the UK Economy. The pound has reduced by 22% against the Euro since the referendum, moving from £1.40p to £1.10p. The UK has gone from the top of the G7 for economic growth to the bottom. Private business and public-sector organisations such as the NHS are facing labour shortages,

2.5 The Council is currently engaged in a wide range of workshops, internally and with partners, in order to: consider the wide range of different scenarios, understand key risks and put plans in place to tackle issues as they arise.

2.6 It is possible that additional funding to allow Local Authorities to respond to Brexit may be included in the government’s Public Sector Finance Settlement 2019/20. However an announcement on this has been delayed until after Parliament’s “meaningful vote”, and at the time of writing this report no further date for this vote on the settlement has been set, which could delay budget setting for local councils and other agencies eg Police. The Chancellor of the Exchequer has also indicated that the government may need an emergency budget once there is clarity.

3. Financial impact on the Borough

3.1 On the 28th November the Bank of England published scenarios illustrating what could happen to the economy, making key assumptions about the form of the new relationship between the UK and EU, the degree of preparedness across firms and critical infrastructure, and how other policies respond.

3.2 As no deal has been agreed by Parliament, at present the UK is on course for the “No-deal Disorderly” scenario, which has been modelled to see a 7.75% to 10.5% reduction in GDP in the short term based on the current

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position within the EU. In this scenario the UK would lose the existing trade arrangements that it currently has with non-EU countries through membership of the EU. The UK’s border infrastructure is assumed to be unable to cope smoothly with customs requirements.

Diagram 1: Bank of England Brexit scenarios 28th November 2018

4. Public Sector Preparations

4.1 On the 18 October Eastleigh Borough Council held a debate at Council on the impact of BREXIT; at this meeting the Council resolved that:

“people to be given a vote on whatever deal the Government ends up negotiating along with the opportunity to vote on keeping the many benefits Britons enjoy by staying in the European Union, and urges Eastleigh’s MPs to support a final decision by the British people with the option to withdraw Article 50 and remain in the European Union.”

4.2 On the 19th October Ministry of Housing, Communities and Local Government (MHCLG) contacted all local authorities asking them to set out risks and dependencies relating to exiting from the EU. The Council responded to this request for information in November.

4.3 Following the Council determination, on the 9th November 2018 the Leader of the Council wrote to Mims Davies MP, Steve Brine MP and Dominic Rabb MP the then minister for Exiting the European Union. To date only a generic response has been received from Steve Brine MP. (See Appendix 1 for copy of the letter from the Leader and Appendix 2 for the response from Steve Brine MP).

4.4 On the 7th December the Council attended a Regional Sounding Board in Portsmouth, which provided an update from MHCLG and the LGA. Despite

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Article 50 being triggered in October 2016, MHCLG only set up an Exiting the EU team four months ago and they were unable to provide any clarity at that time for Local Authorities on issues raised.

4.5 In order to manage risks that have been identified the Council will form a Cabinet and Management Team Working Group.

5. Council Operations

5.1 Government commitments to adopt EU legislation initially mean that there are few immediate legal responses that the Council will need to make. There is an assumption that GDPR will be retained in the UK since the UK led its introduction in the EU.

5.2 If new legislation is introduced, the Council will need to ensure staff are trained appropriately; the capacity of councils to respond to legislative changes and new burdens will depend on details of any such changes. Government has previously committed to funding new burdens. The LGA will lobby on this point on behalf of the sector.

5.3 Regardless of the exit scenario, non-UK EU Staff will be required to register for settled status. The Council’s Human Resources have been asked to ascertain how many staff are likely to be in this position, as the Council currently only checks for EU citizenship this is not clear. In some sectors, nationally it is assumed that 7% of the workforce may be Non-UK EU nationals, therefore around 20-30 staff may fall into this category. The Scottish Government have committed to cover registration costs for Public Sector workers, currently set at £65 per adult person. As an employer the Council should consider covering these costs and providing additional guidance and support.

5.4 Brexit is likely to impact on the delivery of some council projects; care should be taken to ensure that it is not used to rework terms, agreements, or delay timings for matters with little actual connection to Brexit.

6. Economy

6.1 Over the last 12 months the Council has held discussions with a range of large and small employers in the borough regarding their Brexit preparations. Those likely to be affected either had contingency plans (e.g. where they have continental European offices) or stated that they were waiting to see what deal was put in place.

6.2 Due to the level of uncertainty for businesses, the Council intends to hold a workshop in the New Year and provide support and guidance for business, particularly the impact of an economic downturn or even recession.

6.3 Some employers such as fast food outlets depend heavily on non-UK EU staff and there have been worries about the EU Settlement Scheme. Service entitlements that are based on EU citizens’ rights to remain will be affected

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by any problems citizens have applying to secure their rights via the Settlement Scheme application process. The Council has been briefed on this matter by Simon Hayes, Director of Visas and Citizenship and pilot programmes are already in place elsewhere in the UK.

6.5 Environmental Health has enforcement responsibilities for the import and export of foodstuffs, which could become significantly more complicated if there is No Deal, requiring the council to take on more staff. At present no further information or resources has been allocated by central government.

6.6 The longer term economic impacts of Brexit are of concern as this could place significant pressure on households and, as a result, greater reliance on Council services.t.

7. Environment

7.1 The Council will continue to work towards waste and air quality targets.

7.2 There is considerable uncertainty and concern about the longer term picture with regard to environmental protections and waste legislation. The Council has already engaged in Policy development discussions relating to the emerging UK Environment Act.

7.3 The Council is a beneficiary of several environmental grant schemes which originate from the EU, the government has yet to confirm how it would apply a UK version of the Common Agricultural Policy.

7.4 During 2017/18 a capacity issue has led to a temporary suspension of fridge collections in Hampshire. A slowdown in exports or increased cost of disposal could have a similar impact on the wider waste service. In the first quarter of 2018/19 approximately 6.2% of the Council’s recycling was shipped to the EU for processing, it is therefore considered that the level of risk currently appears relatively low.

7.5 Many DEFRA, Natural England and Environment Agency staff have recently moved into the Department for Exiting the EU, this presents a risk to ‘business-as-usual’ issues in these agencies, such as responding the planning matters.

7.6 The UK is reliant on Energy Imports from the EU with around a third of Gas and 17tWh of electricity imported from the EU.

8. Infrastructure Resilience

8.1 Hampshire’s Local Resilience Forum is taking a proactive approach with frequent multiagency liaison from January 2019, with plans being drawn up for disruption for 12 weeks as per Government advice.

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8.2 The Hampshire and IOW Local Resilience Forum held a Brexit-themed session (Preparation for a No Deal) in October 2018. It is expected that the biggest impact will be Portsmouth Ferry Port as 70% of its traffic is with Europe and it is the second largest cross channel port after Dover, and has the most routes to Europe.

8.3 The Government have stated that there are contingency plans which include redirecting freight from Dover to alternative ports. The Borough’s proximity to Portsmouth port means we could experience significant traffic disruption on the M27 if there are delays for import/export vehicles at the port. Whilst this may not be the case for Southampton where trade is currently mostly intercontinental, both areas are considering holding areas for Lorries.

8.4 The Council understands that Southampton Airport has contingency plans in place, many relating to airlines obtaining relevant licenses to be able to continue flying to/from EU destinations.

8.5 In discussions with the Local Resilience Forum we understand that there has been little engagement from Highways England and the DfT in relation to potential additional strains on the network, the Council will seek additional clarity relating to contingency plans, particularly regarding roadworks such as the Smart Motorway which are scheduled to begin in March.

8.6 Council officers will continue to be involved in local national events for Preparing for EU Exit, there is a session on the 12th December relating to Economic Development and a further session on the 15th December focusing on Food and Medical Supplies.

9. Support Services

9.1 The Finance team are receiving Treasury Management advice in relation to Brexit from financial advisers Arlingclose.

9.2 Procurement could become more complex in future, however as the EU procurement directive was enacted directly into UK law it is unlikely there will be any short term policy change. The Council will need to look into its supply chain to understand the level of risk should there be issues with a slow down of supply or costs dramatically increase due to tariffs.

9.3 A No Deal scenario would require the UK government to enter negotiations for a World Trade Organisation (WTO) treaty; in the short term this is likely to cause significant issues to supply chains for the Council, businesses in the area, and directly impact upon residents.

10. Housing

10.1 There is a concern that the reduction in EU migration could at least in the short term lead to a shortage of skilled labour eg bricklayers, electricians etc. The previous recession resulted in a dramatic slow-down in construction,

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reports are already surfacing that banks are responding to the risk of Brexit by withdrawing loan offers to developers.

10.2 Sector concerns suggest that with a potentially substantial slow-down in construction, housing need will not be met. This was a major issue following the 2008/9 credit crunch. This Council pioneered a builders’ guarantee scheme to ensure developers remained on site. Early consideration will need to be given to reintroducing an updated scheme, linking with any national scheme from Homes England, and also acquisition of new stock for market rental and affordable rent to maintain supply. Support for the planning process could be needed in the medium-term given the pattern of slow-down in applications that followed the last recession.

11. Elections

11.1 At present the election planned for May 2019 are Borough (one third) and Parishes. European elections are being held in May but at present it is assumed this will not involve the UK. This situation could change and there could also be General Election or even another Referendum on EU membership.

11.2 An immediate concern is the level of confusion surrounding residents voting rights for the May local elections. It is likely that this will lead to additional demands on the Elections team (Specialists and Case Management). In December 2018 the Government published a policy statement which attempted to clarify voting rights regardless of Brexit scenario, it stated the following:

“The UK will continue to pursue reciprocal agreements with Member States to secure the right to stand and vote in local elections for UK nationals in the EU, as it is doing in a ‘deal’ scenario.”

12. Community cohesion

12.1 As part of its community safety responsibilities, the Council may need to respond to an increase in hate crime reporting. The Community Safety officer is in regular discussions with the Police and other partners relating to this and if necessary will develop a plan of action.

12.2 Social media will inevitably be a source of public interaction and the Council’s Communications Team is making preparations for a large increase in the use of Facebook, Twitter etc.

13. Property

13.1 The uncertainty faced by business continues with business pressing the government for clarity in relation to the likely outcome of trade talks with the EU. The risks and potential effects of Brexit to the Councils commercial portfolio are likely to be similar to those experienced during a downturn in the market and a recession:

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Businesses affected and therefore due to uncertainty results in unwillingness to expand or enter into longer leases, impacts on rental income, increased vacancy rates and void costs.

Increased risk of Tenant default/failure – loss of income, increased arrears resulting in increased costs for debt recovery

Increased Voids – resulting in higher costs. May take longer to re-let and require additional incentives to achieve a letting

Lettings and lease renewals - on less favourable terms eg lower rents and increased incentives such as longer rent free periods.

Range and value of commercial property on the market - it is possible that the Council may see further commercial opportunities.

14. Financial Implications

14.1 It is difficult to assess the direct implications of Brexit on the Council and the Borough. Several assessments appear to indicate significant issues relating to a “No Deal” scenario, with relative negative impact on the economy from all exit scenarios.

14.2 The proposal for to cover the cost of registration fees for non-UK EU staff will have a small impact on staffing overheads.

14.3 The Government has postponed the Public Sector funding announcement and it is possible that additional funding may be provided to assist councils likely to see additional costs associated with service provision related to Brexit.

15. Risk Assessments

15.1 There are a wide range of risks associated with Brexit and council operations/services, the Council has put in motion plans to carry out a full risk assessment.

16. Equality and Diversity Implications

16.1 The Equality Act is not relevant to the decision in this report as the decision does not directly relate to eliminating discrimination, advancing equality of opportunity, or fostering good relations between different people.

17.1 Conclusion

17.1 There is still a great deal of uncertainty relating to Brexit, therefore the council must take a risk management approach, working with partners and government to seek clarity and access funding in order to ensure resilience for the area.

17.2 It is recommended that Cabinet agrees to the following:

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Commitment to cover registration cost for all Non-UK EU staff and provide HR additional support

Arrange a workshop and provide additional support for local business

Write to Highways England and the DfT to seek confirmation that contingency plans are in place all BREXIT scenarios, with particular focus on works planned around March.

Set up a Cabinet/Management Working Group to monitor key risks and ensure that contingency plans are in place.

JASON LIGHTSTRATEGY LEAD FOR ENVIRONMENT

Date: 10 December 2018Contact Officer: Jason LightTel No: 023 80688077e-mail: jason.light@eastleigh.gov.ukAppendices Attached: 3

LOCAL GOVERNMENT ACT 1972 - SECTION 100D

The following is a list of documents which disclose facts or matters on which this report or an important part of it is based and have been relied upon to a material extent in the preparation of this report. This list does not include any published works or documents which would disclose exempt or confidential information.

* List Background Papers or state None.

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Appendix 1 – Letter to Eastleigh MP and Minister for Exiting European Union

9 November 2018

Dear Secretary of State

At its meeting on 18 October 2018 Eastleigh borough Council’s full Council meeting voted in favour of the following motion:

“Council notes that it is now more than two years since the Referendum and the Government has still to present to the public a deal with the European Union that secures a strong and stable place for Britain in the world, or that delivers on the promises of the Leave campaign.

Council further notes that since the vote:

a) Britain has gone from the top of the G7 for economic growth to the bottom,b) Private business and public-sector organisations such as the NHS are facing labour

shortages, c) Inflation caused by Brexit-related depreciation of the pound is driving up living costs

for the least well-off and further squeezing living standards, d) Confidence of investors and established businesses is ebbing with jobs moving away

from the UK, ande) Essential research and innovation funding through the UK’s participation in Horizon

2020 has already fallen by over £100m.

Council concludes that a ‘hard’ or ‘no deal’ Brexit will harm the prosperity of Eastleigh residents and calls on the Government to avoid any form of Brexit that would:

a) Leave UK businesses outside of either the EU single market or the EU’s international trade deals, threatening tariff-free trade and supply chains including stock in our shops, raw materials, medicines and other essential goods,

b) Create delays for residents and visitors entering or leaving the United Kingdom at its borders,

c) Lose access to vital institutions and infrastructure such as Galileo and the European Medicines Agency,

d) Divide the United Kingdom by separating Northern Ireland from Great Britain,

and thus calls for the British people to be given a vote on whatever deal the Government ends up negotiating along with the opportunity to vote on keeping the many benefits Britons enjoy by staying in the European Union, and urges Eastleigh’s MPs to support a final decision by the British people with the option to withdraw Article 50 and remain in the European Union.”

On behalf of the Council I therefore call on the Government to give the British people such a vote.

Keith House

LEADER

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Appendix 2 – Response from Steve Brine MP

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Appendix 3 – Further information

Guidance for Registration on Non-UK EU citizens https://www.gov.uk/uk-residence-eu-citizens/apply

18 October – Eastleigh Borough Council – Full Council Meetinghttps://meetings.eastleigh.gov.uk/ieListDocuments.aspx?CId=276&MId=6116&Ver=4

24 October – National Audit Office - The UK border: preparedness for EU exithttps://www.nao.org.uk/report/the-uk-border-preparedness-for-eu-exit/

28 November – Bank of England – EU withdrawal scenarios and monetary and financial stabilityhttps://www.bankofengland.co.uk/report/2018/eu-withdrawal-scenarios-and-monetary-and-financial-stability

10 December - Hampshire County Council Cabinet Brexit reporthttp://democracy.hants.gov.uk/documents/s26907/Brexit%20Report.pdf

6 December - Citizens’ Rights - EU citizens in the UK and UK nationals in the EU – 6th December 2018 Policy Paper. https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/762222/Policy_paper_on_citizens__rights_in_the_event_of_a_no_deal_Brexit.p