UK government allocates over £400m to key Brexit departments
The UK government has allocated £412m by 2020 to fund the direct costs of Brexit within the civil service, with the Department for Exiting the European Union (DEXEU) receiving £51m in 2016-17 and up to £94m/annum in the years to 2020.
Setting out his first Autumn Statement as chancellor yesterday, Philip Hammond also said that the Department for International Trade and the Foreign Office will receive £26m a year between them.
The indirect costs of Brexit are set to be far greater, however, with autonomous financial watchdog the Office for Budget Responsibility (OBR) predicting that lower economic growth and tax revenues will require the government to borrow an extra £122bn over the next five years – £59bn of that as a direct result of Brexit.
The OBR also forecast that the government will still have a £21bn deficit by 2020-21 – a much worse outcome than Hammond’s predecessor George Osborne predicted last year, when he expected to achieve an £11bn surplus by that date. Public debt is expected to peak at more than 90% of GDP.
Hammond has abandoned Osborne’s ‘fiscal rules’, dropping his pledge to eliminate the deficit by 2020 and allocating public funds to infrastructure and R&D – but he announced that Osborne’s planned departmental spending cuts are to continue as planned, meaning that almost every department will have to deliver its Brexit work in an environment of rapidly-falling resource budgets.
“As the OBR’s debt projections demonstrate, we have more work to do to eliminate the deficit,” said Hammond. “So departmental spending plans set out in the Spending Review last autumn will remain in place, and departmental expenditure in 21-22 will grow in line with inflation.
“The £3.5bn of savings to be delivered through the Efficiency Review announced at the Budget… must be delivered in full.”
He has, however, made a small exception for the Department of Justice, which will receive an extra £500m to recruit 2,500 prison officers and fund wider reforms to the justice system.
Public sector unions have expressed concerns that planned efficiency savings will prove difficult given that Brexit is likely to push up workloads in all government departments, not just those directly involved with leave talks.
The deputy general secretary and civil service head of trade union Prospect, Garry Graham, told Global Government Forum: “As a result of Brexit, the civil service is facing a tsunami of additional work. This is at a time when the civil service is at its smallest since pre-World War II. The decision to stick to current departmental spending plans sounds more like the title to the film ‘Carry on Regardless’ rather than a cool and calm appraisal as to the challenges faced and how to deal with them.”
He pointed out that the latest Civil Service People Survey shows that many staff are struggling under unacceptable workloads and unable to achieve a reasonable work-life balance. Three-quarters believe they would be paid better elsewhere for doing similar work.
Dave Penman, the general secretary of senior public servants’ union the FDA, also criticised the continued cuts – which are set to reduce most departments’ resources by about 20%. “The task of preparing for and implementing the consequences of Brexit will impact across the civil service and have major consequences for a number of departments, particularly DEFRA, the Home Office and the department for Business, Energy and Industrial Strategy,” he said. “With no additional funding, departments will once again be asked to deliver ever more with ever less.”
Penman added that “Brexit on the cheap is the government’s favoured approach.”
Bronwen Maddox, director of the Institute for Government, said the additional money to support trade and negotiations will help Whitehall prepare for Brexit. “But it is too soon to say whether this is enough money, because we don’t yet know how the government will approach Brexit negotiations or what resource will be required,” she added.
This was the first major economic statement since Britain’s vote to leave the EU, and the last time the Autumn Statement will take place in its current form.
Hammond pledged to reinvest £1bn of the efficiency savings found by government departments by 2020 in “priority areas”. He also hinted that protection of certain budgets, such as triple lock pensions and key public services, would be reconsidered for the next parliament.
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