We are waking to a very different future for politics, finance and governance in the UK.
The immediate response of the markets and the political parties will play out in the days and weeks ahead. But what will this mean for local authorities in the short and long term?
There is speculation on the exact route which will be followed to implement the referendum decision and how long this will take. The next few months will inevitably focus on the leadership of the country and the Conservative Party. In terms of legal implications, the message at the moment is "Business as usual - until told otherwise".
Many areas of local government activity and regulation are rooted in policy and legal foundations flowing from UK membership of the EU. These include procurement, state aid, employment and immigration rules. Until changes are made, local authorities will need to continue adhering to all relevant legal requirements whether they flow directly or indirectly from a EU source.
There is no immediate legal impact because (taking procurement / trade issues and employment as examples)
- Many of those European obligations have been implemented by way of national legislation or regulations which remain binding unless and until parliament revoke them. The TFEU principles applicable to the free movement of goods (equal treatment, non-discrimination, transparency and proportionality) are embodied in our national Public Contracts Regulations 2015, which were brought into force to implement the European Directive of 2014/24 on public sector contracts. These will remain in force, at least for now, and breaches of them can be challenged in the same way.
- The UK's vote to leave has no automatic consequences: the "eject" button has not yet been pressed. To do this, the U.K. will have to first invoke Article 50 of the Lisbon Treaty. Although there is now reference to this happening sooner rather than later, it is not clear exactly when this process will start. Article 50 itself envisages a 2 year negotiation period (capable of extension if all other states agree). After the end of the negotiation period the treaties cease to apply to the departing member state and instead any new agreed departure terms would apply.
- Existing world level and future European level trade agreements mean public bodies are already subject to and are likely to continue to be subject to broadly equivalent requirements of transparency, non-discrimination and equal treatment in any event.
- For employment, the trade model we negotiate for gaining access to the single market is likely to determine which of the EU employment laws we may have to remain bound by as the EU countries would not want the U.K. to be able to undercut their businesses through having less onerous employment protection laws for our workers. As with other areas, any change will not be quick because all EU employment law is already incorporated into our national laws unless and until revoked and/or replaced. Furthermore, the U.K. has already chosen to "gold plate" some of the EU laws, such as some aspects of working time and TUPE, and some of our U.K. employment laws (e.g. unfair dismissal) are not derived from EU law and so would not be affected. We are covering these issues in more detail in our online employment update, Employment Eye.
More immediately, the fall-out from the Brexit vote could have other impacts on local government. George Osborne proposed an emergency budget in the event of a Leave Vote - if this now happens, and follows the previous approach to austerity, local government can expect to bear the brunt of further measures.
If there are further changes in national political leadership, this could have a more profound effect on current policy direction. The devolution agenda has been driven to a large extent personally by George Osborne as Chancellor - would this survive a change in his role? The inevitable political vacuum while the leadership election is contested may halt policy developments and new legislation in any event.
Any downturn in the economy whilst all this plays out will itself impact local authorities. The downside of greater financial autonomy is that the connection between the council and its local economy is closer and more immediate – great in successful times but of real concern in difficult economic times.
Local government officers, many of whom will have had little sleep last night working to deliver a smooth referendum, will have much to reflect on in the days ahead.