Duncan Osler: How will Brexit affect the public sector?

The EU referendum result in June spawned a host of consequences, and many a discussion about the impact and implications of Brexit.

Public bodies like the NHS will be affected by changes to the regulatory regime post-Brexit. Picture: Greg Macvean

The European Union (Notification of Withdrawal) Bill is now passing through the UK parliament and a white paper – The United Kingdom’s exit from and new partnership with the European Union – has been published.

But what can be said about the impact and implications of Brexit on the public sector?

In itself, withdrawal from the EU will not alter the statutory functions of public sector bodies, such as local authorities and the NHS. However, it is likely to affect how public bodies are able to perform those functions in a number of ways.

The regulatory environment

The UK government has said that it intends its Great Repeal Bill to remove the European Communities Act 1972 from the statute book and convert the body of existing EU law (the “acquis”) into domestic UK law. Many of these EU laws apply to the public sector, for example in relation to data protection and public bodies, like other organisations, will be affected by changes to such regulatory regimes.

The Brexit white paper does not provide much detail on this, but a more detailed white paper is anticipated to accompany Great Repeal Bill.

The regulatory environment for the public sector is often a complicated one, such as in relation to health and safety and medicines. Where ongoing access to EU institutions, such as the European Court of Justice (ECJ) is to cease, what regime will apply? Public bodies will welcome clarity about any changes to their regulatory responsibilities on withdrawal from the EU, as well as arrangements for enforcement of rights.

The economy and infrastructure

The more the UK economy grows or is maintained outside the EU, the greater the potential through tax receipts to maintain or raise public sector budgets, in turn helping the public sector deliver its functions.

Continuing public sector investment in infrastructure stimulates parts of the economy, such as the construction sector, and supports economic growth, for example by improving transport connections. Such investment is delivered through construction procurement, the supply of goods and materials as well as services.

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For the public sector to procure effectively along the full supply chain, access is required to overseas markets for items that are not produced in the UK or are capable of being sourced more cheaply from elsewhere. Access to a well-qualified labour pool is also a requirement, something which is also important for public bodies in their role as key employers in the UK.

A sound public procurement regime

This needs a competitive environment and a healthy number of bidders. In turn this requires bidder confidence in the procurement market, especially for larger projects or those needing commitment to high bid costs. A fair and impartial legal system is needed to underpin bidder rights to fair treatment and maintain the UK’s enviable good reputation for public procurement, even if bidders cease to have recourse to legal remedies beyond UK national courts such as the ECJ.

Will state aid rules apply?

Public procurement rules form part of the EU competition law regime, along with rules restricting state aid. The Brexit white paper states: “We recognise how important it is to provide business, the public sector and the public with as much certainty as possible.”

In that regard, clarity would be very welcome on the extent to which public bodies will still require to comply with a state aid regime, as well as what might replace European regional development funding across UK regions.

Variations on a theme

Withdrawal from the EU will increase the day-to-day workload of some public bodies, one obvious example being UK Visas & Immigration (part of the Home Office). Other bodies will see their operating environment change, for example ongoing collaboration in areas such as policing may reduce.

The complex interaction of EU regulation with almost every facet of the public sector makes identifying the impact and implications of Brexit a major task.

• Duncan Osler is a partner at law firm MacRoberts

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