It was always clear that those arguing for the UK to leave the EU were right, in simply factual terms, in saying that if the UK was currently paying in £18 billion and only getting £9-10 billion back, the UK would be able to replicate all current EU spending in Wales and the UK more generally, and there would also be a ‘surplus’ of some £8-9 billion available for spending on other things. Or, at least, it was factually accurate with one condition - the only impact on finances is the change in the way that £18 billion is spent.
It was always equally clear, however, that that change would not and could not happen in isolation. Some of the functions carried out by the EU and paid for by the UK subscription would need in future to be carried out by the UK so part of the ‘surplus’ was already accounted for. And it was always highly unlikely that a UK Government, with a different set of priorities and an ingrained resistance to the whole concept of regional aid, would ever agree to spend the money in the same way.
But, even more significantly than either of those factors, there is the impact on other government revenues and expenditure of the decision to leave the EU. Now I’ve long believed that the UK economy can and will adapt to being outside the EU, which is why I never saw the argument as being predominantly an economic one. But that’s not to say that it will adapt immediately; there was always going to be a short-term shock before the adaptation happened.
The result of that short-term shock will probably be a reduction in growth and a corresponding reduction in taxation revenues received by the Exchequer. (Insofar as there is an economic argument for Brexit, it is the belief that short-term pain will lead to long term gain, and it surprised me throughout the campaign that the Brexiters didn’t use that honest argument instead of trying to suggest, flying in the face of the obvious, that there would simply be no problems.)
That in turn means that the £18 billion reduction in contributions to the EU is far from being the only change in the overall fiscal position of the UK Government. I don’t know what the overall impact will be, nor over what timescales – but then neither does anyone else.
That’s all by way of context to considering the statement yesterday by Andrew RT Davies for the Conservatives in Wales. His comments (and specifically the line that “the Treasury will have more money”) seem to be predicated on an assumption that there are no other changes to the Treasury’s revenue and expenditure following Brexit. Whilst he doesn’t come across as a man with a strong grasp of economics, I still find it hard to believe that even he really believes that. In effect he’s trying to spend money which may or may not exist (neither he nor I can know that at this stage).It’s truly astounding that, without a hint of irony, he then goes on to accuse Labour of doing precisely that – spending money which doesn’t exist. Pots and kettles come to mind.