Brexit dividends

Tweet

In his latest pitch for the Conservative leadership, Boris Johnson has returned to the ‘promise’ to spend an extra £18 billion a year (£350 million a week) on the NHS following departure from the EU.  The figure has been widely discredited many times and even most of those responsible for promoting it during the EU referendum have long since admitted that the ‘Brexit dividend’ – i.e. the amount of money available for other things because it’s no longer being sent to ‘Brussels’ would be a lot less than that.

I’d go further – I’d argue that there will be no Brexit dividend for the foreseeable future.  Perhaps there may be in the long term, if the economy really does outperform to the extent that Brexiteers believe want the rest of us to believe, although it’s beyond any reasonable or realistic forecasting window so we’ll never actually know whether we would have been better off staying in or not.  But in the short to medium term, most recognise that there will be a hit to the economy, and coupling that probable reduction in GDP, or at the least reduction in growth of GDP, with the requirement to spend a lot more on replacing all the EU agencies with UK versions, increasing the spend on managing the physical and economic borders, and the other increased costs which will come in the wake of Brexit, I believe that zero is a reasonable estimate of the Brexit dividend within any reasonable forecasting period.

Having said that, I welcome Johnson’s statement that the UK Government can spend an extra £18 billion on the NHS if it wants to.  And I agree with him; they can – it’s just that it has nothing at all to do with Brexit.  Looking at the detail of what has been said by Johnson and his supporters, that’s a truth which they come close to acknowledging themselves.  £8 billion of that total – more than 40% - has already been committed and is in no way contingent on Brexit.  What Johnson has asked for is that an extra £5 billion a year be made available in 2019 and a further £5 billion in 2022.  Given the ease with which more than £1 billion was found to buy a coalition partner, and the total government spend of more than £770 billion per annum, this isn’t much more than small change to HM Exchequer – less than 1.5% of expenditure.

However, for a moment, let’s assume that there is a relationship with Brexit.  Part of Johnson’s argument is that the UK should not honour any perceived commitments to EU budgets after the date of departure, and he wants a maximum transition period of six months.  If he’s right, then why isn’t the whole of the extra money available immediately?  Why do we need to wait until 2022?  And if he’s wrong, then where is the 2019 tranche of money coming from?  The answer to both of those questions is very simple – the initial premise is wrong, and a decision to spend more on the NHS is not contingent on Brexit; it’s a simple matter of policy.  The only reason for linking it to Brexit is to attempt to persuade us that Brexit has a short term benefit, when he knows as well as anyone else that it does not.  But then, Boris and truthfulness have been estranged for a very long time.