UK PM pledging 'Brexit dividend' for health system
June 15, 2018
UK Prime Minister Theresa May is likely to hike spending on the National Health Service by €5 billion a year, funded in part by a "Brexit dividend." But as her political options narrow, many see May’s move as gesturing.
The British Prime Minister Theresa May is expected on Monday to unveil an annual 3-percent rise in National Health Service (NHS) funding per year at a ceremony in London to mark the popular state-run institution’s 70th birthday.
The Daily Telegraph newspaper reported on Friday that May will present the hike as part of what some call a "Brexit dividend," one of the Leave campaign's main pledges at the EU referendum in 2016. Foreign Minister Boris Johnson, for example, argued 350 million pounds (€390 million) a week could be spent on the NHS if Britain left the EU.
Conveniently, a 3-percent rise would be worth the equivalent of 350 million pounds a week.
In March, May’s reluctance to call the return of the UK’s 8 billion pound annual net contribution to the EU a "Brexit dividend" was widely interpreted as indicating her reservations in suggesting there could be a net gain from leaving the 28-member bloc. But that reticence appears to have dissipated somewhat since.
Dividend or penalty
Many in fact doubt such a dividend exists. The official statistics watchdog, the Office for Budget Responsibility (OBR), has since the referendum criticized Johnson for repeating the claim and has said there is unlikely to be any dividend.
The OBR said the 350-million-pound figure failed to take into account the amount the UK gets back from the EU in rebates and also from EU spending, nor does it consider if Britain will continue paying into the EU after it leaves.
The economist Will Hutton, argues the main effect of Brexit is and will continue to be poor economic growth and tax rises.
"The extra 350 million pound a week supposedly available for the NHS turns out not to exist and instead we have an exit bill of 39 billion pounds," he says. "Then there is the up to 20 billion pounds a year cost of observing customs obligations after Brexit, an avalanche of self-imposed red tape, along with as much or more again as UK organizations expensively relocate to the European mainland."
"We haven’t even left yet, but the uncertainty has already zapped 1.3 percent off GDP, according to estimates — the equivalent of 340 million pounds per week," The Financial Times newspaper wrote recently.
NHS: Running just to stand still
In November 2016, the Institute for Fiscal Studies (IFS) estimated the government would need to borrow an extra 15 billion pounds a year by the end of the decade to cover the economic impact of Brexit. That is about 10 percent of the NHS budget.
The IFS and Health Foundation said in report in March this year that NHS spending would have to rise by an average 3.3 percent a year over the next 15 years merely to maintain current health provision and by at least 4 percent to improve it. "With little room for cuts in other departments after eight years of austerity, higher taxes are almost inevitable," the IFS said.
While Jeremy Hunt, the health minister, has called for more money for the NHS, one of May’s rivals in her own party and a Remainer in the Brexit vote, finance minister Philip Hammond, said last week that Britain could be heading for tax rises to fund any cash boost for the NHS.
A politically toxic combination of higher government borrowing and higher taxes would represent an unannounced end to the policy of fiscal austerity that has been the hallmark of Conservative governments since 2010.
Chickens coming home to roost
Meanwhile, the former Conservative Party leader Iain Duncan-Smith, a leading Eurosceptic, said recently that Britain would save over 100 million pounds by not holding elections to the European Parliament in 2019.
He said this was part of a Brexit dividend and the money saved could be spent on the NHS. He didn't elaborate on where the remaining approximately €4.8 billion might come from.