Debunking the ‘Brexit Dividend’ Myth

Overview

On Sunday 17th June, the Prime Minister again claimed that there will be a “Brexit dividend” for the NHS, taken from the payments which the UK makes into the EU’s budget as an EU member.  This was part of an announcement by the Prime Minister that the NHS would receive an additional £20bn per year by 2023. The “Brexit dividend” has been widely debunked since its announcement.

Top Lines

  • It is simply not true to say that this additional £20bn funding for the NHS will be funded by any kind of “Brexit dividend”. As Paul Johnson, the head of the IFS think tank confirmed yesterday, “there isn’t a Brexit dividend”.
  • As even the Government’s own impact analysis has shown, Brexit would make this country worse off under every possible scenario, meaning less money to spend on the NHS and other public services.
  • On top of this, the Government has committed to pay a £40bn divorce bill, and to pay for access to specific EU programmes.
  • Instead of a dividend, Brexit is damaging the NHS and causing a staffing crisis. With these facts only now coming to light it is only right that there is a People’s Vote at the end of the process.       



Detail

Brexit has already hammered our economy

  • We know from the Governor of the Bank of England, Mark Carney, that Brexit has already cost 2% in lost predicted growth and that each household is £900 less well-off than it would have been, had the UK voted to remain in the EU.[1]
  • According to the Office for Budget Responsibility, the vote to leave the European Union “appears to have slowed the economy”.[2]


Even the Government admits Brexit will damage our economy in every scenario

  • Rather than £350 million extra a week for the NHS promised by the Vote Leave campaign, the Government’s own secret Brexit impact analysis shows that, even if the UK secures a free-trade deal with the EU, the Government will need to borrow an extra £55 billion over the next 15 years, wiping out any alleged ‘Brexit dividend’.[3]
  • A recent study for the thinktank Global Future by Jonathan Portes, a professor of economics and public policy at King’s College, London, found that the government’s preferred 'bespoke deal' would have a net negative fiscal impact of about £40bn a year.[4]


We’ll pay even more in the “backstop” period the prime minister wants after we quit

  • The Prime Minister has even admitted that the UK will be paying into EU coffers during the “transition period” which will last until end 2020, with the OBR noting that £16.4bn of the UK’s divorce bill almost £40bn will be paid by this point.
  • The Prime Minister has noted that during transition, the UK will continue to honour its commitments until the end of the current budget cycle, totalling billions of pounds, whilst having no say on the rules.


The Government has promised to spend billions to access EU programmes

  • The Government have pledged to remain a member of certain EU agencies which will incur a financial cost.
  • Theresa May said in her Mansion House speech that “We would, of course, accept that this would mean abiding by the rules of those agencies and making an appropriate financial contribution.”[5]
  • The Government also stated that they wish to remain involved in the European Science & Innovation programme and the Galileo programme which would involve continuing financial contributions.[6]


The Government has agreed to pay a £40bn divorce bill

  • In December the government agreed with the EU the methodology behind the calculation of the divorce bill. Estimates put this at around £40 billion.[7]
  • Brexit Minister Suella Braverman, recently admitted that the so called ‘divorce bill’ would have to be paid prior to the establishment of a new trade deal with the EU.[8]

 

Experts’ views:

  • Paul Johnson, the Director of the IFS, noted on 17 June that “there is no Brexit dividend” where the Government has admitted that Brexit will weaken public finances by £135bn per year and that “Financial settlement with EU plus commitments to replace EU funding already uses up all of our EU contributions in 2022.”[9]
  • Sarah Wollaston MP, a former GP and the Conservative MP for Totnes referred to the “Brexit dividend” as “absolute tosh” and that it was “Sad to see Govt slide to populist arguments rather than evidence on such an important issue.”[10]
  • Paul Williams MP, “Brexit is actually harming the NHS, causing an exodus of staff, we ‘re losing access potentially to new drugs and it looks as if the economic outlook for our country over the short to medium term is going to be harmed by Brexit.”[11]

 

[1] https://www.theguardian.com/business/2018/may/27/project-fear-coming-true-after-all-two-years-later-brexit

[2] http://cdn.obr.uk/EFO-MaRch_2018.pdf

[3] https://www.euractiv.com/section/uk-europe/news/lost-trade-will-nullify-brexit-dividend-uk-government-admits/

[4] https://www.theguardian.com/politics/2018/apr/18/each-brexit-scenario-will-leave-britain-worse-off-study-finds

[5] https://www.gov.uk/government/speeches/pm-speech-on-our-future-economic-partnership-with-the-european-union

[6] https://www.gov.uk/government/speeches/pm-speech-on-science-and-modern-industrial-strategy-21-may-2018

[7] https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/665869/Joint_report_on_progress_during_phase_1_of_negotiations_under_Article_50_TEU_on_the_United_Kingdom_s_orderly_withdrawal_from_the_European_Union.pdf

[8] https://www.independent.co.uk/news/uk/politics/brexit-divorce-bill-uk-pay-eu-trade-deal-talks-david-davis-suella-braverman-a8364841.html

[9] https://twitter.com/PJTheEconomist/status/1008255315954094080

[10] https://twitter.com/sarahwollaston/status/1008283502998179840

[11] https://twitter.com/peoplesvote_uk/status/1008666440449298432