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Sunday 17 June 2018

Brexit Dividend? WHAT Brexit Dividend?

Our free and fearless press is today telling the world that Theresa May is to pledge billions more in spending for the NHS. Furthermore, the right-leaning part of it - for which read most papers - is proclaiming this to be a “Brexit dividend”. All that money that formerly went to those ghastly Eurocrats is now coming home. Hurrah for Empress Treeza!
Well, I hate to be a party pooper, but while the more credulous pundits have lapped up the spending claims, as well as that of a “Brexit dividend”, those watching the PM give the world her carefully scripted and rehearsed good news in a set-piece interview for The Andy Marr Show™ would be best advised to err on the side of caution, although they won’t.

Theresa May was unequivocal when it came to how her proclaimed 3.4% funding increase for the NHS would be funded: “We’ve got to find that money … that will come through the Brexit dividend”. That dividend would have to stump up £20 billion a year, maybe significantly more. But those praising the PM to the rafters should stop and think first.

Here is what the FT - derided by those on the Europhobic right because it keeps reminding them of reality - has told readers: “Treasury officials dismiss the idea that a significant Brexit dividend will override the painful arithmetic for the public finances stemming from a mediocre outlook for the UK economy”. And there is more.

Paul Johnson, former chief microeconomist at the Treasury and now director of the Institute for Fiscal Studies, a think-tank, said: ‘There is no Brexit dividend. Payments to the EU will fall [after Brexit], but tax revenues will fall more as a result of Brexit … That is the official position of the government, which has accepted the Office for Budget Responsibility’s forecast that the public finances are likely to be weakened to the tune of £15 billion a year as a result of the [Brexit] referendum vote’”.
Johnson put the choice bluntly: more money for the NHS could be found by “taxing more or borrowing more … You can’t pay for it from an imaginary [Brexit] dividend”. This conclusion is shared by ITV Political Editor Robert Peston. This is his take.

The idea of a Brexit dividend, as articulated by the PM today, is dubious. UK growth has slowed significantly since the Brexit vote, at a time when global growth has significantly accelerated. If this does not represent a Brexit drag on growth, it is very difficult to know what it is. And UK growth is forecast, even by the government, to limp along at 1 to 1.5% for years to come, a cut of roughly a third from pre-Brexit forecasts

And his conclusion? “Our net contribution to the EU budget, after money we get back from the EU in various forms, is nearer £150m a week than the £350m that was on the bus. So even if you believe the reduction in UK economic growth is temporary and that there really will be a Brexit dividend, the PM’s promise of £600m extra in cash for the NHS in 2023/24 still means our taxes and government borrowing are set to rise by £450m a week”.

So let’s get real: there isn’t going to be a Brexit dividend, and even if such a thing were to materialise, it would not prevent significant tax rises to pay for the Tories’ announcement.

Why do so many people swallow the propaganda without considering all of that? Another case of You Might Wish To Ask That, I Couldn’t Possibly Comment.


Anonymous said...

A "Brexit dividend"?

The same as "the peace dividend" at the "end" of the Cold War? Before all the wars in the East? Before the 2008 Depression and "austerity"? Before the latest anti-Russian bullshit propaganda? Or the same as "the arms divend" of weapons sales to Saudi Arabia to enable them to mass murder Yemenis?

The puppet Marr, of course, went along with all this lying shite. Quelle surprise. Not.

Goverment by lies and deception. What else did you expect from the Nastzi party and a woman with the political "morals" of a guinea pig?

Ted Bangor said...

Funny how the most pro-leaving Express has almost double the amount being given to the NHS as all the others.
It's almost as if they just added the new amount to what was previous on a bus, or just made a number up.

Arnold said...

It would seem to be an admission that farming subsidies and EU help for poorer regions won't be replaced by Government help. That's the only conceivable source of a Brexit dividend.

Pendragon said...

BBC-TV News at 1:15 pm on Sunday (17 June) gives the NHS budget as £115 billion.
(Is this the budget for 2018-19? Is this the budget for England or for the UK?)
Anyway, the NHS Confederation says that the £20 billion splashed all over today’s newspapers actually means an annual 3.4% increase in the budget compounded over the next five years.
Here’s how £115 billion grows at a compound rate of 3.4% per year:

2018-19: £115 billion
2019-20: £118.9 bn
2020-21: £123.0 bn
2021-22: £127.1.bn
2022-23: £131.5 bn
2023-24: £136.0 bn

These, of course are at today’s prices. If, for example, inflation as measured by the CPI were to be 2.5% in 2019-20, then the NHS budget would have to be £121.9 bn instead of £118.9 bn to account for the decreased spending power of the budget caused by inflation.
Five years of inflation will have obviously increased the £20 billion to a higher figure---but that depends on what inflation is going to do in the next five years. Not only that but the markets used by the NHS increase their prices, apparently, at a rate faster than that of the CPI.
You can see why the Conservatives chose £20 billion per year as the headline figure to sell to the public: divide it by 52 and you get £385 million per week which is bigger than than the £350 million figure on the side of the Brexit bus.
Mind you, you will have to wait five years for the extra NHS spending to exceed £350 million per week. It won’t happen until 2023-24.

Pendragon said...

TED BANGOR: Don't forget that the £20 billion increase to the NHS budget arriving in 2023-24 is at today's prices.
The Sunday Express seems to have made an estimate of how five years of inflation will have decreased the spending power of the £20 billion.
In 2023-24 you will need an increase in the NHS budget of £31.2 billion to have the same spending power of £20 billion at today's prices.
£31.2 billion per year works out as £600 million per week.
Taking the Express's estimate of inflation into account means an increase in the NHS budget of 4.9% per year.
So in the November Budget Statement, you may hear the Chancellor proudly announcing "nearly a 5% increase in NHS spending for the year beginning April 2019". Put it in your diary.