NEWS
17/06/2018 17:47 BST | Updated 18/06/2018 12:17 BST

'There Is No Brexit Dividend': Economist Paul Johnson Rubbishes Theresa May's £20bn NHS Boost

Labour slams Tories for finding a 'magic money forest'.

Theresa May’s claim that a “Brexit dividend” will help boost NHS funding by £384m a week has been picked apart by a top economist as a senior Tory MP labelled the boast as “tosh”.

The Prime Minister announced the NHS will receive an additional £20bn a year in real terms funding by 2024, meaning a weekly increase of £384m in real terms, and £600m a week in cash terms compared with now.

It is expected that taxes and borrowing will rise to pay for the increase in funding, and for resources to be redirected from the more than £9bn a year the UK currently pays into the EU.

In the Mail on SundayMay wrote: “Now, as we leave the European Union and stop paying significant annual subscriptions to Brussels, we will have more money to spend on priorities such as the NHS.”

In press briefings, it was sold as a “Brexit dividend”, and even made its way in to the Downing Street Twitter.

But Paul Johnson, director of the well-respected Institute for Fiscal Studies, said the government had already accepted that Brexit would swipe £15bn a year from revenues – or £300m a week.

Moreover, the ‘divorce bill’, plus commitments to replace Brussels funding in some areas, would swallow up all of the returning EU contributions until 2022.

He later told BBC1’s Sunday Politics: 

“There isn’t a Brexit dividend.

“So there isn’t a dividend in two senses; first over this period, if you look at the arrangement we’ve come to with the European Union in terms of paying our exit bill, and you add to that the commitment the Government’s already made to keep funding farmers and so on, there is literally arithmetically no money, and in addition we know, because the Government’s accepted this, that the public finances will be worse as a result of the Brexit vote.

“The (Office for Budget Responsibility) has said by £15bn; it could be a bit more, it could be a bit less.”

“As a pure, sort of arithmetic point of view, over this period, there’s no money.

“If you look further down the road, yes, we’ll stop paying money to the European Union, but the economy’s already shrunk a bit as a result of the vote; the Government has accepted that.

“Actually the public finances will be £15bn or so worse off, not better off, so there really just isn’t money there for a Brexit dividend.” 

Meanwhile Commons Health Committee chairwoman Sarah Wollaston said she was sad to see the Government “slide to populist arguments” as people were being “treated like fools”.

Wollaston tweeted: “The Brexit dividend tosh was expected but treats the public as fools. Sad to see Govt slide to populist arguments rather than evidence on such an important issue. This will make it harder to have a rational debate about the ‘who & how’ of funding & sharing this fairly.”

Jamie Whyte, research director of the Institute of Economic Affairs, said:  “The Government is dangerously close to treating the Brexit dividend as their own version of the ‘magic money tree’.

“Make no mistake - both taxes and public borrowing will increase to make good on these funding promises.”

Labour’s Shadow Chancellor John McDonnell told the 5 Live the funding boost is a “sort of pre-election gimmick”.

Speaking to John Pienaar, he went on to say “Can you imagine if I’d come forward like this, there’ll be accusations of magic money trees - this is a magic money forest that’s come out this morning.”

Even Nigel Farage accused May of political spin.

Referring to controversial promises made by the Leave campaign during the referendum, May told BBC1’s The Andrew Marr Show: “Some people may remember seeing a figure on the side of a bus a while back of £350 million a week in cash.

“Well, I can tell you what I am announcing will mean that in 2023-24, there will be about £600 million a week in cash, more in cash, going into the NHS.”

Asked where the non-“Brexit dividend” element of the funding would come, May said: “As a country we will be contributing more, a bit more, but also we will have that sum of money that is available from the European Union.”