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Theresa May under fire over NHS 'Brexit dividend' claim May's NHS 'Brexit dividend' claim draws scepticism and doubt
(about 7 hours later)
Theresa May is under pressure to justify how a so-called Brexit dividend could help pay for a planned £20bn annual funding rise for the NHS, as her announcement on extra health spending was met with scepticism. Theresa May’s promise of £400m extra in weekly NHS spending within five years has been overshadowed by scepticism among experts and her own backbenchers over her claim it can be financed through a windfall delivered by Brexit.
The prime minister told the BBC the government’s 10-year spending plan for the health service in England – which she will formally unveil on Monday – would involve “significantly more money going into the NHS”. Ahead of a major speech by the prime minister in which she will pledge a £20bn annual real-terms NHS funding increase by 2023-24, May was ridiculed for arguing that some of the money would come from a so-called Brexit dividend.
She told Andrew Marr on Sunday: “What we’re doing is saying very clearly as a government that the NHS is our priority. And it’s right, because the NHS matters to people. Britain contributes more money to the European Union than it takes out. Vote leave campaigners emphasised before the referendum that leaving the EU would free up these funds for the UK government to spend on vital infrastructure and austerity-hit services like the NHS.
“We have looked carefully at what we have put into the NHS to ensure that we deliver world-class healthcare.” The Office for Budget Responsibility (OBR), which is the Treasury’s independent economic forecaster, has calculated that any benefit to the UK has all but disappeared in the past two years, largely due to a slowdown in the economy that it blames on the Brexit effect.
But May’s assertion that the rise could be partly paid for with money saved by ceasing EU contributions after Brexit was dismissed by Sarah Wollaston, the Conservative backbencher who chairs the Commons health and social care committee. Once it became clear to businesses and consumers that the government was split over how to negotiate Britain’s departure from the EU, creating huge uncertainty about the outcome, investment fell, productivity stagnated and consumer spending flatlined. This has forced the OBR and the other main forecaster, the Bank of England (BoE), to downgrade GDP growth this year and next year. The implied hit to the public finances is about £15bn a year by the early 2020s.
“The Brexit dividend tosh was expected but treats the public as fools,” she tweeted. “Sad to see government 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 and sharing this fairly.” Britain pays around £19bn into the EU pot each year, much of it coming back to the UK in the form of subsidies for farmers, research and development and infrastructure projects plus a £5bn rebate. This situation will continue during a transition deal, denying the government the Brexit dividend until 2020.
Her view was echoed by Philip Lee, who recently resigned as justice minister and who sometimes works as a freelance GP. Lee tweeted that while the extra money was to be welcomed, “we must be honest about how we are going to pay”. The OBR said the UK’s £5bn rebate has already been “spent” ​on domestic priorities and cannot be spent again. The Institute for Fiscal Studies said in its assessment that the remaining £14bn could theoretically be redirected, but the government has already pledged to replace at least some EU spending (for example, farming subsidies) for some years, leaving an £8bn surplus. However, a reduction in GDP of just 1% translates to a fall in tax revenue of more than £8bn.
He added: “There is no evidence yet that there will be a ‘Brexit dividend’ – so it’s tax rises, more borrowing or both. The Bank of England said the trend rate of growth for the UK has fallen from around 2.5% to 1.5%, which matches the fall needed to wipe out the Brexit dividend. BoE governor Mark Carney said household incomes after adjusting for inflation were £900 lower than expected before the referendum vote.
“Real household incomes are about £900 per household lower than we forecast in May of 2016, which is a lot of money,” he said, referring to the total lost growth for incomes in the two years since the 2016 referendum.By Philip Inman
“At the moment, as a member of the European Union, every year we spend significant amounts of money on our subscription, if you like, to the EU,” she said in an interview on BBC One’s Andrew Marr show. “When we leave we won’t be doing that. It’s right that we use that money to spend on our priorities, and the NHS is our number-one priority.”
The Institute for Fiscal Studies (IFS) said, however, that even the government had accepted the idea of an immediate post-Brexit boost to coffers would not happen. Two senior Tory MPs who are also doctors similarly criticised the proposal.
Sarah Wollaston, who chairs the Commons health and social care committee, 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.
Dr Phillip Lee tweeted:
As a GP, I‘m happy to see more money for our health & social care. We need to spend more as our population ages. But we must be honest about how we are going to pay. There is no evidence yet that there will be a “Brexit dividend” - so it’s tax rises, more borrowing or both
The decision to announce extra spending for the NHS and to frame it specifically as a benefit of leaving the EU has been widely seen as a sop by May to hardline Brexiters in her cabinet and on the Tory backbenches ahead of some potentially crucial votes this week on the EU withdrawal bill.
Boris Johnson, the foreign secretary, who has stood by the EU referendum bus slogan that departure would free up £350m a week extra for the NHS, tweeted:
Fantastic news on NHS funding - a down payment on the cash we will soon get back from our EU payments. #TakeBackControl #BrexitDividend
The gambit is likely to trouble other Conservatives, however, both in terms of whether the increase could instead mean higher taxes or more borrowing, and if it would even deliver a noticeable improvement to NHS services.
In another tweet, Wollaston said the increase, amounting to a 3.4% rise in real terms, would not improve matters without extra money for preventative treatments, social care and capital budgets.
The Local Government Association, which represents councils, said the NHS “cannot thrive” without new social care funding to keep people out of hospital and free up beds.
The IFS has previously said a 5% real-terms increase would be required for real change. The institute’s head, Paul Johnson, noted that 3.4% was higher than recent increases, but still below the long-term average.
Johnson told BBC1’s Sunday Politics that the EU money for the next few years had already been allocated, and that the government’s Office for Budget Responsibility said Brexit would initially erode public finances by about £15bn a year.
“It could be a bit more, it could be a bit less,” he said. “As a pure, sort of arithmetic point of view, over this period, there’s no money.”
May was vague on where else the money could come from, telling the Andrew Marr Show that the UK would be “contributing more as a country” and more details would be announced later.
Labour and the Liberal Democrats called for greater clarity on the spending boost. The shadow foreign secretary, Emily Thornberry, said she would “certainly welcome it if we could believe it”.
Thornberry told Marr: “They’ve told us they’re going to pay for it from a Brexit dividend. We don’t really know what that means because we don’t know what the deal is going to be and what the overall effect on the economy is going to be, and actually whether Brexit is going to end up costing us a great deal of money.”
Between 2010-11 and 2016-17, health spending increased by an average of 1.2% above inflation and increases are due to continue in real terms at a similar rate until the end of this parliament. This is far below the annual inflation-proof growth rate that the NHS enjoyed before 2010 of almost 4% stretching back to the 1950s. As budgets tighten, NHS organisations have been struggling to live within their means. In the financial year 2015-16, acute trusts recorded a deficit of £2.6bn. This was reduced to £800m last year, though only after a £1.8bn bung from the Department of Health, which shows the deficit remained the same year on year.Between 2010-11 and 2016-17, health spending increased by an average of 1.2% above inflation and increases are due to continue in real terms at a similar rate until the end of this parliament. This is far below the annual inflation-proof growth rate that the NHS enjoyed before 2010 of almost 4% stretching back to the 1950s. As budgets tighten, NHS organisations have been struggling to live within their means. In the financial year 2015-16, acute trusts recorded a deficit of £2.6bn. This was reduced to £800m last year, though only after a £1.8bn bung from the Department of Health, which shows the deficit remained the same year on year.
Read a full Q&A on the NHS winter crisisRead a full Q&A on the NHS winter crisis
The junior Brexit minister Suella Braverman was unable to say how much a Brexit dividend might amount to if it did exist. “There are lots of estimates,” she told Sky’s Sophie Ridge on Sunday when questioned about it. The Lib Dem Brexit spokesman, Tom Brake, said he had written to the head of the UK Statistics Authority to adjudicate on whether a Brexit dividend might actually exist.
Speaking to Marr, May was vague on how the funding increase would be paid for, saying only that it would be financed from the country “contributing a bit more” and a boost to public finances from Brexit – something the government’s official forecasts say will not happen. The issue is likely to pursue May at her speech in London on Monday, where she plans to talk about her personal commitment to the NHS, the work of NHS staff after last year’s Manchester Arena terror attack and her own experiences with type-1 diabetes.
But the PM insisted there would be extra money after Brexit. “At the moment, as a member of the European Union, every year we spend significant amounts of money on our subscription, if you like, to the EU. The new money would ensure the NHS “will be growing significantly faster than the economy as a whole, reflecting the fact that the NHS is this government’s number-one spending priority,” May will say, according to extracts released in advance. “This money will be provided specifically for the NHS. And it will be funded in a responsible way.”
“When we leave we won’t be doing that. It’s right that we use that money to spend on our priorities, and the NHS is our number one priority.”
The argument contradicts official forecasts, which say that leaving the EU will weaken the public finances, at least in the short term. EU contributions until 2022 have already been earmarked, either to keep paying into Brussels budgets or to replace this spending elsewhere.
May also faced pressure about the amount of the increase, which she said would be a 3.4% real-terms average rise over the first period, up to 2023-24. This is less than the 5% that the Institute for Fiscal Studies (IFS) says is needed for real progress.
In another tweet, Wollaston said the planned 3.4% real-terms increase over the period was welcome but “will not deliver as planned” without increases in preventive health measures, social care, training and capital budgets.
May saidsome improvements would come from efficiencies, and she claimed too much of the NHS budget increases under Labour governments were spent on non-clinical care. “We need to make sure that the money we put in is being spent on delivering for patients,” she said.
To pay for the rise, May said the UK would be “contributing more as a country”, but gave no details as to whether this would be higher taxes or more borrowing. “The chancellor will announce the details in due course, and before the spending review but there are many aspects that will change over the next few months, potentially,” she said.
The shadow foreign secretary, Emily Thornberry, expressed scepticism about the plan, saying people would not be fooled.
Thornberry told Marr: “I’d certainly welcome it if we could believe it [but] how are they going to pay for it? They say that they’re going to increase taxes, but we’ve yet to hear who is going to get their taxes increased and how. They say they’re going to increase borrowing but they haven’t said by how much, and they haven’t told us what the effect will be.
“They’ve told us they’re going to pay for it from a Brexit dividend. We don’t really know what that means because we don’t know what the deal is going to be and what the overall effect on the economy is going to be, and actually whether Brexit is going to end up costing us a great deal of money.”
Thornberry also noted that the new plan did not include extra spending on social care. “You can’t talk about just the NHS. You can’t have the NHS without social care. Anyone who has an elderly relative or is elderly themselves knows that.”
The Local Government Association (LGA), which represents councils, said it was disappointing there was not a parallel boost to social care.
Izzi Seccombe, who heads the LGA’s community wellbeing board, said: “Properly funding social care would help prevent crises in the NHS by reducing the numbers of people who are admitted to hospital in the first place.”
The Liberal Democrat MP Norman Lamb said the funding was “an inadequate sticking plaster” that “falls well short of what the IFS and others say is necessary. It will condemn the NHS and patients to a very uncertain and dangerous future.”
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