Sounds familiar? Time to make some sense of this slogan.
As shown here before, Brexit has already, and, if carried through, will continue to inflict massive economic damage to UK household incomes, tax revenues, and public spending potential.
According to the Bank of England, the British GDP is already £20 billion smaller than it would have been after a remain-vote. This is consistent with the 0.5% GDP growth underperformance of the UK compared to the G7 since 2016 (1% of GDP is equivalent to £20 billion). Given the UK’s previous position at the top of the G7 growth ranking, the FDI collapse and the currency devaluation-induced loss of consumer spending caused by the leave vote are the evident culprits. This also means that this underperformance is set to continue and compound by around £10 billion per annum as long as investor confidence and household incomes remain depressed, i.e. until at least 2021, the earliest possible year in which businesses and consumers can decide based on a ratified new UK-EU commercial relationship. Until then, a total of £50 billion of GDP (or £2,250 per household applying the Bank of England’s ratio) will have been lost. Taking back control? Of what?
As we know from the Government’s own impact assessment, a Canada-style FTA with the EU as well as various new trade deals with the most important non-EU countries will result in another 5% GDP shortfall (£100 billion in today’s money) over the following fifteen years.
Already today, in 2018, 40% (the UK’s average public sector share of GDP) of the £20 billion GDP lost would be sufficient to pay the UK’s real net EU contribution. In other words: a remain vote would have perpetually self-financed the UK’s EU membership fee after just two years. 2019 would have been the first year in which EU membership would produce a cash surplus, which would continue to grow thereafter.
Consequently, aborting Brexit would make the £40 billion earmarked for the divorce payment available for the NHS. Add to that the billions wasted on Brexit preparation, e.g. customs officers, lorry parks, IT systems, agency replication, the anyhow incapable Davis and Fox departments, not to forget the Boris jet and the Brexit yacht, etc., and you quickly have the £2,000 per household together requested by the Institute for Fiscal Studies and the Health Foundation to keep the NHS afloat. The healthier GDP in subsequent years would provide the basis for ongoing funding growth. The NHS problem would be solved not only financially, but also in terms of staffing, and no new taxes would be required.
* Arnold Kiel is a self-employed Management Consultant, father of two sons in British education, and very concerned about their future in this Europe
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32 Comments
“Taking back control”, was an emotional appeal, not a rational one. Hence, the inertia and the mess. I am still intrigued to know what the Tories actually plan to do. I am not sure ‘muddle’ will work for much longer. Brexit will be expensive.
But one of the key aims of the Brexiters is replace the NHS with a US style insurance – based scheme. To do that they need to convince a sufficient portion of the electorate that universal coverage is no longer affordable. For them the economic damage caused by Brexit is not a bug it’s a feature.
@andrew – can you share your evidence that “one of the key aims of the Brexiters is replace the NHS with a US style insurance – based scheme” please ?
Simon McGrath
You simply need to read Conservative Home and policy papers from the right wing think tanks and pressure groups.
The fall in inward investment will also have a compound effect on the loss of govn revenues and who knows which will be the first large foreign company to completely pull out of the UK. Financial services revenue will also do a disappearing act if no access to Europe. Never mind, though, we will all be able to buy cheap Asian mangoes that are absolutely delicious (except they will probably be sprayed with something carcinogenic to improve their longevity as they have to come a long way on the ship).
I assume the LibDem’s have a plan on how to fairly distribute the much reduced govn spending.
Amongst dispute about what is Brexit, it is clear from the campaign that money for the NHS was a prominent issue. The Party needs to be saying as loudly as it can and as often as it can that money needs to be delivered up front.
Andrew
Thanks -i had a quick look at Conservative Home and found a number of articles arguing for the NHS to be funded by tax increases but none suggesting a US style system. can you give us a link please ?
More likely social care and NHS will be merged, there are still plenty of large holes in the tax system that can be plugged without increasing the actual rates so staying within manifesto promises. Tories much more likely to take a chunk out of the welfare budget than commit political suicide of changing the basis of the NHS or increasing personal taxes.
Andrew Melmoth,
you are absolutely right. Leading Brexiters are not only Americanophile, they are outright trumpian. They have a (US)-Republican aganda to slash entitlements which will indeed become unaffordable once all industry is gone, and the resulting service-economy will provide less and less economically self-sufficient middle-class jobs. ID-checks at poll-booths are just one proven disenfranchisement-instrument they are keen to import.
The irony is not only that their vision is the polar opposite of the vain hopes of their deluded followers (that is why you won’t find this truth on Conservative Home). They also view the EU as a socialist club, just as Corbyn wants to leave because in his view it is a capitalist one.
This appears to be a similar argument to one recently expressed by Project Fear architect, Will Straw, to which Jonathan Portes, Professor of Economics at King’s College and Senior Fellow of UK in a Changing Europe, replied “I’m afraid this is nonsense. Confuses short-term (uncertainty, exchange rate) impacts with long-term (trade) ones. And short-term losses have been *much* less than forecast by (HM Treasury)”
Professor Portes is not a Brexiteer, but I imagine he is eager that those against Brexit argue their case factually.
Bill le Breton – It does sort of raise the long term point though doesn’t it? Irrespective of the EU the NHS’ long-term has to be more than a political slogan. The Coalition protected the NHS from fiscal consolidation with a ringfence (albeit with ‘efficiency savings’ being made) and the net effect was a service in crisis and deeper cuts elsewhere. The less kind comparison I heard when I worked in the NHS was that it was an exercise in pouring water onto sand. We saw with the 24/7 NHS mess that there are very real limits that we are probably near.
Indeed in many EU countries they do have insurance systems of some form. Including I understand most German Lander. What people think of that is another matter of course, but to simply reduce this to NHS vs US System is wholly disingenuous.
Now clearly this is a debate that won’t go down too well with a lot of people – we got a glimpse of the routine with social care reform at the election. But at some stage the NHS is going to have to be more than a political weapon of convenience and something that will need a serious, hard, think about the long-term. EU or not.
Anyway, I’ll take my abuse now.
Simon,
The Tories has a long history of wanting to privatise the NHS
Margaret Thatcher secretly pursued a plan which proposed ending the NHS, despite claiming the health service was “safe with us,” newly released Treasury documents have revealed.
https://www.politicshome.com/news/uk/political-parties/conservative-party/news/81146/margaret-thatcher-secretly-entertained-nhs
Gove is also one of a group of more than 20 Tory MPs and MEPs who are cited as supporters of Hannan’s views in another book, The Plan: Twelve Months to Renew Britain, published in December last year, in which Hannan and Tory MP Douglas Carswell describe the NHS as “the national sickness service”.
Both books call for the NHS to be replaced by a new system of health provision in which people would pay money into personal health accounts, which they could then use to shop around for care from public and private providers. Those who could not afford to save enough would be funded by the state.
https://www.theguardian.com/politics/2009/aug/16/tory-mps-back-nhs-dismantling
The Conservative manifesto also points to the prospect of legislative change and indicates that the provisions of the Health and Social Care Act – a highly unpopular piece of legislation among both campaigners and professional associations – may not be sacrosanct where they interfere with the implementation of STPs. This hints at the fact that much STP activity has occurred outside statutory provision and is an implicit acknowledgment by the Conservatives that Accountable Care Organisations (ACOs) offer a better route to commercialisation than a model based on a competitive provider market in a time of financial constraint. Anti-privatisation campaigners, aware that ACOs can be contracted out to non-public organisations and always suspicious of Conservative intentions, will take little comfort from this.
http://blogs.lse.ac.uk/politicsandpolicy/nhs-funding-and-the-general-election/
Arnold Kiel – ‘ID-checks at poll-booths are just one proven disenfranchisement-instrument they are keen to import.’
Many EU states have voter ID checks. Indeed a look at wikipedia confirms my understanding that several German lander have voter ID checks. When my wife first came to the UK she was staggered that there was no voter ID. Look, there are many, many arguments I will have with the right. Voter ID seriously isn’t one of them.
‘They also view the EU as a socialist club.’ If the last decade has provided proof of nothing else, I think it is fair to say that is has demonstrated that whatever the EU is, a socialist club it is not.
A full switch to classic social insurance is an unappealing answer. General taxation provides the widest possible tax base and is cheap to collect. Classic social insurance involves contributions from employees and employers, with some additional contribution from the state. But that has the effect of switching the whole cost of health (and of social care in a merged system) on to the working age population thus raising the cost of employment.
To get to a fully integrated health and care system requires a dose of realism. The costs cannot be loaded onto a younger generation already struggling with student loan repayments and unaffordable housing costs.
The problem of rent, the health needs of the older generation and social care needs to be borne across the generations with a sustainable system of income, wealth and land taxation that addresses inter-generational equity.
The responsibility for care of elderly parents lies first and foremost with the family unit. The states role is to enable the family unit to undetake that responsibility.
Joe B – ‘The problem of rent, the health needs of the older generation and social care needs to be borne across the generations with a sustainable system of income, wealth and land taxation that addresses inter-generational equity.’
Agree totally. But there is more chance of us driving for McLaren at the next Grand Prix than there is of that happening.
Bill le Breton,
on June 24, 2016, global currency markets agreed that the UK is worth 10% less than the day before. Strangely, no international currency-trader or property-investor jumped at this opportunity, because, quite rightly, no short-term rebound was expected. After the Government’s hard Brexit plans became clear, this evaluation was confirmed by the resulting severe, structural, and lasting trading disadvantages of leaving the customs union and the single market. HM Treasury’s estimate was based on assumptions concerning investor- and consumer-behaviour. They got everything right, except the timing of the latter. By now, they are spot on.
Little Jackie Paper,
irrespective of the healthcare financing system, the NHS is underfunded. I find JoeB’s arguments for tax funding compelling, but an insurance-system like Germany’s can also work (it spends a few more %-points of GDP, but I don’t believe that is primarily a system question). What I fail to imagine is a smooth system change; it would inevitably result in cost increases, service-level deterioration, and loss of cost control in a messy transition period in which insurance premiums are phased in and tax-allocations diverted. This process would last several Governments, be constantly politicised and happen without stringent accountability. I would not go there.
I am fine with voter ID-ing, if an ID for every eligible voter is compulsory and readily issued. The EU certainly is too socialist for Redwood, Hannan, Fox, Rees-Mogg et. al.
@JoeB
Personally I think that the solution to social care is very generously funded implementation of the Dilnot Commission – http://webarchive.nationalarchives.gov.uk/20130221121534/http://www.dilnotcommission.dh.gov.uk/our-report/
A cap of £35k on lifetime cost – the maximum someone would pay and a threshold of £100k in assets (house and savings etc) below which you would pay nothing – currently £23.5k
As examples – people’s potential liabilities
Below £100k in assets nothing
£125k in assets – £25k (currently £102.5k)
£135k in assets – £35k (currently £112.5k)
£300k in assets – £35k (currently £276.5k)
Paid for (in part?) by a 10% inheritance tax – so those with £300k in assets would be swapping a potentially liability of £276.5k for having to pay (for certain!) – £30k in inheritance tax.
If the Far Right and Far Left both hate the EU it is probably doing something right…
The geopolitical shift resulting from Brexit reflects a deep socio-economic fault line within the UK, and probably beyond it too. Brexit gave a public voice to class divisions that were deeply embedded but previously had either been ignored or hushed out of ‘respectable’ public debate.
Simply, figures such as mentioned in Arnold Kiel’s article or painted on the well known bus count for little because people have simply stopped believing them. We supposedly have a GDP some 250% greater than when Mrs Thatcher took over in 1979. And yet, for many life is considerably worse than it was. How do you explain that in figures?
Brexit is only a part of the general EU picture. There are problems everywhere and there’s a huge one brewing in Italy. Brexit reflects a history of dysfunctional economic policy in Europe that prioritised market competition in ways have ultimately undermined the ideal of European solidarity. The EU PTB have only themselves to blame for the mess that they themselves have created.
Peter Martin: It would be perfectly possible to have a higher GDP and for some people to be less well off if the others were much better off (at the expense of the less well off) as they so obviously are. You have to go to Africa and parts of Asia to see real absolute poverty compared to the relative poverty seen in Western European countries.
@Arnold,
“They also view the EU as a socialist club, just as Corbyn wants to leave because in his view it is a capitalist one.”
Neoliberal/Ordoliberal policies, practices and thinking dominate the European Commission, European Parliament, European Central Bank, and European Court of Justice. The EU constitution is the only one in the world that enshrines austerity economics into its text. Therefore the EU is not socialist. I’m sure hardly anyone on this blog thinks it is.
Jeremy Corbyn is right. It is a capitalist club. But so is the WTO. So is NATO. Probably the UN, too, is a capitalist club now. China and Russia have become just as capitalist as the rest of us. There is , however, no widespread movement for withdrawing from those organisations. That, in itself, isn’t sufficient reason for wanting out.
The question is whether it is a successful capitalist club and, if not, whether it is sufficiently democratic to allow the kinds of reform needed to make it successful. There are those, like Yanis Varoufakis, who argue that reforms are possible. But I have to say that is just wishful thinking on his part. The EU PTB are never going to allow YV and those who think like him anywhere near the centres of power.
Brexit isn’t even the EU’s biggest problem. It’s hardly a problem at all. If the Italian banks go belly up, then it’s ‘Goodnight Irene’ for the euro and possibly the EU too.
@Arnold,
“on June 24, 2016, global currency markets agreed that the UK is worth 10% less than the day before.”
Presumably you are saying this on the basis that the pound fell in value by 10% after the referendum result?
But it’s not as simple as that.
People in the UK have debts as well as assets so if we convert all debts denominated in pounds to US dollars those people are better off by around 10%. In US dollar terms. The Government has its debts largely denominated in pounds. So the Govt is better off! Those with shares did well too. Companies who have significant earnings in overseas currencies do better as result of a lower pound. Their shares rise in price as a consequence. Companies who are facing stiff foreign competition do better with a lower pound.
“The higher the better” is a peculiar British failing as regards the value of our currency. Other countries do take a different approach. Germany could have a currency which was significantly higher if it left the eurozone. Would Germany be worth 25% (or whatever) more if that were to happen? Even when Germany used the DM the Bundesbank used to create DM to feed German exporters and keep the DM lower than it would be otherwise on the forex markets.
Denmark pegs its currency to the euro at the rate of 7.45 kr = 1euro. If it removed the peg its currency would rise. So why don’t the Danes want Denmark to be worth more than it is? Of course the answer is that they want to be able to sell pork and bacon, amongst other things, into the UK cheaper than the competition.
The big EU exporters are in a bind. If the EU decides to punish the UK then we won’t be able to afford to buy so much. It’s that simple. We and the USA are the EU’s best customer. You won’t find another country which is prepared to run such as large trade imbalance as the UK. You may find another country who will take a 100 billion of exports from Germany but they will want 100 billion of exports into Germany too. They won’t be happy with less than half as much!
Peter Martin,
as usual, your comments are neither new nor relevant. It remains a simple arithmetic fact that remaining would have overcompensated for the EU net contribution and freed GBP 40 Billion for the NHS which will be wasted on a damaging and benefit-free separation.
I am somewhat concerned that anyone thinks that historically made predictions for the UK economy are now regarded as ‘arithmetic fact’ or any other similar phrase. Basing one ‘what if’ scenario against another, or against current events, when there are so many other variables, and also given the very poor record of so many economists in anticipating major changes in the UK and/or world economy is in the realms or soothsaying rather than economics.
@ Arnold,
As usual, your comments are based on an almost complete misunderstanding of macroeconomics. In this case, there is an added factor of simple speculation as Mark Seaman well explains.
Mark Seaman,
after June 2016, UK growth miraculously fell from top to bottom of the G7 and the pound lost 10%. The drop in real purchasing power can be arithmetically derived from wages and (largely imported) inflation, and every (foreign) investor will tell you that Brexit ended investment in manufacturing plant, property and equipment in the UK. These are hard verifiable facts, no soothsaying. Are you seriously suggesting this would have happened anyhow, or for unrelated reasons?
No insult intended, but your wholesale rejection of expertise in the BoE or the OBR (or any other reputable data-processing institution), and of all economic analysis and forecasting with it, suggests you are a leaver. There is no other way to uphold this groundless obsession.
What appalls me most is that leavers not only reject any kind of analytic approach to validate their preference, they did not even develop a testable hypothesis to, at least in theory, explain why their preference is in any way beneficial. They never engage in a discussion based on facts, but reject facts and analysis outright. Trumpian indeed.
frankie 28th May ’18 – 4:51pm….
frankie, NHS privatisation is nothing to do with Brexit and everything to do with Tory ideology; the ideology that says, “if you can’t make a profit from it, it’s bad”.
Jeremy Hunt is, perhaps, the most pro-EU Tory minister and yet it was he who co-authored a study on why the NHS should be replaced by an insurance system.
@Arnold Kiel,
“They [leavers -PM] never engage in a discussion based on facts, but reject facts and analysis outright.”
This is a bit rich coming from you! Whenever I try to explain to you the contradictions of the economics of the EU and eurozone, and why the euro is a fundamentally flawed concept, you don’t bother to engage in any meaningful discussion or offer any alternative analysis. It’s either “nothing new” or “irrelevant” or whatever.
It’s like trying to explain that the Earth is not the centre of the universe to those who are determined that it should be on religious grounds.
Peter Martin
The reason so many of the debates in which you engage turn into dialogues of the deaf is not because your opponents are determined to blind themselves to the ineluctable logic of your position. It’s because there are massive holes of logic in your arguments of which you appear to be completely innocent. You attempt to turn every Brexit debate away from the question a) is it in the UK’s interests to leave the single market? towards the question b) – Is the Euro a flawed project? You appear to think affirming B necessarily leads to affirming A and this is so obvious that it requires no argument. But it does need an argument because it doesn’t follow at all. It is quite possible that the euro is flawed but that leaving the single market will hugely damage the UK economically. In fact it’s not just possible it’s where the weight of economic opinion lies.
Next time rather than just riding your hobbyhorses how about addressing yourself to the actual question?
@ Andrew,
I’m not sure I know what the question on this thread actually is.
But the point of it does seem to be about turning around the “taking back control” slogan and using it in the Remain cause. That’s fair enough. I’d say the best way to do that would be for the EU to get its act together, stop subverting democracy in Italy (and elsewhere) and produce an EU which is genuinely popular instead of leaving the “populists” to knock the EU.
As it is, the EU is failing miserably. It will inevitably self destruct if it doesn’t change its ways. I’ve never quite understood the phrase “rats leaving a sinking ship”. If the ship is sinking then anyone with any sense would would want to leave too.
Thank you Andrew, especially since my capacity for politeness is exhausted. Now to the “subverted Italian democracy”… and the “genuinely popular” (of course not “populist”) promise of spending OPM on a flat tax and UBI…, and rats. Sorry, but I am giving up.
@ Arnold,
You can be as polite, or otherwise, as you feel the need to be. If you, or anyone else, feels I’m lacking any politeness, please feel free to admonish me in a suitable way.
I’m sure we’ve all noticed this word “populism” creep into our general lexicon recently. Usually with a measure of distaste. What does the Oxford Dictionary have to say about the word? It is:
A political approach that strives to appeal to ordinary people who feel that their concerns are disregarded by established elite groups.
So are extreme EU-ophiles guilty of disregarding popular opinion? That wouldn’t be on everything BTW. There’s no popular push for a UBI or flat tax. So what is wrong with the concerns of ordinary people? The purpose of democracy is to make sure everyone has an input. Or is it? What’s wrong with a bit of populism from time to time?