I’m a mathematician by training, and work professionally with numbers. And, because I find testing arithmetic projections entertaining, I thought that I might play with the proposed “£20 billion for the NHS”. See what you think.
Firstly, I should note that that £20 billion isn’t for you, Scotland, Wales and Northern Ireland, although the Barnett Formula might mean that there is more money available for you too.
I’ll assume that the BBC’s figure of £114 billion for NHS England’s budget is accurate, and note that the Office for Budget Responsibility is predicting that inflation will be fairly constant at 2% per annum over the next four years.
Over five years, in order to keep pace with inflation therefore, the budget will need to increase by about 10.4%, or £11.9 billion. Now, we are told that, of the £20 billion, £9 billion will come from the “Brexit dividend”, with the remainder – £11 billion – coming from tax rises and additional borrowing.
It looks to me, therefore, that all of the real terms growth is dependent on the existence of a “Brexit dividend” and that all of any such dividend will be spent on the NHS. Given that some of it will need to be spent on creating British equivalents of various European regulatory bodies, and additional staff in areas of government such as HM Revenue & Customs, where between 3,000 and 5,000 extra staff, and a new Customs system are required, according to its Chief Executive, Jon Thompson, that does seem to be, how can I put it, optimistic.
It seems even more optimistic when you take into account the Government’s own predictions about the impact of Brexit on the UK economy, which suggest a shrunken tax base over the next five years.
In other words, the Government is proposing to borrow and tax more simply to keep pace with inflation, and any real terms growth will depend entirely on the achievement of a profit from leaving the European Union that has been described by the likes of Paul Johnson at the Institute of Fiscal Studies thus;
Paul Johnson✔@PJTheEconomist
Extra NHS funding at 3.4% p.a. means rises over next 5 years higher than over last 8, but still below long run average.
Extra £20bn means higher borrowing or higher taxes. Former incompatible with manifesto commitment.
Means health spending accelerating as % of total spending pic.twitter.com/yjJsjV03Uv
Paul Johnson✔@PJTheEconomistExtra spending can’t be funded by Brexit dividend.
1) Govt has accepted Brexit will *weaken* public finances by £15bn pa
2) Financial settlement with EU plus commitments to replace EU funding already uses up all of our EU contributions in 2022
There is no Brexit dividend
If he’s right, and he has a pretty good reputation, there is no money for the real terms growth element, and the Government needs to find another £15 billion, presumably in extra tax rises and borrowing, to plug the gap in the public finances, or cut a whole bunch more stuff.
There is no doubt that this is very good politics in the short term, as it places a burden on those seeking to remain in the United Kingdom to explain why they are trying to deny the NHS all of this money. In the long term, though, either the Government are going to have to get a very good deal, better than even their projections envisage, or hope that they’ll have someone else to blame when the money doesn’t materialise.
And they might just get lucky…
* Mark Valladares is the Monday Editor of Liberal Democrat Voice.
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