Blow for Theresa May as Government watchdog rejects claim ‘Brexit dividend’ will pay for NHS boost

Posted On: 
17th July 2018

The Government’s official spending watchdog has become the latest body to reject ministers’ claims that a “Brexit dividend” will help fund a huge funding boost for the NHS.

Theresa May unveiled plans for a major NHS funding boost last month
PA Images

Theresa May has announced plans to increase the health service budget by £20bn, and said some of the cash will come from the money the UK will stop sending to Brussels after Brexit.

At the time, she said: "Some of the extra funding I am promising will come from using the money we will no longer spend on our annual membership subscription to the European Union after we have left.

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"But the commitment I am making goes beyond that Brexit dividend because the scale of our ambition for our NHS is greater still. So, across the nation, taxpayers will have to contribute a bit more in a fair and balanced way to support the NHS we all use."

In a blow for the Prime Minister, a report by the Office for Budget Responsibility - which was set up under David Cameron to offer independent forecasts - said "Brexit is more likely to weaken than strengthen the public finances overall".

The devastating findings came as the OBR forecast that the outlook for the UK's public finances is "less favourable" than last year.

In their latest Fiscal Sustainability Report (FSR), they said: "The Government has indicated that it will fund at least some of the health package by increasing taxes and/or reducing other spending, but in the absence of firm detail we cannot include this in our projections..

"It has also said that the announcement will be funded in part by a ‘Brexit dividend’, although our provisional analysis suggests Brexit is more likely to weaken than strengthen the public finances overall.

"There will be direct savings from the net contributions to the EU budget that the UK will no longer have to make, but it is unclear how much will be available after payments towards the agreed withdrawal settlement and other Brexit-related spending commitments."

The OBR forecast in March that the UK, were it still in the EU, would pay £13.3bn into the EU in 2022-23.

However it says despite the saving from Brexit, “£7.5bn will be absorbed by the withdrawal settlement payment expected for that year, leaving £5.8bn to be spent on other things".

The report adds: “In principle this could cover slightly less than 30 per cent of the cost of health package in that year, but this does not take into account other calls on these potential savings, including commitments the Government has already made on farm support, structural funds, science and access to regulatory bodies.

“Pending a detailed withdrawal agreement and associated spending decisions, we assume in this report that the extra health spending adds to total spending and borrowing rather than being absorbed in whole or part elsewhere."