Boris Johnson’s claims of a “Brexit dividend” have been ridiculed by economists as the Governor of the Bank of England let slip that voting to quit the EU has already cost the UK £200m a week in lost growth.
The Foreign Secretary’s infamous claim that Brexit would return £350m a week from Brussels faced yet more humiliation after Mark Carney told a private gathering in Davos that the country had forefeited £10bn in GDP since the 2016 referendum.
Asked to measure in “Brexit buses” the economic impact of the vote, Carney told businessmen in the Swiss resort that the hit to growth was between two-thirds and three-quarters of the sum emblazoned on the Vote Leave battlebus, the Times reported.
The Bank has been careful not to publicly quantify the effect of the referendum, but Carney’s words echoed those in a new report by the Institute for Fiscal Studies (IFS), whose chief declared bluntly yesterday “the Brexit dividend does not exist”.
Labour MP Wes Streeting, leading supporter of the Open Britain campaign, said: “These comments by the Governor of the Bank of England reveal the truth: there is no Brexit dividend, only a Brexit deficit. The lies of Brexit charlatans like Boris Johnson are being exposed by the day.”
Boris Johnson had told allies earlier this week that he wanted to use the new funds coming back from Brussels to pump an extra £100m a week into the health service.
But IFS director Paul Johnson said: “In fact we would need to spend £1bn a year more just to compensate NHS staff for the higher prices already seen since the referendum”.
And a new analysis by the IFS found that lower economic growth after Brexit would be “likely to mean less money for public services, including the NHS”.
It states that while £8bn in EU net contributions and spending will be released by quitting the block, a reduction in GDP of just 1% “translates to a fall in tax revenue of more than £8bn”.
And the IFS cites official Office for Budget Responsibility figures implying the hit to public finances of Brexit will be “about £15bn per year by the early 2020s, about 10% of the NHS budget, more than outweighing the UK’s net contribution to the EU.”
New piece on the NHS Brexit dividend. It does not exist. In fact we would need to spend £1bn a year more just to compensate NHS staff for the higher prices already seen since the referendum. https://t.co/s3vPihypfNpic.twitter.com/1BNiqEAUJ1
January 24, 2018
“In other words, so far the implication is that Brexit has reduced rather than increased the funds available for the NSH (and other public services), both in the short and long term.”
Carney’s £200 million figure is not directly comparable to the Leave campaign’s £350 million because the former refers to lost growth while the latter was money available for government spending.
The £10 billion of lost growth equates to 0.5 per cent of GDP, but critics point out that the figures are likely to get worse after Brexit actually kicks in from 2019, with the real impact likely after a transition period ends in 2021.
The Carney breakfast was hosted by KPMG and Bill Michael, its UK chairman said afterwards: “The UK economy is underperforming. There is ample evidence we risk becoming decoupled from the rest of the world.
“The UK CEOs we’re talking to in Davos are very concerned. They want to be part of the actions that will address this. We can’t risk Brexit widening that growth gap.”
Robert Chote, the chair of the Office for Budget Responsibility, told the New Statesman on Thursday that the UK was “weak and stable”. He also reiterated the OBR calculation from the time of the Autumn Statement that there is a 50/50 chance of another recession over the next five years.