BoJo still doesn't get it. He is now demanding that Mrs May commits to spending what he calls the "Brexit dividend" of £5.2 billion on the NHS (HERE). I should point out that this is £100 million a week, a bit short of the £350 million painted on the red bus. However, this isn't really important because there's not going to be a dividend at all.
The economy has already slowed down. It looks like we'll reach growth of about 1.7% or 1.8% at best. Before the vote we were stroking along at 2.4-2.5% and expected to carry on at the same rate or even more, especially as the Euro zone and the global economy is starting to grow quite quickly. This means we are losing about 0.7% annually. Most economists think this is wholly down to Brexit.
The UK economy has a GDP of about £2 trillion. It does not take a genius to see that 0.7% equals about £14 billion of lost output this year alone, before we have even left.
The government raises about 35% of GDP through taxation (it spends rather more than this and has to borrow a bit more to make ends meet) and therefore you can see that we have LOST £5 billion already.
The OBR's figures released last November shows an economy that will be smaller by about £72 billion a year by 2021 compared to what it was expected to be at the time of the referendum. Using the same 35% it can be calculated that the treasury will be about £25 billion short by the time we leave. Assuming a future PM decides to honour the NHS pledge and give £350 million a week to the NHS (£19 billion a year), the treasury will need to raise taxation by around £44 billion a year.
Bear in mind that corporation tax for example raised about £42 billion in 2016-17. See the problem?
BoJo is talking about the "Brexit dividend", but this week, Oxford Economics released a report purporting to show we will be £125 billion worse off by 2020 if we fail to secure a trade deal and the BBC tell us this morning the NHS is "haemorrhaging" nurses at the rate of 3000 a year. What does this tell us? Let me say I don't necessarily believe the £125 billion or even that we might leave without a trade deal, but I do think the economy will be significantly smaller in 2021 that was thought.
BoJo's Brexit dividend is a pipe dream, an illusion, albeit a persistent and attractive one. The haemorrhage of nurses will initially strengthen the Brexiteers, they will point to the pressing need for more money to be spent on health. And this will receive support from those leave voters who cling to the idea that the EU has been holding us back.
But they will be told to wait until we have left before the "dividend" can be spent. This will be 2021-22 at the earliest. So, BoJo and his extremists mates are going to have to keep going with the mantra about jam tomorrow for the NHS. But if Oxford Economics is right (together I must say with the OBR and the great majority of economists) when 2021 comes around there won't be any jam in the cupboard, in fact we may be lucky to have a cupboard at all, or even a kitchen.
What is BoJo going to say then?
