Net Figures, Gross Deception – Why there is no big Brexit bonus for public services

Emblazoned across posters, leaflets and big red buses, the Vote Leave campaign stated in stark terms that membership of the EU cost UK taxpayers £350 million per week. It was a figure repeatedly challenged by the Remain campaign and by fact-checking organisations who pointed out that it ignored the automatic deduction of a rebate before any contributions are made to the EU budget. It wasn’t even the case that money was ‘sent’ and then a proportion ‘returned’: it was never sent in the first place.

Actual contributions vary between years depending on changes in Gross National Income, but with the application of the rebate, in 2014 the weekly contribution was more like £282 million or 14.7 billion for the year. The £350 million figure also failed to account for the money transferred back to the UK public sector under a range of EU programmes. Once these are taken into account the Office for National Statistics calculated the UK’s net contribution in 2014 at £190 million a week or £9.9 billion for the year.

But whether the figure was £350 million or some other figure probably wasn’t relevant. The point was that voters either couldn’t see or didn’t value what they got for their money, underlining what has sometimes been seen as a ‘transactionalist’ approach to EU membership rather than a more value-driven concept of membership. Voters were, however, clearer that the UK had experienced a post-financial crisis period of austerity and budget cuts. EU contributions were being made as domestic spending was being squeezed. If we are to understand what taking back control over money might mean, answers lie in the different features of EU and domestic public spending and the relationship between the two.

For the EU 2016 budget, annual spending commitments on all EU policies amounted to €155 billion. By comparison, UK government spending in 2016-17 was expected to be £772 billion, with spending on health alone (£145 billion) amounting to more than the total annual EU budget. These figures tell us something important about the differences between EU and domestic public spending. The main items of domestic expenditure reflect the primary role of the nation state in redistributive policies and the provision of public goods. It is precisely in the areas of welfare, health and education that the EU plays a limited role. The EU itself does not provide these public goods and services.

Instead, EU spending focuses on a set of policy initiatives that reflect the specific tasks and competences of the EU as well as priorities set by EU leaders. For 2016, the EU annual budget set out principal headings for expenditure: €19 billion allocated to supporting growth, jobs and competitiveness, including €9.5 billion for Horizon 2020, the EU’s strategy to support research and innovation; €50 billion for territorial cohesion (tackling economic disparities between different parts of the EU); and €42 billion supporting farmers under the Common Agricultural Policy. The EU budget is, of course, partly spent in the UK. The most significant funds for UK purposes are the ‘European Regional Development Fund’ (‘ERDF’) which supports disadvantaged regions and the ‘European Social Fund’ (‘ESF’) which promotes skills and training to support labour market participation. For 2014-2020, the UK is allocated €17.2 billion. The European Agricultural Guarantee Fund is the principal source of direct payment to farmers under the Common Agricultural Policy. The allocation to the UK for 2014-20 is €22.5 billion.

Once it is recognised that sums of money flow back to the UK from the EU budget, it becomes even more apparent that there never could have been a £350 million a week Brexit bonus for the UK to spend on the NHS. The only way of getting close even to the figure of £282 million that took the rebate into account would be to cut to zero all the expenditure on things like research, regional policy and support for farmers that currently comes back to the UK out of the EU budget.

But beyond the narrow narratives of the referendum campaign, the wider context for concerns about control over money were to be found in the post-crisis politics of austerity. For voters who had felt the effects of a shrinking public sector both in terms of employment and the provision of public services, rejection of EU membership was an opportunity to challenge ideas that the economy was either simply a product of market forces or the object of a type of post-political technocratic managerialism that seemed to characterise the European response to the financial crisis of a decade ago. That a Conservative Government was backing EU membership while pursuing policies of austerity that were, in any event, consistent with the prevailing European preference for fiscal discipline, created a focal point for political resistance, not least for traditional Labour voters. Viewed in this way, we can also see more clearly why the idea of diverting resources from the EU to public spending on the NHS might have resonated strongly with voters.

* * * * *

A year on from the referendum and the figures for the year in which the referendum was held show that the UK’s net contribution to the EU was £156 million a week. Meanwhile it is also reported that the UK may have outstanding liabilities to the EU of £36 billion that will need to be settled as part of the UK’s withdrawal from the EU. New money will be spent after Brexit but it will be on putting in place new IT systems for customs and immigration and on creating new regulatory structures needed to make markets operate after Brexit. There will be no Brexit social dividend for public services. And the NHS will not get £350 million a week of new spending.

Adapted from Chapter 7 ‘Control over Money’ in Brexit Time – Leaving the EU: Why, How and When? which is out now.

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