Boris is right. Brexit does mean taking full control of £350 million a week, says top economist
A top economist has backed Boris Johnson in his exchange with Sir David Norgrove over how much money the UK will be able to take back control of upon leaving the EU.
Professor David Paton, Chair of Industrial Economics at Nottingham University Business School and a member of Economists for Free Trade, says that the Chair of the UK Statistics Authority’s letter attacking the Foreign Secretary “is simply wrong” and “will need to be retracted”.
Sir David Norgrove accused Boris Johnson of using the £350 million per week figure in connection with “the amount that might be available for extra public spending”, which is factually wrong. Professor Paton points out that Mr Johnson actually said that £350 million was the amount over which we would take back control and this statement is accurate.
Professor Paton explained that the average annual payment, before the rebate’s deduction, to the EU from the period 2015-2017 “is just over £18 billion per year, which indeed works out to about £350 million per week.”
Furthermore, by the time the UK formally leaves the EU in 2019, “the gross payment is expected to rise to £19.5 billion – £375 million per week” before the rebate’s deduction. On this basis, Professor Paton argues that “the £350m figure is actually an underestimate of our gross payments when we leave.”
Professor Paton also maintains that it is absolutely reasonable to refer to the gross payment to the EU before the rebate’s deduction.
He argues that “the rebate is constantly under threat and there is no guarantee that it will continue”.
Professor David Paton’s full piece
Sir David Norgrove of the UK Statistics Authority has written to Boris Johnson to accuse him of misusing official statistics by repeating “the figure of £350 million per week in connection with the amount that might be available for extra public spending.” Sir David goes on to say that the Foreign Secretary “assumes that payments currently made to the UK by the EU will not be paid by the UK Government when we leave.”
The only trouble is that Boris Johnson did no such thing. In his recent Telegraph article he states “… we will take back control of roughly £350 million per week. It would be a fine thing … if a lot of that money went on the NHS” (my emphasis). Quite unambiguously he is referring to our gross payments to the EU over which we will regain control – there is no reference to “extra money” and no assumption that the UK will not continue with payments currently made by the EU. Given that there will be significant net savings, it would be quite possible to continue all payments and still give “a lot” of our gross payment to the NHS.
Sir David’s letter is simply wrong and presumably will need to be retracted.
Putting the letter to one side, it is interesting that Boris Johnson has revived the £350 million per week figure since, for many Remainers, it is an article of faith that the figure was a lie. So now seems a good moment to reconsider whether or not the £350 million per week figure can be defended even in terms of the gross payments to the EU.
One difficulty in evaluating the claims is that the money we send the EU and the rebate we get back varies from year to year, depending on, the size of our economy, money we get in customs duties and how much VAT is collected. Fortunately, a recent House of Commons Briefing Paper by Matthew Keep provides a very clear analysis of the money we currently send to the EU and the likely payments over the next few years were we to stay in the EU. The Briefing Paper helpfully lists for each of the next few years the gross payment, the post-rebate payment and also the net payment taking into account payments made by the EU back to the UK Government.
If we look at the gross payment to the EU before the rebate, the average for 2015-2017 is just over £18 billion per year which indeed works out to about £350 million per week. If we take off the rebate, the average payment becomes £13.5 billion per year – £260 million per week.
Now which figure is more reasonable? In fact, an argument can be made for either. On the one hand, the UK Government does currently have control of the rebate. On the other hand, the rebate is constantly under threat and there is no guarantee that it will continue – Tony Blair’s Government voluntarily agreed to reduce the rebate and there would be nothing to stop future Governments doing something similar.
On balance, my preference has always been to focus on the post-rebate figure but, yes, there is indeed a case for quoting the £350 million per week figure instead.
A further point is that Boris Johnson refers to the time when we have “settled our accounts”. So really, we should talk about what our payments will be at the time we leave the EU, i.e. 2019 or after. By then the gross payment is expected to rise to £19.5 billion – £375 million per week – or, after the rebate, £15.3 billion – just under £300 million per week. So the £350m figure is actually an underestimate of our gross payments when we leave.
Although it is perfectly fair to discuss the amount of money over which we will regain control after Brexit, we might also be interested in talking about the net payment, i.e. taking account of money the UK Government gets back from the EU, mainly for the Common Agricultural Policy and regional development.
Once we are out of the EU, we will have control over this money and we may decide we want to shift some or all of it towards other priorities such as the NHS. However, if we take as a starting point that we continue to spend the same amount on these things, as we do now, the House of Commons Briefing paper concludes that the net payment to the EU when we leave will be a little under £11 billion per year – about £200 million per week.
A further complication is that the net payment excludes money which goes from the EU to non-Governmental bodies, most notably under the Horizon and Erasmus programmes. The IFS calculates that the UK receives between £1 to £1.5 billion per year for such projects. Taking the higher figure and again assuming we might want to continue funding at the same level, the effective net payment when we leave the EU would be about £9 billion per year or £170 million per week.
So let’s summarise where we are. If we want to talk about the money over which we will have control when we leave the EU, it is reasonable to use either the gross figure of £375 million per week or the post-rebate sum of just under £300 million per week.
If we want to be more cautious and assume that we will continue to fund all projects currently funded by the EU, we would still have an additional mount of at least £170 million per week.
Almost certainly, over time, we will want to re-direct much of current EU spending to priorities which better match UK voters. There will always be many competing priorities for this extra money including schools, social care, policy, defence, tax cuts and debt repayments, but arguing that Brexit can lead to significant extra spending for the NHS is sensible and evidence-based.
Professor David Paton is Chair of Industrial Economics at Nottingham University Business School and a member of Economists for Free Trade