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So, there's been some disagreement recently on a proposed increase in funding for the British National Health Service. The government has declared that this money would come from a "Brexit dividend" before later admitting that most of it would come from an increase in taxes.

This is similar in content, but not in scale, to the infamous bus which declared that:

"We send the EU £350 million a week, let's fund our NHS instead."

There seems to be a lot of mixed information around this issue lately so needless to say I'm confused and uncertain.

  • What, exactly, is a "Brexit dividend"?
  • What is likely to define the size of it?
  • Isn't there a so-called "divorce bill" which will mean Brexit is a net loss to the country?
AJFaraday
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    It’s the same as the bus thing. – chirlu Jun 21 '18 at 09:25
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    @chirlu or "we (the government) don't think we can win elections again if we don't follow through on the implied promise on that bus" – Caleth Jun 21 '18 at 11:21
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    The 350 million Pounds figure was a (blatant) lie. Sorry for the source in German. In fact, as it is the case with all propaganda, there is a grain of truth hidden. In order to reach the 350 m figure, you need to ignore all the money the UK receives from the EU. – Dohn Joe Jun 21 '18 at 12:01
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    @Dohn Joe, it's not even that, it's simply that £350m is not sent: the so-called rebate is applied before any money is 'sent'. The higher figure was deliberately chosen to cause controversy to keep the idea that we send the EU a lot of money in people's minds. – Lag Jun 22 '18 at 08:29

1 Answers1

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The "Brexit Dividend" is the money the UK will save from not being part of the EU. As per the question, it is exactly the same as the £350m a week claim, in that it represents money the UK used to pass to the EU and will no longer have to. £350m * 52 = £18.2bn so the numbers are pretty similar.

The problem, as pointed out about the red bus, is that it doesn't exist. The numbers are wrong to start with, not taking into account rebates or a host of "shared services" such as Euratom, European arrest warrant, lower customs requirements or an endless list of other things.

The Fact Check here hedges a little. In that if it does exist, no one can say how big it is. It would all depend on post-brexit agreements around liabilities payments and market access etc.

Some sources go a bit further, The Financial Times for example calling it a myth. The BBC, much like Fact Check says from a pure accounting point of view there may be a Brexit Dividend, but that it won't be enough to cover the £20bn pledged and that accounting benefit ignores any economic impact (i.e. lower tax returns if exporters lose access to EU markets) of Brexit. It's also not clear if the beneficial figure in the BBC article include the cost of replicating any European Agencies that the UK leaves (like Euratom).

chirlu
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Jontia
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    While the case can be made that the Brexit Dividend is small, I think it is a massive stretch to say that it doesn't actually exist. It seems nigh on impossible that all 28 countries that pay into the pot all receive the exact same amount back. In fact, a large principle of the EU is to redistribute money from the richer countries to the poorer ones. If nothing else, the money that was previously spent paying for MEP salaries is the Brexit Dividend. – Matt Jun 21 '18 at 16:52
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    @Matt The UK is or was a net contributor to the EU. Which is where what the BBC article calls the Accounting Dividend comes from. Unfortunately given the other associated costs of leaving from the liabilities payment to agency costs and so on nil is much more likely to be accurate than £20bn. It is certainly a more honest estimate. But you can certainly add the £8m per annum UK MEP salary bill to the dividend if you wish. I make that around 0.04% of the promised sum. I will leave you to find the rest. – Jontia Jun 21 '18 at 17:31
  • @Matt "cost vs revenue" is not a closed sum when it comes to national budgets. Countries do have growth and one could argue that GDP growth inside the EU is superior to outside (source needed). This is even true for the entire planet since world GDP keeps rising. The biggest issue, however, is the single market. If you build a company in the UK you don't want your list of potential clients to be just the 70M UK citizens, you wan't the full 500M EU market. Only that allows you the scalability that otherwise would only be available in other domestic economics such as China or US. – armatita Jun 22 '18 at 08:14
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    @Matt If you save 100 units of money while having to spend 150 units of money to replicate all the services you lost access to are those 100 still a dividend? – Voo Jun 22 '18 at 08:32
  • @Jonita great, so we have now agreed that there is money that is lost, one way or another, to the EU. So, now for your main point that it will be expensive to leave, I think we agree here too. But the one time cost of leaving per annum will be less than the cost of paying for full membership to the EU. Going forwards, either the UK and EU will accept a trade deal, possibly with a yearly fee (still less than membership), or the UK will have no deal and be free from "liabilities payment". Either option means money left over per year i.e. a dividend – Matt Jun 22 '18 at 09:19
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    @armatita the size of the single market you are in doesn't dictate a country's economic success. Italy has the EU as a market but hasn't grown for almost 20 years. Japan, Australia and Canada exist as independent political entities yet they both trade with the whole world and are immensely successful economies. – Matt Jun 22 '18 at 09:22
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    @Voo I don't see how your calculation there is useful? We can easily reverse those numbers, if it only costs an independent country 80 units to replicate the services, then there will be 20 fewer units required. – Matt Jun 22 '18 at 09:25
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    @Matt Indeed. The point is that in your original post the computation was flawed because you only considered the amount of money sent to the EU, but not what you get back from it. Your point as stated was "We send money to the EU so clearly we lose money, even if it's just a little bit", that little thought experiment shows you that this is too simplified. Even if everyone paid into an organisation and there was no money back at all, everybody could still easily profit from it. Now what those numbers actually are is more complex and we don't have much information about it. – Voo Jun 22 '18 at 09:38
  • @Matt Neither did I say it would. And Italy is far from a good example. Italy was an industrial giant that suddenly saw itself directly competing with other emerging industry oriented economies such as China. It has been having a lot of difficulty into adapting to a new reality but I don't see how that relates to the "hypothesis" that being in a larger economy is beneficial for one's own domestic economy. The great majority of large companies come from countries with a lot of people. The effect might not be provable but it's certainly very strongly correlated. – armatita Jun 22 '18 at 09:48
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    @Matt and others: a simple analogy for the “net contributor” argument. At work, there’s a coffee club; we each pay in £10 per week, and that buys enough coffee+milk for us each to have 2 coffees a day. In fact I only have one coffee a day, so I’m subsidising the cost of other members. But if I leave the club and buy my coffee from the café next door at £3 per coffee, I’d end up spending £15 a week! So within the club, I’m a net contributor; but if I leave the club, I don’t get any “dividend” — I lose money instead. – Peter LeFanu Lumsdaine Jun 22 '18 at 09:54
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    @Voo but your assumption again there is that being in the EU is more profitable than being out of the EU. Neither of us can claim to know the answer to that. My point simply is that the money we pay to the EU will no longer have to be paid to the EU. We do not directly receive more back from the EU than we give, so there will be more money left i.e. a dividend. The greater benefits of EU membership remain to be seen but that is a separate issue. – Matt Jun 22 '18 at 10:04
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    @PeterLeFanuLumsdaine That works great as long as you still want coffee, not if you want tea – Matt Jun 22 '18 at 10:05
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    @Matt: Sure! I’m not saying there may not be other advantages, like choosing a different drink. I just meant to show how one can be a net contributor to a club, and yet still leaving the club can cost rather than gain you money, once you allow for replacing the benefits you were getting from it (whether with the same services or an alternative). – Peter LeFanu Lumsdaine Jun 22 '18 at 10:15
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    That fullfact.org article is terrible. How can they present unknown parameters and economic forecasts as fact? The fact is that the UK pays more into the EU that it gets out. After brexit, the UK has control of that money. Whether it's spent on the NHS, a divorce bill or proping up a failing ecomony, it's still real. – Richard Jun 22 '18 at 10:37
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    @Matt I made no such assumption at all, because it's pretty complicated to figure out the cost and benefits. I'm simply explaining to you that "We pay money into organisation X and get less direct money from the organisation, ergo we lose money" is naive. Peter's explanation is much better though, well done. – Voo Jun 22 '18 at 10:47
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    @Richard the problem is that the £350m a week and £20bn dividend are presented as facts. Your arguments against the fullfact.org article are equally valid against those other figures. Leaving aside the fact that they are artificially inflated (i.e. wrong) in the first place as they ignored the rebate. The total amounts plus and minus are unknowable at least until the agreements are signed and probably not for long after that. That being the case it is irresponsible of the UK government to claim a figure and then spend it with no justification beyond "more in than out". – Jontia Jun 22 '18 at 11:35
  • It is potty things like trademarking feta cheese and insisting it is upheld in international trade negotiations that mean the EU should go. Feta is feta no matter where it is made – Willtech Jun 22 '18 at 12:36
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    @Willtech: Producers of Stilton cheese or Welsh Lamb disagree. :-) https://www.bbc.com/news/uk-england-36624655 – chirlu Jun 22 '18 at 13:41
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    @chirlu Yes, there are, as almost always, valid points on both sides of the fence. Australia has been producing feta cheese for many years and does so so well that even Greece actually imports it to be repackaged and sold locally. We all know it as feta cheese and having to re-name it suddenly is confusing and pointless. It is not as if it was an idea had just last week by some fairy to compete in the feta market. I would argue that geographic identity of feta was lost long ago. – Willtech Jun 22 '18 at 21:06
  • @chirlu I would argue that the protection should be given the other way over. Grant Greek feta 'genuine' status so that it can be sold as 'Genuine Greek Feta'. 'Genuine Cumberland Sausages' only come from Cumberland. Australia might later be able to market 'Genuine Australian Feta' or, at least 'Australian Feta'. – Willtech Jun 22 '18 at 21:17