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Analysis

Dear Theresa, money doesn’t grow on trees

by Hugo Dixon | 14.02.2019

The prime minister is promising a non-existent Brexit dividend to bribe Labour MPs to back her miserable deal. This is populism from the Boris Johnson playbook.

We certainly need to heal our divided country. And a big part of the answer is to invest in parts of the country that have been neglected for decades. We need a “Jumpstart Fund” so these communities can reinvigorate themselves. But if we quit the EU and damage the country, there won’t be the cash for Theresa May’s plan.

Conservatives used to boast that they were the party of sound money. If they splurge out non-existent cash to bribe Labour MPs, they will either have to put up taxes or increase public borrowing or make cuts elsewhere.

No wonder Philip Hammond is resisting the prime minister’s demand that he find money for her bung. The chancellor doesn’t want to announce any plan before his spring statement on March 13, according to The Times. It’s not clear where he’ll find the money given that the economy is already suffering and Brexit hasn’t even happened.

If May manages to magic up cash for her “pork barrel Brexit”, the opposition should be wary. Any money will be at best a short-term sticking plaster for their constituencies. It won’t be sustainable unless we have a healthy economy.

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Although no numbers have been publicly discussed, the £1 billion that May gave Northern Ireland to bribe 10 DUP MPs to support her government is a precedent, albeit a shameful one. If she put cash into 20 Labour constituencies at the same rate, the total bill would be £2 billion.

Contrast this with what would be possible if we stay in the EU. The economy will be bigger and the public finances will be healthier. Indeed, the long run fiscal impact compared to the government’s deal will be 1.8% of GDP, according to the Institute for Fiscal Studies. In today’s money, that is £36 billion.

What’s more, cancelling Brexit would create a sustainable boost to public finances. On these numbers, there would be an extra £36 billion every year – not just once.

The money could be used to invest in communities with proud heritages which have been blighted by deindustrialisation. There would also be enough to help repair the crumbling NHS and integrate migrants better. CommonGround has produced a report, which I co-authored, setting out how this could work.

During the 2017 election, the Tories criticised Jeremy Corbyn for believing money would grow on a magic tree even if he clobbered the rich and companies with higher taxes. The prime minister is guilty of believing in her own Brexit money tree.

Edited by Luke Lythgoe

2 Responses to “Dear Theresa, money doesn’t grow on trees”

  • Withdraw A50 immediately. It is the most expedient and least costly way out of this mess we are in. We would not lose our right to leave the EU at a later date should we choose to do so. When we have a plan and are better prepared for the consequences, but not now.

    How can anyone support the current state of chaos in our country today? This exists because we have no plan and no unity in the direction we wish to take.

    Reclaiming our seat at the top table as an honoured member state of the world’s largest trading group is a far, far better choice that walking blindfolded into an uncertain future that will bring misery to millions.

  • With Theresa May off on another begging round to European leaders , I’m reminded of Albert Einstein’s famous definition of insanity. Someone who repeats the same course of action time after time, expecting a different outcome.
    The most she can expect is some minor words of reassurance, but no substantial changes to the negotiated withdrawal agreement, and that for one simple reason.

    The EU leaders know that a No Deal outcome would hurt the UK very much harder than harm to EU economies, where it would be spread around the 27.
    They can read the almost daily news of companies such as Ford, Nissan, Airbus, JaguarLR having very strong doubts about their continued operations in the UK, especially in a No Deal scenario. Not to mention the many comapnies that have already voted with their feet.