Quitting EU would mean less money for NHS, not more

The Leave Camp claim there would be a money pot from quitting the EU that could be used to pump into the NHS as well as pay for other goodies. Boris Johnson, who could be prime minister if the people vote to leave, made this contention a central plank of the first day of the official campaign.

In fact, the economic damage caused by Brexit would hit tax revenue, wiping out the smallish saving from not paying into EU budget. There would be less money for the NHS, not more.

InFacts has set out Britain’s EU budget contribution facts, as follows:

£6.3 billion a year compares with the UK’s GDP of £1,865 billion, which amounts to 0.3%.

Leaving the EU would have a depressing impact on the UK economy, at the very least for a period of years during which the uncertainty over terms of leaving would discourage investment and consumer confidence. By how much? Nobody knows, but it is likely to be macroeconomically significant, causing at least a cyclical dip, as well as long-term damage, given that the UK’s overall trading arrangements would be less favourable for many years.

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The macroeconomically significant starts at 1% of GDP, and could mean several times more, so let’s say 1-3% as a range. The corresponding reduction in tax revenues due to just the cyclical dip would be around one-third of the GDP reduction, thus in the range of 0.3-1% of GDP. Even at the bottom of the range, this would wipe out the savings from ceasing payments to the EU budget. At the top of the range, the government would have to tighten its belt if it still wanted to meet its budget targets.

Johnson might also have noted that the nursing services of the NHS are hugely dependent on other EU nationalities, especially the Portuguese in this case. If one wants to talk about saving the NHS, one should rule out for starters immigration restrictions on Portuguese nurses.

Edited by Hugo Dixon