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Hammond is peddling the debunked notion of a 'Brexit dividend'

Lianna Brinded
Head of Yahoo Finance UK
UK Chancellor Philip Hammond said that a deal would produce a dividend. Photo: Reuters

All eyes and ears were on UK Chancellor Philip Hammond today (1 October) as he delivered his digest on how the UK economy was faring in the run-up to an impending Brexit on the second day of the Conservative party conference in Birmingham.

Alongside reassurances that he has “enough fiscal firepower in my locker” to fund preparations for a no-deal Brexit — the worst-case scenario for Britain as it means crashing out of the European Union without any agreements in place — he peddled the same promise that has been debunked time and time again.

That pledge is that if Britain leaves the EU that there would be a “dividend” — suggesting the economy reap a financial reward for severing ties with the 28-nation bloc. After vast amounts of criticism from academics, independent analysts, and fact-checkers, Hammond’s promise was slightly tweaked to say that there would be a “deal dividend,” implying that there would be an economic boost once a Brexit deal is agreed.

The “Brexit dividend” is the idea that the UK economy will suddenly come into a windfall of money once it leaves the EU because the government will not have pay bills to the EU anymore. The UK government says that as part of the Brexit dividend, there will be a £20bn ($26bn) funding increased to Britain’s National Health Service (NHS).

Ever since that pledge was floated during the campaign process from Brexiteers ahead of the June 2016 vote, fact checkers and analysts have continually debunked that promise. For example, the UK’s largest independent fact-checking agency Full Fact said “there is no guaranteed extra money to pay for increased NHS funding from stopping our payments to the EU budget. Other costs associated with Brexit are expected to outweigh the savings.”

To put this into perspective in a simple example, imagine you own and run a stall in a market. It costs you £100 a week to be there and you make on average £1,000 a week in sales. You also, as part of that market, have favourable trading rates between sister-markets. If you decide that you want to leave the market because you figure you don’t need that marketplace any more, you would save £100 on costs. However, you’d be losing out on all the revenue you bring in for selling your wares and the better rates for dealing with sister markets. In fact, you’d probably be paying more.

Despite all this, prime minister Theresa May has continually tried to push out the notion of a Brexit dividend, which again has caused ire amongst experts.

Iain Begg, professorial research fellow at the European Institute and co-director of the Dahrendorf Forum, London School of Economics and Political Science said in a lengthy post: “Read my lips: no such thing as a Brexit dividend.”

“Few doubt the need for increased funding for the NHS and the government plans to boost its budget by some £20 billion a year by 2023 will be widely welcomed,” said Begg. “Yet to portray it as somehow connected to Brexit is, simply, dishonest, the more so when it is being spun as enabling pro-Brexit ministers to deliver on a referendum promise.

“It has been explained endlessly, but apparently has to be reiterated yet again, that the true UK gross contribution to the EU has to be measured after deducting the rebate received since 1985.”

Even a politician within May’s party said, Sarah Wollaston, said: “The Brexit dividend tosh was expected but treats the public as fools.”

But it looks like May’s Conservative government is hanging onto this notion for dear life.