27 April 2016

Vote Leave is the real threat to the NHS


Vote Leave was planning to run an optimistic campaign, based on economics. But last week’s pasting seems to have put paid to that strategy for now. The Treasury’s study of the hefty economic costs of leaving the EU was widely seen as credible. Vote Leave campaign co-convener Michael Gove’s suggestion that a post-Brexit Britain’s relations with the EU ought to emulate Albania’s was widely ridiculed; even the country’s prime minister doesn’t think it is a suitable model for Britain. And the president of the United States, Barack Obama – echoed by his likely successor, Hillary Clinton – demolished the delusion that the UK could flee the EU into the warm embrace of the US.

In desperation, Vote Leave is now resorting to the nasty negativity associated with UKIP-backed Leave.EU. It has put out a spine-chilling video claiming that the National Health Service is in danger if Britain remains in the EU, with St Thomas’s hospital in London crumbling because UK taxpayers’ money is being sent to Brussels instead of spent on healthcare. Albania has gone from being a model to a menace, with the video warning that hordes of Albanian migrants threaten to descend on NHS hospitals. Gove claims that a migration “free-for-all” poses a “direct and serious threat” to public services. Some might call this Project Fear (or worse).

But Vote Leave’s arguments are nonsense. For a start, there is no pot of gold at the end of the Brexit rainbow to spend on public services. Contrary to what Vote Leave consistently claims, Britain does not send £350 million a week to Brussels, as InFacts has explained. Last year the UK’s notional contribution to the EU budget was £17.8 billion (£340 million a week). But that amount never gets sent to Brussels, because the rebate that Margaret Thatcher won in the 1980s is first deducted. So the UK’s gross contribution to the EU last year was actually £12.9 billion (just under £250 million a week). And the EU also sends money back to the UK: £4.4 billion to the government, mainly for farming and regional aid, and £1.4 billion to the private sector, notably for research. On top of that, the government counts Britain’s £0.8 billion contribution to EU overseas aid as part of its own development-aid target of 0.7% of GDP. So Britain’s net contribution to the EU budget last year was actually £6.3 billion: £120 million a week. That is equivalent to 26 pence a day per person. With the best will in the world, reallocating that funding to public services would not make a big difference.

Vote Leave argues that the UK government could spend our contribution to the EU budget better than the EU does – and that may be true. But at most, a post-Brexit UK government would have an additional £250 million a week, not £350 million, to spend, of which £130 million is currently allocated by the EU to spending in, or on behalf of, Britain. If Leave campaigners plan to reallocate this £130 million a week to hospitals, they need to say where they would cut funding from. Farmers in rural constituencies with Conservative MPs? Regional aid for constituencies in the south-west with newly elected Tory MPs last year? Research funding for universities helping to develop new tech businesses around Cambridge in Silicon Fen? If Vote Leave doesn’t plan to reallocate any funding, it would have only an extra £120 million a week (the net contribution to the EU budget) to spend.

Even that £120 million is a mirage. The immediate uncertainty and disruption of Brexit, together with the lasting cost of impeded trade with the EU and the rest of the world, would damage the economy, as I explained for CapX last week. That would open up a big hole in the government’s accounts. The Treasury reckons Brexit would reduce tax receipts by as much as £45 billion a year if the UK ends up trading with the EU on the basis of World Trade Organisation (WTO) rules.

You don’t have to believe the Treasury’s figures. Since the UK’s net contribution to the EU budget is equivalent to a mere 0.35% of GDP, even the slightest economic hiccup would do more damage to public finances than the putative savings from our EU budget contribution.

Vote Leave is also wrong to claim that curbing EU migration would boost public services. Studies show that EU migrants are net contributors to public finances: they pay more in taxes than they take out in benefits and services. In effect, EU migrants subsidise the public services, welfare benefits and pensions provided to British people. They enable taxes to be lower than otherwise. And they help repay the vast public debt incurred by the existing population.

So if Britain curbs EU migration, there will be less money available for public spending on UK residents, not more. Since many EU migrants work as doctors, nurses and other key workers in the NHS, keeping them out would also harm the delivery of public services. Reciprocal controls would hit Brits living elsewhere in the EU too. If the million or so British pensioners living in Spain benefiting from free healthcare had to come home, that would put even greater pressure on the NHS.

Since existing EU migrants are a boost to public finances, there is every reason to think that future ones would be too. And if and when Albania, Macedonia, Montenegro and Serbia, which are currently candidates for EU membership, eventually join, their impact on Britain will be small. Their combined population of 12.6 million is less than a third of Poland’s and the UK government has pledged to impose transitional restrictions to prevent the citizens of new EU member states coming to work in Britain for years. As for Turkey, its increasingly authoritarian government has no prospect of joining the EU any time soon. Even if it met the entry conditions, France, Cyprus and others have pledged to veto its entry – and Britain could too.

The bottom line is this. If Brexiteers are genuinely worried that the NHS is in danger at current levels of funding and believe that it would be safe if only an additional £350 million a week were spent on it, that is easily fixable if Britain votes to remain in the EU: I look forward to Michael Gove demanding additional NHS funding on 24 June, the day after the referendum. What would really threaten public services is leaving the EU, which would tank the economy and deprive the NHS of the taxes and hard work of EU migrants.

Philippe Legrain, who was economic adviser to the President of the European Commission from 2011 to 2014, is a visiting senior fellow at the London School of Economics’ European Institute and the author of European Spring: Why Our Economies and Politics Are in a Mess — and How to Put Them Right.