LONDON—British Prime Minister Theresa May said on June 18 that the 20-billion-pound ($26.57-billion) funding boost to the country’s National Health Service will be partly funded by a tax increase.
The government also said that economic growth and savings from Britain exiting the European Union would help cover the cost.
May first announced the funding boost over the weekend, timed to coincide with the National Health Service (NHS), which provides free health care to people living in Britain, marking its 70th anniversary.
Speaking at the Royal Free Hospital in north London on June 18, May announced that British taxpayers would need to contribute “a bit more” but promised contributions would be calculated in a fair and balanced way. She also reiterated that the 20-billion-pound boost would be partly funded by the so-called Brexit dividend.
“There will be those payments that we’ll be making over a period of time to as part of our withdrawal from the EU but there will still be more money coming back from the EU, and our priority for that is the NHS,” May said.
The prime minister said spending will increase by an extra 20 billion pounds by 2023-2024, which means the budget would increase by an average of 3.4 percent in real terms over the next five years.
Details of what exactly the increase will be and where the taxes will come from are expected to be addressed in the Autumn Budget.
The announcement comes as a row in Parliament over Brexit tested May’s slim majority.
The idea that a “Brexit dividend” actually exists is widely contested, even by some conservatives.
Sarah Wollaston, conservative chair of Health & Social Care Select Committee & Liaison Committee, tweeted on June 17 that the idea of the Brexit dividend was “tosh.”
It’s a sentiment that’s echoed by the head of health and social welfare at the Institute of Economic Affairs, Dr. Kristian Niemietz.
“The Brexit dividend so far is an illusion. There might be one in the future but for now we still don’t know what the final financial arrangement with the EU will be,” he said.
“[NHS] spending has always increased by real terms every year, but much less so than the historical average, far less than during the new Labour years. It’s now going back to the roughly the long-term average rate of increase,” he said, referring to the 3.4 percent increase in spending.
Senior research economist at the Institute for Fiscal Studies, George Stoye, said that the 20-billion-pound boost is just enough for the system to stand still, without taking into account any new pressures.
“It’s not going to be enough if you want a much better system,” he said.
He also questioned where the money will be coming from.
“In five years’ time, we don’t know exactly what will be happening. At the moment, the Office of Budget Responsibility [OBR] suggests that its about 6 billion pounds that could be spent on other things at that point, if we stopped paying to Brussels. About half that would probably be put towards services, or things that the EU used to pay toward, like farming subsidies,” he said.
“The OBR reckons that tax revenues in the early 2020s are going to be about 15 billion pounds lower than they were in the absence Brexit, so if looking at minus 15 compared to plus three, obviously, that’s not paying for much,” he said.
During the EU referendum campaign in 2016, Brexiteers claimed that by leaving the EU, Britain would save 350 million pounds ($463 million) per week, which could instead be spent on the NHS. The figure, however, didn’t include the cost of the rebate or payments flowing from the EU to Britain.