Philip Hammond must decide how to fund the cash injection for the NHS

At the beginning of this year a rather irritated Philip Hammond publicly knocked back demands from Boris Johnson for a "Brexit dividend" for the NHS.

Instead of making good on the Vote Leave promise that leaving the EU would result in another £350m a week for the NHS's coffers, the chancellor warned that Britain's economy was suffering due to uncertainty over Brexit.

Increases in public spending would have to wait.

So imagine his quiet fury this morning as the prime minister announced that the NHS would be getting a post-Brexit boost in the form of an additional £20bn-a-year in real terms by 2023/4.

That amounts to an annual 3.4% increase from 2019 onwards - and it's been left to Mr Hammond to work out were the money will come from.


Politically, Mrs May has little option but to deliver some form of Brexit dividend for the NHS.

Image: Mr Hammond previously knocked back demands for a 'Brexit dividend' for NHS

Whether she supported the claim or not, it is now down to her to deliver the Brexit the public voted for and NHS funding was the centrepiece of the Vote Leave deal.

But in reality, the "Brexit dividend" is just political spin.

Any money coming to the NHS in the next five years will have to come from increased borrowing or taxation.

This is because the net £9bn-a-year we pay into the EU every year has already been earmarked up to the year 2022 at the very least.

It's going to be used to pay Britain's £39bn Brexit divorce bill and maintain farm subsidies for British farmers amongst other things.

There isn't spare money lying around to be put into the NHS.

And, aside from all of that, there is unlikely to even be a "Brexit dividend".

As Paul Johnson of the Institute of Fiscal Studies pointed out, the government has already accepted analysis from the fiscal watchdog that Brexit will weaken public finances by £15bn a year.

NHS cash not going to come from a 'Brexit dividend'

"There is no Brexit dividend," says Mr Johnson.

"Payments to the EU will fall, but tax revenues will fall more as a result of Brexit. It will come from higher taxes and borrowing."

What's more, the prime minister's claim that the NHS will receive another £600m a week in cash terms - and linking it to the £350m a week on the side of the Vote Leave bus - is also misleading.

The £600m is based on a nominal spending rather than real spending, so it takes in money to cover inflation too.

"Don't even begin to swallow any rubbish that this will be some Brexit bonanza," tweeted Tory MP Sarah Wollaston, the chair of the health select committee.

"In reality the tax rises and borrowing will need to be higher as a result."

Whatever the spin, what is clear from Mrs May's announcement is that the spending review this autumn will be bitter. Mr Hammond will have to decide how to fund NHS increases.

Will the chancellor increase taxes (and break a manifesto pledge) or decide instead to borrow more to pay for public services?

He could try to pay for NHS increases by finding cuts elsewhere, but the public is fed up with austerity, and her cabinet are too.

Watch for a slew of demands for more spending for defence, schools and housing, all coming as the chancellor warns of weakening public finances in the face of Brexit.

Another perfect storm for the autumn.