The Government has announced increased spending on the NHS. The full way in which this is to be paid for is not yet clear, but it seems to be a combination of higher taxes, reallocated spending from elsewhere and the “Brexit dividend”. It is the latter aspect that has triggered an immediate debate and that I focus on here. The dividend being referred to is in terms of the boost to government finances. These have been in a terrible state for some time, not linked to Brexit, although they are now improving as the deficit falls. Indeed, many of the country’s deep-rooted challenges – not least an imbalanced economy – became clear at the time of the 2008 financial crisis. The public finances were not to blame for that crisis but were in a poor state to withstand that shock. Projections for the government’s finances are also prone to large margins of error, even for short periods ahead; thus, quantifying any dividend – or lack of it – is prone to failure. But in qualitative terms, it exists. Realising it is both the challenge and opportunity. There are two aspects to any Brexit dividend. One is how to spend the money that the UK currently sends to the EU. This figured prominently in the referendum campaign – with the £350 million figure on the side of the bus (I was not part of the official campaign and criticised this figure as misleading at the time as it reflected the gross not the net payment by the UK to the EU, which was roughly half). Most economists would accept this aspect of the dividend – although not necessarily the figure itself. David B Smith for instance, is at the high end, and talks of the VAT and gross national income contribution to the EU’s finances of £15.1 billion in 2019-20 and using the HMRC’s Ready Reckoner shows this is equivalent to choosing to cut income taxes by 3 pence or reduce VAT by 2.5 per cent. Cutting taxes usually, as he argues, has a positive second round effect too. While there is a strong case for cutting taxes, the immediate priority should be to ensure that areas – like universities – that currently receive EU funding now receive that directly from the government to ensure no shortfall. The challenge with this first aspect of the dividend is to decide what to do with it. But then economic opinions diverge significantly over the second aspect of any dividend. The consensus – reflected in the independent OBR’s view – is that any boost received from a return of this EU money would be offset by a then under performance of the economy – hence the consensus idea of no Brexit dividend. To realise a Brexit dividend is not just about leaving the EU, but it is about what you do when you leave. To achieve a full dividend, the economy needs to perform well and better outside the EU. I think it will – although not initially as we are seeing, because of the uncertainty and lack of vision being outlined about what lies ahead. I have called this the ‘Nike swoosh’ as the further ahead one projects, the better the prospects. In a nutshell, if we left the EU in a stupid way then there would be no dividend. This would mean agreeing not only to a poor future relationship with the EU, but also to one that tied our hands in other areas of policy – such as limiting our ability to pursue an independent future trade policy or set all aspects of our own domestic policy. For the consensus, their fear is a so-called “hard Brexit”. The challenge here, however, is whether the Government has done enough of the hard work to prepare for a ‘No Deal’ (although in this instance we would save any exit payment to the EU). In my view, there will be a Brexit dividend, but to realise its full potential it is not just about leaving the EU, it is about leaving the EU in the right way: outside the Single Market and the Customs Union – and with the Government implementing the correct economic policies to boost the domestic economy. There is not enough focus on the latter. This pro-growth policy has to be about boosting investment, infrastructure and innovation, underpinned by the right incentives. It has to involve removing the tax and regulatory burden on businesses – without impeding workers’ rights – and avoiding likely expensive pointless future EU legislation. This dividend would be reflected in a better future economic performance and higher future tax revenues. Currently only 5% of UK firms sell directly into the EU Single Market, but all firms have to abide by its rules and regulations. There are many things the UK should have done when it was in the EU that it will need to do now, but this will requires a mindset change – and we won’t be able to blame Brussels for our shortfalls. Part of the reason it is so difficult to leave the EU is not only the lack of coherence of our present approach, but also because the EU’s tentacles have infiltrated so many areas of business life and government policy – as highlighted in the plethora of “competency reports” on our relationship with the EU produced by the previous Coalition Government. Thus there will be new-found powers – perhaps articulated well in the debate on farming and the environment, but also necessary in other areas too. Quantifying the Brexit dividend is based on future growth outperforming outside the EU. There certainly has been little evidence of a dividend from being in it. Those who argue there is no dividend overlook the deep-rooted problems in the euro and EU and fail to appreciate the opportunities from Brexit. The challenge is that the dividend is hard to quantify and will come through in larger amounts in the future – once the economy performs – but it is not there to be spent fully now, which is what the Government appears to want to do.