March 4, 2019 / 4:09 PM / 21 days ago

Breakingviews - May offers tiny plaster for gaping Brexit wound

A figure depicting Britain's Prime Minister Theresa May is pictured during the "Rosenmontag" (Rose Monday) parade in Dusseldorf, Germany March 4, 2019. REUTERS/Wolfgang Rattay

LONDON (Reuters Breakingviews) - Theresa May’s so-called Brexit bribe is unlikely to sway hearts and minds. The UK prime minister promised to invest 1.6 billion pounds in impoverished English towns. Critics see it as a bung to get opposition lawmakers to back her EU exit deal. But the paltry investment might only draw attention to the damage that May’s Brexit has already done the UK.

May is not explicitly tying funds from the new “Stronger Towns” kitty to support for her Brexit deal. But the timing suggests a strong link. The fund was cooked up in the last few weeks just in time for a March 12 vote, and after discussion with opposition MPs in constituencies that voted to leave the EU, and so might back May’s deal. The money will be doled out according to a “needs-based formula”, the government says, but is skewed against parts of the UK where lawmakers are unlikely to back May’s deal, like Scotland.

However, the 1.6 billion pounds, spread over six years, is small beer when compared to the 1.5 billion pounds that the European Union gives each year to the UK to help develop its poorer regions. The two funds aren’t directly comparable: the UK will continue to receive EU funds through 2020, and the government has said it will come up with a new scheme. Yet it has not committed so far to match the loss of EU funds. If the Towns Fund is a start, there is a long way to go to offset the damage from leaving the EU.

Moreover, measured against the economic impact of Brexit, the new fund is an even smaller drop in the ocean. Berenberg estimates that UK business investment is roughly 14 percent lower now than it would have been if the 2016 Brexit vote had not happened. That equates to around 30 billion pounds a year, or 112 times the Towns Fund. Investment might pick up once the UK leaves and clarity emerges over its relationship with Europe. Yet May’s deal deliberately ducks that question, likely meaning further uncertainty.

The kitty is at least an attempt to address the regional disparity that fuelled the Brexit vote in towns like Stoke-on-Trent. Yet, by pushing ahead with a damaging deal, May risks making the anger even stronger when the country next votes.

Breakingviews

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