Labour Euro-Safeguards Campaign - Bulletin March 2006


MORE QUESTIONS AND ANSWERS ON BRITAINíS FINANCIAL CONTRIBUTIONS TO THE EUROPEAN UNION

  1. Have we been told the truth about how much we are paying to the EU?

    When the government agreed the budget for the EU for the period to 2013 in Brussels in December 2005, it was clear that the implication would be a much larger net contribution by the UK to the EU budget than had previously applied. This was to happen as a result of the British rebate being substantially scaled down from what had been agreed before. In the heat of the negotiations, lasting for many hours until the early morning, it must have been difficult to keep track of exactly how much was being given away to secure a deal, particularly bearing in mind the complexity of the EU budget. Now that we have more time on our hands to investigate what concessions were made, however, against the background of what we were paying anyway, it appears that the UK position is going to be much worse than was thought to be the case.

  2. What is the official line on Britainís net contributions to the EU budget?

    Various people, particularly in the House of Lords but also in the House of Commons, have tried to elicit through questions to government ministers exactly what Britainís net contributions will be for the period to 2013. Unfortunately, the answers which have been forthcoming have not been as full as might have been hoped, while official comments have rubbished all estimates made by non-government sources. Three well researched studies, despite being based on government figures, were dismissed on the grounds that they "are all based on extrapolations that go so far beyond the normal sense of where one should take an economic extrapolation that they are not in any realistic sense credible". This condescending stance has not, however, stopped the government from being forced to give some answers to the questions put to them. These have produced figures which project the net cost of Britainís contributions to the EU budget rising from an estimated £4.7bn in 2007 to a range of between £6.0bn and £6.8bn a year by 2011 to 2013. On this basis, Britainís total net contribution to the EU budget between 2007 and 2013 would be in a bracket between just under £38bn to just short of £40bn - enough, incidentally, to build and fully equip about 200 large new NHS hospitals.

  3. Is this the total financial contribution we are due to make?

    While £40bn may be a very large sum, it nevertheless appears that this may be a long way from being the end of the story. Statistics published by the Office for National Statistics, an official government body, show a considerably more alarming picture. This arises from the fact that the figures quoted by official sources on our net financial contributions to the EU almost always focus only on those made to the EU budget. They appear to exclude payments made by the UK Treasury to other parts of the EU organisation. For those minded to check original sources, the figures to compare are those for our total net contributions to EU Institutions, which appear in Table 9.2 on page 129 in the 2005 UK Balance of Payments Pink Book, with those in Table 9.9 on page 151 for our net contributions to the EU in the same publication. During the five years 2000 to 2004, the total in Table 9.2 comes to £23.0bn whereas in Table 9.9 it amounts to no more than a still very substantial £13.9bn. The reason for this big discrepancy can readily be established by a close inspection of the range of data covered by each of the tables. Table 9.2 covers the whole of the UK international current account, and thus, to balance, has to capture all our transactions with the EU. Table 9.9, on the contrary, only itemises payments specifically to do with the EU budget.

  4. What is so significant about these figures?

    There are two major conclusions to be drawn from the big discrepancy between these two sets of figures. The first is that, because they cover a fairly long span of years, the difference between the totals is much more significant than if only one or two years on their own were involved. A major problem with EU accounts is that they are produced on such a piecemeal and inconsistent basis that it is often extremely difficult to draw reliable conclusions from them. Some of the accountancy is done on a cash basis and some with accruals in place. Varying accounting periods make it hard to make accurate comparisons between one year and another. In addition, as is well known, EU accounting generally leaves a great deal to be desired. About 5% of its budget cannot be accounted for at all and roughly another 5% suffers from being inadequately recorded. That is why the EU auditors have refused to sign off its accounts for the last consecutive eleven years. Over as long a period as the five years covered by the Pink Book figures, however, errors and inconsistencies tend to balance out. The second very striking feature of the difference between the contributions to the EU institutions and the EU budget is how large the discrepancy is. The figure for the institutions is almost 70% larger than the one for the budget. As it is the latter figure which is the one which is almost always quoted, the implication is that the total net cost to the UK of our EU membership, in terms of current annual transfers to the EU as a whole, is much higher than it is generally thought to be.

  5. Where is all this extra money going?

    If a lot more money is being transferred to the EU every year than we are normally told is the case, where is it all going? Unfortunately, the official figures which are available provide no clear answers. One way of finding out might be to try to obtain a comprehensive picture across the whole of the EU Member States as to where official funds were flowing between them. The government refuses to provide any information along these lines, however, on the somewhat unconvincing grounds that ďIt is not government practice to publish exact forecasts of the contributions and receipts of other member states, as this could prejudice the UKís relations with these states.Ē Even without being able to see the overall picture from both sides, however, it is possible to piece together at least some of the reasons why there should be such a large difference between what appears to be the total that we pay to the EU and the usually quoted figures. Some of the money we pay to the EU Overseas Aid budget appears not to be included in the usual budget figures. It is also not clear that all CAP payments are covered. It is, however, extremely unsatisfactory that there should be such a huge unaccounted for sum. Unfortunately, up to now, all attempts via questions in Parliament to provide explanations as to how to reconcile the different totals have failed to throw any clear light on where large additional sums of our money have been going.

  6. How much are we going to pay into the EU between now and 2013?

    If the government projections of our net financial contributions to the EU over the period from now to 2013 only take account of the budget and not the wider contributions, they are clearly likely to be a large underestimate of the real total. The total difference identified above over the five year period 2000 to 2004 between the amount we paid to the EU institutions and the EU budget came to £9.1bn, which averages just over £1.8bn per annum. If this additional sum continued to be paid, without any increase or decrease, every year between now and 2013, our net contribution would rise over this seven year period from about £40bn to almost £55bn. If, however, the ratio between our budget contributions and the total we pay to the EU institutions stayed the same, our net contribution through to 2013 would be much higher - possibly as high as about £70bn. This is a huge prospective drain on our resources. It would mean that our net payments to the EU during the next seven years would average about £10bn a year and that by 2013 - the starting point for the next round of EU budget negotiations - it would be even higher, as our net contribution, as agreed at the Brussels summit, is bound to rise over the period. It is surely unbelievably unsatisfactory that the British public should be left with so little information about a matter of such vitally important national interest.

  7. Is it reasonable that we should not be told the true picture?

    Whitehall must know how much our membership of the EU is likely to cost us over the coming years. It appears, however, that the figures published by Office for National Statistics, even though this is a government organisation, are produced in such a way that it is very hard to get behind them. The result is that, from the outside, it is impossible to come to a fully informed view about what the true situation is. If it is as bad as the worst interpretation shows it might be, then surely we ought to be told that this is the case. If, on the other hand, the more gloomy projections are wrong, it is clearly in the governmentís interest to let us know what they believe the true position to be. Without adequately detailed information being made generally available, it is difficult to avoid the conclusion that the reason why no clear figures are being published is because there is a lot to hide.

  8. What overall conclusions should we draw?

    Overall, however, even without further clarification, it is impossible to avoid the conclusion that Britain has for a long time had an extremely poor deal from the EU, made significantly worse than it was before by the concessions made in December 2005. The costs to Britain of its EU membership are, of course, not only to do with the budget. The expense of the CAP and excessive regulation amount to perhaps £35bn per annum while the combination of protectionism, regulation and the depressing effect of our heavy net contributions to the EU have had a continuing and significant dampening influence on our growth prospects. Whereas these effects, though crucial in the long term, are relatively invisible, our annual financial contributions to EU budget are tangible and incontrovertible. If the sums involved are rising to the astronomic figures which now appear to be in prospect, it is difficult to see that public opinion would regard them as anything like reasonable or acceptable. They also present a huge threat to the stability of the countryís finances and an increasingly serious drain on the governmentís already overstretched resources. Why should the British public put up with underfunded public services while billions of pounds per year are being paid to other countries in the EU, many, if not all of them, with no good claim on us at all? It is hard to believe that the coyness of Whitehall and the government about providing figures to show what the true financial cost of our EU membership is has nothing to do with the fact that, if the public really knew how bad the situation was, there would be a public outcry. If this is the position, it is indeed a sorry commentary on the fact that our continual membership of the EU - as, of course, was the case when we joined what was then the Common Market in 1973 - rests on Whitehall and our political leaders apparently deliberately being unwilling yet again to tell us honestly and fully what the real position is.

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