Labour Euro-Safeguards Campaign - Bulletin November 2010


QUESTIONS AND ANSWERS ON THE COST OF EU MEMBERSHIP TO BRITAIN

  1. How much does it cost Britain to be a Member of the European Union?

    On numerous occasions over the past decades, those sceptical of the benefits to the UK of our membership of the European Union have called for a thorough official cost benefit analysis to be carried out, as was indeed done by the Swiss government in 2006/7. Such suggestions have always been brushed aside on the feeble and tendentious grounds that the net gains from membership were so obvious that there was no need to quantify them. Recent developments, however, must make even those most committed feel queasy. The reality is that Britain's membership of the EU is very expensive, although some costs are much easier to identify and pin down than others. Meanwhile the benefits are in many cases becoming harder to see. The most immediately transparent cost is our net budget contribution to the EU. Following the December 2005 Brussels Summit, at which the UK's rebate was significantly whittled away, this is set to rise sharply. It is currently about 4 billion pounds a year but may well be 7 billion pounds by 2012 and to 9.5 billion pounds by 2014. Off budget contributions to EU projects such as Galileo - a monstrous waste of money if ever there was one, now expected to cost the EU taxpayer up to 22 billion euros over the next 20 years - add at least another 2 billion pounds a year. The net costs to Britain of the Common Agricultural Policy (CAP) and Common Fisheries Policy (CFP) are also well established at about 16 billion pounds per annum and 3 billion pounds per annum respectively. More difficult to quantify - although still very substantial - are the costs of excessive regulation. All regulations benefit some people but inevitably at the expense of others. If the benefits are netted off the costs, conservative estimates are that the net charge is about 2% of our national income - roughly 30 billion pounds per annum. Nor are the upward costs of our EU membership showing any tendency to flatten out. Our rebate is currently under further attack by other EU Member States. There is no serious prospect of reform of either the CAP or the CFP, both of whose costs are trending upwards, along with EU expenditure generally. The flood of new regulations from Brussels continues despite everything which the new Coalition government says it would like to do to stop this happening. Whatever the exact costs of our EU membership are at the moment, there is every likelihood that they will continue to grow exponentially over the coming years.

  2. What is the current state of Britain's finances?

    At the same time as everyone can see that EU expenditure is on the rise, it is equally obvious that the state of Britain' public finances is dire. In 2009, there was a shortfall of about 170 billion pounds between the governments income and expenditure. One in every four pounds which the government spent was borrowed money. Clearly, this state of affairs cannot continue. There is an important debate in train as to how fast this deficit should be cut. The current Coalition wants to reduce the deficit by as much as possible as quickly as it can be done, partly because of the need to pacify the markets and partly because they think that reduced government expenditure will stimulate the private sector into more rapid growth. Labour is much more cautious, fearing that too rapid cuts in public expenditure will tip the economy into a double dip recession, while at the same time rising unemployment and social security costs increase government outlays at the same time as reduced tax takes cut its income, making the deficit increasingly difficult to close. These disagreements, however, are largely about timing rather than the direction in which fiscal policy needs to move. No-one thinks that it would be possible for Britain to continue for long with a deficit anything like the size we had in 2009. Since the chances of the economy being able to grow fast enough to close the gap naturally between the government's income and expenditure within the timescales involved are negligible, there is a widespread consensus that large amounts of cuts in expenditure sooner rather than later are going to be required whichever political party is in control.

  3. What is the government proposing to do to bring the deficit under control?

    To get to grips with the country's fiscal problems - and taking the view that major reductions in expenditure are required sooner rather than later - the Coalition government is planning cuts on a drastic scale to take effect in the near future. Most government departments are being asked to produce budgets showing expenditure 25% below those which they currently enjoy. The social security system is being turned upside down. University tuition costs - not long ago free to a large proportion of students - are set to rise to anything up to 9,000 pounds per annum. Everything from our defence capabilities to public sector pensions is under review, as drastic reductions in government outlays are sought from almost every available source. There is, however, one glaring exception to all this urgent effort to find savings. There is no prospect of anything being done to secure a reduction in our payments to the EU which, on the contrary, as noted above, are steadily going up. The battle currently being fought is not about reducing expenditure. It is only about how much the EU budget should increase.

  4. What is the EU doing about cutting its expenditure?

    It is not, of course, only Britain among EU Member States which has severe budgetary problems. Indeed, in varying degrees, all the countries making up the EU suffer from similar problems. Some, in particular Greece, Portugal and Ireland, are in much greater financial difficulties than we are. It might therefore be expected that, as a matter of course, the EU would share the pain experienced by its Member States by trimming back its expenditure and carefully controlling its budget to avoid increases in outlays, with reductions if possible. This is not, however, what is happening. On the contrary, the EU is on a major spending spree as if the problems faced by those paying the cost simply did not exist. Far from being cut back, the EU budget as a whole is planned by the Commission and European Parliament to increase next year by 5.9%. EU national political leaders, including our own Prime Minister, are trying to get this increase trimmed back to 2.9%, but with no certainty that this is going to happen. At the 5.9% level Britain's net payments to the EU would rise by about 880m - enough to pay for 14,000 NHS doctors - and at 2.9%, by approximately half this figure.

  5. What do the EU institutions propose to spend all this money on?

    It is how the EU intends to spend all the extra money it wants to raise that beggars belief. 44% of the EU budget is still spent on the Common Agricultural Policy which almost no-one in the UK supports. The new EU foreign service, duplicating those already existing, is set to cost a staggering 5.8 billion pounds to establish - about 20 times the cost of the UK's Foreign Office - including 33 million pounds on 150 bomb proof limousines for all EU ambassadors and a head quarter building in Brussels costing 10.5 million pounds per annum in rent. With a total staff of 7,000 people, the European External Action Service is reported to be planning a team of 46 in Barbados, 57 in Vietnam, 53 in Madagascar, 92 in Morocco, 132 in Turkey and 124 in America. 50 senior officials will earn 157,000 pounds a year or more, and all will benefit from generous expenses, allowances for drivers, entertainment, free education for their children and further subsidies for subsistence, household expenses and resettlement. Overall, there is a proposed budget increase of 4.4% in administrative expenditure across the board for the EU institutions. The number of staff employed by EU quangos and committees alone has tripled over the last five years, projected to cost a total of 2.1 billion pounds in 2011, of which the British taxpayer would have to pay 300 million pounds. At the European Parliament, MEP's are demanding a staffing increase of 388 posts to assist their work, in addition to an extra 32,000 pounds per MEP for more assistants or researchers who can earn up to 80,000 pounds a year. MEPs are also expecting, in the current stringent climate to see their entertainment allowances double! Meanwhile, waste of money on existing EU projects continues on a staggering scale. Official figures show that every new job created by EU regional funding in Wales cost 68,000 pounds. The EU has just opened a new 25 million pound office in London. Plans are being developed to create an EU funded "independent European public service news channel" on something like the scale of the BBC, and no doubt at comparable cost, to pump out EU slanted news. So far the EU has spent a total of nearly 8 billion pounds to help Sicily catch up with the rest of living standards in the rest of Italy, with almost no discernable positive results. Almost 5 million pounds has gone to Hungary to build a "beach city" 45 miles from Budapest. Meanwhile, the EU spends 2 million pounds on EU bands and orchestras, it runs libraries which cost 570 pounds per loaned book or 580 pounds per visitor, and it has spent 1.4 million pounds on a programme to define God. All this and much more already costs the British tax payer 20.8 million pounds a day in net contributions before any budget increases are considered. And is there any evidence that all this money has been properly spent on its intended purposes? Unfortunately not. For sixteen consecutive years, EU auditors - themselves a by-word for extravagant life styles - have failed to sign off the EU accounts as a result of poor accounting procedures, shading into wholesale fraud and misappropriation of funds.

  6. How have we got into this extraordinary state of affairs?

    How have the people making up the European Union ever allowed the EU institutions to get so out of control? There is a simple fundamental reason. The EU suffers from a huge democratic deficit. Whatever the position may be in its constituent Member States, the EU itself is not a democracy. When its institutions were originally established, it was always intended that they should be staffed and controlled not by elected politicians accountable to the people but by bureaucrats who were thought to be more honourable and reliable. Unfortunately, history shows that, while everyone may have an inclination to feather his or her own nest, democracy is far the most effective way of keeping political leaders honest and in touch with those whose interests they are charged with representing. Unconstrained by having to pay attention to any electorate, however, bureaucrats have no such limits imposed on what they can do. It is hardly surprising that, in these circumstances, they live in worlds of their own, increasingly out of touch with reality. This is clearly the condition into which the EU institutions have fallen, as their extravagance has increased, matched only by their determination to seize yet more powers - currently particularly over economic governance - from Member States. We have been promised that there will be no further transfer of powers to Brussels without the consent of the British people in a referendum, not least so that some measure of control can be kept on otherwise ever increasing costs. Is the Coalition government going to keep to its word?

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