Labour Euro-Safeguards Campaign - Bulletin March 2011


MORE QUESTIONS AND ANSWERS ON THE COST TO THE UK OF OUR EU MEMBERSHIP

  1. The Cost

    A really extraordinary aspect of the UK's EU membership is the adamant refusal by successive British governments to make any assessment of what the costs of membership are in relation to the benefits gained from it. As everyone familiar with this topic knows, every attempt to get the Treasury or any other British official body to carry out a proper cost benefit analysis has resulted in us being told that the advantages of membership are so comprehensive and obvious that doing the work to quantify them in relation to the costs is a waste of time and money. It is particularly reprehensible that this situation should prevail not only because there is a great deal of evidence that the costs do in fact exceed the benefits by a wide margin but also because an accurate assessment of the position is extremely important and the public is certainly entitled to have an informed official view. Other countries, such as Switzerland and France have carried out such exercises with results which are far from showing clear net benefits from EU membership. The Swiss report, published in 2006 showed that the benefits to Switzerland of joining the EU were substantially outweighed by the costs. The French report, produced by a think tank close to the French government of the time, produced a perhaps surprisingly downbeat assessment of the good that EU membership was doing France. There is therefore no great difficulty about getting an official assessment for the UK carried out. The problem is resolute refusal by official bodies to carry out an exercise whose results would almost certainly be highly embarrassing to them.

  2. What would the results be likely to show on the EU budget?

    Although there is no official report that pulls all the figures together, there are plenty of government statistics from which it is possible to see what the conclusions of any objective report might be, although even some of the more obvious figures require some research and interpretation to produce a clear picture. This is particularly the case with the frequently quoted figures for the financial cost of EU membership. This is made up of our gross contribution to the EU budget less the money which is returned to the UK by expenditure in Britain. For the last three years for which figures are available, Britain's gross contributions have been 13.060 billion pounds in 2007, 13.334 billion pounds in 2008, and 14.779 billion pounds in 2009. Expenditure in Britain has been 5.324 billion pounds, 5.736 billion pounds and 5.467 billion pounds, giving net figures of 4.213 billion pounds, 2.736 billion pounds and 3.920 billion pounds. These are very large sums, made worse by the fact that the net balance is paid abroad, thus both weakening our balance of payments position and leaving all the benefit of the net cost to the UK of our membership in the hands of people living outside the UK. Uncertainty is added because the official statistics, appear to be published in a singularly opaque way, making it very hard to see whether all of the costs of our EU membership have been included. Furthermore, as a result of the planned erosion of the rebate on our contribution negotiated at Fontainebleau in 1984, and rising EU expenditure, our net contribution to the EU budget is on a sharp upward trend. By 2013 it may well be approaching as much as 10 billion pounds.

  3. How much do the Common Agricultural Policy and the Common Fisheries Policy cost the UK?

    Neither the Common Agricultural Policy (CAP) nor the Common Fisheries Policy (CFP) enjoy any significant support in the UK. The CAP - which still consumes over 40% of the EU budget - was established as a trade off between German industrial power and French agricultural interests when the Common Market was originally established. It has never been remotely in the UK's interest to be part of this organisation. It raises food prices to far above world levels, adding some 20 a week to the food bill of every family of four people. Most CAP subsidies go to large agribusinesses who don't need them, rather than to small scale farmers, while encouraging farming methods which are ecologically harmful. The high tariffs and policies of dumping unwanted food on Third World markets have caused huge problems to Third World farmers, more than counteracting all the benefit from EU aid programmes. In addition, administration of the CAP is a by-word for fraud and corruption. If the CAP is bad, however, the CFP, although smaller in scale, is even worse. As a result of political log-rolling and appallingly bad management, a million tons of perfectly edible fish are killed and then thrown back into the sea every year. The CFP has been an environmental disaster, allowing the UK's erstwhile rich fishing grounds to be plundered to a point where a number of key species have been almost fished out of existence. Now, the EU fishing fleet is moving south off African coasts, ruining the livelihoods of local fishermen and causing more killing of local wild animals to make up for dietary deficiencies. In direct costs to the UK, the CFP has been calculated to involve us in 4 billion pounds or more per annum in lost revenues and increased costs.

  4. What other costs has the UK had to bear as a result of our EU Membership?

    Other costs to the UK arising from our UK membership are harder to quantify but still very substantial. The torrent of regulations imposed on us, many from Brussels, has been estimated not only in the UK, but also by Holland, to cost everyone in the EU billions of pounds per annum. All regulations benefit some groups of people but at the expense of the population at large, who have to pay for them. If all the benefits have all the costs subtracted from them, the total costs exceed the total benefits by at least 2% of the national income - i.e. 2% of 1.5tn, which is about 30 billion pounds per annum. Another major cost to the UK is the adverse balance of trade which we have had with the EU practically every year since we joined the Common Market at the beginning of 1973. Whereas our trade with the rest of the world has been in rough balance throughout the last four decades, our cumulative trade deficit with the EU amounts to nearly 400 billion pounds and is currently running at 28 billion pounds per annum.. The drain of employment which has thereby been entailed, particularly well paid blue collar manufacturing jobs going to other EU countries such as Germany whose manufacturing industry is in much better shape than ours, has had high social as well as economic costs for the UK. In addition, the strain on our balance of payment position resulting from year after year of substantial trade deficits has made it much harder than it otherwise would have been to keep our economy growing steadily. If, without this deficit, we had been able to grow the UK economy, say, 0.5% per annum more rapidly than we have done over the last nearly 40 years, we would all be very much better off now that we actually are.

  5. Are there other potential cash costs to Britain of our EU membership?

    The sums of money which we pay net to the EU institutions every year, although substantial, are, however, dwarfed by costs which Britain would be likely to incur if the eurozone breaks up. There have already been bailouts costing roughly 100 billion euros each for Greece and Ireland. Portugal seems likely to require similar treatment before long and Spain - a much bigger economy - may follow. Up to now, all the sums committed have been in the form of guarantees and loans - including 7 billion pounds, which Britain lent to Ireland. Provided that the Single Currency does not break up as a result of devaluations and defaults by the weaker eurozone economies, the loans will stay in place at their face value and the guarantees will not be called in. If, however, the deflation, unemployment and low, if not negative, growth forced upon the weaker economies becomes intolerable and they cease being Single Currency members - all of which seems quite possible in the not too distant future - the loans will not get repaid at least in full and the guarantees will be triggered. If this happens, the sums of money involved in pay outs by all the non-defaulting states will be huge. This will happen for two major reasons. One is that the sovereign debts owed by countries such as Greece and Ireland will very probably only get repaid in their devalued currencies - in new local euros or currencies which are likely to be worth perhaps half their German euro equivalents. The other major problem is that a substantial number of banks are very likely to become insolvent if devaluations and defaults take place. They will then require huge sums of tax payer money to enable them to keep in being as going concerns. While it is true that most of the costs of these bailouts will be borne by the non-defaulting eurozone economies, by no means all will be. For example, of the sums pledged so far, Britain is liable for 12% of the 60 billion euros European Stabilisation Mechanism, leaving us, even though we are outside the Single Currency, with a contingent liability of about 6 billion pounds on this account alone if the eurozone runs into really serious trouble.

  6. How have European countries outside the EU done?

    Another way of approaching membership costs of the EU, not only to the UK but other Member States as well, is to compare the performance of European countries within the EU to those outside it. The main Western countries which have not joined are Switzerland and Norway. Both of them have much higher living standards than even the better performing EU Member States, lower rates of unemployment, much more stable economies than the EU average and more cohesive societies. Neither of them have been obliged to follow the deflationary policies of the European Central Bank. Of course other factors are involved, as they always are when making comparisons of this sort. The Swiss and Norwegian experiences, however, strongly suggest that there are significant costs to EU membership while most of the benefits, such as co-operation wherever this makes sense, can be enjoyed without the necessity for being an EU Member State.

  7. Why is knowing the cost to Britain of our EU membership currently so crucial?

    Events across the world, particularly in the Middle East, are highlighting as never before how much people value being able to have a say in how they are governed. There may well be echoes of the anger manifesting itself so dramatically in Cairo, Tripoli and now in Libya and elsewhere in the Arab world in the widely felt resentment in the UK at the undemocratic way in which the EU operates. There are now stronger calls in the UK for a referendum on Britain's relations with the EU than there have ever been, after all the broken promises on the Constitution and its recreation in the form of the Lisbon Treaty. More than anything else, in these circumstances the people of Britain need to have clear access to the facts and reasonable interpretations of them, to enable them to come to a balanced judgement as to where they think their future best lies. It is not enough for the government and the political establishment in the UK to say that the case for Britain's EU membership is so obviously positive that it is not worth trying to quantify it. There is much too much evidence that this is not the case. If there is a favourable cost benefit analysis to be undertaken, the government should get it produced for all to see and consider. If they continue to fail to do so, those who very much doubt that their case can be made can only conclude that no such favourable outcome would be the result.

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