EUROFACTS

VOL  NO 19

9^th JULY 2004

How much does it cost the UK to belong to the EU?  The Government says membership results in a net economic benefit, not a cost, but it has resisted demands for a rigorous cost/benefit analysis.  Since the Prime Minister maintains that the forthcoming referendum on the [EU] Constitution is, in effect, a vote on membership there can be no grounds for withholding the single most important economic fact about membership that the public would need to make up its mind.  Even if, as we believe, Blair’s claim about the referendum’s purpose is merely a scare tactic, an objective assessment of present and future costs and benefits is a necessary condition of an informed public debate on the issues.

Government reluctance

However, the Government’s reluctance to order an inquiry into the costs of membership – and its decision to block such an attempt by members of the House of Lords earlier this year- have become more explicable in the light of a study of the economic implications of Britain’s membership of the European Union by Ian Milne the founder editor of Eurofacts a frequent contributor to its columns.

The results of the study, A Cost Too Far? Published by Civitas-which can be downloaded free from www.civitas.org.uk [printed copies £8.50 each from June Press] – Civitas the London based think-tank, suggests that the costs are HUGE- and likely to grow.  Using government statistics the study suggests that the current recurring annual direct net cost to the UK of EU membership is likely to range between three and five per cent of GDP with a ‘most likely’ figure of four per cent, equivalent to £40 billion [£40,000 million] a year- i.e. £13 billion [£13,000 million] more than is spent on National Defence, and roughly equal to the combined excise duties on drink, fuel and tobacco.  Of this £40 billion an estimated £20billion is the direct cost of EU regulation.  A further £15billion is the direct net cost to the UK of the Common Agricultural Policy, while another £5 billion is Britain’s net contribution the EU budget.

According to the Study, the heavy burden of direct net economic cost will not get lighter; at best it will not get worse.  The more likely scenario is that the net cost of being a member of the European Union wills grow- perhaps dramatically so. This gloomy prognosis is due partly to measures already in the EU pipeline as a result of the EU Constitution and Enlargement [Well done! Tony Blair] and partly because Britain is locked into a Regional bloc in unmistakeable long-term decline.

Missed opportunities

[Ian] Milne’s “most likely” estimate does not include “opportunity cost” – the cost of missed opportunities arising from the fact that the Continental Europe with which Britain has been forced to converge is seriously under-performing.  He poses the question- which our political and economic elites ought to have asked, but haven’t – Could the UK have done better had it been free of the constraints imposed by EU membership, and if so, how much better?

This question inevitably leads to others: 

“What if the formidable energies and resources that the British government devotes to integration with ‘Europe’ had been diverted to standing free in the rest of the world?  What if HM Government had not spent much of the last ten years fending off the effects of the working Time Directive, the Withholding Tax and much else and spent the time and money negotiating FTA’s [Free Trade Agreements] with the fastest growing economies of the world, and with further liberalising the domestic economy itself?”

Cultural affinities

In order to answer these questions the British economy is compared with peer group economies with which it shares political, legal and cultural affinities – those of the so-called Anglo-sphere countries:

The US, Canada, Australia, New Zealand.  During the decade1993-2003 these economies grew by an average of 3.47 per cent a year- compared to the average UK growth of a rate of 2.86 per cent a year.

It follows that if the UK economy had grown at the same average rate as its peer group economies between 1993 and 2003 –its real GDP in 2003 would be 6 per cent higher than its actual real GDP [Gross Domestic Product]

In other words, when one adds on the costs described earlier to the opportunity costs, the current recurring annual net cost to the UK of the EU membership is ten per cent of GDP, or approximately £100 billion [£100,000 Million] per year at present levels of UK –GDP.   This is about one- and –a quarter the sum spent each year on the British National Health Service.

Moreover, in the absence of fundamental reform in Continental Europe the opportunity costs are likely to grow still further.  If the calculation made in respect of the previous decade were extended to the next ten years the difference in the size of the UK economy at the end of the period would be 12.5 per cent, resulting in an opportunity cost in 2013 of £125 billion [£125,000 million] annually at today’s values.

Professional economists tend to be extremely reluctant to estimate opportunity costs since these depend on assumptions, which may well turn out to be wrong.  However, it is quite clear that membership of the EU has denied Britain important economic opportunities whose cumulative impact has been great indeed.  Those who take the trouble to read Ian Milne’s study – and all those in public life from the Prime Minister down should do so as a priority- will be struck by the fact that while his estimates of such costs turn out to be huge the assumptions on which his calculation is based are actually cautious and conservative.

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[Fonts adjusted, brackets and underlining used]

‘A Cost Too Far?’  By Ian Milne, Civitas.   Downloadable free from www.civitas.org.uk

Printed copies £8.50 [Only extracts given above] available from: The June Press Ltd

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Daniel Hannan - Forming an OPPOSITION to the EU

www.telegraph.co.uk.blogs

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VOTE

MAY -2007

TO LEAVE THE EUROPEAN UNION

WITH THE ONLY PARTY WITH A MANDATE

TO SET YOU

 FREE

THE

UK INDEPENDENCE PARTY

www.ukip.org

TO RECLAIM YOUR DEMOCRACY DON'T VOTE FOR THE TRIPARTITE PARTIES IN WESTMINSTER

BUT

SMALL PARTIES THAT SPEAK THEIR MINDS WITHOUT SPIN AND LIES.

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ONLY

PRO-PORTIONAL REPRESENTATION

WILL BRING DEMOCRACY BACK TO THE ENGLISH PEOPLE

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MAY/07

[All underlined words have a separate bulletin

THE QUESTION THAT THE VOTER MUST ANSWER

‘DO YOU WISH TO BE GOVERNED BY YOUR OWN PEOPLE, LAW AND CUSTOM OR BY THE CORRUPT ,EXPENSIVE UNACCOUNTABLE AND ALIEN BUSYBODY BRUSSELS’

-SIMPLE IS IT NOT?