‘Out of sight, out of mind’
Civitas, 26 August 2009
‘Out of sight, out of mind’ should be the Labour Government’s new slogan because the EU is burning a hole in the UK’s wallet and the Government was hoping you wouldn’t notice… writes Ariane Poulain.
Just the day before parliament broke up for summer on 21st July, the Treasury quietly released an annual statement on the ‘European Community Finances’ which the Government clearly wanted to keep concealed from the media’s glare and the public’s prevailing ‘credit-crunch’ attitude. Buried within the extensive report, on page twenty-five, lay the shocking figures of the UK’s payments to the EU: next financial year the UK’s net contributions to the EU will rise by 60%, from £4.1 to £6.4 billion. As John Redwood, Conservative MP, said yesterday, this is ‘money we can’t afford, being very badly spent’.
The cost of our membership to the EU used to be £165 per household, per year, but for the next financial year, this will rise to £257 per household. This latest revelation on the cost – or should I say burden – of being a member of the EU is unwelcomed news at a time when recent GDP growth rates indicate that Britain is still firmly in the midst of an economic crisis, 2.4 million people are unemployed and home repossessions have steadily risen by nearly 50% in the first half of this year. This news will be most unwelcome to those who, in the latest European election, voted for parties that advocate Britain’s leaving the EU. (It should be noted that these voters were not a small minority – anti-EU sentiments made up over a quarter of votes cast.)
Let me reign in my criticism for the time being and consider the reasons for this staggering increase.
The EU budget is made up of three sources of revenue from all member states. Members’ contributions could be considered ‘equal’ on the basis that the ‘own resources’ contributions are relative to each states’ wealth. With regards to the UK, however, Margaret Thatcher secured a rebate in 1984 which means that roughly two-thirds of the UK’s contribution is given back to the UK Government (approximately £3 billion annually). The rebate was sought because, compared to other EU member states, the cost to the UK of its EU membership significantly outweighed the benefits. A huge amount of the overall EU budget was (and still is!) spent on the EU’s Common Agricultural Policy (CAP) – protecting the EU’s agricultural sector by subsidising farmers, however, the UK’s farm sector was considerably smaller (and still is!) in comparison to other EU member states – therefore the UK receives far less in CAP payments.
Despite the fact that the rebate deal was considered a great triumph of Thatcher’s premiership, Tony Blair squandered her efforts – and our money – by renegotiating the rebate at an EU summit in 2005 when – following pressure from Germany, to help ‘foot the bill’ of the newly enlarged EU – Blair agreed to reduce the UK rebate by 20% in exchange for a promise that the EU would conduct a major review of the CAP (following the 2004 EU expansion, the UK only received 9% of CAP expenditure). ‘In return for the gigantic handover he [Blair] got virtually nothing’, because four years later, minimal CAP reform has occurred, but the UK still has a whopping bill to pay to the EU.
Over the past few days the Conservative Party has launched a scathing attack on the Labour government for its somewhat underhanded release of the UK’s contributions to the EU figures and reiterating the critical ‘Blair botch’ of the rebate negotiation. However, Dennis MacShane, Labour MP, defended Blair’s rebate decision by arguing that if the Conservatives are in favour of Turkey joining the EU with a relatively impoverished population of 80 million, then they cannot expect the UK and its fellow EU members not to address the financial consequences, ‘you cannot enlarge the EU without helping’.
As the Treasury’s statement noted, UK payments to the EU more or less depend on the exchange rate and the sharp decline of the Sterling against the Euro cannot be ignored as a significant factor in the payment increase. 85% of the UK’s contribution depends on this conversion. The impact of the global economic crisis on exchange rates cannot be ignored because In 2003, UK contributions were based on a rate of £1/€1.43 whereas next contributions to the EU budget are based on a rate of £1/€1.05.
At this point, I ought to provide a list of benefits that the UK receives from its EU membership, from the perks of being a member of the world’s largest trading bloc to the political and economic stability the UK has by being a part of the ‘heart of Europe’, but though this list would not take me all day there is one last criticism of the UK’s increased payment to the EU that I must indulge in:
Daniel Hannan’s blog this week correctly identifies that the cost of EU membership is actually more outrageous than the Treasury’s report indicates. Yes, you heard me correctly ‘more’. In reference to the 60% increase, Hannan argued that as ‘large as these numbers are, they understate the true cost of membership’ . His point is that the Treasury’s figures were based on net as opposed to gross contributions, thus overlooking the actual amount we take out of our pockets and hand over to the EU.
Furthermore, the Treasury’s statement on EU finances only refers to the total amount that the UK contributes to the EU budget; it does not include the extra costs that the UK incurs in the form of the burden of increased EU regulation – which the UK is legally obliged to enforce. In February 2009, OpenEurope reported that 72% of UK regulation derives from the EU and that, by 2018, the cost of EU regulation is forecast to be £356 billion (£14,300 per household). If ever there was a case for the UK to re-evaluate its position in the EU the time is now.
Whilst speaking on Britain’s place in the EU in 2007, Peter Mandelson said ‘I do not think [that] scary EU stories really interest the British people…’ but this recent news of a 60% increase in their payments to the EU might just capture the nations interest …