Politics: Show Me The Money

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‘We send the EU £350 million a week, let’s fund our NHS instead’: The UK enjoyed a hefty discount via a rebate that Margaret Thatcher hand-bagged leaders into accepting in Fontainebleau in 1984. Britain’s very own Svengali, Dominic Cummings, Vote Leave campaigner and now right-hand man of Boris Johnson, claimed that it was a message on the side of a bus promising to take the contribution to the EU and spend it on the National Health Service that won the referendum.

The Counterfactual: It is instructive to look at some of the costs the UK will incur outside the EU to help to understand its value, and the UK’s folly. In 2018, the UK paid £13 billion into the EU budget, the UK received around £4bn of this ‘back’ from various European programmes, so let’s say £9bn is its net position.

Let’s start with the cost of not being in the Single Market. As already stated, this is around 6% of GNI; for an open economy like the UK, it is certainly higher again. Her Majesty’s Revenues and Customs estimate that the static ongoing year-on-year additional cost for UK traders accessing the EU alone will be around £15bn (€17.5bn). This excludes one-off costs.

What about the detested CAP? The Conservatives have promised to guarantee cash payments will be paid to the same tune for a further five years, so that’s about £3.2bn – assuming that British agriculture survives being distanced from its largest market and the real possibility of devastating tariffs.

On research, the UK will either continue to pay into the EU’s budget or set up its own European Research Centre with a budget of £1.5bn per year. EU regional investment funds will be replaced by a ‘Shared Prosperity Fund’ that will cover current receipts. Then there is the choice of paying into the various agencies or investing in the expansion of national agencies for medicines, food safety, chemicals, satellite systems. And on, and on. In brief, any theoretical savings are wiped out – by some margin.

Digging deep: Nevertheless, the European Commission has been scratching its head, thinking of ways to lessen the pain – and reduce the moaning – and they’ve been pretty creative. There are three new ‘own resources’ that have been identified as green taxes from emissions, trading schemes and non-recyclable plastic, and a percentage of a common consolidated corporate tax base.

The Commission suggested cutting the administrative fee for collecting customs duties from 20% to 10%. Many of the countries are arguing for 1% benefit disproportionately from
collecting these duties. The Netherlands, for example, has huge ports, and collects €3bn in custom duties every year, of which it can keep 20% as a very generous administrative cost.

Countries that host institutions also benefit disproportionately, and the bigger the institution the bigger the benefit. Belgium, which considers itself a ‘net contributor’, benefits from about €5bn for hosting the main European institutions. And this is a modest estimate of the financial impact, the institutions attract a massive lobbying industry of over 25,000 people. Luxembourg draws around €2bn for the institutions it hosts.

And then there are the different agencies. The Netherlands lobbied ferociously to host the European Medicines Agency, which costs €300 million per year, provides around a thousand jobs and according to Dutch research is likely to attract thousands of visits, boost private research investment and attract new pharma companies.

We all want bang for our buck, but expecting the EU to do everything on a shoestring is just not reasonable. Countries need to explain the EU’s benefits more clearly to citizens. There are enormous benefits in working together, whether it’s to protect external borders, or find a cure for cancer, pooling our resources is often the most effective and efficient way forward. We really are much better together.

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