The gift that keeps on giving

On the BBC’s Question Time last night, Conservative MEP and devout Eurosceptic Daniel Hannan, stated that the austerity the United Kingdom has undergone over the last six years was not (contrary to received Conservative opinion) caused by Gordon Brown’s profligate spending, but by our membership of the European Union.  His logic was that every week, the United Kingdom pays £350 million to the EU and that this equates almost exactly to the savings made by the austerity measures of George Osborne.  So the cuts could have been avoided by withdrawing from Europe and using the weekly £350 million to pay down the deficit.

This morning, the Labour MP and co-chair of the Vote Leave campaign, Gisela Stuart repeated the claim on Radio 4’s Today Programme.  The £350 million the United Kingdom hands over in cash to the EU every week could be used to increase the funding of the NHS.  She actually did suggest that someone in the UK Government hands a huge wad of cash to the European Union, though she didn’t specify the exact denomination of the notes, but there must be a convoy of lorries constantly plying between London and Brussels to keep the cash handover in operation.

Vote Leave officially launched its campaign today with this same claim, repeated again later by Michael Gove.

But as the BBC reporter tried to point out to Boris Johnson at the launch, the arithmetic is not quite so simple.  For a start, £350 million per week is the gross value of the United Kingdom’s contribution to the EU budget.  Some thirty years ago, Margaret Thatcher negotiated a rebate from the contribution for the UK and this is deducted from the contribution before any payment is made.  So the amount paid to the EU is just short of £270 million per week.  It is still a large number, but it is some 25% lower than the figure quoted by the Vote Leave campaign.  Boris Johnson tried to deflect criticism by stating that the £350 million was our gross contribution, which is true, but it is not the amount that the United Kingdom pays or, in the terms expressed by Vote Leave, the EU takes.

If you were to receive a Christmas gift from someone in the office Secret Santa and having received it you discovered that the purchaser had not spent the agreed £20 per gift, but had purchased something at a discounted price, which only cost £15 and the other person had simply trousered the £5 themselves, then you might consider them to be selfish or even dishonest.  This is the shady trick being played out by the Vote Leave campaign.

However, the deceit is greater than Vote Leave conveniently ignoring the value of the rebate.  There is no doubt that the contribution to the EU budget made by the United Kingdom is a significant amount.  It is also undoubtedly true that as the second largest economy of the EU, the United Kingdom is a net contributor to the EU budget.  But the United Kingdom does receive about £110 million of the contribution back per week in EU farm subsidies, educational and research grants and regional development funding.  The net contribution the United Kingdom makes to the European Union is approximately £160 million per week, less than half the amount trumpeted by Vote Leave.

The Vote Leave campaign has accused the Bremainers of scaremongering when it suggested that farm subsidies might end with Brexit.  They argued that Brexit could allow the United Kingdom to increase  the value of those subsidies.  They made the same scaremongering accusation and  aspirational aim of increasing the funding when discussing the educational and research grants.

If we do leave the EU in ten weeks, then it is likely that contribution we will be required to make to the EU budget in order to maintain our access to the Single Market will most likely be of the same magnitude as out current net contribution.  Which means the net saving to the United Kingdom Government would be about £110 million per week.  To achieve this saving, we would have to accept an end to farm and educational and research subsidies, or fund them ourselves.

The Vote Leave campaign has promised £350 million per week extra for the NHS.  That is more than triple the amount of our likely saving.  Daniel Hannan has suggested we should reduce the deficit by £350 million per week.  Vote Leave has suggested replacing the subsidies to farmers and academic bodies, in fact has whispered plans to increase them.

By these accounts, the potential saving from a possible Brexit, the Vote Leave group would have us believe that this saving could be spent seven or eight times over.

This is the exact opposite of scaremongering.  It is wildly over optimistic and rash.

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2 Comments Add yours

  1. Barker says:

    I don’t care if it’s £150 a week, I don’t want to be governed by a bunch of unelected suits in Brussels.
    What’s more, the UK’s trade in this free market runs at deficit of £62 billion a year, while Germany runs a surplus to the same amount. So I don’t think we will need to pay a penny to trade in the eu because it would cost Germany too much money.

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  2. Thanks for your comment. Your first statement is one of bald fact. It is perfectly reasonable to want to leave the EU over issues of democracy and sovereignty. I don’t dispute this. But there is a clear indication that to do so will be to the detriment of the UK economy and it is dishonest of the leaders of the leave campaign to suggest otherwise. It’s a choice, which is more important the loss of some democracy and sovereignty or a reduced standard of living.

    Your argument regarding the trade deficit is misguided. The UK is running a huge current account deficit, not just with the EU, but with the rest of the word too. This is not sustainable irrespective of whether we stay or leave the EU. It is caused as a result of the UK’s lack of productivity and also as a result of the over valuation of the pound. At some point, if it is not addressed, there will be a marked slide in the value of the pound, we will see price rises on imported goods and the deficit will reduce. However relying on BMW and Mercedes to allow us free access to the Single Market after Brexit is wishful thinking. While we import a lot from Germany and the rest of Europe, our imports from them represent only 7% of their exports, whereas our exports to them are about 45% of our total exports. We are much more reliant on the Single Market than the other EU members are open our market.

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