Ask Full Fact: our EU membership fee and the economy

28 April 2016

“Will the money we could save by not paying for EU membership actually represent a gain to the UK economy?”

Full Fact readers

Experts on both sides agree that the impact of leaving the EU on the UK’s economy would be much bigger than what we save on the membership fee—regardless of whether they think it would be a positive or negative impact.

Economic studies put other factors down as more important

Economists say that the money involved in our contribution to the EU budget is relatively small compared to the wider economic issues involved.

In 2014, the UK economy was worth around £1,817 billion in cash terms.

The ‘membership fee’ the government sent to the EU—even before deducting money that comes back—was an estimated £14 billion.

If after leaving the EU we wanted to keep up spending in areas that EU money currently covers, such as farming, poorer regions of the country and research grants, the saving would be around £6 billion.

So the saving would be around 0.3% of the size of the economy. Researchers at the London School of Economics recently arrived at a similar figure.

They say that this would be far outweighed by the negative trade effects of not being in the single market. That’s in line with what most economists seem to think.

But you don’t have to agree with them to think that the membership fee is small relative to the overall costs and benefits of leaving.

A study from the Institute of Economic Affairs, arguing that the UK would actually gain from trade and less regulation by leaving the EU, says that our continued membership of the EU could cost the economy 13% of its value every year. Only a small portion of that is put down to the membership fee.

A third report by Open Europe that gives a range of possible outcomes, from good for the economy to bad, sees the membership cost as more significant in the grand scheme of things, but still only one of several factors. Trade and regulation are seen as more important.

Economic changes would affect the government’s finances far more than the membership fee savings

If the economy did suffer, it wouldn’t be much comfort that the government has made a financial saving on the membership. A weaker economy usually means the government gets less in taxes, after all.

The Institute for Fiscal Studies, a pre-eminent economic think tank which is on neither side, says “the overall fiscal consequences of withdrawal [from the EU] would be overwhelmingly driven by the effects of that decision on the wider economy”.

So if the economy is important to you in making your decision, it’s best not to focus too much on the membership fee on its own, and instead think about the impact overall. We’ve looked at the arguments about that here.

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