Cost of the EU: Can we count on Express estimates

Published: 1st Feb 2011

'EU membership... imposes costs that impede prosperity. The most obvious cost is our net contributions to the EU budget', argues Ruth Lea, Economic Advisor at the Arbuthnot Group.

Writing in the Express for a special edition entitled 'Get Britain out of the EU' published earlier this month, she states that our net contributions to the EU amount to over £8 billion for the current financial year according to last June's budget. This figure does not greatly contradict Office for Budget Responsibility forecasts in the June 2010 Budget, which expect the net contribution for 2010-2011 to be £7.7 billion.

But the Express makes a number of other claims regarding the contribution which the UK makes to the EU which seem contentious.

Leo McKinstry in the same feature suggests that 'we waste £12 billion a year on our contribution to Brussels'. This tallies with figures published by the House of Commons Library which show that the average annual gross contribution of the UK to the EU budget between 2005 and 2008 was around £12.5 billion.

However theses analyses only present one half of the ledger, and the Express goes on to print the sums which the UK receives from the EU. Here we can read that the annual contribution the UK makes to the EU (cited as €13.7 billion) is offset against 'what [we] take out', at €8.2 billion.

In fact, these claims are inconsistent with others cited in the Express. They state, with reference to the Taxpayers' Alliance, that 'EU membership costs this country £125 billion a year'. Nigel Farage, UKIP Leader, also claims that the UK pays the EU £48 million a day.

These figures are not only contradictory — they are also inaccurate. The net statistics (the gross contribution minus refunds, abatements and public sector receipts) listed by HM Treasury are set at £3.6 billion for 2005, £3.9 billion for 2006, £4.6 billion for 2007, £3.3 billion in 2008 and £2.5 billion in 2009. Even looking at the largest estimates, which include the gross contributions the UK has made to the EU through levies and customs duties, the figure in 2009 reached £14.1 billion, including the UK abatement, nowhere near the £125 billion a year estimate stated by the Express.

Taking the net figure of £2.5 billion would lead to a daily cost of only £6.84 million; on the basis of the gross cost in 2009 of £14.1 billion, we would be left with an estimate of £40 million daily. Averaging the gross cost from the last eight years gives us a mean annual gross figure of £13.9 billion which would average out to £38.1 million a day. Both these figures do not reach Mr Farage's estimate, with the net figure furthest from the mark.

How might they have come to such estimates?

The Taxpayers' Alliance, the predominant source of the Express' EU-related claims, factors in a number of different costs to its calculations, including the cost of red tape, VAT and other tax fraud, higher food prices as well as maintaining EU officials in member states. However, it is difficult to quantify many of these additional costs, thus raising doubts about the validity of the figures.

Common Agricultural Policy and Common Fisheries Policy

Martyn Brown writes an article costing the various projects commissioned by the EU, and makes reference to both the Common Agricultural Policy (CAP) and the Common Fisheries Policy (CFP). He cites figures gathered by the Taxpayers' Alliance that the annual bill to Britain of the CFP is £2.8 billion. Like the calculations made for UK contribution to the EU budget, they factor in contingent costs such as the decline in communities at £27 million, loss of comparative competitiveness at £10 million and the administrative burden of the policy at £22 million.

The Taxpayers' Alliance arrives at a figure of £10.3 billion a year for the UK cost of CAP by once again considering secondary factors besides the £4.7 billion share of the CAP budget such as the cost of regulation, increased food prices in the UK (which the Daily Express had duly noted) as well as an estimate for the cost of increased social welfare at £317 million.

The domestic cost of complying with EU regulation

In an article outlining the impact of EU "red tape and interference" on British industry and commerce, City Editor Peter Cunliffe claims that 'complying with EU regulation costs the UK £75 billion a year'. Later on, however, figures are cited from the Taxpayers Alliance estimating the cost to business of complying with EU regulation at £64 billion and the cost of administering at £32 billion.

Again, these claims are at odds with figures from the Department for Business, Innovation and Skills (BIS), who calculated the annual cost of EU regulation at £8.6-9.4 billion in 2010. This is the monetary cost that the EU regulatory burden places on UK businesses annually. However, it must be noted that there are a number of specific regulations that have a significant regulatory cost in the UK, for example, recent changes to the Pregnant Workers Directive agreed in the European Parliament could cost the UK an extra £2.5 billion annually.

Another study by the British Chambers of Commerce in its 2010 Burdens Barometer sets the cost of regulation from 1998 to 2010 at approximately £60.8 billion but as this stretches over a 12 year period, this would average out to a figure of roughly £5.1 billion annually.

The discrepancy in these may be due to the varying estimates given for the amount of regulation the UK sources from the EU. Whereas the BIS estimates that 31 per cent of the cost of regulation is derived from the EU, Euro-sceptic think tank Open Europe put the figure at 71 per cent since 1998. According to them, UK regulation cost £32.8 billion in 2009 with 59 per cent of that cost due to complying with EU, a figure of £19.35 billion. This is still far off the £75 billion figure cited by the Express.

Euractiv lists a number of criticisms that the Open Europe study has occasioned. For example, Stanley Crossick of the European Policy Centre states that much of the regulation addressed in the study would be needed anyway regardless of whether or not the UK were a member of the EU, such as the Data Protection Bill or the Employment Relations Act imposed in 1998 and 1999 respectively.

Conclusion

It seems there is a lack of consistency within the Daily Express itself with regards to the facts and figures it has published in this feature edition. It has also referred extensively to data and research which calculate many of the indirect costs of UK membership to the EU, both difficult to estimate and difficult to verify. There also seems to be few attempts to provide a cost-benefit analysis; a lot of the figures used are gross rather than net estimates which only take outgoing payments into account.

Rima Saini and Ceri Hughes

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