What is the EU's true cost?
Accurate information about the cost of the UK's membership of the EU is of ever-increasing importance. Unfortunately, the official statistics are opaque, confusing and inconsistent
Ahead of the European elections on May 22, the recent debates between Nick Clegg and Nigel Farage brought clarity on one point. Accurate information about the cost of the UK's membership of the European Union is of ever-increasing importance.
Unfortunately, the official statistics are opaque, confusing and apparently inconsistent, and a major tidying-up job is needed. Disagreement is inevitable on the indirect costs of EU membership, the costs of regulation and protectionism, where so much depends on interpretation.
But the direct fiscal cost – the sum of the payments made by the UK public sector to the EU – ought to be a big definite round number, not least because a large government machine has the job of keeping Parliament properly informed.
Farage claimed that, in this direct sense, EU membership costs £55 million a day. The figure originated in an earlier statement from UKIP, based on official data showing that total debits on current transfers with the EU in 2010 and 2011 were just under £20 billion. Such debits are known to be dominated by payments between the UK government and EU institutions. If £20 billion is divided by 365, the answer is indeed £55 million.
Clegg disputed the number, protesting correctly that it overlooks the UK's credits from the EU and suggesting that the net figure is much lower. Given that Clegg is Deputy Prime Minister, a reasonable expectation might be that he would have the correct sums at his fingertips and could reel them off confidently.
But that assumes the government machine can produce a single set of correct statistics. Perhaps surprisingly, this assumption breaks down when analysts delve into official sources.
Every year the Office for National Statistics (ONS) produces the so-called Pink Book, an authoritative statement of the UK's balance of payments. Last year's edition gave the numbers for 2012, showing debit payments to EU institutions of £16,428 million, credits of £5,913 million and a net balance of minus £10,515 million. The figures are all there in black and white, and haven't been made up by either UKIP members or Liberal Democrats.
Also every year the Treasury prepares a White Paper on European Union finances. The results of the latest exercise were published last November. It lists gross payments to the EU of £15,746 million, to be offset by the UK rebate of £3,110 million and public sector receipts from the EU of £4,168 million, and an implied "net contribution to the EU Budget" of £8,468 million.
Again, the figures are there in black and white, and in no obvious sense are partisan or biased.
The two official sources are not the same! The ONS figure for the net cost was £10,515 million, over £2,000 million more than the Treasury's £8,468 million. Politicians are busy and short of time, and in media appearances they are told to limit themselves to a one-minute sound-bite. When they are asked for a figure on the daily cost of the EU, the information in the last two paragraphs would — quite legitimately — justify at least four answers, varying from £23 million to £45 million.
Yes, given the time to elaborate, Farage and Clegg might come closer to a single agreed total. But in television debates the demand is for speed and excitement.
On the face of it, however, none of the 2012 figures support Farage's £55 million a day claim. But that is to forget that we do now have a great deal of official information about 2013. According to the ONS, total debits on current transfers to the EU28 rose once more last year, to £22,628 million, equivalent to no less than £62 million a day.
Even allowing for the fact that a proportion of the £22,628 million has nothing to do with the European Commission and its agencies, a number approaching £55 million a day is far from absurd, even if it is not plainly correct. Every figure in this subject seems to be open to challenge and contradiction.
The Clegg/Farage confrontation was just a taster. The main course of the debate on EU membership will come in 2017 or later when the referendum on continued EU membership is held. Reliable facts and figures will be essential.
The government – any government, regardless of its political complexion – must try to make sure that the public is well-informed, and that the statistics produced are accurate and clear. Inconsistencies between numbers from two or more supposedly trustworthy official bodies are a nuisance and should as far as possible be avoided.
Having said that, such inconsistencies are the mark of a functioning democracy in which well-meaning, low-ranking statisticians are not forced to kowtow to a monolithic official orthodoxy. Perhaps the publication of conflicting numbers from the ONS and the Treasury is something to celebrate rather than to condemn, despite all the trouble that it causes.
Tim Congdon is a leading economist and honorary chairman of the Freedom Association. His latest book is Money in a Free Society (Encounter). He is the author of an annual study for UKIP, How much does the European Union cost?
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