Nov 2009 20

Response to Left Foot Forward on the costs of the European Union

Left Foot Forward have posted an article which purports to “fact check” our cinema advert.  Their criticisms are shallow and don’t actually identify any problems with our advert or the reports underlying the claims it makes about the cost of the EU.

“Claim: The EU’s Common Agricultural Policy costs £10.3 BILLION a year

Wrong.

The £10.3 billion figure comes from the TPA’s own ‘Food for thought’ policy document which arbitrarily tacks on unquantifiable factors like “social welfare costs” (which the TPA put at £317 million), “regulatory burdens” (£264m) and “duplication of food safety agencies” (£5m) to the actual CAP budget (page 5). The TPA have also, failed to subtract the amount British farmers receive back from the CAP, which in 2006 was €4.3 billion (£3.9bn).

They TPA also fail to quantify the alternative to CAP, namely a separate agricultural policy for each country with France trying to out-subsidise everyone else in favour of its farmers; protectionist barriers emerging across Europe; and extra costs from divergent regulations and standards.”

There is nothing arbitrary about inclusion of costs like the additional payments that need to be made to those depending on state handouts because the CAP pushes up food prices, spending on duplicated state agencies that are required under the CAP or the cost of CAP regulations.  The CAP is a major policy which increases costs in a number of areas as well as the headline transfers from taxpayers and consumers to farmers across the EU.

That British farmers receive money under the CAP isn’t in dispute.  The scheme clearly has both costs and beneficiaries and the report was an attempt at costing the scheme, not a cost-benefit analysis, though paying £10.3 billion for £3.9 billion in payments to farmers doesn’t sound like the best deal.

“Claim: The EU’s Common Fisheries Policy costs Britain £2.8 BILLION each year

Wrong.

The figure of £2.8 billion comes from the TPA’s “The Price of Fish” document and, once again, factors in a whole series of tenuous external costs. They admit, for example, that their figures for “unemployment in the fleet”, “decline in communities”, “damage to recreational fishing” and “loss of comparative competitiveness” among others are only “estimates”, (pages 6-7). The Federal Union have previously dismissed these figures.

The entire fisheries budget for 2009 is only €900 million (£810 million) (p.3).

As with CAP, the TPA ignore the €137.8m (£124m) the UK will receive from the CFP via the European Fisheries Fund from 2007-2013 (page 27).

Indeed, the TPA ignore the fact that the decline of fishing is due to the decline of fish stocks, which would have happened anyway without the Common Fishing Policy (and arguably even more, if it weren’t for the CFP’s quotas).”

It shouldn’t be any surprise that many of the figures we quote are “estimates”.  Just about any figure that you read in the newspapers or see broadcast is, to some extent, an estimate.  For example, Left Foot Forward, in their latest post at the time of writing, have no problem quoting the proportion of our exports that creative industries are “estimated” to provide.  Our fisheries report (PDF), notably, was the first attempt by anyone – either within government or outside it – to come up with a public estimate of the cost of the CFP.

The writer of the Federal Union blog that they link to admits that he hadn’t read our report when he wrote his article.

We don’t dispute that some end recipients are beneficiaries of things like payments under the European Fisheries Fund.  But, as some of that takes the form of grants to break up ships, the British industry might see those payments as something of a mixed blessing. 

As our report makes clear, a decline in fish stocks and the British fishing industry on the scale we have seen wasn’t inevitable and is connected to the Common Fisheries Policy.  As Charles Clover, director of the new film The End of the Line says, "Europe’s fishing policy has failed".  That policy forces British fishermen to throw away vast quantities of marketable fish, the scarce resource it is supposed to conserve.  Other countries have fared far better at managing their stocks while maintaining their fishing industry, but then they aren’t part of the European Union.

“Claim: Each EU MEP costs the taxpayer £1.8 MILLION (€2 MILLION) each year

Wrong.

The TPA get this figure from an Open Europe ‘study‘ from June this year, which appears to include £1.3 million worth of pension contributions for every MEP every year.

These are the actual facts:

An MEP’s pre-tax salary is €91,984 (£82,785) a year.

Pension contributions (at 3.5 per cent of the salary) are €3,219 (£2,897) a year.

They are entitled to a general expenditure allowance of €50,424 (£45,382) a year.

They can claim an annual travel allowance for official travel to a third-party state of €4,148 (£3,733).

They have a maximum staffing allowance – for staffing costs – of €210,480 (£189,432) a year.

Assuming that MEPs claim the full amount, this adds up to €360,000 (£324,000) a year, leaving a shortfall of £1.5 million, which no realistic amount of travel expenses and attendance allowances could account for.”

The 2010 draft budget lists the costs as (in Euros):

PERSONS WORKING WITH THE INSTITUTION
€865 116 000 

BUILDINGS, FURNITURE, EQUIPMENT AND MISCELLANEOUS OPERATING EXPENDITURE
€310 984 026

EXPENDITURE RESULTING FROM GENERAL FUNCTIONS CARRIED OUT BY THE INSTITUTION
€137 945 700 

EXPENDITURE RESULTING FROM SPECIAL FUNCTIONS CARRIED OUT BY THE INSTITUTION
€232 417 000 

OTHER EXPENDITURE
€43 550 000 

TOTAL
€1.59 billion

The Lisbon Treaty coming into effect slightly changes the number of MEPs, but let us take the number as it stands now (736 until the Romanian and Bulgarian delegates are ‘activated’).

That means each MEP currently costs €2.16 million in order to pay, service, house, interpret, and send out brochures for.

You might argue that MEPs, elected or appointed, are desirable; or that they are value for money given one’s political opinion of EU integration, or how the system should function.  But, their “cost” is quite clear.

After that, Left Foot Forward makes an extended argument about regulatory cost.  Any complaints on those figu
res should be directed to EU
Commissioner Gunter Verheugen, formerly the Enterprise and Industry Commissioner, who was the actual source (still accessible online via Open Europe here).

“Claim: VAT fraud in the EU costs us £80 BILLION a year

Misleading.

This is not a “cost of the EU” – it is fraud against EU Member States by criminals that the EU is helping to combat. Without the EU, VAT fraud would still exist.”

The design and scope of VAT is set by the EU, and the tax is compulsory for member states.  Carousel fraud is therefore one cost, to those states, associated with membership of the EU.  If we weren’t members of the EU there would be other options, such as a local sales tax.  They would have their own costs, but potentially would be less liable to wastage, which impacts upon tax take and expenditure.

"Claim: Today the EU costs you TWO THOUSAND POUNDS a year

Wrong.

Even the house journal of the TPA, the Daily Express, puts the cost of membership at only £257 a family. In August, in an article featuring a quote from none other than TPA Campaign Director Mark Wallace (and taken apart by Left Foot Forward), the paper reported that Britain’s annual contribution to the European Union stood at £6.4bn.

But this takes no account of EU expenditure in the UK. The European Commission’s EU budget 2008 (Annex 5) shows that the biggest net contributor was Germany, which paid about €7.8 billion more into the 2008 EU budget than it received. By contrast, the UK made a net contribution of just €993 million. This works out at £15 per person – less than 1 per cent of the TPA claim.

The total EU budget for 2008 was €116.5 billion, which represents 0.94 per cent of the EU Gross National Income. Research suggest that “over ten years, the Single Market has boosted the EU’s GDP by €877 billion. This represents €5,700 of extra income per household.”

The Express gave the cost of contributions to the EU budget; our figure looks at broader costs such as the cost of regulation on business and higher food prices.  You can read an explanation of the figure here.

The criticisms Left Foot Forward has made do not stand up to scrutiny.  However, we are glad that our work has provoked a debate.  Too often EU policy is formed behind closed doors, with little public discussion.  The Great EU Debate aims to change that.

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  • F Wright

    I used to think the TPA were a useful non-political organisation that provided useful info to help stop waste in government. But it’s increasingly clear that you are just a front for promoting the hard-right ideology of the kind of people who support UKIP. Disappointing.

  • AdrianS

    I wouldnt describe the UKIP as hard right!
    What would you call the BNP then?
    In a democracy legitimate questioning of goverments & EU spending should be a priority and not simply dismissed or smeared by leftwing / liberals simply because it produces inconvient truths.
    It is right to question whether we get a good return from Europe for the money the taxpayers spends in it. In one breath politicians promise us more local accountability and democracy in the next they sign away our rights to Brussels which influences most of our legislation and law.
    Left or right wing we should not let this happen. Britain used to be a great country and with the challenges of the years ahead we need politcal leaders batting for the UK not bending over and getting six of the best from the EU all the time

  • themurf

    No, TPA. “The GReat EU Debate” website is another poorly argued piece of anti-EU propaganda.
    We can get that from Murdoch’s newspapers every day of the week thanks.

  • http://www.federalunion.org.uk/blog/2009/01/some-facts-about-fishing.html Richard Laming

    Re fishing, I am the author of the Federal Union article referred to and, once I had read the TPA document (I hadn’t read it because it wasn’t available then), I added to my article an analysis of it, which you can read here http://www.federalunion.org.uk/blog/2009/01/some-facts-about-fishing.html
    so your dismissal of the Left Foot Forward point is incomplete.
    Re VAT, another solution would be to have a single EU VAT system rather than having these gaps across borders. That way, the possibility of MTIC fraud would be eliminated, in the same way that there is no MTIC fraud arising from trade between England and Scotland at present. I’d be interested to know, as a taxpayer myself, why you dismiss this option.