If the Government accept a bailout of Portugal, they will be betraying the interests of British taxpayers 3

Matthew Sinclair European Union

The European Union is already very expensive. In 2009, it cost British families £5.3 billion in net contributions but last year that rose to £9.2 billion. That’s a more than 70 per cent rise in a single year and it means families are paying over £350 a year each in net contributions to the EU. Even that understates the real cost as a lot of the money that we get back, which is netted off in that figure, is tied to wasteful projects we wouldn’t choose to spend money on ourselves.

And that is just the EU budget. The amount we pay to actually sustain the EU’s institutions and their spending programmes. The EU is also used as a vehicle to impose all sorts of costly regulations, bypassing accountable national politics. Directives are agreed in Brussels and then become immutable rocks that domestic policy has to be formed around. Once they get back here, officials and politicians gold plate them.

We saw an example of that at the Budget recently. In Brussels they agreed the EU Emissions Trading System (ETS) which puts limits on industrial emissions and results in higher energy prices for consumers and manufacturing industry. I would bet that 99 per cent of the British public haven’t even heard of it, and there was certainly no real democratic debate before it was implemented, but we are all paying a significant price for it. With that policy in place, the Government introduced a new regulation, ostensibly to make it work better called the carbon floor price. That isn’t being implemented in other European countries, who are content that the EU ETS remain less effective but cheaper. By 2015-16 the Government’s carbon floor price alone is expected to raise £1.4 billion – about £50 a family. That’s just the gold plating on one regulation. The total will be immense.

Now we’re being asked to bailout Portugal. There is no credible case that it will remedy the dire situation the eurozone is in. Countries like Portugal, Ireland, Greece and Spain (often known as the PIGS) have suffered because they had very low interest rates set for a then sluggish Germany and that led to a huge boom. Now that boom has turned to bust and they are sitting on an impossibly large liability for failed banking systems and unaffordable spending. Their economies are hopelessly uncompetitive but they can’t devalue relative to a now booming Germany. The European Central Bank have been forced to raise interest rates in order to curb inflation but that will make it significantly harder for the PIGS economies to recover. Again they are getting almost exactly the monetary policy they don’t need. As Allister Heath – Chairman of the 2020 Tax Commission – wrote today in City AM, the euro is a one size fits all straitjacket and there is no way that a proper recovery will be possible until the PIGS are cut free. They will still be facing a very tough situation and some banks will make significant losses, but there is just no sense in kicking the can down the road. That’s why the bailout for Ireland was a bad idea and we opposed it.

Andrew Lilico, Director and Principal at Europe Economics and a member of the 2020 Tax Commission, wrote a brilliant article yesterday setting out why the Portuguese bailout is a particularly bad idea. While others came looking for a bailout so it would be easier for them to adjust to living within their means, the Portuguese are coming because they can’t pass an austerity plan. Martin Callanan, the leader of the Conservative group in the European Parliament, wrote arguing that we shouldn’t take part and that we could fight the bailout politically and legally.

If the Conservative leadership can’t even muster up as much eurosceptic backbone as their MEPs then they will have spectacularly let down taxpayers. They can’t just keep going with the blame game about whether or not the last Government is responsible. At the moment it looks very much like that is an excuse to play along and put good relations in Brussels above looking after our money. There is no way that British taxpayers should be paying to sustain monetary union, a mistake they didn’t make. We shouldn’t be paying for politicians on the continent just to kick the can down the road.

Matthew Sinclair

Matthew is Director of the TaxPayers' Alliance, author of Let Them Eat Carbon and editor of How to Cut Public Spending (and still win an election)

Follow @mjhsinclair

Anonymous

Dan Hannan explains why bailing out Portugal is illegal
John

Why go on about the net contribution? The gross contribution is surely what matters. The theory is that the difference between the two is the benefit we receive from the EU. By definition, the projects which are funded by the EU are those which governments shouldn’t fund (it’s the rule). So while we’re slashing public spending – and hitting frontline services in the process – a few billion quid of second string publicly-funded projects is exempt from the chop.
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