Give us our money back
Daniel Hannan offers the perfect way to cut taxes: withdraw Britain’s £12 billion EU contribution Ihave found it: the philosopher’s stone of politics, the fiscal elixir of life, the magic formula that has eluded democratic governments for centuries. There really is such a thing as a pain-free spending cut.
Over the past month, the two main parties have been arguing over whether it is possible to trim £12 billion a year from government expenditure. The Tories say that it can be done with a few nips and tucks, and that we won’t feel a thing. Labour says that slicing off such a sum will mean patients sleeping in corridors and leaky school roofs and unemployed civil servants holding out their bowler hats on street corners.
I was pondering these claims when I noticed something: £12 billion is precisely the amount that we pay the EU each year. Quite a coincidence, when you think about it. I mean, Michael Howard and Oliver Letwin are accused of lying because they think that £12 billion can be wrung from the entire budget. If Labour does not actually call them shysters, the epithet is implicit in its poster campaign. And yet here we are meekly handing over an identical sum to Brussels. If ever there was a pain-free excision, a tax cut with no losers, surely this is it.
For some reason, though, the question of our financial tribute to the EU has disappeared from the political agenda. It seems such an Eighties issue, redolent of Galtieri and Soft Cell and Rubik’s Cubes and those hideous leg-warmer things that girls used to wear. To the extent that we think about it at all, we tend to assume that the sums are fairly small, and are a sort of admission fee for our participation in the single market. After all, the whole thing was settled when Margaret Thatcher got us our rebate, wasn’t it?
Not according to Treasury figures. In the 20 years since the rebate was negotiated, we have contributed £170 billion gross (£50 billion net) to the EU budget. A billion here, a billion there: pretty soon it starts to add up to real money. Our annual financial transfer to the EU is equivalent to the entire Home Office budget. If we stopped our payments, we could give the whole country a 60 per cent cut in council tax. Or, if we preferred, we could abolish capital gains tax and inheritance tax and still have enough left over to scrap stamp duty.
It is true that £12 billion is the gross figure. The more commonly cited sum is our net contribution, which last year amounted to £4.2 billion. But why commentators should prefer this second measure is a mystery. They don’t do it in any other field of public life. No one argues, for example, that income tax, rather than being 22 pence in the pound, is in fact zero, because the whole sum is ‘given back’ in roads, schools and hospitals.
So what if £8 billion of EU funds is spent in the UK? It does not go on projects that we would have chosen for ourselves. Indeed, it is often devoted to schemes whose chief purpose is to glorify the EU: public works where the blue flag will be prominently displayed next to busy roads, for example. Sometimes the money is spent more or less overtly on advertising, as when the organisers of an exhibition cash in simply by printing the 12-star symbol on their programme. Sometimes it disappears into private bank accounts.
Ah, say the Euro-apologists, but that’s our own fault. The funds may be allocated by Brussels, but they are often disbursed by national authorities. This is true. But, precisely because the money is not seen as ours, it is rarely treated with much respect. Quangos and local councils spray Eurogrants about with abandon, and the Commission carries on signing the cheques in the fond belief that it is buying popularity. Thus, to quote an example from my own patch, Brighton council recently advertised for a six-month EU-funded project ‘to study the impact of gender mainstreaming in the field of waste management’. No councillor would dare spend his constituents’ money on such a scheme. But when it’s Europe’s money, who cares?
Only, of course, it isn’t Europe’s money. It’s ours. It has simply been sloshed through the various tubes and compartments of the Brussels machine, leaking all the way, before coming back to these shores. This criticism applies even when the money goes on impeccably worthy projects. As an MEP, I like to think that I have helped a number of honourable applicants to open the Commission’s spigots. But I never do so without wondering what their youth orchestras or training schemes have to do with Brussels. If we had hung on to our own resources in the first place, we should be able to pay for all these things with several billion pounds to spare.
If £12 billion really were the ticket price for single-market membership, it would be hard enough to justify. In the 20 years since the rebate, we have run a total trade deficit with the EU of £220 billion — a deficit we have had to make up through our healthy surpluses with every other continent in the world.
In reality, though, the EU budget has nothing to do with international commerce. I recently wrote in these pages about the happy condition of Iceland, which, through its membership of the European Free Trade Area (Efta), is fully covered by the four freedoms of the single market — free movement, that is, of goods, services, people and capital. Its payments to Brussels amount to just 0.07 per cent of the island’s GDP. The other three Efta countries also make only token contributions. Yet every one of them exports more per head to the EU than does Britain. Luxembourg, meanwhile, which is easily the EU’s wealthiest state, has been a massive net beneficiary from the budget. Indeed, for most of the 32 years of our membership, Britain and Germany have been the only significant net contributors. Some admission fee!
Our budget contribution does not purchase market access. Rather, it funds the CAP, the CFP, the EU’s overseas aid budget, the structural funds and so on. Withdraw from these things and we would truly get our money back — including the two million-odd quid that we handed over while you were reading this article. It’s worth a thought.
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