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Saturday, October 06, 2012

Cost of the EU

  A few days ago Tim Congdon, a prominent economist and member of UKIP produced this pdf

How much does the European Union cost Britain?

  Considering that this is a subject our government have gone to great lengths to avoid ever answering one would expect journalists to be rather interested in it. After all

“News is something somebody doesn't want printed; all else is advertising.” - William Randolph Hearst (something similar is atributed to Orwell, who would have agreed with him on little else)

  Apparently not, or more likely there are very few journalists in our "news" advertising media.     I, in 2007, produced an estimate of £73 billion based purely on the monetary contribution and Comissioner Verheugen's public admission that 5.5% of GDP is destroyed by Brussels regulation.

    Mr Congdon:

  Nature of cost / % of / Rationale

1 - Direct fiscal cost / 1% / Relatively easy to quantify from official publications and balance- of-payments data; concept is of gross payments to EU institutions over which UK government has no further control.

2 - Costs of regulation / 5% / Mandelson 2004 to CBI conference 4% of GDP, but many other sources confirm approximate estimate of this size; many subsequent directives etc. have increased costs.

3 - Costs of resource / 3¼% / CAP long recognised to cause large resource misallocation. misallocation This may now be only ½% of GDP, but other EU protectionism estimated by Minford et al 2005 to cost further 3% of GDP.

4 - Cost of lost jobs / ¼% / Open UK labour market from 2004 allowed 700,000 Eastern Europeans into the UK, taking away jobs of over 100,000 UK-born people; labour market is still open.

5 - Costs of waste / ¼% / CFP involves fish discard and effective ‘gift’ to other nations of fraud and corruption fishing rights in UK territorial waters, but costs under 0.1% of GDP; waste of over-prescriptive water standards; abuse of UK student loan system.

6 - Contingent liabilities / ¼% / Costs of ‘benefits tourism’, plus some allowance for possible recapitalization of EIB and other EU institutions.

Total   10%
 Conclusion: the UK is about 10% of GDP worse-off because of its membership of the EU.

Which he estimates as having been about £150 billion.  

 The point I would like to make about this is that it is not only a reasoned assessment but an entirely reasonable one. He has not chosen the highest cost in each instance as some government reports (eg the Stern Report) do (Stern was rubbish for other reasons too - namely that they assumed all the initial catastrophe assumptions they were given without looking at evidence)..

  I'll give you an example of what he could have done.  

2 - Verheugen actually said 5.5%, Congdon has chosen to take only 5% but could equally have assumed the commissioner, being a eurocrat was understimating and then add 1/2% for increased regulation since then coming up with 7%. 

 3 - He ignores, for very good reason, an OECD report which said the common agricultural policy cost 4% on its own.

Had he assumed it even half correct that would have added another 1 1/2% to the misallocation cost, with which it would have been difficult for europhiles to argue.

  Those bring it up to 13% of GDP. Taking a more recent GDP estimate of £1,737 bn that would be £226 billion.   

 I am actively not saying that this latter figure is correct - I don't think it is. But I am saying that no honest europhile can claim Congdon's figures aren't a moderate and reasonable estimate.   

 Indeed more trustworthy than one would expect from the government - if they had been willing to give any.


At the end he translates the £150 bn figure into just over £5,000 per household. I have previously estimated that £1,200 of the £1,300 in each household electricity bill is government regulation and that bill is only 1/3rd of the total cost of electricity - the rest being paid thorugh higher prices on everything else.

That means £9,000 per household, unnecessarily, from those 2 alone. No wonder we aren't feeling better off.

Then look at the loss of, compounded, economic growrh this parasitism causes.

Being a glass half full sort of guy I prefer to look at this, not in terms of how much has been stolen from us, but in terms of how wealthy we will be once we get a government not committed to such parasitism.

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