Monday, September 02, 2013
Cost of the EU - Updated
Some time ago I reviewed Tim Congdon's estimate that the EU costs us £150 bn annually. I concluded that he had consistently decided to estimate cautiously and that this was the lowest figure that was credible. I assume this is why no EUrophile media has seriously attempted to dispute the figure.
He is right to use such caution, in that the case for leaving is overwhelmingly made by such a figure and a higher but less certain one would produce less certainty.
However it left me free to make my own estimate of a possible higher figure simply to show the options and I came up with £236 bn.
Then I was given this link, published by Richard North in 2004 as follow up to a rather silly discussion with him I mentioned a couple of days ago:
"According to the recently published 354-page annual report on Competitiveness, produced by the EU commission and available on the Europa website, "suffocating red tape" is blamed for much of Europe's sluggish performance. The commission also states that the EU could raise overall GDP by 12 percent through adopting an American-style "regulatory burden".
This is how he made up the 10% estimate of EU parasitism and how I recalculated it with underlined, the new (well actually old) 12% figure in place:
...............................................
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 underestimating 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.
But then if we bring in the 12% figure instead of the 5.5% this brings the 13% up to 19.5% of gdp.
So instead of £226 billion we get (226 X 19.5/13) the EU costing £339 billion annually.
That comes to £11,300 yearly per family across Britain.
Then look at the loss of, compounded, economic growth this parasitism causes. No wonder we are doing so badly.
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.
He is right to use such caution, in that the case for leaving is overwhelmingly made by such a figure and a higher but less certain one would produce less certainty.
However it left me free to make my own estimate of a possible higher figure simply to show the options and I came up with £236 bn.
Then I was given this link, published by Richard North in 2004 as follow up to a rather silly discussion with him I mentioned a couple of days ago:
"According to the recently published 354-page annual report on Competitiveness, produced by the EU commission and available on the Europa website, "suffocating red tape" is blamed for much of Europe's sluggish performance. The commission also states that the EU could raise overall GDP by 12 percent through adopting an American-style "regulatory burden".
This is how he made up the 10% estimate of EU parasitism and how I recalculated it with underlined, the new (well actually old) 12% figure in place:
...............................................
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 underestimating 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.
But then if we bring in the 12% figure instead of the 5.5% this brings the 13% up to 19.5% of gdp.
So instead of £226 billion we get (226 X 19.5/13) the EU costing £339 billion annually.
That comes to £11,300 yearly per family across Britain.
Then look at the loss of, compounded, economic growth this parasitism causes. No wonder we are doing so badly.
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.
..............................................
Professor Congdon is issuing an updated costing assuming " The biggest single cost to the UK and indeed to all member states is the burden of the ‘directives’ and ‘regulations’ contained in the so-called acquis communautaire. That cost is growing over time, with – I suggest – an increasing handicap each year of ½% to 1% of national output. If this were true, we would expect EU member states to have slower output growth – by about ½% to 1% a year – than the advanced, high-income countries as a whole. And that is exactly what we do see. The economic importance of the EU in the world is falling sharply."
It certainly seems reasonable to assume that, since EU regulation is increasing, the amount it costs should. However I must admit that the concept of the 12% having increased by another 6% since the paper in 2004, which would be 25.5% and £443 billion. That, while arithmetically sound is just too scary to contemplate.
However what I am willing to say is that the amount we lose from being in the EU is an absolute minimum of Professor Congdon's estimate and the laws of statistics being what they are, are almost certain to be between these 2 estimates (ignoring the last) and that there is no particular reason to think they will be at the lower end.
Which is as good an argument as can be for quitting and quitting very quickly.
Labels: EU, Government parasitism, UKIP
