Judging by Twitter, Europhiles are left wringing their hands in despair, almost giving up the fight. This is a gift for the Eurosceptics, must be an inside job by a UKIPer at Brussels, total idiocy by the EU, makes it hard to defend them etc. Certainly a chunk of Labour is seeking to out Tory the Tories, as they have done on immigration, by rushing to get behind the populist call to stop Brussels in its latest outrage. Let's just turn the pan off boil for a moment and look at all this a bit more dispassionately.
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| PM "goes to war" |
We're being Singled Out
The first general reaction yesterday seemed to be that Britain was being singled out by "Brussels" by arbitrarily having a bill slapped on it to pay a great deal of money in a completely unreasonable space of time. People were asking if this was deliberate spite by Brussels, or whether it was designed to push us out. In total it was, perhaps predictably, a typically UK centric reaction. It is of course the one that's being carried through in the tabloids.
I looked at the story and asked myself whether any one else had been given a similar demand. It turns out that 11 of the 28 member states have in fact been asked to pay more. So clearly it's not just us.
Our figure, €2.1 billion, is however far larger than any other country's. Except the British economy and population is far larger than say the Netherlands': we have 64 million inhabitants, they have 16 million people. So I took the figures that were being reported and did a 3 second calculation. We are being asked for €2.1 billion extra; the Netherlands are being asked for €642 million (I had to go to the Dutch press for that as the reaction was so uniquely UK-centric at first).
So that's a demand of €32 per person for the year from every Briton and one of... oh, 20% more than that, or €38 per person, from every Dutch person.
Suddenly it's becoming a bit tricky to see this as a hate campaign directed solely at Perfidious Albion, masterminded by a garlic munching Frenchman and a beer-swilling German, over a waffle in a side street Belgian café, determined to get their revenge for our success at Empire and the War.
It's "Brussels' Fault"
Some people talk about Brussels as if it is some huge amorphous blob made up of foreigner bureaucrats that is designed solely to make our lives miserable. It is all imposed on us from abroad, with no democratic input whatsoever. They seem oblivious to the fact that all the important decision making, the really key stuff, is made by a body called the European Council.
Who is the European Council made up of? It's the heads of state or government of the national states. Yep: it's David Cameron for the United Kingdom. It's a tiny body: 28 people for each one of the member states, plus the Council president and the Commission president. This isn't thousands of foreign civil servants. It's our democratically elected national leaders setting out the political agenda and workings of the EU.
The Council determines how the EU works, by creating and amending treaties, and by making decisions. One of those decisions was made back in 2007 and it was unanimously adopted. It wasn't anything sexy or exciting: it concerned the method for calculating the annual EU budget, and in particular the dreary way statistics are calculated. Once the rule is made, it's then over to the hordes of bureaucrats at the Commission, Eurostat and other EU bodies. Remember every one of these bodies was set up as a result of the decisions of the democratically elected national leaders, to carry out their will.
Don't like the rules? Blame our leaders, who created them. It's not the fault of people whose job it is to carry the rules as they have been instructed to. If they're doing their job poorly they deserve criticism, but if they are applying the rules as they are supposed to, it is hard to blame "Brussels". Unless you're a complete idiot, of course.
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| (Picture in no way linked to preceding sentence) |
Why the Demand?
Britain has been consistently reporting too low values for our Gross National Income over the last years. Hence there has been a large adjustments upwards. It's that simple. We weren't happy with the way the statistics were calculated by everyone, wanted the system to be fairer, and have now found out we've been underpaying.
The reason the story has hit the news is that the FT published a leaked draft report on the statistics. You can read here in detail why the report says what it does, but here it is in essence:
- In May of every year the EU Commission is required to meet with representatives of each state to estimate what their Gross National Income will be for the coming year.
- Every autumn they meet again to see if there are any revisions to the numbers. This is a purely mathematical revision.
- It enables the Commission to set the revised figures in stone on 1 December of each year, as it is required to do.
Patrizio Fiorilli is the spokesman for the EU budget commissioner. He commented "The timing is far from ideal, but there are rules we have to follow." As for using 1995 as the benchmark year for calculating the impact of GNI figures: “Member states including Britain insisted on this. It is their decision,” he said.
This is a one-off large scale revision: in the UK's case it actually relates to 11 years of underpayment that works out to £155 million a year on average. It is a historic correction, not an ongoing demand for massive new contributions as many no doubt think. The Commission confirmed this yesterday: "With all these issues now cleared, future such corrections will again be rather minor, as they were in recent years."
Addendum: What hope is there when the national broadcaster wrongly claims as it did in this report, that it is an annual additional £1.7 billion that has to be paid? (They've since corrected it):
The Financial Times by contrast described the £155 million figure as "a sum that would barely deserve a footnote in the annual UK national accounts.
The 1 December deadline
The Commission hasn't plucked this date from the air either. It is the date that is set out in the rules that are followed every year, as described above. Apparently the PM found out about the issue on Thursday. The government admits the Chancellor knew on 21 October, but didn't tell the PM until 23 October. If this is such a massive issue (more on that below) you'd think George would have texted Dave and warned him WW3 was about to break out. Maybe he didn't have his mobile number. In turn, the Commission confirmed member countries were told of the revisions on 17 October. You'd assume someone would have sent an email off to the Chancellor a bit faster than all that.
Our representatives in all this, the people on the ground, are employees of the Treasury. A good question was whether they realised that there would be a large revision, or whether it was sprung on them. They are the ones who prepared the statistics for the meeting in May. It seems a little unlikely that someone didn't notice the massive difference in the GNI figures that led to the €2bn recalculation.
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| HM Treasury. George's patch |
Did the Government delay making news public about this expected revision to the UK’s EU contribution because of fears about how it would play out for the Conservative party?” he asked. Never! Our PM would never allow a paralysing fear of UKIP to affect something as important as this just because of his party interests. Surely.
Turning the Tables
The Prime Minister has ruled out paying the €2.1 billion on 1 December. He hasn't ruled out paying it entirely on a different date. He really can't: he is part of the club that has agreed the way all this works. It's not up for him to argue that rules should be bent: a constant criticism of others is that they don't stick to the agreed rules and should do so. It is also interesting to imagine a situation where it transpired the UK had been overpaying, rather then underpaying. I can't imagine we'd be throwing our toys out of the pram if that were the case.
It's the exact position Germany and France are in, for example. They have been overpaying for years and are entitled to a reduction on that basis. I don't see why they should agree to give up that refund of money, in the same way we never would. In terms of the bigger picture, Germany contributes more to the EU budget than the 19 smallest states do combined. They contribute not that far off double what the UK does.
It might seem instinctively "cruel" or "perverse" that Greece is being included in the countries that is being required to make an increased payment this year given its economic situation. But hold on one moment: it is being requested to pay an adjustment of €89.4 million. That is, with respect, chicken-feed in terms of a national budget, even a country like Greece that has been ravaged by the inhuman policies of austerity. The fact they are being asked for the payment reflects solely the fact that they have been underpaying previously and there is a fair, objective application of the rules across the board.
Another important thing to note is the stat contained in the bottom right hand of the above table. This isn't the EU conducting a "cash-grab" as has been suggested. The budget will actually be €419 million shorter on revenues than had been expected as a result of the application of the rules. Was it the Prime Minister or was it Farage (I genuinely forget) who excitedly said "This isn't fair, they weren't expecting this extra money!" - the fact is they are going to be working off less money, not more next year.
Sex and Drugs
Some people in my timeline got terribly excited about the fact that our "black economy" was being included in the statistical calculations for the first time, and that this could be responsible for the increased payment.
It is correct that our GDP was given a £10 billion boost after officials worked out that paid sex work represented £5.3 billion for the economy. In other EU countries such as Germany and Netherlands such work is legal and taxed, and has therefore been included in the statistics for years. It is therefore fair (as the national leaders agreed) that everything should be calculated on the same basis. Another £4.4 billion was added from the sale of illegal drugs. However, our economy is worth $2,900 billion. These figures represent under 1% of GDP and are hardly responsible for most or all of the €2.1 billion repayment figure.
Still, a headline of "Sex work and drugs lift EU bill" gets the clicks, I guess.
Huge Numbers
It's so hard for us mere mortals to understand numbers involving multiple rows of zeros on the end. What does a million anything look like? A billion? A trillion? We can only go on the outrage that politicians express and if they sound terribly cross, assume this must be a massive thing. €2.1 billion sounds like a huge deal anyhow. Will we ever be able to afford it?
It is undoubtedly a lot of money. Just three days ago, however, it became clear that government borrowing was 10% higher than a year ago. Its spending last month was £11.8 billion. That's in one month. The overshoot in spending was - wait for it - £1.6 billion higher (€2.03 billion) in that single month than it had been in September 2013. The Tories' careful management of the economy involved an overspend that was a full £1 billion over the expectations of the City.
This sparked ABSOLUTE OUTRAGE. TALK OF WAR. CAMERON BANGING TABLES. RIOTS IN THE STREETS. WITHDRAWAL FROM EVERYTHING. Oh. Actually, there was a story in the Guardian and one in the economics section of the Telegraph and everyone just carried on.
It's clear that utter double standards apply, and people just aren't applying critical faculties to this. The EU payment is a one-off, correcting possibly twenty years of underpayment by us, which was because of the statistics we supplied. It is in accordance with the rules we insisted on. The Government is slashing spending left right and centre, quite deliberately taking away payments from the long term disabled, and yet they are overspending to the tune of £1.6 billion in a single month. Hardly an eye brow is raised.
Where are the howls of outrage on the front page of the Mail or the Express over this? The simple fact is that the howls in the EU case come from the fact that Johnny Foreigner is seen as making the "unfair" demand, and nothing sells as well as xenophobia in today's toxic Britain.
EU Myths and Lies
Whilst we're on the subject of myths let's get something straight about EU spending. It is not going on an army of fraudulent, lazy bureaucrats in Brussels, and it does not represent a mountain of gold.
The EU budget was €144 billion in total in 2013. The member states' national budgets were €6,400 billion by contrast. It stands at around 1% of the 28 EU countries' GDP, whereas the budgets of national governments represent 49% of their GDP on average. The EU budget is always balanced, so there is no deficit or debt - unlike with national governments.
94% of what we pay into the EU comes back on expenditure in EU countries on policies and programmes that directly benefit people who live in the EU. That includes to you and me on all sorts of programmes, regional spending etc - £5.2 billion in the United Kingdom every year. 6% goes on administration. Less than 0.2% of EU spending goes on fraud.
On top of everything the UK still gets an annual rebate on its payments: a legacy of Mrs Thatcher that is worth over €3 billion a year to us. That's pure special treatment for Britain.
The Commission estimates that in 2013 the average EU citizen paid only €0,89 a day (£0.70) towards the EU budget. It points out that's less than half the price of a cup of coffee. It genuinely is hardly very expensive given the benefits that the EU brings its citizens. The CBI puts the value of UK membership of the EU at between £62bn and £78bn a year in extra trade and intangible benefits. This means jobs and income for ordinary people. €8.6 billion in and over £60 billion back out? That seems a pretty darn good deal to me.
Final Word: over to Carl
So there we have it. In summary, we asked for these rules. We've been paying too little for years. The chutzpah of David Cameron is amazing. He truly is a showman: he's successfully convincing people in this country that the EU really is a conspiracy that has unfairly singled out Britain (and pretty much Britain alone) to stump up loads of cash unfairly. This hasn't been known for months: oh no, it's just come to light. And it's a massive, massive amount of money with loads and loads of zeros (unlike the amount his chancellor and best mate is overspending on literally a monthly basis) that we can't and won't pay. And Europhiles and Labour supporters are falling hook line and sinker for this utter tosh.
I have no idea who Carl Hornsey is, but this was retweeted into my timeline. He puts it all much more succinctly than I do. I like his style.
