UKIP claims are just so much hot air

by Leon Duveen on 21 November, 2012

Nigel Farage & UKIP claim that we could leave the EU and instead enter into a Free Trade agreement with it as Norway & Switzerland have done They claim that this would leave us better of not having to pay our contribution to the EU budget which in 2010 was €5.4 billion net (amount paid to the EU by the government, €12.1 billion, less the money paid back to the UK through different schemes, €6.7 billion)[1].   If you add in the amount we get back from our “rebate” and other taxes & duties raised in the UK and passed to the EU, the net contribution was €3.6 billion.  This works out to about €580 (or just over £500) per person in the UK in 2010.

As usual, the UKIP claim does not give the full picture, if fact it hardly gives any of the picture.  Let’s look at Norway’s relationship with the EU.  Norway is part of the European Free Trade Area (EFTA) which is linked to the EU through agreements to create the European Economic Area (EEA).   This give Norway access to the “Single Market” but it comes at a cost.  Not only does Norway have to obey the rules of the market as set by Brussels, over which it has only a very limited say, it also has to make a substantial financial contribution, over €188 million in 2009[2] (approximately €373.50 per head of population), to the EU budget for the privilege.  Indeed some estimate that Norway is the 10th largest contributor to the EU, even though it is not a member.   It is also worth noting that most of Norway’s exports to the EU are oil & gas, both of which are desperately needed in the EU, but it still has to pay nearly 65% per head of what we pay as full members.

If the UK were to leave the EU, there is no guarantee that we could join EFTA and so benefit from access to the EU Single Market.  Even if we could, the nominal saving would only be around €1.2 billion a year (about £1 billion) from an annual UK Government Budget of £682 billion but what would the cost be?  We would lose our say over the rules by which the Single Market operates and our veto over any Treaty changes. We would lose a tremendous amount of goodwill from our European neighbours, and most importantly we would have to make bi-lateral trade agreements with the rest of the world rather than be part of the EU’s agreements.  This would have a devastating effect on this county’s manufacturing base and also impact directly on the financial markets in London which we are always told do so much for our economy.

If we were not able to join EFTA and were not able to negotiate similar bi-lateral agreements with the EU as Switzerland has (and frankly why would the EU want to if we had flounced out) then the economic outlook for the UK outside of the EU would be dire.  Cut off from our biggest customers and suppliers by being outside of the Single Market (we currently sell £13.9 billion of goods per month into the EU), we would be a small to medium economy trying to compete against the EU, USA, China, and the other BRICS nations.  It is difficult to see how we would manage, especially if the main financial markets were to move to Frankfurt to be inside the Single Market area.

I have only looked at the economic cost of leaving the EU.  Other, less quantifiable, benefits of membership are co-operation on defence, the environment, crime, protection of workers’ rights and, not least, the absence of war on most of Europe for the longest period in recorded history.

No one is claiming the EU is perfect, far from it, but we need to be in it working to make it better.  UKIP and parts of the Conservatives are deluded to think that we could “go it alone” and are trying to delude voters with half truths and cherry picked facts.  Do not be fooled, life outside the EU would be very hard for the UK.

Further information on the EEA and EU-EFTA arrangements can be found here:

http://www.eu-norway.org/ARKIV/newsarchives/EEA_agreement_facts/

http://www.efta.int/eea/eu-programmes/application-finances/eea-efta-budget.aspx


[1] http://image.guardian.co.uk/sys-files/Guardian/documents/2012/01/26/EU27_Money.pdf

[2] http://en.wikipedia.org/wiki/Norway%E2%80%93European_Union_relations#section_4

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