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16 June 2016

Do we really send the EU £350m a week?

In short: no. And agricultural subsidies, development funding for poorer areas and scientific research wouldn’t disappear in the event of Brexit, so the UK government would still bear those costs.

By Caroline Crampton

Even if you have been trying your very hardest to avoid the debate around the EU referendum, at some point in the past month you will have seen a man on television in an ill-fitting suit shouting very large numbers at you. It might have been Boris Johnson, or Michael Gove, or Chris Grayling – you can’t quite remember. But one thing they kept saying did stick in your mind: apparently, we pay £350m a week to the European Union, and all we get in return is a load of faceless bureaucrats and a bunch of non-bendy bananas.

Except, it’s far more complicated than that. The UK government does pay a “membership fee” to the EU, which is our contribution to the budget that Brussels then has to spend, but figures for 2015 show it breaks down across the year as £250m a week (still a large number, but £100m less than the shouty man claimed). That adds up to £13bn for the whole year. In 2014, it is estimated that the UK economy was worth £1.82trn in cash terms, so the EU contribution works out at less than 1 per cent.

This does not take into account the “rebate”, a word that gets thrown around a lot in these discussions. In the mid-1980s, when what we now call the EU was still known as the European Economic Community, Margaret Thatcher successfully made the case that because the UK’s GDP was higher than that of other members, and because we traded more with non-EEC states, we were making a disproportionately high contribution to the Brussels budget. Surprisingly, the Leave campaign doesn’t bang on about this very much, even though it represents one of the biggest changes to date in the UK’s relationship with the EU. As a result of Thatcher’s negotiations, we get a rebate on our membership fee, which last year was calculated as £5bn. It’s an instant discount, applied here in Whitehall, so we don’t even have to send the money to Brussels only for bureaucrats to send it back.

Whatever Nigel Farage would have you think, we also get economic benefits from our membership of the EU that we offset against the cost. In 2015 EU provisions such as the Common Agricultural Policy and the European Development Fund benefited the UK to the tune of £4.4bn. Outlying and poorer areas (for instance, Cornwall and the Scottish islands) receive money for infrastructure, industry and tourism. We also include our contribution to the EU aid budget – £816m in 2014 – in deciding if our giving matches the foreign aid spending target for developed countries of 0.7 per cent of national GDP. Altogether, the UK’s net contribution to the EU in 2015 was roughly £8.5bn: about £164m a week, or £23m a day.

Ah, says the shouty man in the suit, but that’s still a lot of money, and we wouldn’t have to pay it if we left the EU. Unfortunately, he’s not right about that, either: in order to access the benefits of trading in the single market, we would still have to make a contribution. Norway pays almost exactly the same per capita to the EU as the UK. The need to spend money on agricultural subsidies, development funding for poorer areas and scientific research wouldn’t disappear in the event of Brexit, either, so the UK government would still bear those costs.

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In fact, when we talk about how much it would cost the UK either to stay in or leave the European Union, the membership fee is a very small fraction of the amounts being debated. One study by the Institute of Economic Affairs calculates that the loss of potential non-EU trade and the regulatory burden of staying in could cost the UK economy 13 per cent of its value every year. The Remain campaign favours a report by the Confederation of British Industry, which says that membership of the EU is worth £3,000 a year to every British household as a result of the trade, investment, jobs and lower prices it brings us. Again, this is based on projections that speak to the economy as a whole; in this kind of study the membership fee barely signifies.

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All these figures are volatile and disputed, subject to varying calculation models and budgets that are constantly being revised. But we can say with certainty that Britain doesn’t send £350m a week to the EU, only to get nothing in return.