The net saving is £10 billion

Various lower estimates for the UK’s saving from leaving the EU have been put about. Let me remind people where the £10 billion figure comes from. It is the last official ONS figure for a whole year, 2014, published in the Pink Book. It is based on the following figures:

 

UK payments into EU

 

Vat contribution                                                                              £2388 m

GNI contribution (based on recently revised up GDP)         £13762 m

Customs duties                                                                               £2949 m

Total (inc small items)                                                                 £19107 m

 

Payments to UK

Fontainebleau abatement  (Thatcher rebate)                        £4416 m

UK charge for collection of customs duties etc                      £741 m

Agricultural receipts                                                                    £2309 m

European Social fund                                                                    £221m

Capital receipts (universities, regional etc)                           £1478 m

Other receipts                                                                                    £70 m

Total Receipts                                                                              £9235 m

 

NET ONE YEAR COST OF EU                                                                      £9872 m

 

 

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31 Comments

  1. A.Sedgwick
    Posted March 1, 2016 at 6:13 pm | Permalink

    Excellent hard facts from your goodself yet again.

    How long will the Fontainebleau abatement (Thatcher rebate) £4416 m last? My view not long if we Remain.

    • Lifelogic
      Posted March 1, 2016 at 6:28 pm | Permalink

      If we remain it will be a disaster for the UK economy and UK democracy.

      Furthermore we will be stuck of Cameron and tax until the pips squeak, IHT ratter/pension robber Osborne. Surely the voters will not fall for it a second time will they?

      • Hope
        Posted March 2, 2016 at 11:23 am | Permalink

        The extra sums need to be added, i.e. £1.7 that turned out to be £2.9 billion! The Sum Cameron claimed he would not pay but went belly up and doubled it. The same additional amount is written into the budget this year. The ONS has previously stated it did not know the exact amount the UK gives to the EU, so I do not accept the alleged £10 billion nonsense because there are literally billions of additions. This is even before the£280 million or so to help Turkey with migration, that Dennis pointed out the UK was not liable to pay, or the £7 billion bail out loan to Irealand. These are not insignificant sums. This is taxpayers’ money the idiot is giving away, after claiming he saved the UK from making such payments, yet somehow wants to scare everyone of the dangers for leaving!

        Good to seen Lamont is for out and thinks his former employee, Cameron, is talking nonsense about the economics of leaving.

        Reply The Autumn Statement figure for Expenditure transfers to the EU 2015-16 was £11.7 bn

    • Leslie Singleton
      Posted March 1, 2016 at 8:05 pm | Permalink

      Every fibre of their being if we Remain will be devoted to homogenising us with the rest such that as they would see it there would be no reason for the rebate. A pox on anything and everything to do with homogenisation. If I want to feel at home, I’ll stay at home.

    • Denis Cooper
      Posted March 2, 2016 at 7:47 am | Permalink

      The governments of some of the net recipient countries have the cheek to complain that they are subsidising our rebate. They know that it’s just the quirky way that the rebate is calculated and paid, but they still complain.

  2. Lifelogic
    Posted March 1, 2016 at 6:24 pm | Permalink

    True value of the payment to the UK (give all the strings attached, compliance costs, money paid only to do daft things, cost of funded by the EU adverts and the likes) perhaps less than half the £9235 m.

  3. NickW
    Posted March 1, 2016 at 6:35 pm | Permalink

    Here is a campaign slogan for leave;

    Be Leave in Britain.

    Vote Leave June 23rd.

    Simple and to the point and focused on the wording of the question.

    • stred
      Posted March 2, 2016 at 3:26 am | Permalink

      How about: Spinelly-Not on your Nelly!

      Sorry-up with wind caused by the latest diet.

  4. Denis Cooper
    Posted March 1, 2016 at 7:04 pm | Permalink

    Comparing with James Kirkup in the Telegraph “EU Facts”:

    http://www.telegraph.co.uk/news/newstopics/eureferendum/12176663/EU-Facts-how-much-does-Britain-pay-to-the-EU-budget.html

    He has:

    “In 2015, the UK’s full membership fee would have been £17.8 billion.”

    You have £19.1 billion and that’s for 2014, not 2015.

    He has:

    “Last year, that rebate reduced our contribution to £12.9 billion.”

    So he has the rebate as £4.9 billion for 2015.

    You have that as £4.4 billion for 2014.

    Therefore so far your total gross payment less rebate for 2014 is £14.7 billion, while his is only £12.9 billion for 2015, £1.8 billion less than your figure for an earlier year.

    He says:

    “The Treasury says total EU payments to British public were £4.4 billion in 2015. Payments to private organisations were worth another £1.4 billion in 2013 (the most recent year on record.) That suggests we get back almost £6 billion a year.”

    You say that for 2014 it should be £9235 million total receipts minus £4416 million for the rebate, already taken off the gross payment, = £4.8 billion, so his estimate is about £1.2 billion more than your calculation.

    Then he says:

    “Almost £1 billion of British money given to the EU is spend on international aid. That spending is counted towards the UK Government’s target of spending 0.7 per cent of Gross Domestic Product on aid.

    In other words, it’s money the UK would have to spend anyway outside the EU, for as long as the Government remained committed to the aid target.”

    So now we have his gross contribution less rebate at £1.8 billion less than yours, and his money coming back is about £1.2 billion more than yours, so his net contribution is now about £3 billion less than yours; plus he now arbitrarily throws in a £1 billion deduction for international aid which he says the government is committed to provide anyway, so now his net contribution should be about £4 billion less than yours.

    Well, it isn’t quite that much less, more like £3.5 billion less; he says:

    “Taking account of the money that comes back and the aid spending, Britain last year gave almost £6.5 billion to the EU that would otherwise not have been paid out if we were not members of the club.”

    while you say:

    “NET ONE YEAR COST OF EU £9872 m”

    or £10 billion a year as a round figure; and that works out as £27 million a day rather than his £18 million a day.

    I think I prefer your calculation to his estimates, JR, but if I was going to quote gross cost per day I think I would prefer to use the abated gross contribution of £14.7 billion a year divided by 365 = £40 million a day paid over to the EU, rather than £55 million.

    £10 billion a year it is.

  5. acorn
    Posted March 1, 2016 at 7:09 pm | Permalink

    That is one way of adding it up JR, there are several. PESA gives different numbers because (a) The account timing differs. (b) The EU gets a higher figure for UK total managed expenditure, because it does not net off some types of expenditure that Treasury / ONS does. (c) PESA is public sector accounts, so you have to add back in the private sector receipts as in JRs list. https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/446703/PESA_2015_CM_Annex_C.xlsx

    £10 billion is a good number to use on the doorsteps.

    • stred
      Posted March 2, 2016 at 3:42 am | Permalink

      10bn/6bn is bugger all wasted. The compensation for the failed Euro is something else. H2s the stinky rail project will cost 80bn + Stonehenge Druid project 2bn. Waste on NHS x 10. Waste on PFI x 10+. Environmental Agency-add up the cost of deliberate flooding. Waste on silly salaries for privatised foreign aid, Network Rail, etc.

      The question is Sovereignty.

      • Denis Cooper
        Posted March 2, 2016 at 7:58 am | Permalink

        Yes, the total cost of EU membership is a lot higher than just the £10 billion net contribution to the EU budget. But even if it’s £50 billion a year that’s still only 3% of GDP, and once again I compare that to the long term growth rate for the UK economy which is about 2.5% a year. Whether it’s net economic gains, as some like to claim, or net losses, as seems far more likely, in reality the economic effects of EU membership are a bit marginal.

        • Lifelogic
          Posted March 2, 2016 at 9:45 am | Permalink

          Indeed growth could certainly be 3 % higher PA or more outside the EU. Certainly if we have a proper Tory government, cheaper energy, far less regulation, lower taxes, efficient government, selective immigration and easy hire and fire.

          The UK would boom without the EU and Osborne’s over taxation straight jacket.

        • stred
          Posted March 2, 2016 at 10:56 am | Permalink

          DC. As shown by the Capital One report put on here by Hefner last week. Not a lot either way- and entirely ignored by the MSM and politicians. It begs the question- Why do the ‘top people’ in the Civil Service and their politician stooges spend so much time lying about the costs of Brexit? Is it about their prospects of far higher earnings in Bruxelles?

        • hefner
          Posted March 2, 2016 at 2:20 pm | Permalink

          Denis,
          Thank you for your “the economic effects of EU membership are a bit marginal”. That was my conclusion too, already some time ago.

          Now it would be great and very useful to have hard numbers on the benefits of Brexit. I know it might very difficult to do given the number of known unknowns and unknown unknowns. The Leave campaign has to come up with hard figures translated into the average benefit to households, not to GDP or UK companies. Could this be £300/year? or anything more substantial? Also cit would have to come up with impact on (un)employment, if possible over the range of jobs.

          The US primary campaign has recently been focusing on the lack of impact on average households of a reasonably going US economy. A similar comment could be made, I guess, for the UK. So what will Brexit do that Remain will not?

          Reply The one firm figure we can offer is the 0.6% gain to GDP when we spend the contribution money we currently send abroad.

  6. alan jutson
    Posted March 1, 2016 at 8:01 pm | Permalink

    Thank you JR

    Every Leave politician should carry a card around with them, with all of these figures on them.

    It should be produced at every interview or claim to the contrary by BSE politicians or interviewer.

    It should be gone through slowly, and with a complete explanation as to what each figure means.

    Then no room for any argument.

    So very simple, so very powerful.

    We need more graphics like this.

  7. forthurst
    Posted March 1, 2016 at 8:39 pm | Permalink

    “UK charge for collection of customs duties etc £741 m”

    Does this include UK inspectors to ensure that our fishermen do not steal our fish, or do does the EU send their spies to do that?

  8. Iain Gill
    Posted March 1, 2016 at 8:39 pm | Permalink

    What the ordinary voters really want to know is which tick in which box will actually result in less immigration. We seem to be doomed to massively out of control immigration regardless of whether Brussels or Westminster are calling the shots.

    The sheer numbers are too big. The perks given to foreign workers to undercut UK long term residents are beyond a joke.

    The nose of all those Tory MP’s who promised to bring immigration under control must be getting very long by now.

    • Anonymous
      Posted March 1, 2016 at 11:54 pm | Permalink

      Iain Gill – Immigration is not going to stop until we are as poor as everywhere else.

      If you dislike it then vote OUT on the 23rd and never vote Tory again.

      • Denis Cooper
        Posted March 2, 2016 at 8:05 am | Permalink

        Certainly the pressure for immigration is not going to abate until we are getting on towards being as poor as everywhere else; but that doesn’t mean to say immigration can’t be very greatly reduced, if not entirely stopped.

  9. oldtimer
    Posted March 1, 2016 at 10:22 pm | Permalink

    Yesterday City AM reported Deutsche Bank’s estimate of the effect on UK-EU trade if WTO rules applied. They estimated that UK exports to the EU would fall by £16 bn (around 1% of GDP) and EU exports to the UK would fall by £34bn. They singled out the transport sector (includes cars) and financial services as sectors likely to be hit hard. It is not clear what fx assumptions they used in making these estimates, though they do predict a fall in the £:$1 fx rate to £1.28 by end 2016 and to £1.15 by end 2017. All such estimates should be taken with a pinch of salt – no one really knows.

    Nevertheless if we then factor in the £10 bn recovery of the current net payment to the EU you have reported above, then this significantly mitigates the overall negative effect of Brexit on the UK economy as estimated by Deutsche Bank. Clearly there would be an effect, but not one that would be impossible to overcome. As Mr Cameron himself said, before the scaremongering campaign launched by No 10, the UK is perfectly capable of surviving and flourishing outside the EU. After all, the world economy has experienced a much bigger shock because of the fall in the price of oil – benign for consumers if bad for the producers. China’s slowdown has also had a huge effect on the world economy; it would not surprise me if the effect on Jaguar Land Rover sales to China has been bigger than anything that company would have to contend with under Brexit. True it would face a 10% tariff on exports to the EU, but that would be offset to some degree by the devaluation of sterling we are warned about. On the other hand German car exporters to the UK would also face the 10% tariff and also have to swallow the effects of the predicted devaluation of the £. So the chances are that JLR would have a good chance of offsetting losses in the EU by gains in the UK for the XE, XF and XJ against its now much more expensive competitors. The unpredictable, the unkowns are a fact of life for the business world – you just have to get on with it. Brexit would be no different – there is far too much hand wringing coming from the business world.

    • oldtimer
      Posted March 2, 2016 at 9:40 am | Permalink

      To amplify my post, the UK ran a trade deficit in goods of £89 bn with the EU in 2014. If the Deutsche Bank is broadly correct in its estimate of the impact of WTO tariffs then the UK balance of payments would improve by c £18bn (£34 bn less £16 bn noted above).

      These are, of course, just estimates like any other numbers that are being bandied about. But given that the Deutsche Bank wants the UK to vote Remain, it seems unlikely that it would seek to underplay the impact of Brexit; indeed it is entirely possible it might seek to over egg the costs of Brexit to frighten the voters. But we should not be frightened by their calculations but encouraged.

      The UK faces two endemic problems: a persistent, growing national debt (the roof has yet to be fixed) and a persistent balance of payments deficit (we consume too many imported goods). The £ sterling fx rate does not fully reflect these weaknesses; devaluation would help dampen demand for imports and encourage greater domestic production. It probably would be mildly inflationary but that is something the Bank of England should welcome as its target rate is 2% pa. Brexit would be something of a shock to the system, requiring change and adaptation to new circumstances, but it would be beneficial in important respects and not wholly bad as the government seems to think. And I think that the government’s negotiating position would be much stronger than they would have us believe.

  10. Richard1
    Posted March 1, 2016 at 10:33 pm | Permalink

    Thanks, the Sunday Times should take note, they have the figure at £7bn.

  11. forthurst
    Posted March 1, 2016 at 11:04 pm | Permalink

    Perhaps you could add in the £1 billion admitted by the government to be paid out in unemployment benefit to EU migrants?

  12. matthu
    Posted March 1, 2016 at 11:21 pm | Permalink

    Thank you, John.

    Although I think “Other receipts” needs to be closer to £291 m (unless you have left a line out) otherwise the receipts don’t add up.

    • Denis Cooper
      Posted March 2, 2016 at 8:05 am | Permalink

      Oh dear! That needs correcting.

  13. Anthem
    Posted March 1, 2016 at 11:34 pm | Permalink

    Excellent facts but there does seem to be an awful lot of ins and outs.

    What is the cost of arriving at these figures?

    Peter pays Paul £10. Paul pays Peter £9.

    Accountant charges both £10.

  14. The Active Citizen
    Posted March 2, 2016 at 6:39 am | Permalink

    Excellent diary entry JR. Some small points to add.

    EU Contributions by the UK
    Actual 2006 : £3.9bn net, £12.4bn gross
    Proj’d 2016 : £11.1bn net, £19.6bn gross
    [Source: ONS]

    So our net contributions to the EU this year will have almost trebled in 10 years. I see no reason for this rate of increase to fall, only to rise – particularly with the many billions which Frau Merkel’s migrant crisis is causing.

    Assuming a vote to leave this year, and the 2-year period of exit envisaged in the provisions of the Lisbon Treaty, our net contributions to the EU will be around £11.75bn when we leave.

    That’s £11.75bn divided by 28,035,000 households = £419 per household.

    Secondly, I hope people in the various Leave campaigns are working on all the additional costs of EU membership, with a very long list.

  15. Antisthenes
    Posted March 2, 2016 at 6:52 am | Permalink

    The cost of EU membership is far more than our net contribution. We lose out economically because of EU market rules and interventions. We already have enough of our own that burden businesses and taxpayers with additional unnecessary costs. Add in the cost of just running the EU bureaucratic and political machine and we have money wasted in the extreme. Then our current account already problematic sending money to the EU only exacerbates it. Governments are wasteful and inefficient bad enough that the UK one is allowed to be so but adding a second is madness.

    Then we have the social and political cost sovereignty gone. How we live our lives dictated to us by a bunch of foreigners who think nothing of trampling over our individual rights and democracy to achieve their impossible dreams. No the cost is far too much in so many ways we must get out before we are bankrupted economically, politically and socially by the EU monster.

  16. David Price
    Posted March 2, 2016 at 8:14 am | Permalink

    The problem with using a number like £10b is that it is only meaningful to politicians, economists and financial types who play with large money flows. For a lowly private sector taxpayer who has to fund it the number is so large it is generally meaningless.

    £10b is the gross tax and NI from around 1.26 million average salary private sector jobs.
    (Ave sal = 26500, tax & NI = 5400 plus emp NI of 2500 so lowest employment cost = 29000 to generate 7900. 10b/7900 = 1.26 m).

    UK private sector employs around 26m people so around 5% of them are paying for that £10b.

    £10b is 22% of the 2016 defence budget, 11% of the education budget, 9% of the welfare budget none of which we can afford as we run a continual deficit and mounting debt.

    1.26m is roughly 40x the population of Wokigham, 6x the population of Reading and more than the population of Birmingham, the second largest city in the UK.

    I don’t pretend that this is accurate and I’m sure it underestimates the true cost but trying to put it in to perspective suggests that while £10b may be funny money to some but it is far from trivial to people who generate it.

  17. Paul H
    Posted March 2, 2016 at 5:48 pm | Permalink

    There is an important point which doesn’t ever seem to come through very strongly. Suppose I take £20,000 from you, then offer to return £10,000 on the following conditions:
    1. You will spend it on what I tell you to.
    2. You will put up a billboard telling everyone that Paul H had generously given you £10,000 of his money.
    Would you feel that I had only taken £10,000 from you? Of course not. Would you feel that the billboard was a fair statement of fact? Of course not. Yet Cameron is disgracefully peddling the line to Wales, inter alia, that they will lose the £10,000 if we leave the EU.

    On the one hand we are told that the UK is too small to survive on its own, and hence have to pay £billions for the privilege of then being able to pay yet more to the Germans for their cars and to the French for their cheese. Then, in the next breath, we are told that this puny nation leaving the EU will be so traumatic that it will help crash the world economy, and that the EU needs the UK so it would be selfish to leave. If the latter is the case, the other constituent nations (soon to be EU regions) should be paying us to stay instead!

    I hope that someone, somewhere, is putting together a communications strategy on behalf of the “leave” campaign. It is going to be very important to reduce abstruse arguments and numbers in a way which makes them readily comprehensible in everyday terms – tables of numbers will not cut it. At the moment Downing Street seems to be making the running with one scare story after another. In fact I do wonder if they are doing too much too early and risk scare-fatigue setting in, but presumably the strategy is to embed the “remain” message in the public consciousness before the leavers get their act together and and make it hard for any subsequent rational debate to make its mark.

    If that is the case then people such as yourself will need to be absolutely brutal, telling it as it is and being prepared to state bluntly when – for example – Cameron and his ilk are simply lying or presenting half-truths. I do worry that not wanting to go “blue on blue”, not to mention long-standing acquaintance, is going to hobble the “leave” campaign. For example, Micheal Gove has not been seen or heard from since his initial, very impressive, declamation. Is he biding his time, or laying low in deference to a friendship which he seems to value rather more does Cameron?

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    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.

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