Saturday, 7 May 2016

Brexit: The UK Contribution to the EU Budget

The primary question in the Brexit debate is: is the UK a net beneficiary or a net contributor to the EU budget? The answer is indisputable. The UK is the second largest net contributor to the EU budget, behind Germany. We put in more than we get out. Only a fool would belong to a club where one gets out less than what one puts in.

The Remain campaigners tend to quote the UK’s net contribution to the EU budget. The Leave campaigners tend to quote to gross figure. Which makes more sense?

In 2014, the UK gross contribution to the EU budget was £18.8bn (£361m per week). A rebate is deducted before the money is sent, bringing this figure down to £14.4bn (£276m per week). The EU sent £6.0bn back to the UK in the form of payments to support things like agriculture, regional development and university research, meaning the net contribution from the UK to the EU was £8.4bn (£161m per week), or about £314 per household on average.

Does it make more sense to quote gross or net contribution figure?

At first I thought it was disingenuous of Leave campaigners to quote the gross figure.  However, when tax contributions are quoted, gross figures are always used. For example, when income tax contributions are discussed, the figures are always gross.  It would be strange to say that an individual’s income tax contribution is zero (or negative!) on the basis that it is all returned to him in the form of government services.  Nobody bothers trying to subtract the value of government services from an individual's tax contributions, in order to quote net income tax contribution.  It should be the same for the UK contribution to the EU: the £6.0bn paid to the UK should not be subtracted from the UK gross contribution figure; so it is fair to say that the UK contributes £276m per week to the EU.

What about the rebate? Does it make a difference that it is subtracted before the money is even sent? Perhaps. But on the other hand, the rebate could be revoked at any time, so on that basis it could be argued that it is fair to say the UK contributes £361m per week, not £276m per week.

The 2014 figures are taken from here: http://www.bbc.co.uk/news/uk-politics-eu-referendum-35943216

Although it is based on 2010 data, here is a useful infographic showing EU contributions by member state: http://image.guardian.co.uk/sys-files/Guardian/documents/2012/01/26/EU27_Money.pdf

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