AXEING THE GROSS CONTRIBUTIONS TO THE EU
The British government is being advised by the IMF and Standard & Poor to move towards a policy of reducing debt in the near future. To do this, the government deficit must be reduced to nil and, indeed, a surplus achieved so that debt can be reduced.
For this year 2009/10 and 2010/11, the government estimates that there will be a deficit of £175 billion each year reducing to £100 billion or so after 2011.
In short, cuts of about £100 billion p.a. are required to government spending. The Reform think-tank has come up with a shopping list of £30 billion, the Taxpayer’s Alliance of £50 billion, while Vince Cable says we need cuts of £80 billion.
It is widely publicized that David Cameron has said he will continue to increase spending on foreign aid and the NHS while promising cuts elsewhere.
In all this the £16.5 billion paid to the EU (less the Fontainebleau abatement of £4.8 billion – net £11.7 billion) has been ignored by the three parties and the think-tanks who seem all committed to maintaining this burden on the taxpayer.
There is, in fact, good reason that the complete axeing of the gross contribution to the EU should be at the top of the list of ‘cuts’.
There are three points to make about British EU contributions. First, they have to be paid in euros. There is no question of Mervyn King printing some extra money and handing it out to the EU. It may be possible to pay British government liabilities in the UK in ‘funny money’ but the EU demands hard cash.
Second, the headline gross contribution paid to the EU of £16.5 billion consists of three parts. There is the abatement of £4.8 billion which can be reasonably said to be a deduction from the gross of £16.5 billion. Second, there is the part which is spent in the UK, about £5.0 billion. The rest, nearly £7 billion, is simply given to the EU and is a total loss to the British taxpayer.
Third, the money given back to the UK (£5.0 billion) is spent on EU mandated activities. Some of these, such as EU promotion activities, is plainly wasteful but much goes to agricultural subsidy and various social programmes.
That some activities may be considered useful and others wasteful is irrelevant.
The question from an accounting view is whether the gross (less abatement) or the net contribution is the correct figure to consider when considering the taxpayers’ EU burden and considering the amount to cut. The answer is very simple. In all aspects of government spending, cuts are considered in relation to what is spent. Secondary and tertiary effects are ignored. After all, having found out that MPs;’ expenses include moat cleaning and wisteria cutting, the fact that cuts mean moat cleaners and wisteria cutters will see a fall in income and even lose their jobs is not a reason to continue paying MPs’ outrageous expenses. Quango employees or consultants spend their incomes on all sorts of expenditure which form the income of others. All parties are committed to cutting quangocrats and consultants but do not take account that those who receive their income from the expenditure of quangocrats or consultants will lose part of their income. And there is a further tertiary effect on those who receive part of their income from the expenditure of those who receive income from quangocrats or consultants.
The same logic should, therefore, apply to EU contributions. The yardstick on which cuts should be based is the gross contribution (less the abatement). Certainly, some people in agriculture, some landowners, fake academics such as Jean Monnet professors, those engaged on EU funded social programmes or promotional activities will lose their income or their jobs.
It is impossible to take account of secondary or tertiary affects. The only figure that counts is the gross contribution – what is actually spent by the government.
FUTURUS/29 September 2009
For this year 2009/10 and 2010/11, the government estimates that there will be a deficit of £175 billion each year reducing to £100 billion or so after 2011.
In short, cuts of about £100 billion p.a. are required to government spending. The Reform think-tank has come up with a shopping list of £30 billion, the Taxpayer’s Alliance of £50 billion, while Vince Cable says we need cuts of £80 billion.
It is widely publicized that David Cameron has said he will continue to increase spending on foreign aid and the NHS while promising cuts elsewhere.
In all this the £16.5 billion paid to the EU (less the Fontainebleau abatement of £4.8 billion – net £11.7 billion) has been ignored by the three parties and the think-tanks who seem all committed to maintaining this burden on the taxpayer.
There is, in fact, good reason that the complete axeing of the gross contribution to the EU should be at the top of the list of ‘cuts’.
There are three points to make about British EU contributions. First, they have to be paid in euros. There is no question of Mervyn King printing some extra money and handing it out to the EU. It may be possible to pay British government liabilities in the UK in ‘funny money’ but the EU demands hard cash.
Second, the headline gross contribution paid to the EU of £16.5 billion consists of three parts. There is the abatement of £4.8 billion which can be reasonably said to be a deduction from the gross of £16.5 billion. Second, there is the part which is spent in the UK, about £5.0 billion. The rest, nearly £7 billion, is simply given to the EU and is a total loss to the British taxpayer.
Third, the money given back to the UK (£5.0 billion) is spent on EU mandated activities. Some of these, such as EU promotion activities, is plainly wasteful but much goes to agricultural subsidy and various social programmes.
That some activities may be considered useful and others wasteful is irrelevant.
The question from an accounting view is whether the gross (less abatement) or the net contribution is the correct figure to consider when considering the taxpayers’ EU burden and considering the amount to cut. The answer is very simple. In all aspects of government spending, cuts are considered in relation to what is spent. Secondary and tertiary effects are ignored. After all, having found out that MPs;’ expenses include moat cleaning and wisteria cutting, the fact that cuts mean moat cleaners and wisteria cutters will see a fall in income and even lose their jobs is not a reason to continue paying MPs’ outrageous expenses. Quango employees or consultants spend their incomes on all sorts of expenditure which form the income of others. All parties are committed to cutting quangocrats and consultants but do not take account that those who receive their income from the expenditure of quangocrats or consultants will lose part of their income. And there is a further tertiary effect on those who receive part of their income from the expenditure of those who receive income from quangocrats or consultants.
The same logic should, therefore, apply to EU contributions. The yardstick on which cuts should be based is the gross contribution (less the abatement). Certainly, some people in agriculture, some landowners, fake academics such as Jean Monnet professors, those engaged on EU funded social programmes or promotional activities will lose their income or their jobs.
It is impossible to take account of secondary or tertiary affects. The only figure that counts is the gross contribution – what is actually spent by the government.
FUTURUS/29 September 2009