The cost of EU membership

Chelsea footballers, dangerously close to failing in Europe (picture Julian Mason)

Chelsea footballers, dangerously close to failing in Europe (picture Julian Mason)

A new pamphlet from the Taxpayers’ Alliance claims to set out some acts about what it costs Britain to be a member of the European Union.  The size of the net contribution, what proportion of the EU budget goes on agriculture, that sort of thing.  (You can read their document here.)

But like all such exercises, there is as much interest in what it leaves out as what it includes.  For example, there is the claim that EU regulation costs the UK £124 billion a year, or £5,000 per household.  The source for this claim is an analysis by Open Europe.

Let us read that Open Europe research – it is on the web here – and we find those numbers in the Executive Summary on page 1.  Our eyes naturally move on to the following paragraph on that page, which reads as follows:

We estimate the benefit/cost ratio of the regulations we studied at 1.58. In other words, for every £1 of cost introduced by a regulation since 1998, it has delivered £1.58 of benefits. However, the benefit/cost ratio of EU regulations is 1.02, while the ratio of UK regulations is 2.35.

That’s right.  EU regulations benefit more than they cost, even in the eyes of the critics of the European Union.  The sclerotic, out of touch, bureaucratic, European Union, the EU that regulates anything that moves, still produces laws that are worth having.  It could do better, but even it its current form, its regulation helps more than it hinders.  Let’s hear that from the eurosceptics.

All that Open Europe can bring itself to say is that:

EU regulations come dangerously close to failing an overall cost-benefit analysis.

Dangerously close to failing.  In the same way that Chelsea came dangerously close to losing the Champions League final to Bayern Munich last year; you remember, that was the year they won it.  Does Frank Lampard look back on that night and think he came dangerously close to failure?

And from the Taxpayers’ Alliance on the subject, silence.  They can’t bear to face the prospect of EU being worth the money.

But if the eurosceptics want to pile up statistics, that’s a game that two can play.  They want to count the costs: I am going to estimate some of the benefits.

Europe is now, in contrast with its own history and in contrast with the rest of the world, remarkably peaceful.  The threat of conflict among European countries is at an all-time low.  What is that worth?

First, that means that arms spending is low.  European countries are not arming against each other.  There is no dreadnought race between Britain and Germany, France is not building fortifications along the Rhine.  Around the world, the average national expenditure on the military is 2.2 per cent of GDP: in the EU, it is 1.7 per cent.  That 0.5 per cent saving amounts to a sum of around €65 billion, or slightly more than half the current EU budget of €120 billion.

Secondly, there is the fact that Europe no longer needs conscription.  Thirteen EU member states have abolished compulsory military service since the turn of the century and only six, with 6 per cent of the EU population, still retain it.

But let us imagine that every 18 year old had to spend a year as a soldier, peeling potatoes, polishing boots, and marching up and down.  If each young person was capable of productivity of half the EU average of €41 per hour, the productivity loss to GDP for each conscript is around €30,000, or €180 billion for all 6 million people who reach the age of 18 in the EU each year.  Total EU GDP is €12.9 trillion, so conscription wastes the productive potential of 1.4 per cent of total output.

These are the costs of preparing for war, but what would be the cost of actually fighting one?  Twice in the last century, European countries fought long and bloody wars against each other, and it was the experience of doing so, and the failure of the institutions set up at the end of the first world war to prevent a repeat, that spurred the creation of what is now called the European Union.  Preventing another major conflict is a major achievement of the EU: what is that saving worth?

There have been numerous attempts to quantify the costs of fighting the world wars, but the advance of technology and the ravages of inflation make it impossible to put a precise figure on it.  (There is also something rather distasteful about putting into monetary terms an event that claimed the lives of so many millions of people, including inter alia one sixth of the population of Poland.)

The most reliable way is probably to think in terms of GDP.  The UK national debt rose from 25 per cent of GDP to 135 per cent during the first world war, and from 110 per cent to 240 per cent during the second world war.  This suggests that harnessing a modern industrial economy to fight a major war costs at least 20 per cent of GDP each year, and probably more.

Of the last 100 years, the world wars have taken up eleven of them, costing perhaps 200 per cent of GDP.  So avoiding such a war is worth, on average, 2 per cent of GDP a year, or twice the EU budget.

Altiero Spinelli remarked on the sheer destructiveness of war, that it precluded the attainment of any other political objectives and that therefore to achieve those objectives required first the abolition of the threat of war.

If anyone wants to quantify the costs and benefits of the EU, the abolition of the threat of war has to be taken into account.  While the numbers involved aren’t really the point, the benefit is nevertheless very large indeed.

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