The Daily Telegraph, 21st November 2005

By Ruth Lea

A story that recently caught my eye concerned the European Court of Auditors's latest refusal to approve the EU's accounts. In the words of the court they refused, for the 11th successive year, because "the vast majority of the payment budget was again materially affected by errors of legality and regularity".

In other words, the accounts were riddled with fraud and errors. Yet, so accustomed have we become to the Commission's persistently fraudulent behaviour, the reaction was little more than a resigned shrug.

This vignette typifies much of the British attitude to the EU. We don't really like or approve what the EU does but there is a feeling that we cannot do much about it; or, more radically, that we could not prosper outside the EU's fraudulent bureaucracy.

And it is costly. The UK is the second-largest net contributor to the EU's €100billion (£70billion) budget after Germany. Last year, we paid £4.5billion more into the EU's coffers than we received, even after the rebate ("abatement") which was agreed under the 1984 Fontainebleau Agreement to provide the UK with a more equitable budgetary settlement.

The rebate is currently worth about £3billion to £3.5billion annually but as the tortured negotiations for the EU's budget for 2007-13 proceed, it is clear it is under threat. Britain's financial contribution to the EU looks almost certain to increase.

Britain is, of course, a rich country and should be generous in funding worthwhile international projects. Humanitarian aid for the world's poorest has huge moral persuasiveness.

But funding for the EU, with still half the budget going on the wholly indefensible Common Agricultural Policy (CAP) and administered by a Commission condemned by its auditors, seems to be, in economists' understated parlance, a "misallocation of resources". EU financial help for France's riot-torn cities simply looks bizarre.

Of course, one can argue that £4.5billion is a small part of Britain's GDP - a mere 0.4pc - and this is but a small price to pay for the benefits of EU membership. After all, the argument for British membership of the EU was always overwhelmingly in terms of economic prosperity. But this begs the question about just what the benefits are and, moreover, there is mounting evidence that any benefits are significantly outweighed by the costs.

For example, the CAP, protectionist and discriminatory, remains a major sticking point to a further opening up of the world markets, which could greatly assist developing countries. The CAP could yet scupper the WTO's current Doha Round of trade talks. Our membership of the EU's Customs Union means we are unilaterally incapable of negotiating any trade deals.

This was poignantly demonstrated in the recent "bra wars" skirmish, in which the Trade Commissioner Peter Mandelson capitulated to protectionist pressures from France, Italy and Spain - to our cost. And the potential benefits of the Single Market are compromised by a Commission mindset that fears free markets and favours costly regulatory compliance and control.

Moreover, the infamous rallying cry that "3m jobs are dependent on trade with the EU" looks less than persuasive when we note that Britain appears to have a structural trading deficit with the EU.

Last year, the current account deficit with the EU was £22billion, £12billion of it with Germany. If 3m jobs depended on exports to the EU, then 3.3m jobs were lost because of imports from the EU. The other EU countries have a very good trading deal with us, which they won't want to damage.

So budgetary costs apart, the evidence is stacking up that, far from aiding our prosperity, membership of the EU is positively harming it. It is time to shed the CAP, regain the ability to negotiate our own trade deals and reject the strangulating red tape.

Of course, this would mean a major redefinition of our relationship with the EU. But, given the tectonic shifts in the global economy, the time is ripe for discussion of alternatives.

I have already promoted the notion of an "à la carte Europe", in which countries individually choose the nature of their relationship with the EU, as the modern model for European countries. It's time to revisit the idea. After all, a form of à la carte Europe already exists with Norway and Switzerland, both indubitably part of Europe even though not signed-up members.

This is surely the future for the UK and, doubtless, some other EU member states. The UK should start negotiating for a future as unequivocally European as Norway's or Switzerland's but free of the EU's costly, fraudulent and economically damaging bureaucracy. Pie in the sky? Only if we think so.