15.1 Estimates of the costs of Britain's EU membership

Estimates vary very widely concerning the costs of EU membership to the UK.

Budgetary costs

At the very minimum, there are the net annual public sector contributions to the EU budget - currently around £3½bn to 4½bn. Gross contributions, arguably, the more relevant statistic because they represent money over which the British Government has no control over allocation, run far higher. The data for the years 1997 to 2006 are shown in the table below.

UK contributions to and public sector receipts from the EU Budget, 1997-2006 (£m)

	1997	1998	1999	2000	2001	2002	2003	2004	2005	2006
Gross contributions.	7,991	10,090	10,288	10,518	9,379	9,439	10,966	10,895	12,567	12,824
UK Abatement.	-1,733	-1,378	-3,171	-2,085	-4,560	-3,099	-3,559	-3,593	-3,656	-3,338
Total Contributions.	6,258	8, 712	7,117	8,433	4,819	6,340	7,407	7,302	8,911	9,486
Total public sector receipts.	4,661	4,115	3,479	4,241	3,430	3,201	3,728	4,294	5,307	5,188
Net contribution.	1,597	4,597	3,638	4,192	1,389	3,138	3,679	3,008	3,604	4,298

Source: House of Commons Library, answer to PQ number 130155 from Mr Bernard Jenkin MP, May 2007. The figures exclude private sector receipts which were £575m in 2006. The data were taken from various editions of the annual Treasury publication European Community Finances. The figures for 2006 in the above table are estimates.

Turning from calendar years to financial years, the latest contribution of net contributions in financial years was given in the Budget 2007. The table below provides the latest data for 2005/06 to 2007/08.

Net contributions to the EU Budget, 2005/06 to 2007/08 (£bn)

	2005/06	2006/07	2007/08
May 2006*	4.5	2.0	5.5
March 2007**	4.4	3.3	3.3

Source: House of Commons Library, answer to PQ number 130155 from Mr Bernard Jenkin MP, May 2007.

* European Community Finances, Cm 6770, table 3.2.

** HM Treasury, Budget 2007, HC 342, table C11.

The net annual public sector contributions are set to rise significantly under the current financing period (2007-2013), compared with the last financing period (2000-06). The forecast contributions to the EU Budget for 2007-13 were set out in a Written Parliamentary Question (WPQ) on 31 January 2006. A number of the figures were given as ranges.

Contributions to the EU Budget, 2007-2013 (£bn, 2004 prices, payments)

	2007	2008	2009	2010	2011-13
Gross contribution before abatement	-14.2	-14.6	-13.7	-14.4	-14.1/ -14.5
Abatement	3.9	4.6/4.7	4.8/4.9	3.8/3.9	3.5/4.1
Receipts	5.6	5.2	4.2	4.6	4.2
Net contribution	-4.6/-4.7*	-4.6/-4.7	-4.6/-4.7	-6.0/-6.1	-6.0/-6.8

Source: House of Commons Library, answer to PQ number 130155 from Mr Bernard Jenkin MP, May 2007, from a WPQ (31 January 2006).

* Note: Budget 2007 estimated a net figure of £3.3bn for 2007/08 (see table above).

Total economic costs

But these costs are, arguably, just the "tip of the iceberg" omitting, for example, the costs of CAP's protectionist policies to consumers and the costs of EU regulations on business. Two recent analyses using different data sources and different methods have come to remarkably similar conclusions about the huge current and future net costs of British membership of the EU. These analyses are by Ian Milne and Patrick Minford et al.

Milne put the cost of membership at 26% of GDP. Minford et al calculated that the cost of membership was 24.5% of GDP. The break-down of the estimates are shown in the table below.

The UK: current and future costs of EU membership (annual, net), as a % of GDP

Type of cost	Milne (most likely scenario)	Minford (mid-point estimates)	Difference: Milne less Minford
Current costs:
Regulation (Milne)	2.0	Na	Na
Manufacturing trade costs (Minford)	Na	2.8	Na
CAP	1.5	0.3	1.2
EU Budget	0.5	0.4	0.1
Single Market (Milne)	Zero	Na	Na
Inward Investment (Milne)	Zero	Na	Na
Total current costs excluding opportunity cost	4.0	3.5	0.5
Opportunity cost (Milne)	6.0	Na	Na
Total current costs including opportunity cost	10.0	3.5	6.5

Additional future costs:
Combined costs excluding opportunity cost (Milne)	10.0 (minimum)	Na	Na
Harmonisation (Minford)	Na	15.5	Na
Pensions (Minford)	Na	5.5	Na
Joining Euro (Minford)	Na	Macroeconomic volatility doubled	Na
Additional opportunity cost (Milne)	6.0	Na	Na
Total future costs	16.0	21.0	-5.0

Total current and future costs	26.0	24.5	1.5

Sources: Ian Milne, A Cost Too Far? An analysis of the net economic costs and benefits for the UK of EU membership, Civitas, 2004.

Patrick Minford, Vidya Mahambare and Eric Nowell, Should Britain leave the EU? An economic analysis of a troubled relationship, Edward Elgar in association with the Institute of Economic Affairs, 2005.

RL, May 2007.