The EU: It's the Economy Stupid!

Philip addresses the Bruges Group Conference about why the EU is a bad deal for Great Britain.

The EU: It's the Economy Stupid!

In 2004 the European Union was included in the CIA World Fact Book, the open source publication which tracks the key characteristics of every nation around the globe. It was the first time a supra-national body had ever been included in the publication dedicated to tracking developments of nation states. The reason the CIA gave for the EU's inclusion in the Fact Book was that"it has many of the attributes associated with independent nations: its own flag, anthem, founding date, and currency, as well as an incipient common foreign and security policy in its dealings with other nations. In the future, many of these nation-like characteristics are likely to be expanded."

Well so much for the intelligence gathering abilities of the CIA, we could have told them that this is the way the EU is going years ago! Indeed they might also have mentioned that the EU has its own President, Parliament, Court and embassies.

But the inclusion of the EU in the CIA's World Fact Book provides impartial third party endorsement of the fact that the EU has moved far beyond the idea of a common market which was sold to the British people by Sir Edward Heath and Harold Wilson back in the 1970s. The original Eurocrat , Jean Monet, the architect of the modern EU, first spoke of political union being the eventual aim at the time of the creation of the European Coal and Steel Community, a fact which must have been known to our political leaders who took us into the project.

The EU is rapidly taking on more and more of the trappings of nationhood and Brussels much more than Westminster is becoming the source of UK laws with around 70% of our laws emanating from the continent.

How much longer can Britain claim to be a democratic country when more than two thirds of our laws come from an unelected and unaccountable supra-national state? Laws which take precedence over those passed by our democratically elected Government. If we don't like what our Governments do we can show our disapproval in the ballot box. But no such right exists with the EU. The EU Commission can ride roughshod over the wishes of the British people and there is little we can do. We don't even have anyone to complain to. My post bag is filled with letters complaining about laws the EU has passed or money the EU has wasted, but I can't do anything about it I'm only a Member of Parliament. In fact no Member of Parliament can do anything about it, not even the Member for Sedgefield. Only collectively as a nation could really do anything to stem this ebbing of our democracy and that is through withdrawal from the EU.

Some people say that we shouldn't be"banging on" about Europe. However we have to recognise that we can only effectively"bang on" about the issues we are encouraged to, such as making poverty history and sorting out the immigration chaos when we remove the dead-hand of the EU from these areas.

Now we are told that we need to be at the heart of Europe because not to be would see us lose our cherished influence. Well I must say that this influence we are told so much about by the proponents of the EU has done a superb job in overhauling the wasteful and damaging Common Agricultural Policy and the Common Fisheries Policy. Some influence! The EU continues to lumber in a direction which is at odds with the UK's national interest and all the British Government can do is to try and spin defeats as victories for British influence. But as skilful a politician our Prime Minister might be, even he had a job presenting his negotiating away part or our rebate for little more than warm words on the CAP as a victory.

The truth is that in this country we have already won many of our arguments on the EU.

People now realise that they were lied to when we joined the Common Market in 1973 and in the subsequent referendum of 1975, only a very naïve or disingenuous politician would seriously attempt to argue otherwise.

People know that the EU is wasteful and inefficient; that millions of pounds are wasted every day by the EU.

People know that the EU is corrupt, and that year after year the auditors refuse to sign off their accounts.

People know that the EU is undemocratic and unaccountable and that there is little they can do about EU civil servants who waste our money by the billions.

People know that the UK has lost much of its sovereignty and that the EU's politically correct and often crazy laws take precedence over laws set by our Parliament.

On these issues the British people are with us and if they were asked in a referendum on these issues alone, we'd have a landslide.

But the reason we have not yet broken through is simple, and it is summed up by Bill Clinton's election winning campaign slogan of 1992: "it's the economy stupid".

It is on the economy that the argument over whether Britain remains in the EU will be lost and won. This is something which proponents of the EU realised a long time ago.

People think about issues in the way that they affect them and if you are in business your driving concern is how something affects your bottom line. EU proponents understand this and they present their arguments in terms people can understand; jobs and trade.

Like it or not most people do not see the EU as being a bread and butter issue. For most people the distant and impersonal EU is less tangible than schools and hospitals, police on our streets and the money in our pockets. Few people spend much time thinking about the constitution, but mortgages, bills and pensions occupy most people thoughts on a daily basis. Equally if you're in business you are going to be far more concerned with making money and growing your business.

By presenting Britain's membership of the EU in economic terms they know that they can sell what is essentially a political project to the British people. It is unfortunate, if perhaps understandable, that people and indeed businesses will let issues which do not affect them on a daily basis slide if they are told that to do anything about them would hurt them financially.

Now I will agree with the EU proponents that the economy, jobs and trade is the area where this argument will be decided, but I disagree that it is their trump card. When you consider the economics; when you consider the EU's effects on trade, jobs and growth you will find that the case for Britain leaving the EU is more compelling than ever.

So when a Europhile asks me why we should leave the EU, I will tell him: 'it's the economy stupid'.

We are told that if we were ever to withdraw from the EU Britain's trade with our European neighbours would suffer, that our economy would suffer, that it would mean the loss of jobs and prosperity. We are told that over 60% of our trade is with the EU and that withdrawal would mean the loss of our markets. We are told that the single market has been good for our economy and that we would suffer financial consequences from withdrawal. We are told that if we came out of the EU then 3 million jobs would go. We are told that we get financial benefits from the EU projects.

Now I will be honest with you if I were the Managing Director of a small company or employed in manufacturing I am pretty sure that I would find these to be quite compelling arguments as they relate directly to my own livelihood, my own mortgage and my own pension.

Our political leaders repeat this mantra over and over again only on Monday in his speech to the Lord Mayor's banquet the Prime Minister said:

"I can't see a single good reason for Britain not being at the centre of Europe and every good reason why it should be. Europe gives us weight and strength."

But when you examine these issues in any kind of detail what you actually find is that the EU is bad for trade, it is bad for jobs and that Britain is worse off by being in the EU and that withdrawal would give Britain a more global outlook to meet the challenges of the 21st Century. Let us look at these areas:


Now we are told that around 60% of UK trade is with the EU and that if we came out you can say good bye to that and around 60% of our economy and about three million jobs. Now I could quibble about their statistical sleight of hand as when they refer to this figure what they are actually referring to is export of goods and not the usual measure of exports which is goods and services, which when you factor in services means the EU is the recipient of around half of our trade. The reason I wont quibble the relative importance of EU versus non-EU trade is that to do so would be to give credence to the argument that this trade might be lost if we left the EU, which as I will explain is patently ridiculous.

The reason trade wont be lost is that it is a two way street, our European neighbours make money from us too. If fact they make more money from us than we make from them. When you look at the balance of trade between the UK and the EU, Britain has been running at a trade deficit since we joined in 1973. According to the House of Commons Library between 1973 and 2005 the cumulative trade deficit between the UK and the EU amounts to an astonishing £230 billion. Our EU partners have made £230 billion more from us than we have from them.

Now ask yourselves given the value of the UK market to the European economies what do you really think the chances are of the EU ceasing this trade if we left the EU? How many European businesses do you seriously expect will say"alright that's it Britain has left the EU, I don't care what it does to my profit margins I am no longer trading with them on principle". Not very likely is it.

In fact the non-EU European country of Switzerland enjoys a healthier balance of trade with the EU than we do and has a far higher proportion of its trade with the EU than we do. So much for the benefits of EU membership.

Indeed this deficit continues to rise while the UK enjoys a surplus with the rest of the world and our surplus with the USA continues to rise year on year.

Britain built its wealth as a global trader, and our future prosperity depends on developing our own free trade agreements with China, India, the rest of the Commonwealth and Nort and South America. It does not depend on being part of an inward-facing, backward looking protection racket set up to protect inefficient continental farmers and businesses.

We were trading with Europe long before we were members of the EU and, if Gordon Brown doesn't destroy it, I will bet you my parliamentary pension that we will be trading with Europe long after we've left too.


This also gives the lie to the claim that three million jobs would be lost, they would not. Let us accept their figure of 3 million jobs, these jobs may be dependent on trade with Europe but these jobs are not as EU proponents suggest dependent on our membership of the EU. Trade with Europe is not dependent on our membership and neither are the jobs is supports. The only jobs dependent on the EU are those of EU civil servants based here, which I will admit may have to find alternative careers; now I know the EU is a bloated bureaucracy but is hardly accounts for 3 million jobs now does it.

Importance the UK economy

In making the case for the EU its proponents claim that the EU is responsible for 60% of the UK economy, it is not. Exports of which the EU accounts for about half are responsible for 21% of UK GDP, so trade with EU countries accounts for about 10% of GDP. Now as I said I do not believe this trade would be lost and I mention it only because so much of our economy has little or no dealings with the continent, yet they must bear the burden of EU red tape and regulation. Now if you are a large multi-national you are better able to shoulder this burden. But if you are small business in Shipley then the effect can be crippling.

The benefits of EU Membership

If you want the truth about the EU and the much hailed single market, don't go to a British Politician go straight to the horse's mouth, the European Commission. For our friends in the Commission the EU is unashamedly a political project so to them unlike their British counterparts, its economic failings do not take away from the validity of the project.

Earlier this year Enterprise and Industry Commissioner, Gunter Verheugen, stated that EU regulations were costing the European economy 600 billion euros a year! 600 billion that amounts to around 5.5% of Europe's total GDP!

On it own this figure is staggering enough that each year European businesses are losing the equivalent of the entire GDP of Holland each year, but when you consider it against what the EU estimates to be the financial benefit of the single market then case against the EU does become a little open and shut. Now the most recent Commission estimates are for 2002 when the Commission put the benefits at 165 billion euros, quite substantially less than the costs. Even when you take account of inflation the costs of EU membership to business is around three time the benefits.

So much for the economic benefits of the EU! Far from being good for business the bureaucratic EU is actually profoundly harmful to business, and that is by their own admission.

I wonder how much of these costs are falling on the shoulders of British businesses and I wonder what a British businessman feel about withdrawal when faced with a figure like that. Indeed an ICM/Open Europe poll of Chief Executives, found that 52% of businesses think the cost of implementing EU regulations now outweighs the benefit of the Single Market.

It also found that 52% think the EU is"failing" and 60% agree with me that we should leave the EU and just have a free trade only agreement with them. This is a remarkable transformation of business attitudes to the EU in Britain. Interestingly in that same survey only 24% thought that the Eu would gain in importance in the world economy whereas 35% thought it would decline. These Chief Executives believed that China, India and South America were the places likely to gain in importance economically in the future.

The EU is good for our economy

Since 1970 the United States has enjoyed net growth of around 25% yet the EU, this much heralded economic powerhouse has enjoyed net growth of around zero. When you consider those stark figures you have to ask whether the EU has contributed to this sluggish growth. When you compare the EU's stifling levels of regulation and high taxes with the US's business friendly low tax economy, you are forced to conclude that the EU's social democratic model has contributed to this.

The UK if the Chancellor is to be believed has enjoyed the longest period of sustained growth, but what might this have been if we had not had the drag of the EU?

Adam Smith once said that there is an awful lot of ruin in a nation, well there is even more ruin in 25 especially when that 25 contains some of the most powerful economies in the world. The European economy can absorb much of the harmful effects of the EU before European businesses and European citizens begin to feel the pinch. But believe me that pinch will come. The EU cannot continue on its current track and still expect to see economic growth and be able to compete with the emerging economic powerhouses of China and India and a resurgent Russia buoyed by its vast mineral wealth. In years to come historians will look back and say the biggest winner of the EU project was China.

If we are to compete with the vastly cheaper labour forces of India and China our economy will need to be agile and competitive with a light regulatory touch not the EU model of crippling regulation, restrictive employment laws and high taxes. Surely the EU and the British Government must see the economic threat posed to our economy by India and China

The cost of EU membership

Britain puts more into the pot than it gets out of it, we have long been a net contributor to the EU with British tax payers funding inefficient farmers across the EU and any number of wasteful EU social projects.

Since we joined the EEC in 1973 Britain has contributed almost £200 billion in membership fees. In 2007 British taxpayers will pile on another £14.2 billion on to this Bill for our continued participation. In 2006 the full cost to the UK both direct and indirect works out at an astonishing £50.6 billion and in 2007 this net cost of the EU is set to rise to £52.4 billion.

Any myths about the benefits to the UK of the EU were certainly dispelled by the excellent and timely research by the Bruges Group into the costs and benefits of membership. Let us just look at some of the findings.

The annual cost of EU membership for every man woman and child works out at £873; can you imagine what a hard working family of four on a tight budget could do with that kind of money?

Every minute of 2007 the EU will cost the UK £100,000. Every minute! It really beggers belief! Now I've got a chocolate bar for the first one of you who can tell me at the end of this speech how much the EU has cost us in the time its taken me to make it.

Just think what we could do with that money. Just think of the nurses, operations, policemen, prisons or, now don't tell George Osborne I said this but dare I say it tax cuts. If Britain came out of the EU we could afford tax cuts, increased defence spending and spending on the public services. When you consider how wasteful the EU, how many people do you think would see this as the best way to spend this money?

We all know millions upon millions of British Taxpayer's money is being wasted but the EU, but there is no independent means of proving this. Here in the UK we have the National Audit Office, so when the Government waste inordinate amounts of tax payers' money on unwise or badly managed projects there is a body which can go over the books and show to the public what went wrong. No such body exists within the EU. The EU is left to police itself and as is common in the political cultures of certain European countries a level of waste and corruption is seen as inevitable and therefore there is little anyone can do about it.

The member states are also unlikely to do anything to expose this corruption. Those who are net receivers are unlikely to raise objections about an inefficient and wasteful system which directly benefits them. They know the EU doesn't work, but it works for them. For net contributors like the UK the cost of the EU inefficient or otherwise is a debate which they don't want to have. The last thing the British Government want is to have the EU wash its dirty linen in public and for the British people to see just how many doctors, nurses or policemen could be paid for with the money wasted in Brussels. Apart from the sporadic interest demonstrated by certain sections of the media, the British people remain oblivious to the staggering waste of the EU.

Ask yourself is this really a body to which we want to be committing billions when prisons are full to bursting, hospitals are closing and our armed forces are so stretched and poorly equipped?

Conclusion: It's the economy stupid

The indictments against the EU are devastating. So when a proponent of the EU brings the debate on to the economy he is not playing his trump card but bringing it on to our territory. The EU is a failed economic system which costs the British tax payer and British business billions so it is we who should be challenging our opponents. It is they who should be defending the economic implications of their costly and wasteful position.

If Britain is to remain competitive in the 21st Century, if we are to continue to attract investment and win business then we will need to start by freeing ourselves from this stifling political union. The 21st century with the emerging economies of Asia is not a time for uncompetitive protection rackets. Businesses is global and if we are to compete we must be too. The internet means that the barriers of nation states and supra-national states are of much less relevance than they once were. Take online auction sites you can operate a business from your living room in Doncaster and trade with an artisan in Jakarta. Government must reflect this with a light regulatory touch and the main impediment to this is the EU.

So while we must continue to make our arguments about sovereignty, democracy, accountability and corruption, the most pressing arguments for leaving the EU, and those most relevant to the British people and British business, are economic. So when asked why we need to leave the EU, we should always quote Bill Clinton: it's the economy stupid.