EU: UK Membership

Baroness Noakes Excerpts

Thursday 24th October 2013 Lords Chamber

[Baroness Noakes (Con)]

My Lords, I congratulate the noble Lord, Lord Shipley, on securing this debate. Like him, I am looking forward to the maiden speech of the noble Lord, Lord Wrigglesworth. The noble Lord, Lord Shipley, and I can at least agree that whether there are any economic benefits from the UK’s membership of the EU is an important issue, but there, I fear, we part company. In my six minutes I will not be able to answer all the points that the noble Lord has erroneously raised today.

I have a pretty clear view. There are no net economic benefits of the UK’s membership of the EU. That is, the economic costs of membership outweigh the benefits and I suspect that this has been the case from the very first day that we joined the EU. Successive Governments—including, I regret to say, the current Government—have refused to commission a proper economic cost-benefit analysis of our relationship with the EU. The dominant pro-European bias in Whitehall, which takes its lead from the Foreign Office, can almost certainly take the blame for this, but I have never understood why the Treasury, where economic reason should reign, has gone along with it.

The Library’s helpful note for today’s debate shows the difficulties in estimating the economic outcome from EU membership. The studies quoted in that note show a big range from plus 6% to minus 5% of GDP. However, the Library does not appear to have seen Professor Tim Congdon’s 2013 estimate of the costs of membership which has just come out. He finds that the cost of the UK’s membership is an astonishing 11% of GDP. That is, we are worse off by 11% of our GDP each and every year that we remain EU members.

The largest single element, amounting to over one-half of the total, comes from the cost of regulation: the Social Chapter, financial services regulation, the renewables’ agenda and a host of other regulations. The Prime Minister is in Brussels today, again attempting to restrain these intolerable burdens. I expect this effort to fail as all others before have failed. Regulation is the Commission’s weapon of choice for preserving its hold over member states.

The second largest element of the 11% is the cost of resource misallocation, which accounts for around 30% of the total. The common agricultural policy, with its protectionism and overt subsidy of uneconomic agriculture, has often been seen as the main villain when it comes to resource misallocation, but that is now only a small part of the overall picture. Much more important are the impacts on both basic and high-technology manufacturing from tariff and non-tariff barriers. In 2005, these were estimated by Patrick Minford and others to be of the order of 3% of GDP. Nothing has significantly changed in the intervening years to moderate that estimate.

Professor Congdon is clear that a withdrawal from the EU would not lead to an immediate boost to the UK’s economy of 11% because much of the damage has already been done in terms of killing business enterprise in the UK. It could take a decade or more to recover—but at least it would start to move in the right direction.

There is a lot of scaremongering about what would happen if we left the EU, but one thing that is completely untrue is that 3 million or more jobs associated with exports to the EU would be at risk. We are a net importer from the EU and so more EU jobs depend on trade with the UK than the other way round. If the 3 million figure is correct, we are probably talking about well over 4 million European jobs resting on trade with us. Therefore it is fanciful to think that the UK would not continue to trade with the EU—it is just that we would probably do so via free trade agreements. We would certainly not need to be tied into the unsatisfactory Norwegian and Swiss arrangements which have already been referred to. Just as now, a minority of our trade would be with the EU. The proportion of our exports going to the EU has been declining for several years and, once we eliminate the Rotterdam-Antwerp effect from the statistics, is probably now below 40%. That it is getting less is a good trend. We need to diversify away from dependence on markets which promise low or no growth.

The single market may have made it easier for UK businesses to do business with Europe but that has come at a huge cost, with UK businesses concentrating far too much on markets which have performed badly compared with the rest of the world. UK businesses would now be in a far better position if they had concentrated on the higher growth markets in the world, including the USA, which remains our largest single trade partner. I congratulate the Government on their emphasis on overseas trade and encourage them to do more to ensure that, in particular, our small and medium-sized enterprises get access to the support, finance and advice that they need to grow in markets outside the EU.

The lack of an economic case for membership of the EU is one reason why I support a referendum on our membership of it. I believe there is no economic case for our membership and that, even if we were to renegotiate its terms, that would remain the case. We would be crazy to remain in membership if the economic case were not made.