EEC, EC and the EU: UK Financial Contributions

Debate between Graham Stringer and Philip Hollobone

Wednesday 19th April 2017 Westminster Hall

[Mr Philip Hollobone (Kettering) (Con)]

I beg to move,

That this House has considered the UK’s total net financial contribution to the EEC, EC and EU since 1 January 1973.

May I say what a huge pleasure it is to serve under your chairmanship, Mr Chope? I thank Mr Speaker for granting me this important debate. I hope that the debate will do what it says on the tin, because if my hon. Friend the Minister is unable or unwilling to do so, I shall reveal this country’s total net financial contribution to Europe since we joined the Common Market on 1 January 1973. It is a huge figure, which British taxpayers have had to spend over the past 44 years.

Mr Chope, you will recall that we joined what was then called the Common Market with effect from 1 January 1973. Its official title was the European Economic Community. Since that date, it has changed—sometimes with and sometimes without the consent of the British people—into the European Community, or the EC, and from that into the European Union. According to detailed and authoritative research published by the Library, over the past 44 years this country has contributed a net total, in real terms—in today’s money—of £187 billion. That sum has been transferred from British taxpayers to European Union taxpayers. That is up to 2016; it does not include this year, next year or the bit of 2019 before we leave that dreadful organisation. If the real-terms total is something like £187 billion today, it will be well over £200 billion by the time we leave. I estimate that we will have spent £209 billion on being a member of that organisation—that is our membership fee.

It is simply outrageous for any EU negotiator to demand that this country continues to pay to leave when we have contributed all that money, net, since we joined on 1 January 1973. I look to my hon. Friend the Minister, who is an excellent Minister in the Department for Exiting the European Union, to be extremely robust when he negotiates our exit from that institution.

[Graham Stringer (Blackley and Broughton) (Lab)]

Will the hon. Gentleman give way?

[Mr Hollobone]

I would be delighted and honoured to give way to the hon. Gentleman.

[Graham Stringer]

I am grateful. I assume that the figures the hon. Gentleman is giving are cash figures and are not updated to current value. Does he agree that, had that money been put in the country’s wallet, we would now have the largest sovereign wealth fund in the world?

[Mr Hollobone]

That is an extremely good point. The cash figure—the total of our actual payments each year in the value of money at that time—is £137.4 billion. In real terms—in today’s money—it is £184.571 billion, so £185 billion. I have added £2 billion just for fun. That is the sort of tactic that the EU negotiators will adopt, so we should start playing them at their own game. Of course, they will demand that we pay an exit or divorce bill for leaving. My argument is that we should not pay anything at all.

The European Commission’s chief negotiator, Michel Barnier, has reportedly put the exit bill at close to €60 billion. Estimates of the payment are contingent on what liabilities and assets are included and how those are shared. For example, the Centre for European Reform has produced estimates ranging from €24 billion to €73 billion, while the House of Lords European Union Committee, in its excellent report, “Brexit and the EU budget”, which was published on 4 March, points to evidence suggesting that the EU will demand between €15 billion and €60 billion. That range of estimates highlights the fact that almost every element of the potential payment is subject to interpretation and the Commission has laid out no official bill or rationale. Negotiations will determine which liabilities and assets are shared and how they are shared.

The Lords Committee concluded that if no agreement was reached with the EU,

“the UK would be subject to no enforceable obligation to make any financial contribution at all.”

The Committee received competing interpretations but felt that that interpretation was the most persuasive, although it stressed that there could be political and economic consequences of the UK leaving without reaching an agreement on the payment. I say to my hon. Friend the Minister that there will be political and economic consequences in this country if we have to pay a massive exit bill. That would be unacceptable to my constituents and, I suspect, to most Members of this House.

There are three big sources of potential liabilities as we leave, which I would dismiss almost in their entirety. The first is called—I am sorry to use French in the Chamber—reste à liquider, or RAL. In its annual budgets, the EU commits to some future spending without making payments to recipients at the time. The EU refers to those outstanding commitments as reste à liquider, and it has been suggested that the UK may be asked to contribute to that RAL when we leave.

Again, estimates of the potential size of those payments vary. Evidence to the Lords Committee suggests that the EU will argue that we could be liable for a share of between 5%, based on our share of allocated financing, and 15%, based on our gross contribution to the EU budget. The Commission’s current forecast of total RAL across the whole EU by the end of 2020 is €254 billion. Using that forecast and our maximum potential share of 15%, our liability would amount to some €38 billion. At the other end, were we to pay 5% based on our proportion of allocated pre-financing under the multi-annual financial framework, our liability could be as low as €12.7 billion. Obviously, I say that our liability should be zero, but if it is going to be at the bottom end, it should be no more than €12.7 billion.

There are other potential liabilities under the multi-annual financial framework. I am sorry about all this jargon, Mr Chope, but as you and I know, that is the way the EU has been run for the past 44 years. There is an outrageous suggestion that, because the multi-annual financial framework runs until the end of 2020, were we to leave in April 2019, we might be liable for payments made between that date and the end of 2020. Quite how the EU comes up with that is beyond me, but that is apparently its serious negotiating stance. Again, estimates vary from €14.8 billion on a 5% share to €44.4 billion on a 15% share.

However, even the German Finance Minister, Wolfgang Schäuble—I am sorry to use German in the Chamber, Mr Chope—has suggested that actually a new multi-annual financial framework could be negotiated, which would come in as soon as we leave in April 2019, thus reducing our liability to nil. The Lords Committee said that

“in Germany at least, there is an acknowledgement that the commitments made in the MFF may not be legally or politically due”.

It would seem to me that even the Germans are embarrassed by some aspects of the EU’s early negotiating stance. I argue that our liability should be zero, but the low end of the estimates is just short of €15 billion.

Then there is the thorny issue of potential pension liabilities for British nationals serving in the European Commission. The Commission of course might argue that we are liable to pay some of the pension contributions for the non-British nationals there, on the basis that the nationality of the pension recipients is irrelevant under pension law. Again, the range of estimates for our potential liability for those pensions ranges from something like €1.2 billion to €9.6 billion. If we add up all those potential liabilities, €12.7 billion, €13.2 billion and €1.2 billion at the low end for the three different categories—RAL, MFF and pension liabilities—the potential bill is €27.1 billion.

Against that, however, there is a strong moral case: we will have contributed just short of £210 billion in real terms during the lifetime of our membership. Surely that entitles us to a big slug of the EU assets. That is what would happen in any divorce court if a couple were getting divorced. According to the excellent note from the House of Commons Library, the EU has €154 billion of assets, including property, equipment, loans and investments, cash and other fungible assets. The Lords Committee concluded that the theoretical maximum that the UK could claim would be €23 billion, using 15% as a relevant share.

The UK is a member of the European Investment Bank and has capital invested in it. The Lords Committee expects that if the UK were no longer to be a member of the EU, and was therefore not a member of the EIB, it would have its capital returned, potentially with a share of the bank’s equity. The Committee says:

“The UK might expect its €3.5 billion in called up capital to be returned if it ceased to be a shareholder. Based on the current net worth of the EIB, the UK may be due a share of equity in the region of €10 billion.”

Of course, Baroness Thatcher negotiated a rebate while she served her glorious 11 years as Prime Minister. In one of her finest moments, she secured a far better deal for many years of our membership of the European Union. Without the rebate, our net real-terms contribution would of course have been even higher. I can in fact reveal that since it was introduced in 1985, it has saved British taxpayers in real terms—today’s money— £117 billion. That is a huge saving for the country as a result of what Mrs Thatcher did. We can imagine that our total net financial contribution would not have been £210 billion; it would have been £117 billion higher, had it not been for Maggie’s efforts. Sneakily, however, the EU pays us the rebate a year in arrears, so I urge the Minister in negotiating to make sure it does not try not to pay us the extra years’ payments we require when we leave. That is one of the sneaky tricks that it might try, and it would be worth €6 billion.

If we add up the €6 billion rebate, €10 billion from our share of the European Investment Bank, and €23 billion as our reasonable share of the assets, it comes to €36 billion potential assets coming our way against potential liabilities of €27.1 billion. So I would argue the EU needs to pay us. We have contributed north of £200 billion in real terms over the lifetime of our membership. If we look closely at the negotiating areas, we can see that a robust negotiator such as my hon. Friend the Minister at the table, eyeball to eyeball with Michel Barnier, should be banging the table in defence of this country and insisting that we will pay not a penny piece when we leave, because we have already contributed far more than our fair share.

I am looking to my hon. Friend the Minister, on behalf of my constituents in Kettering, 61% of whom voted to leave in the referendum, as did 52% of the people of the country: let us make sure that we have a sensible, reasonable and fair deal for the country when we leave the European Union. I hope that the Minister will stare it down.

EU Membership (UK Renegotiation)

Debate between Graham Stringer and Philip Hollobone

Tuesday 5th January 2016 Westminster Hall

[Mr Hollobone]

I thank my right hon. Friend for that intervention.

The fact is that the EU is going in the wrong direction. As we know, it is planning a new treaty to save the eurozone from itself and to give the EU more control. In many respects, that is the right response for the eurozone countries to make, but it would be bad for the United Kingdom. In truth, the EU cannot cope. In some parts of the EU, unemployment is already 25% and youth unemployment more than 50%—the worst situation since the 1930s. Debts are large and growing. Unfunded pension systems require large tax increases, immigration increases or both. Voting to remain would mean signing up to the new EU treaty currently being negotiated, which has been spelt out in the Five Presidents report. That will give the EU even more power over our economy and take our seat on key bodies such as the IMF. No new treaty has ever given powers back or saved us money.

My constituents in Kettering and people across the country will be increasingly alarmed to read the contents of the Five Presidents report, set out in July last year. Who are these pompous five Presidents? The first is Jean-Claude Juncker, the European Commission President. The second is Donald Tusk, the President of the Euro Summit. The third is Jeroen Dijsselbloem, President of the Eurogroup, whatever that is. The others are Mario Draghi, president of the European Central Bank, and Martin Schulz, President of the European Parliament. They do like to call themselves Presidents whenever they get the chance. Among their plans are a euro area Treasury and increasing control over Europe’s fiscal systems.

[Graham Stringer (Blackley and Broughton) (Lab)]

I was not going to interrupt the hon. Gentleman, but if he consults the House of Commons Library, he will find out that there are seven European Presidents, but only five of them signed the document to which he is referring. That just shows what an absurdity this organisation is.

[Mr Hollobone]

The hon. Gentleman demonstrates that he is as well read as my hon. Friend the Member for Shipley (Philip Davies), and I am grateful for that—the situation is even worse than I had feared.