Last week we FactChecked the Vote Leave campaign’s claim that Britain’s membership of the EU costs £350m a week.
Now the pro-EU side has launched its own campaign ahead of the in/out referendum, expected before the end of 2017.
Britain Stronger in Europe, headed by former M&S boss Stuart Rose, is brandishing its own set of figures, which suggest the average Briton benefits from the union.
We think two of the main numbers bandied about on Britain Stronger in Europe’s website are dubious. Here’s why.
“Our annual contribution is equivalent to £340 for each household and yet the CBI says that all the trade, investment, jobs and lower prices that come from our economic partnership with Europe is worth £3,000 per year to every household.”
We don’t have a problem with the £340, which you get by dividing the annual net cost of Britain’s contribution to the European Union – currently around £9bn by the 26 million or so households in the country.
Not surprisingly, Britain Stronger in Europe are using the lower of two figures we can use to talk about the UK contribution.
They are using the net figure – the amount of money Britain hands over to Brussels before seeing about half flow back in the form of rebates and other EU funding streams.
Presumably though, since Leave campaigners focus on the much bigger gross contribution, they would argue that £340 underplays the size of the bill.
It’s also true to say that the CBI, Britain’s biggest business lobby group, has estimated that EU membership is worth £3,000 a year to every household.
We FactChecked this claim in 2013 and found it wanting. Basically, the CBI published a review of the existing evidence on the economic benefits of membership.
But we thought that the selection of research the organisation looked at was biased towards the pro-EU position.
The CBI left out important papers which found that there was a negative impact from Europe, or that the costs and the benefits were roughly equal.
And the “£3,000 for every household” conclusion – based on the estimate that EU membership boosts Britain’s economy by 4-5 per cent a year – was about twice as optimistic as any of the studies it claimed to be based on.
“The average person in Britain saves around £450 every year because trading with Europe drives down the price of goods and services.”
This proved to be a tough claim to get to the bottom of, and we have to go down the rabbit hole now.
The claim comes from this paper published by the European Commission, which says: “The average European consumer benefits are in the range of 600 euros per year, in addition to the gains due to lower prices.”
So far so good – 600 euros is about £450 a year. But how did the European Commission come to that number?
Oddly, it is based on research which has nothing to do with British consumers, or EU consumers, or even the continent of Europe.
In 2006 two US-based economists published this analysis of the effects of globalisation on America from 1972 to 2001.
They found that the increased variety of goods coming on to the market in the US had the effect of boosting the country’s economy by 2.6 per cent.
All the European Commission did was take that percentage and apply it to the GDP of the EU, assuming that the same opening up of trade seen in the US had happened in Europe as well. The benefit comes out at 600 euros per household.
Is that a fair assumption to make? Perhaps. One of the authors of the study, Professor David Weinstein, told FactCheck: “They are essentially assuming that the effects on the US were general. There is good reason to believe that this is not a bad assumption.
“While there are some differences in how each country has experienced the gains from variety, it is not inappropriate to get a general sense of the magnitude by doing the calculation they did.”
So economists have found evidence that the liberalisation of trade boosts the economies of trading nations generally. What we don’t know is if this tells us anything about the European Union specifically.
Would globalisation have increased the varieties of goods available to consumers anyway – as it did in America – if the institutions of the EU had never been created?
There are other reasons why it’s hard to see that figure of 600 euros a year as a definitive statement of the worth of the EU to consumers who live there.
On the one hand, the increase in trade may have lowered prices in the shops – something not captured in that number.
On the other hand, critics would argue that some European policies like the Common Agricultural Policy have the effect of artificially raising the price of food, which we would want to weigh in the balance.
The verdict
Economists have tried to tot up all the economic costs and benefits of EU membership, and come up with wildly different estimates.
The CBI estimate of £3,000 a year net gain for every household is significantly more optimistic than a number of independent studies.
And the claim that increased trade brings a benefit of £450 to every household is hard to take seriously as an endorsement of the EU, given that it is based on research that has nothing to do with Europe.
