A certain DUP MP and former Lord Mayor was in the past apparently both an Economics teacher and Finance Minister. Given his fuzzy grasp even of basic maths, I am unsure which is the matter for greater concern.
Said gentleman created a stir by claiming that leaving the EU could increase the Northern Ireland devolved budget by “£540m”. There is so much that is ludicrous about that claim, this is going to take a while…
Firstly, where does this figure come from?
It just happens to be 2.9% of £18.6b – a figure which is the median of the various figures UKIP and co are fond of quoting as the UK’s “contribution”.
The actual figure last year was £17.8b, so already we are dealing with some fanciful rounding up. 2.9% is relevant as Northern Ireland’s proportion of the UK population.
So before we even start, the figure he meant to quote was around £517m, not £540m. But let us be generous and round it up to an even £525m.
Let us also be clear: even the figure of £525m “for the NI Budget” is predicated on all of this money being: a) available to the UK Treasury to spend post-“Brexit”; and b) allocated in its entirety by the Treasury to the devolved administrations purely on the basis of population.
The latter is somewhat fanciful to say the least, because it politely omits some obvious points:
• the money is taken from the budget for excepted matters, not devolved, therefore falls under UK spending not the NI Assembly’s (or anyone else’s);
• the point, apparently, of leaving the EU is to “take control” of things such as European immigration, environmental policy, border patrols, scientific research funding, establishment of trade deals and so on – all of which would have now to be managed entirely from UK tax revenue and government borrowing rather than pooled with 27 other countries – so Mr Osborne would be needing that £17.8 million (not that he would see it, as we will establish below) to set up the new administration around all of these things;
• Northern Ireland may be 2.9% of the population but it does not contribute 2.9% of tax revenue, a point that would soon be noted by joyous English Nationalists; and
• the cost of UK government borrowing would rise in any case, meaning money would be taken from services to pay for debt interest (we will return to that point in future).
As we shall see, some of the UK contribution is in fact already a specifically excepted allocation which would continue post-“Brexit”.
But since we are here, let’s just run with the fantasy that this £525m were the potential saving to Northern Ireland public spending of leaving the EU.
There’s an issue with the £525m straight off, because before anything else at all happens to that money, the UK receives its rebate, negotiated in the 1980s to make up for the impact of being more urban than France (a major beneficiary of the Common Agricultural Policy). The great irony here is that Northern Ireland’s population density is almost identical to France’s, and markedly distinct from Great Britain’s, yet assuming Northern Ireland pays its “share” of the UK “contribution”, it must presumably receive its “share” of the UK “rebate”.
The rebate is typically between a third and a quarter of the contribution – last year it was 27.5%.
On top of that, the UK allocates its international development aid funding through the EU, to maximise its efficiency. UK legislation (which, like most UK legislation, has nothing to do with European directives) dictates that this must be 0.7% of “national income”, which actually comes to 4-5% of the UK contribution.
So already almost a third of Northern Ireland’s “share” of the contribution (31%) has been returned in rebate or accounted for by an international aid contribution which would continue anyway – a total of £165m. At a stroke the (already fantasy-laden) “saving” is not £540m, not even £525m, but £360m.
EU allocation to Northern Ireland
Let us run through the allocation of EU funds to Northern Ireland during the current six-year period (in Northern Ireland budgetary terms 2014/15 to 2019/20).
Firstly, there is the direct funding:
• Common Agricultural Policy – Direct payments: €2.299m
• Investment for Growth and Jobs Initiative – €308m
• Common Agricultural Policy – Regional Development Programme: €228m
• Common Fisheries Fund – €23m
Let us even be generous here and take this as a full seven-year allocation – it comes to €2.86b, or €408m per annum. Let us also be generous and convert that to sterling at 75p (and 80p is much more typical thus far over that period and much more likely post-“Brexit”): that is £306m per year.
Even with a generous exchange rate, the “saving” (noting again, it was already based on political fantasy) has suddenly reduced to £54m – a tenth of the initial figure quoted. Yet we are far from finished…
Then there is the shared funding:
• PEACE IV (shared with Ireland): €229m
• INTERREG Va (shared with Scotland): €240m
Let us again be generous and ignore the fact that both of these, particularly the first, are focused in Northern Ireland due to its peace process. Let us allocate just half of these to Northern Ireland (even though we know in reality that is where the bulk of the spending will be and ignoring that it is all still to come by 2020 provided we remain in the EU), thus €469m. Splitting that again over the full seven years at a generous rate of 75p, that is just over £50 million per year.
Suddenly we have barely 1% of that £540m “saving” left – and that is being exceedingly generous to a figure which, as we have established, does not really exist in the first place.
And there is infrastructure. Let us take two road projects alone:
• A8 Belfast-Larne 13km expressway (part of Euroroute 18) proceeded not least because of an EU allocation of £14m, half the project cost; and
• A12/M2/M3 freeflow interchange construction (part of Euroroute 01) has already received EU funds and is depending on a further likely EU allocation of around £70m, around half the project cost.
So there is £84m for roads alone – £12m per year.
Suddenly that £540m figure has been reduced to, er, -£6m…!
Even at that, we have not yet mentioned other EU funding and in-kind support:
• the Horizon programme is aimed at encouraging research into new business ideas;
• the rebuilds of Ulster University campuses both at York Street and Magee are eligible for EU capital support; and
• schemes largely or partly dependent on EU citizenship enable Northern Irish students to study abroad or vice-versa (bringing money into local universities and the facilities/business around them), just one of many benefits-in-kind.
The first of these has seen tens of millions pumped into local manufacturing businesses in the Belfast area. The second means that the entire relocation of Ulster University from Jordanstown to Belfast’s Cathedral Quarter is fully underwritten by the EU’s Investment Bank. The third has helped and continues to help thousands of Northern Irish students.
Other allocations are also ongoing – for example, higher and further education received £58m from the EU during the previous funding period (2007-13).
“Brexit” would therefore see the withdrawal of funds from businesses; a requirement that the NI Executive underwrite the entire relocation of Ulster University’s Jordanstown campus (and see how it is managing with Casement Park, a minor issue in comparison); and would restrict students from vital financial support. Note that Northern Ireland is already ahead in terms of pure EU income versus contribution, even before all of this!
The “£540m saving” was plain wrong – and even the correct figure (rounded up to £525m if you are being very generous) was fantasy to start with. It took no account of the new administration of areas currently covered jointly by 28 member states post-“Brexit” and, quite unbelievably, ignored that nearly a third of that money already comes back in rebate or is a UK-determined aid budget anyway. As the money is not devolved, even if there were any over (and there is no reason to believe there would be), it would be retained by the UK Treasury.
Even taking the £360m post-rebate figure and even being generous with the length of funding allocations and the exchange rate, Northern Ireland gains directly from the EU – through CAP, educational support, peace programmes and infrastructure funding – more than £360m each year. That is before considering the value of all of the business, infrastructural and educational funds, and taking account of the underwriting and in-kind support available within the EU and/or as EU citizens for capital projects and exchanges.
It is noteworthy that even this omits the practical issue of the rise in interest rates on UK government borrowing, the rise in the cost of living for households (due to rising prices of EU imports), and the rise in trade barriers which would be the practical (and potentially devastating) impact of leaving the world’s largest single market.
The figures make the case clear. They do not suit those who want to propose “Brexit” purely for flag-waving purposes (and who thus make up fantasy numbers to suit their purely nationalistic case, no doubt in the hope no one will bother to assess them). If they want to argue we should leave the EU despite the fact it would clearly make us much less well off, let them; but no more fuzzy maths, thank you!
The real figures (and value of additional support) mean it is small wonder that the NI Chamber of Commerce, the Federation of Small Businesses, the Ulster Farmers’ Union, and a range of trade unions all fail to see any case for “Brexit”.
It is demonstrably clear that the penalty for leaving the EU is potentially severe for each and every one of us – and so utterly unnecessary!