The CBI gets its sums wrong

CBI1

Pro-EU politicians from the old parties keep telling us that “every UK family benefits by £3000 a year from EU membership”. This is based on a recent CBI report. But there are big questions about the CBI’s numbers.

First of all, they’ve done no new research.  The CBI has simply carried out a review of existing literature on the theme. They’ve taken public estimates of “benefits” – typically 2 to 3 % –and rounded them up substantially. They say “It is not unreasonable to infer (my emphasis) from a literature review that the net benefit arising from EU membership is somewhere in the region of 4–5% of UK GDP or between £62bn and £78bn”.  This claim is unsupported by references, at least in the Executive Summary.

It’s worth reading the excellent critique of the CBI position in the Telegraph blog by Mats Persson, Director of Open Europe.

The CBI appears simply to have ignored the costs of membership.  This is a bit like the reverse of Lord Stern and The Stern Report on Climate Change.  He took all the costs of “global warming”, exaggerated them, and ignored the benefits.

They have also implicitly assumed that we would lose the trade we currently do with the EU when we leave.  They suggest that in any trade negotiations after we leave, the EU would have the stronger hand.  This ignores the fact that we will be not only the EU’s largest external trade customer, but also the largest net customer.  Clearly the UK will have the stronger hand.  The CBI has failed to produce an exhaustive study of the literature and has ignored the many contrary views which have been published.

The most notable omissions include cost/benefit analyses by the Institute of Directors (IOD) and the National Institute of Economic and Social Research (NIESR). The conclusion of the IOD was that after totting up all the economic costs and benefits, staying in the EU leaves Britain out of pocket, to the tune of 1.75 per cent of GDP. A report by NIESR in 2004 concluded that EU membership delivers only a small net benefit.

Further studies by the Institute of Economic Affairs (IEA) and the US International Trade Commission found it essentially too close to call either way.  The author of the IEA paper, the late Professor Brian Hindley, says: “Any economic gain or loss is small – almost certainly less than 1 per cent of GDP… more precise or more sophisticated calculations will not arrive at a large number for either gain or loss.”

This is very different from the CBI’s estimate of EU membership boosting GDP by 4-5 per cent a year. Have these contrary studies been missed off the list because they are “off-message”, as far as the CBI is concerned?

The independent House of Commons library has recently produced an alternative study on the topic which has a choice of literature completely different from the CBI, and represents a much broader spectrum of opinion.  Separate and independent analyses by two of the UK’s most respected economists, Tim Congdon and Patrick Minford, both indicate that the costs of membership, including the huge damage inflicted by gross over-regulation, cost as much as 10% of GDP.

Former trade Commissioner Peter Mandelson estimated trade benefits at 1.8% of GDP (the CBI seems to start at 3 to 5%, and round up to 4 to six per cent).  But former Industry Commissioner Günther Verheugen estimated the regulatory costs of EU membership at 5.5% of GDP (and rising).

So should we take this claim that EU membership boosts GDP by up to 5 per cent seriously? I don’t think so.  No one seems very clear on how the CBI researchers have arrived at those figures. And, as the CBI report itself says, I wonder: “what would have happened if history had been different?”.

 

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18 Responses to The CBI gets its sums wrong

  1. David says:

    The “irritation!” to us of the eu is incalculable.

  2. Me_Again says:

    The only flaw with that post was this line Roger:-
    “… Separate and independent analyses by two of the UK’s most respected economists, Tim Congdon…..”

    Tim is by no means separate or independent, I know he’s no longer our chief economist because he put personal gain before his principals, but I believe he’s still a member in good standing.

    • Roger Helmer MEP says:

      I meant — and I think it’s clear from the context — separate and independent FROM EACH OTHER. I did not mean that Congdon and Minford have no established views or party affiliations.

      • Me_Again says:

        “….Separate and independent analyses by two of the UK’s most respected economists.” That may be what you intended Roger but I doubt I am the only one who read it in that context -but many will not know of Tim’s background.
        Doesn’t matter though because lots of the things I take for granted I have no references for. Something I read somewhere…….is about the best I can come up with without rummaging in the Google locker.

  3. barrymx5 says:

    And of course membership of the CBI is predominently of large companies, many of whom lobby the Commission to ensure new regulations help the keep out competition.

    And Roger you were great on Question Time last Thursday Well done.

  4. Maureen Gannon says:

    my only comment
    Congratulations Roger you did a grand job on QT and showed a great deal of restraint when talked over..

  5. Malcolm Edward says:

    It makes you wonder how members of the CBI manage to run their companies in the real world.

  6. Bellevue says:

    John Redwood, on his blog, has some impressive calculations….. and comes up with a COST to each household in Britain of £4000 per annum.
    When you consider what the Common Fisheries policy and the Common Agriculture policy have cost this country, I would say the cost is even higher.
    (and apart from anything else, Roger, you should be pushing the Who-Rules-our-Country?? theme.)

    • Jane Davies says:

      Bellevue has made a good point Roger in his/her last sentence. A good many people switch off if faced with a mass of statistics even though the bottom line is obvious as you have explained above. But even Joe Bloggs understands that self rule is no longer allowed in the good old UK.

    • Roger Helmer MEP says:

      Personally, I believe that freedom, independence and democracy are the real issues. I hope I would have the courage to vote for OUT even if it cost us money. But it’s reassuring to know that when we do what is right, we also do the best thing for our economy.

  7. Flyinthesky says:

    The CBI’s figures probably only consider the benefits for members and corporates, the actual reality is the benefits of eu membership are privatised whereas the cost, both in financial and in terms of society itself are socialised.
    From whatever bias figures are generated either way I’m convinced the net is negative, even if they were in balance the issue of sovereignty remains paramount. Nation or region, what’s it to be?

  8. catalanbrian says:

    Tim Congdon (UKIP parliamentary candidate, Chairman of The Freedom Association etc.) and Partick Minford (Monday Club, Better Off Out Campaign etc). Independent of each other they may be, but they are both well known Eurosceptics, so I think that any report on the EU made by either of them is unlikely to present a fair and independent view. You UKIPPers must be getting desperate if you need to rely on such misleading nonsense.

    • Me_Again says:

      I have no doubt that when someone who is affiliated prepares a report nowadays, that a certain bias creeps in. However, this is the case with both sides of this argument as you well know.

      We have idiot Clegg saying 7% of UK law comes from the EU. Deliberately disingenuous or mendacious take your pick.

      Ps Brian, we aren’t the desperate ones…………

    • Roger Helmer MEP says:

      Has it occurred to you, Catalanbrian, that they may support UKIP because they understand the economics, rather than vice versa?

      • catalanbrian says:

        But surely it is in your interests to use reports by unbiased people, rather than by people who are likely to present matters from a UKIP/Eurosceptic viewpoint?

  9. neilfutureboy says:

    Dan Hannan wrote recently http://blogs.telegraph.co.uk/news/author/danielhannan/ of how the CBI is now just another government funded sock puppet. It is one of the last organisations you would think would wish to be government funded but there it is.

    This “report” which as you say does not involve any actual research, is exactly what you would expect from career sock puppeteers (as indeed Stern’s also was).

  10. Mike Stallard says:

    Roger, for the very first time I did not bother with reading your excellent article.
    What matters in this “debate” is not throwing figures back and forth at each other. They are selling the sausage not the sizzle.
    If you look at the tiny number of countries that the EU has trade agreements with and compare that with the World Trade Organisation, of which Norway and Switzerland are both members, for instance, the difference is striking. Bandying figures around – but leaving out all the inconvenient ones – is not what we are talking about. We need to present the real picture in all its stark simplicity: the EU is not working and the EU can never work.
    I do not think that, say, Napoleon, was prevented from conquering Italy by a cost analysis. I do not think that, say, Winston Churchill was reckoning up the cost of “fighting on the beaches”. I do not think that Mr Farage is driven by economic analysis, but because he is disgusted.
    And do you know what? So am I!

    • Me_Again says:

      All perfectly true Mike but business decisions are not supposed to be based on emotion.
      Tactical decisions are not supposed to be based on anger.
      Strategic decisions should be pondered long and carefully and be unemotional

      We all feel loathing for the manipulators, I’d guess, we all hate the way things are twisted by the spin doctors BUT we cannot let the high emotion control our actions or we’re stuffed.

      We have to be as coldly calculating as the people we are up against -and I don’t mean the lower level people like Cameron and Clegg.

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