John FitzGerald: €50 each is a small price for EU membership

Irish contributions will increase if UK leaves union but benefits are worth the cost

The Republic has been a net beneficiary until the current decade, and today makes only a small net contribution to the budget. Photograph: Lisi Niesner/Reuters

The Republic has been a net beneficiary until the current decade, and today makes only a small net contribution to the budget. Photograph: Lisi Niesner/Reuters

 

Although increased trade and the resulting growth in output have been the main reasons behind the very large benefits of EU membership for the Republic, the direct payments received from Brussels since we joined have also played an important role. Farming has received the major share of such payments.

Since 1973, transfers received under the Common Agricultural Policy have averaged more than 2.5 per cent of national income a year. Cumulatively, this has amounted to 120 per cent of the average annual national income for one year over that period.

While the structural funds payments have now virtually ended, they averaged just under 1 per cent of national income a year over the period, with a peak of about 3 per cent a year in the early 1990s. Their cumulative value since membership has totalled around 40 per cent of average annual national income.

It is possible that the final agreement will see richer countries such as Ireland paying a higher share of the shortfall

This EU money, and the required matching Irish government funds, ramped up our investment in infrastructure and human capital, supporting the State’s Celtic Tiger boom.

Ireland’s EU receipts have been partly counterbalanced by our contribution to the EU budget. Our cumulated payments to the EU since membership have amounted to around 45 per cent of average annual national income, compared with corresponding receipts of 160 per cent. So the Republic has been a net beneficiary until the current decade, and today makes only a small net contribution to the budget.

Just under half of the EU’s budget is spent on agriculture and rural development. Because the Republic is still doing so well out of the CAP, this explains the small size of our net contribution, in spite of the fact that Ireland is now one of the richest countries in the EU.

A recent paper by UCD’s PublicPolicy.ie shows that in 2017 the Netherlands was the largest net contributor to the EU at around €200 per head, followed by Sweden, Germany, Denmark, the UK (€110 a head) and Austria. The State’s contribution amounted to about €50 per person, a very small price to pay for all the benefits of membership.

As one might expect, big net beneficiaries include some of the poorest EU members: Lithuania, Hungary and Estonia, which each received between €300 and €450 per head in 2017.

Because the Republic benefited so much from the EU budget, we supported increasing its size

The cost of administering the EU amounts to something over 5 per cent of the budget, a tiny fraction – 0.1 per cent – of EU national income. However because of the large number of EU civil servants who work there, rather surprisingly, Luxembourg, the richest country in the EU, is also the largest beneficiary.

When the UK leaves the EU it will leave a hole in the EU budget of about €7.5 billion. If this deficit were closed by raising all other countries’ contributions by a proportionate amount, this would see the Republic’s payment into the EU Budget rising by around €140 million, or €30 per head.

However, it is possible that the final agreement will see richer countries such as Ireland paying a higher share of the shortfall. Of course any transitional payments made by the UK as part of an exit agreement, if there is one, could delay this adjustment.

Negotiations

Over the coming year there will be negotiations on the size and composition of the EU budget for the period 2021-2027. From an Irish point of view, there will obviously be a concern to protect expenditure on agriculture. However, it is difficult to justify continuing to allocate such a high proportion of the EU budget to this sector.

There may be pressure to spend a higher share on infrastructure and on fostering growth in poorer EU regions. In addition, for the future, enhanced EU spending on research, especially into tackling climate change, should be a priority. Another priority should be increased spending on development aid, especially for Africa. Not only does that promote more equity, but economic failure in that region can affect the EU very negatively, and add to migration pressures.

In the past, because the Republic benefited so much from the EU budget, we supported increasing its size. Now that the State is a net contributor, based on narrow self-interest, a smaller budget might seem desirable.

Quite rightly the Government has rejected this approach. Given the EU’s support in the Brexit negotiations, and the generosity of past transfers to the Republic, a more communautaire stance can help us build and maintain alliances in the EU. A larger EU budget is also probably the best way to protect the existing level of CAP expenditure.

While in the Republic it might cost us an extra €50 to €100 a head each year to have a larger EU budget, it would be a small price to pay to protect Irish strategic interests.

BREXIT: The Facts

Read them here
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