a-Fisking we shall go : Daniel Huggins in CapEx Version

So, I read a lot of stuff on Brexit and so on. This fatuous drivel which I fisk, below the line, is earbleedingly bad. It’s from CapEx,  by a chap called Daniel Huggins. He is the grandiloquently titled “Director of Research” at a gingergroup called “Get Britain Out”.

Who benefits most from the UK’s membership of the EU? Much has been written about the terrible impact on us of a “cliff-edge”, no-deal exit. But the political implications of it on both the EU institutions and individual member states is almost untouched by contrast.

Given that the UK is one of few sizeable net contributors to the European Budget,

There are 28 member states. Part of how it works is that the poorer and more agridependent get transfers from the wealthier. Then, when like Ireland, they catch up, they start to pay in in net terms. Like in the UK or any state larger than a hanseatic city on an island.  Heres a nice graph from the House of Commons.

eubudget

the EU is surely worrying about the fiscal black hole

Total EU gross budget (Coz, that’s the relevant cake for analysis here) is circa €140b over the last few years. UK gross payment is circa €14b. That’s 10%. Not a black hole. Irish government saw its gross revenue fall by 20% from peak to trough – that’s a black hole.  Also, how does the author know its worrying? If it were then there would be a MUCH tougher line and a  MUCH larger figure being talked about. As it is its about contracted expenditure, not future losses.

irelandtax

created by the UK’s no-deal departure. And this gives the UK a considerably strong hand in the current negotiations.

Well, the money is nice but see above.

The most recent EU spending plan, the Multiannual Financial Framework, lasts until 2020 and assumes the UK’s continued membership contributions. If the UK decides to leave without a deal, a House of Lords report recently clarified, there is no legal obligation for the UK to pay a penny to the EU.

So, you will leave in 2019 in a huff and that will somehow collapse a funding system that has 1/5 of its time to run?

However, the British Government could elect to pursue a policy of “paying-in” to selected European projects. Following the Swiss example, the UK should be able to “pick-and-choose” which projects are within its national interest – such as Horizon 2020 (the EU’s research funding initiative) – and continue to fund and participate within this framework.

Sure. And that would be great. Oh, did you know, the Swiss have to accept the four freedoms, have no say in how the money is spent and generally have no voice in how decisions that affect them in adopting the acquis are made?

Nor should a no-deal scenario preclude the UK’s continued and fruitful cooperation with the EU member states on competencies such as security and defence – an area in which the UK remains peerless in Europe.

…that’s a nice continent you have there….be a pity if anything happened it. A great way to start negotiations.

 It’s an attractive scenario for the UK, but the EU would still be left with a considerable fiscal black hole to fill.

Not just an ordinary one mind. A considerable one. 10% . A massive whopper.

It’s this black hole which should be proving particularly interesting to the British negotiators.

Talking through the hole?

To make up for the loss of the British financial contribution, the EU must do one of the following, it could raise more funds from its remaining net contributors, reduce the size of its bloated bureaucracy or cut subsidies to its net recipients.

EU budget as a % of EU GDP is 1%. Of that 94% goes on direct expenditure. So 0.06% is spent on the MASSIVE BLOATED OUT OF CONTROL BUREAUCRACY!!!!!

There isn’t a single remaining member state which could risk the ire of the growing eurosceptic movement across the continent by increasing the seemingly ever-inflating European budget.

I guarantee you that Ireland would be happy. And we don’t have a eurosceptic movement. In fact, you might want to look at the very recent Eurobarometer data on attitudes towards the EU and how they have markedly improved…mostly since June 2016. Whatever happened then?  Here’s a snapshot

eurospecitc

 Even the tin-eared political class across the EU isn’t so politically inept as to hand yet more voters to eurosceptic parties – which is exactly what increasing their net contributions would do.

How do you know? Can you show me polling on that?

 As for cutting the bureaucratic budget of the EU, as anyone with any knowledge of the inner workings of the EU will already be aware, this is the least likely scenario of all, as this is the same organisation in which one-in-five workers take home more pay than Prime Minister Theresa May.

And the point of that is? Your PM is underpaid? She should talk to someone

As for the third option of cutting subsidies to the net recipient nations – even the EUs leading bureaucrats know how this would end. To cut handouts would only fan the flames of those growing eurosceptic movements that are held in check only through these EU bribes.

Hmm, you mean things like the CAP which ardent brexiteers such as Dyson and co are keen to keep?

Without the money, the EU will instantly lose its main attraction across much of Central and Eastern Europe.

Hmm. Lets see what the political psychologists say. Nope.. not about the money, honey.

Here : “This analysis showed that support for the EU in the eight CEE countries that became members of the EU in 2004 can be explained to a large extent by the same reasons which have been found to matter in the older member states. “

 

Here : “The overview of data and existing studies shows that the differences in attitudes between old and new member states publics appear to be an artefact of research design and choices rather than a real divide between East and West. There is not much evidence to suggest that the fundamental determinants of attitudes .. are different in East and West: empirical studies which include old and new member states seem to show similarities in attitudes and determinants.

And so, without a deal, the EU risks exactly what they are attempting to avoid through their punitive dealings with the UK – pushing more members to leave.

Speculation, your honour.

Meanwhile, the lack of a trade deal will have a detrimental impact on the member states, in the long-term, as the UK begins to look globally for its imports, and as the EU’s share of the global economy continues to decline.

The EU share of global wealth will of course decline. We should hope it does, as the long imbalance between east and west, north and south get eroded by globalisation. Wanting the EU, or the West, in general, to maintain or increase its % of global wealth is quite literal colonialism. Here, have a graph, via Maddison.

maddisonlong

While many a bureaucrat across Europe can’t wait to see the back of Britain, the idea of “being careful what you wish for” comes to mind, as the full implication a no-deal exit becomes clear.

The UK remains the EU’s single largest export market, with close to a £60 billion trade deficit.

Yes. The UK makes very little the EU want to buy.

In addition, the remaining members’ economies have five million jobs associated with trade with Britain – including one million from the German car industry

That’s impressive, given that less than 1m are employed in total in the German auto industry. 800k in fact.  And about 14% of German cars are sold in the UK. Assuming nobody ever again bought a Porche or a Beemer, that would be .14*800k = 112k jobs at risk.  I’m sure the stockbrokers of surrey will happily trade their Mercedes and Audi’s for Robin Reliants and Vauxhall Vectras

the-austin-brexit

and close to half a million from French wine and cheese production. Will the EU – or its member states – be willing to risk this to keep a federalist political project alive?

 As for cars, so for cabernet and cheese.

For the UK, a no-deal exit presents opportunity. For the EU, however, it risks alienating the EU’s single largest export market and the remaining 27.  If the EU is unwilling to offer Britain an acceptable deal, they are paving the road to their own destruction. Thus can the EU’s fanciful financial demands for tens of billions of pounds

Because nothing says Trust Me in trade than walking away from legally binding commitments.

can be seen as the absurdity they are. The UK has nothing to fear from a no-deal scenario,

apart from all the things it has to fear. Ian Dunt wrote a whole book about it. Its good.

and at a time Europe is facing a crisis of legitimacy,

See above, eurobarometer. Oh, and EU isnt Europe. You have to read more. Beyond the first vowel.

the most significant existential crisis it has ever faced,

apart from WW2. Hey, isnt that your line?

risking its trade surplus with Britain would be a monumental act of self-sabotage.

Since the UK can simply walk away from a bad deal,

It can.

it sits in a far stronger position than is hysterically reported,

No, nobody, apart from you, is saying that. Even John Redwood is advising clients to bail out. This is akin to the Camerlengo of the Catholic Curia saying “go short papal vestments”

and should get back into the driving seat. With countries and banks across the continent still haunted by the thought of bankruptcy,

Dude, you missed a trick. What you should have said is “A spectre is haunting Europe..” and go on from there.  Anyhow. Let’s see. Let’s look at Debt/GDP ratios, a common shorthand for national indebtedness.  I  think the results speak for themselves.  As for banks

Screenshot 2017-11-13 20.53.19

with millions of European jobs

or, as we saw above, not.

and billions of pounds in terms of surplus exports at stake,  the UK has the leverage and the EU is vulnerable. We can afford to walk away, the EU can’tThey should be courting us – not the other way around.

 

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