Would rejoining the EU be too expensive?

Brexiters argue that if we rejoined the EU, the terms of membership would be worse this time around – especially the cost. This centres in particular around the issue of the ‘rebate’.

So what is the rebate? Negotiated by Margaret Thatcher in 1984, the reasoning and calculation are both complex, but ultimately it added up to a refund of part of the UK’s ‘net contribution’ to the EU budget – that is, the difference between the money the UK paid into the EU and the money it received back. It is unlikely that a rebate of this nature would be on offer if the UK were to rejoin.

Benefits vs ‘net contribution’

However, there is an important point to make: making a ‘net contribution’ to the EU does not mean making an overall loss on EU membership. This remains true even if the contribution is higher.

This is because simply calculating how much money a country pays to the EU versus how much it receives from the EU does not include all of the financial benefits the country gains from its EU membership – far from it.

Brexit is costing the British economy up to £100 billion per year - which means Brexit is ten times more expensive than EU membership

Brexit illustrates this starkly. In 2014, before Brexit, the UK’s net contribution to the EU was €11 billion (about £9 billion), after a rebate of €6 billion (about £5 billion). Compare that to estimates from Bloomberg Economics among others that Brexit is costing the UK economy up to £100 billion per year. In other words, Brexit is more than ten times as ‘expensive’ as EU membership!

This is because of all of the benefits of being an EU member that are not direct payments from the EU: the ability to smoothly import and export, access to the European labour market, attractiveness for investment and much more besides. We now see starkly how much this was worth to our economy.

In other words, what the idea of a ‘net contribution’ obscures is that EU membership is not a cost to the economy at all - it is a huge benefit. Brexit Britain has sacrificed revenue of around £100 billion per year in order to save on ‘membership fees’ of £9 billion. If the UK’s net contribution rose to £14 billion – the pre‑Brexit figure if the rebate had not existed – it would not significantly change this picture: it is still worth paying £14 billion in order to make £100 billion.

It is comparable to paying a fee to run a market stall. That might make you a ‘net contributor’ to the expenses of the market, but the sales you make at the market mean you will still come out ahead.

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