EU Membership in Pints

Posted: 2016-06-07 in Uncategorized

On June 23, the UK will decide whether to remain in the EU or not (“Brexit”). There are arguments going back and forth whether being part of the EU is good thing or not. Many of these arguments are based on predictions and more-or-less justified assumptions what could happen (in  a positive or negative way) if Brexit happens. Many numbers are mentioned in the campaigns (e.g., how much the economy would shrink, the pound would fall, the house prices go down), but these numbers are usually (educated) guesses.

However, a non-speculative but re-appearing number is 350 Million. This is the number the Leave Campaign propagate as the amount of money the UK will save by getting out of the EU by simply not paying the contribution to the EU budget (“membership fee”). Per week, by the way.

350 Million or 350,000,000 is such an unimaginable and unreal number that I want to look at it a bit more closely to understand how they get to this number, what it means for the UK taxpayer and how it fits in the general context of other taxes we pay. I will try to relate this number to units that make more sense to most people than the number of zeros attached to 35.

EU membership cost per week

There are basically three ballpark numbers that are used to describe how much money the UK pays per week to the EU (based on the 2015 forecast [1])

  1. £350 Million per week (about 18 Billion per year) is the amount the UK would need to pay if there wasn’t the instant rebate Margaret Thatcher negotiated a few decades back in the mid-80s. This rebate has been in place since 1985 and is immediately deducted from the amount the UK is due to pay (and not paid back), i.e., the rebate never reaches the EU [8].
  2. £248 Million per week (about 13 Billion per year) is actually paid in contributions by the UK (gross contribution) [1].
  3. £163 Million per week (about 8.5 Billion per year) is the net contribution paid by the UK per week: The EU invests about £4.5 Billion per year in the UK, largely to UK farmers and structurally struggling regions, e.g., Wales [1].

I found this informative visualization at [2], which nicely illustrates the differences between 1., 2. and 3.:

UKsEUMembership-graph

Visualization of the UK contribution to the EU budget. Figure from [2]

Given that £350 Million is never paid, I will use the £248 Million in the following because this is the maximum amount of money the government would have at its disposal (if they chose not to support the beneficiaries of the EU expenditure in the UK, e.g., farmers).

EU membership cost per person per week

Thus far, we are stuck with £248 Million per week. That’s a lot of money. Fortunately, we can share among 64 Million people living in the UK [3]. Breaking it down to how much every person pays on average, we get

\frac{\pounds 248  \mathrm{~Million}/\mathrm{week}}{64 \mathrm{~Million~people}} =\pounds 3.87 \mathrm{~per~person~per~week}

In words: £3.87 per person per week. This is a much more tractable number than £248 Million: I can relate this to things I can buy. For example, £3.87 is approximately what one pays for a pint of beer in London; it is a bit cheaper elsewhere in the UK [4]. So, let’s use this as an approximation:

On average, the EU contribution is approximately a pint of beer per person per week.

Pint-Chart: Putting the EU contribution in context

Now, we have a ballpark number of how much the UK’s contribution to the EU budget is on average. This estimate is a bit skewed because only the taxpayers (29 Million of them [5]) make this contribution, and some taxpayers pay more than others (usually because they earn more). Now, let’s put this ballpark number in context of other taxes.

Sticking with the analogy of a pint per week for the EU contribution as a unit of measure, we end up with the following pint-chart of a typical tax breakdown:

pint chart

Pint-chart detailing the average breakdown of income tax and national insurance.

In total, there are approximately 166 pints to spend (there are some small rounding errors), a single one of which goes to the EU (0.6% of the tax paid). Note that overseas aid is at two pints (slightly more than double the EU contribution), Housing/Utilities are 2.5 pints per week and administering the UK costs 3.5 pints.

Most people in the UK pay significantly less than a pint per week, but the proportions in the pint-chart above remain the same: The median income in the UK (half the population earn less money, half the population earn more money) was £23,556 in 2013/14 [7], which corresponds to an EU contribution of £0.52 per week (or £27 per year), i.e., significantly less than a pint. This also means that the vast majority of EU contributions is paid by the wealthier taxpayers. To be precise: To pay £3.87 (or more) per week to the EU, i.e., the pint per week, you need to earn at least  £98,500 per year [6].

To complete this with some concrete numbers, here is my tax breakdown from 2014/15:

tax

Income tax and NI breakdown. The EU contribution is 0.6% (or GBP 1.50 per week).

Last year, I paid a total of £12,752  in tax and national insurance. Most of this goes to welfare, health, pensions and education. I was very surprised to see that the EU contribution is the most insignificant contribution of my tax: an astonishing GBP 77 (0.6%) for 2014/15, it’s hardly visible in the pie-chart. My personal pint would therefore only cost £1.50.

If you want to find out how much money you spend on the EU, check out [6].

Summary

<

p style=”text-align:justify;”>We looked at the amount of (tax) money that we (in the UK) spend on the EU. The numbers propagated by the campaigners are so incomprehensible that we broke them down to units that are easier to understand: pints per person per week.
It turns out that the UK’s contribution to the EU budget corresponds to approximately 1 pint per person per week on average. Most of this is paid by the wealthiest UK taxpayers. The EU contribution plays an almost negligible role of 0.6% in our overall tax payments, i.e., it costs 60p for every GBP 100 tax paid if we ignore all contributions of the EU to UK farming, infrastructure and support of poorer regions. If we include these subsidies (e.g., because the UK government also wants to support UK farmers) we are at 0.4% or about a half-pint per person per week on average.

Cheers.

References

<

p style=”text-align:justify;”>[1] UK contribution to EU budget
[2] Left Foot Forward on 350 Million
[3] UK population
[4] UK beer prices
[5] Annual tax summary
[6] Tax calculator
[7] UK income
[8] EU budget

Advertisements
Comments
  1. David Ham says:

    I think you’ve underestimated the amount of tax you pay. In particular VAT is as much in the total tax take as NI. Also there is a reasonable case for including the employer NI in your payments.

    Like

  2. Brenda Taylor says:

    Thank God for an explanation I can relate to. Obviousely joining won’t break the bank but housing , feeding, and managing unknown numbers of immagrants will still possibly cost us as a nation, unknown and unnessessary worry. What is wrong with the system we have?

    Like

    • Marc Deisenroth says:

      It almost sounds like it is currently the case that people from other countries come to the UK to get free housing and food. This is clearly not the case. Many people come because their skills are needed. Generally, immigrants greatly contribute to the UK’s economy by working and paying tax. In fact, immigrants (usually young, healthy and skilled/educated) contribute more than they “cost”. Without immigrants the NHS would suffer (26% of doctors are from outside the UK), and (higher) education would be substantially hit. The EU gives us the opportunity of free movement and to find a place of living and work. This is a great freedom that is priceless and it would be a shame to give it up for more nationalism and isolation.

      Like

    • Letitia says:

      Evoyrene would benefit from reading this post

      Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s