For more months than I care to remember, Theresa May has droned on about ‘a good deal for Britain’ as if leaving the EU without a deal was a ‘bad’ deal. Our membership of the EU has been a rotten trade deal from day one. And here’s precisely why.
The single market was always trumpeted as a ‘free market’ (so much so that even Margaret Thatcher was deceived by this) which, of course, it is not. Yes, goods do flow freely within the walls of the customs union. But to be in the customs union and in the single market you have to pay a ‘membership fee’ and abide by the rules of the club.
Suppose you want to play golf occasionally, so you consider joining the local golf club. It offers either annual membership or a pay-per-day deal. Any sensible person would work out whether the number of times they wanted to play would be cheaper through membership or through pay-per-day.
So too with the EU. The cost of joining the single market needs to be weighed against the use you will make of it. Either we join, paying an annual subscription, or we work on a pay-as-you-go system, which is what the rest of the world does with the EU.
We have a simple way of deciding which choice we should be making.
If you are trading with the EU on a pay-as-you-go basis, the average customs tariff on goods is 5 per cent.
The UK is a member, so its taxpayers pay an annual fee of around £11billion (this has varied somewhat over the years; this figure is for recent years).
So what is the value of the trade we do annually with the EU? Around £150billion.
If we do the sums, this means the average percentage tariff we are paying on these goods is £11billion divided by £150billion x 100 per cent. This comes out as a tariff of 7.3 per cent. This is higher than that paid by the rest of the world trading on a pay-as-you-go basis. It is therefore a bad deal. It would be 2.3 per cent cheaper to trade on a non-membership basis. (Germany trade far more within the EU than we do and for them the tariff works out at about 2 per cent – clearly a good deal for Germany.)
But, and here is the rub, who is paying the tariff? In the rest of the world, the company doing the trading naturally pays the tariff. But for the UK the tariff is being paid by the taxpayer. To put it crudely, every company in the UK trading within the single market is getting an extra unearned profit of 7.3 per cent from the long-suffering taxpayer. This explains why so many UK companies are complaining about leaving the single market. For years they have been quietly sucking a 7.3 per cent bonus from the public teat, and now see it being snatched away.
No Deal is a good deal for the taxpayer! For businesses, too, it will ‘sort the men from the boys’.
