When Gordon Brown negotiated the EU's budget from 2007-2013, he agreed to make Britain's contributions in Euros, rather than sterling. As I'm sure you probably already know, he also agreed to give up £7bn of our rebate - and agreed to load it into the final years of the period. How many extra billions are we paying as the result of a weakened pound?
Anyone know the answer?
55 comments:
I don't know the answer but what I'm wondering is just how the Tories are letting him get away with it?!
JPT - oh pleeeeze!
Brown has a majority of 60!
Has any commentator raised this? If indeed it is an issue.
If you have nothing to say except witter on about alleged lapses in opposition tactics - at a time when they are 15 points ahead in the polls, then please just shut up.
The pound has slumped 25% in the past year I'm guessing so thats the difference (up or down will someone tell me?)
Is there no start to that man's ability? Sooner or later his profligate incompetence is gonna add up to real money.
According to the Independent...
http://www.independent.co.uk/news/uk/politics/weak-pound-adds-more-than-1633bn-to-britains-eu-bill-1224486.html
Bloody Hell. I'd forgotten that the bloody fool had done that as well. What. A. Tosser.
Another scorched earth economic policy from Gordon Brown. Is he just inept or does he really want to destroy the UK economy.
£1.5bn in the next financial year. I covered this on Bloggers4UKIP on the 4th January.
The Tories were sunk after Black Wednesday which cost £3.3Bn.
I can't believe the Tories haven't pulled together a balance sheet which shows how much tax income Gordon has either lost or wasted for the UK. It is a big number:
1. EU rebate
2. Paying EU in Euros
3. Gold sale $7Bn
4. VAT fiscal stimulus £12Bn
I'm sure there are others.............
I think I'm answering my own question - how much has Gordon lost / wasted:
1. EU Rebate = £7Bn
2. Paying in Euros = £3Bn
3. Gold sell off = £3Bn
4. VAT Stimulus = £12Bn
I count VAT stimulus as lost money, because he threw money at us ,and it has had no effect other than to make everyone a few quid better off after their trip to the pub.
But there is also money lost here to consider:
5. Northern Rock
6. Banking bail out - we won't get all our money back surely
7. Interest on our debt mountain
So I reckon Gordon has at least cost us £25Bn so far............
... not fixing VAT carousel fraud (£ Bn countless)
the list goes on ...
My guess is probably nothing, or not very much. The liability to BVrussels is calculated from VAT receipts and hence it is easy to calculate the annual liability as it accrues and to hedge that exposure by buying euros foward. The Treasury/BofE are quite capable of managing that, and it is the sort of thing they would do to avoid showing a later loss.
£3.8 billion - that's nowt to Merill Lynch.
And how much has he saved for that long period when the pound was overpriced? As with all currency transactions, the fluctuation is fraught with risk so we would be better to be in the Euro to hedge that.
Blackacre: he has only just negotiated it in euros - the budget was from 2007-2013. And it was paid before that in £, which had nothing to do with Brown as it has always been so.
Blackacre
There are 3 problems with your analysis:
1) Currency hedging is only done by competent risk averse individuals. Brown is not reknowned for these traits so I'm not convinced he would have hedged.
2) There are always transaction costs associated with hedging, and on sums as big as this you can bet the costs would have run into millions if not billions. If we'd carried on paying in sterling there would have been no need for these costs and no risk from not hedging.
3) There is a time limit on how far into the future you can hedge, so if he has hedged the payments we'll make now the Treasury will have to take out futures contracts now, priced against current exchange rates. The Treasury could delay their hedge but if they do they risk the exchange rate getting even worse.
It makes you wonder if there was ever any beginning to Gordon Brown's intelligence.
No wonder there are rumours about his mental health doing the rounds.
I would need to know the figures in order to calculate just how much this has cost us, but knowing that the UKs net contribution to the EU runs to billions of £ the answer is probably unutterably huge.
Gordon's economic mismanagement over the past 12 years is so abundantly evident to everybody that very little surprises me anymore. It is quite possible that he is deliberately wrecking the economy in some sort of scorched earth policy - we know he cares nothing for the public, so we cant put anything past that man.
I will try to deal with the cost of our EU membership in a later post on ukpoliticsnews.blogspot.com
Iain - I understand you want to have a go at Brown, but I don't think you can blame him for either of these.
The Treasury (and Brown himself) were livid that Blair wanted to give up part of the rebate as a sweetener to the countries of central and eastern Europe.
Secondly the EU budget has been calculated in Euros for ages, and ECUs before that and, as far as I am aware, Britain would have just had to contribute more pounds in the past, so no real issue there.
Plus exchange rates are taken into account from year to year anyway as more than 70% of the budget is based on a country's GDP as calculated in Euros. So pound weaker, UK GDP in Euros proportionally weaker, so UK contributes less.
In short your e-mailer doesn't really have a clue and you were foolish enough to publish the message. But then again if it's to bash the EU or Brown or - better still - both at once the odd bit of fact checking never got in the way of a good story, did it?
We're all socialists now. Clause 4? Who needs a contract eh campers?
Jon Worth,
The devaluation of the pound would indeed mean that the UK would pay less - if the exchange rates were always taken into account. However, since the payments are set on an annual basis, we are still paying 1.40 Euros to the pound, whereas the exchange rate is 1.05 Euros to the pound (both figures approximate.
This means that for every £1bn we expected to pay, we agreed to pay 1.4bn Euros, whereas we should only be paying 1.05bn Euros. Thus, on a contribution of £4bn (which I think is roughly the UKs net contribution to the EU this year), we have agreed to pay 5.6bn Euros, when, if we paid in pounds we would only pay the equivalent of 4.2bn Euros.
I hope this makes sense to you now.
P.S.
Iain Dale, please link my new blog into the Total Politics Directory. The URL is http://ukpoliticsnews.blogspot.com
And everybody else feel free to read it and leave comments. There are only 2 posts so far, but more (shorter ones) are coming soon!
trevorsden:
The opposition must exploit everything bad connected to Labour (everything), and 15% ahead in the polls is not a time for complacency.
And don't tell me to shut up.
Although Brown's lost us billions on various madcap schemes to 'save the world', this Euro payment probably isn't one of the worst.
Most people anticipate that the Euro will crash later this year, probably in the summer as the rioting season gets underway. In that case, our payments will decline proportionately.
Alex, you you may be a City whizz but I'm not sure you understand hedging. Hedging is like insurance in that having it always costs more in the long run than not having it. You only take insurance if you need deeper pockets than your own to cover short term risks, for which you pay a premium. As nobody's pockets are deeper than the government's, it wouldn't make sense for it to insure or hedge anything, which indeed it doesn't.
It should also be pointed out that Blair and Brown tried to claim the French were going to reform CAP in exchange for our giving them more of our money ( which is in effect what Brown and Blair caved into Chirac for ).
You have to wonder if Labour aren't deliberately trying to bankrupt us.
Iain,
I'm sure you don't subscribe to Regeneration & Renewal magazine, but the front page this week is about the Government refusing to allow the deadline for ERDF funding to be spent to extend by 6 months, which would have allowed £600 odd million to be spent by the RDAs and Councils in England, (they allowed it in Wales, Scotland and NI), on regeneration projects.
The effect of this is to reduce the UKs contributions as the underspend is netted off our bill.
I cannot get the article on-line as my subscription isn't registering, but I would have thought somebody could have made something of Brown effectively cutting £0.6 Billion of spending in the next six months!
So can someone show me in sterling terms how much we paid in over the last few years, and how much we will have to pay in now based on current exchange rates? Will our contribution go up or down?
No budget cutting in the promised land though is there? El Gordo's constituents continue to get an annual subsidy of over a thousand pounds per head courtesy of the English taxpayer. Don't see any party doing anything about that - not Liebour, not the Lib Dums and not the Conswervatives.
@Neil
The flip side of what you say is that the UK gets more money from EU coffers as payments for poor regions, farmers etc. because these are set using the same fixed rate for a calendar year. So the 1 Euro to a farmer is now worth a lot more than it was previously.
The only additional issue is what happens to the extra payment for 2007-2013 that Blair agreed, and how that is calculated - that amounts to €10.5 billion over 7 years.
In short I think all the figures for all of this, and all the scaremongering, is vastly over stated.
But then this is the UK 'debate' about the EU so we would not expect any sense.
So when B-Ruin gets kicked out, he'll presumably be targeting the 'lecture market', on account of his 'excellence' in absolutely sod all.
Why on earth will anyone want to pay squillions to hear him drone on about how he saved the world.
Certainly the audience will be full of Grauniad non-jobs listening to how to increase failure at the public's expense.
B-Liar has the contacts, so presumably they'll compare notes.
Luckily, real businesses don't rate him at all.
Confused thought on Immigrant Labour! Philip Johnston in the Daily Telegraph writes:
The problem for the British workers who fear for their jobs is that the foreigners to whom they object are EU citizens, and therefore perfectly at liberty to travel to, settle and work in the UK.
BUT, but, but, but, but, these workers did none of those things!
These are EU slave labourers, without rights, moved from site to site, displacing local skilled labour forces, who, to gain employment in the future must become part of a similar shiftless gang of migrant workers tossed around the continent of Europe at the whim of the bureaucratic filth who set the rules while reaping the dividends of their deeply embedded corruption.
Just another problem Brown has got on his desk, which he cannot do anything about! He has played right into the BNP's hands
JPT your bleatings are tiresome, as are all the other similar ones.
Just how many minutes do you think the Tories get on the TV news? Cameron can ask 6 questions at PMQs. He ges 20 seconds if he is lucky on the news and PMQs never make the newspaper headlines.
To list all the incompetences by Brown would take all evening.
Infantile comments deserve and appropriate response - So grow up.
This isn't new - it's a repost of a Daily Mail story from 5 January. This story itself was a piece of PR spin fluff for Tory Shadow Europe Minister Mark Francois.
Perhaps the "reader" who gave you this fell asleep on his copy of the Mail, woke up nearly a month later and you decided to break the news.
Or then again, perhaps you ran out of things to say and decided to rehash a Daily Mail headline, as you so often do? Or were you prompted to run this again by Tory HQ?
trevorsden:
Oh dear - do you really think that the only chance of a response the tories have is PMQ's and tv news bulletins?
Do they not have access to sympathetic newspaper journalists, local tv/radio/newspapers, BLOGS!! - this is, after all the age of communiction.
I'm not knocking the tories I'm just saying that with this economic downturn etc and a disastrous labour government - make hay!!!
Why would the eurofederalist Tories get someone to rehash a story about the EU costing us even more money than expected? Don't forget, the Tories aren't eurosceptic, they're committed to keeping us in the EU and telling the truth about how much it's costing us doesn't fit with Tory policy of ever closer union.
Perhaps I can arrange an early meeting with this Despairing Liberal person...
Why is it that whenever idiots like you see a story you don't like, your first response is to try and discredit the messenger?
Grim Reaper - I would love an early morning meeting - we can have coffee and cakes!
My point is not exactly to discredit the messenger in this case, since I accept the basic premise of the story that HM Treasury appears to have made another significant screwup, although understandable at the time, when there was general belief in a permanent high pound - but rather to simply point out that this is old news.
In other words, why is Iain panting over this "revelation" when it was already in the Mail a few weeks ago?
JPT - basically, Yes I do. And of course any Tory statement published by the BBC has to have a load of govt propaganda to 'balance' it.
On the other hand - for once the BBC has been doing the Tories job for them. Brown had his 'Pound in your pocket moment' 18 months ago and now it is coming back to haunt him.
'British Jobs for British Workers' was Browns slogan to the TUC to get their support for his election as labour leader.
Now we see the BBC reporting the strikes which are giving the lie to his claim. These stories are Browns death knell.upeaspi
The "British Jobs for British Workers" slogan is bad for Brown because it is a right-wing xenophobe slogan, but (some) of the unions are hooking on to it as a way to boost support. It's part of the inevitable rise of protectionism that will unravel (if left to mature unanswered to fester and grow) any potential economic recovery in the future.
I understood that our rebate was given up on the 'understanding' that the EU revised the CAP!
What a bunch of useless fools we have in power. Never mind, Gordon is a Happy Bunny.
J Cook raises the Black Wednesday episode, and I presume like most he is blaming the Tories, who were indeed the Government at the time.
What I have never understood is why the fact that Labour were equally thorough advocates of the ERM is not shouted about every time this blame is raised.
On WMD Labour always bring up that the Tories supported their actions, why don't we use the same tactic against Labour ?
Alan Douglas
The strikes will escalate. It will bring Brown down and his Government with him.
Rupert Murdoch has already ordered his editors to pull the plug on Brown.
The BBC are reporting the strikes.
The lumpenproletariat finally understand they have been shafted.
All over the world the tectonic plates are shifting.
It will either be Waterloo or Peterloo.
"Anyone know the answer?"
Leave the EU, or is that too simplistic?
“DespairingLiberal said... The "British Jobs for British Workers" slogan is bad for Brown because it is a right-wing xenophobe slogan...”
Indeed. It sounded thoroughly nasty (and a mistake) at the time. Now it appears to be coming back to bite him big-time. What a shame.
“How Much Has Gordon's Euro Decision Cost Us?”
And your headline made me think there was going to be a rant in favour of joining the Euro. Never mind. There’s time yet...
Simon Gardner (or is it Serverlan?) - yes, Brown made a major pre-planned and carefully focus-group-assessed-no-doubt major screwup. The BBC are right to pick up on it, it's refreshing to see some of the others here not bashing the beeb for a short space of time.
They must be fuming in the Von Broon Fuhrerbunker right now about Auntie - can someone come up with one of those Downfall videos suitably edited?
Seriously though, it is very, very worrying when we start (stunningly immediately!) to slide back into protectionism so rapidly. It really isn't Europe that are the enemy - we export huge amounts of stuff to them and enjoy our holidays there. We even like some of their food.
On the other hand, the workers there do have a point and the unions should pick up on it if the foreign worker-based sub-contractors are taking the work by not paying local wage rates.
Desparing:
You talk about protectionism as if it's some kind of satanic rite.
Can you explain what you mean by it?
DespairingLiberal said...
“(or is it Serverlan?)”
Hooray. You have to be of a certain age to recognize...
“Seriously though, it is very, very worrying when we start (stunningly immediately!) to slide back into protectionism so rapidly.”
It’s happened extremely quickly. It’s happening in continental Europe too. But we could have done without the Prime Minister’s fatuous and immoral boost to it some time ago.
There’s a suggestion in some quarters that it was done to counter localized BNP electoral gains. How short-sighted can you get?
Don’t worry the endemic and mystifying foaming-at-the-mouth BBC bashing will doubtless be resumed shortly. What a paranoid bunch!
Still no explanation of "protectionism"?
Not even Serverlan? Or anybody from Blake's Seven, since it appears to require the inteellect of a galactic overlord to answer it?
At a guess I would say it's about protecting something. Isn't that a good thing?
Yes, it used to be the likes of Michael Howard and William Hague who did the faux-racist foaming from the comfort of their leather seats in the Haise. Now it's loathsome NuLab cynics.
I suppose it's only a matter of time before the Eton Trifles, Cameron & Osborne and their hedge-fund backed pals join in, but things look wierd politically now, with Labour playing for the Right and the Eton boys fighting for the centre.
I always felt you and Blake should have got together by the way. You would have made a lovely couple.
DespairingLiberal said...“Yes, it used to be the likes of Michael Howard and William Hague who did the faux-racist foaming”
It has been interesting and refreshing that Cameron’s lot have so far not done the perennial Howard-style racism. I hope it lasts. All part of the Tories’ master-plan to stop being the “nasty party”. Maybe they no longer have anyone unprincipled enough now that Howard has gone (surely not)?
But the Labour back-benches must be pretty sick at Brown. Unless they are as worried about the BNP as he seems?
“I always felt you and Blake should have got together by the way.”
Nah. Servelan was always far too sexy for the likes of goody-two-shoes Blake.
Wrinkled Weasel said... “Still no explanation of "protectionism"?”
Well I think you should probably google it or look in Wikipedia. I’m no economist.
BUT.... It’s the practice of raising tariff barriers, import restrictions etc against foreign countries’ goods, services, investment and even now labour - so as to protect or insulate your home markets (and hence populations).
It’s quite illegal inside the EU - one of the major founding principles of the Common Market/EU.
It’s also been widely reduced internationally (outside the EU) by virtue of free trade agreements and treaties, the WTO [World Trade Organisation] etc. It has been imposed on many developing and fragile economies in the third world by the IMF. Britain and the US have been a driving force - particularly New Labour and the US neo-cons.
Many rabid anti-EU Tories (is there any other kind left apart from Ken?) claim that the EU should only be about free trade and against protectionism.
The EU itself is somewhat (OK very) protectionist - particularly vis-Ã -vis African agriculture.
With the economy in a spin, there have been the usual widespread calls for more protectionism - not least inside the USA. It looks like those calls will be heeded by the Democrats - despite the fact that much of the drive for more free trade has come from the US.
As he left office, Bush imposed a 300 per cent tariff on Roquefort cheese in retaliation for some perceived EU protectionism or other!
The Prime Minister has stupidly stirred the pot about protectionism over labour (Poles etc) He has therefore generated a great deal of racism and we were speculating whether that was Michael-Howard-style deliberate.
And I’m still no economist.
Fortunately the argument about protectionism is moot. We've sold ourselves down the river and both the UK and the US are embarking on pork barrelled fiscal stimuli that will utterly destroy any prospect of recovery.
The unions are inept, the government criminally incompetent, the bankers laughing, the people revolting. Protectionism assumes there's something to protect. Our only hope is that PIIGS default.
This isn't recession, this is scorched earth.
Thanks Dick and Simon (You really should call yourself Serverlan, it's sub zero cool)
I was beginning to despair that anybody actually thought through the issues on this blog.
Thanks. It's made me think, but just to piss you off, it's crazy to buy miniature vegetables, flown in from Kenya.
Wrinkled Weasel said... “You really should call yourself Serverlan...”
Now admit it. You have absolutely no idea who Servelan was - have you?
WW - quite right. I've never understood miniature corn - what on earth is that? It's horrid, pointless, hard, bitter, bland in colour, difficult to cook and probably has few vitamins.
OT Lady Yasmin Allibya Brown of Meirdsville said on Dateline London: "The British always pick on foreigners in times of crisis". Unchallenged by Gavin Esler.
The fact that we're the most supine and tolerant country on the bloody planet is, ya know, irrelevant to that vile, racist hypocrite.
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