The past 24-hours have been an interesting time for the UK economy. Filled with ups and downs.
On the plus, the UK economy has performed better than many of us may have anticipated, and GDP is up. The bad side…just that, really. This has caused the UK to have to dig into its pockets to find £1.7 billion (€2.1bn) to pay to the EU.
The whole situation is extremely complicated from the outside, and wading through the numbers is difficult. Essentially, the reason is down to the economy performing better since 1995 than other European countries than was initially anticipated.
The Office of National Statistics announced that the UK GDP has grown by 0.7% between Q2. and Q3. That is a 3% rise since the same period last year. Nevertheless, the figure is down by 0.2% since the last figures for Q1. to Q2., which saw GDP rise by 0.9%.
The 0.7% rise has really been consistent since the start of 2013, which is perhaps “indicative of a robust economy”, as European Economist Azad Zangana stated.
Recently, the ONS included under-reported areas of the economy in its estimates, such as prostitution, research and development, and illicit drugs. Therefore, this means that the economy has been bumped up slightly.
Reports suggest that Westminster was expecting the UK to be losers in this years annual EU “tax”, but not quite so steep.
Other countries have been hit, such as the Netherlands, Cyprus, Italy, and (you’ll never guess) Greece.
On the other hand, countries have come out the other end with an early Christmas present. Germany will receive just under €800 million, whilst France will get a rebate of a little over a billion euros. I say a little, but it is actually €1,016,000,000. Other winners include Austria, Poland and Denmark.
Germany is extremely surprising for many. We all know France’s deficit is bigger than one of Francois Hollnade’s baguettes, growing by just under €4 billion in one year. Germany, on the other hand, is the fourth largest economy in the world, and yet its GDP growth rate has fallen by 0.2% in Q2 to Q3.
Despite being such a leader in the global market, Germany does look to have a stormy time ahead, as show in the graph by The Economist.
David Cameron has appeared enraged at the announcement, saying it is “completely unacceptable”. I feel sorry for the lectern he used to give his speech, and his visibly thumped and beat as he emphasised his fury.
Cameron has a few options.
Firstly, he could refuse to pay the bill. This would likely end up in the European Commission taking him to the supranational body that is the European Court of Justice, which could see the UK fined a sum that may actually be less than the tax currently facing the country.
Another approach could be for Cameron to take the EC to the ECJ, and describe the sum as unfair. In this scenario, he is likely to lose.
Lastly, he could push for the rest of the European Council to vote unanimously against the new penalties and rewards. The trouble here is that he is up against 19 of his fellow members of the EU who have been given money this year, just as the UK had last year. As one EU analyst described it: “that’s like turkeys looking forward to Christmas”.
There is some who believe the move is a political one, aimed at making David Cameron feel like a fool for speaking out against the EU on issues such as Human Rights, and limiting the free movement of labour.
It is easy to think this may be the case. The (soon to be former) President of the Commission Jose Barroso saying on the Andrew Marr Show: outside of the EU, the UK’s “influence would be zero!” (in his fantastic Portuguese accent).
Furthermore, we have seen the rise of UKIP in Britain, and this may well set in motion another victory for the Eurosceptic party in the upcoming Rochester and Strood by-election next month.
Patrick O’Flynn, a UKIP MEP, said: “The EU’s budget surcharge is effectively asking UK taxpayers to fork out for the disaster of the Eurozone. Totally outrageous.”
Even Tory backbenchers are roaring their heads, saying this will only further resolve the public to support the referendum on leaving the EU.
It is ridiculous to speculate, however, that the timing and nature of the recalculations are political. These take place every year, some benefit, some lose out. The UK has been lucky enough to have a solid GDP growth in the past few years. This is just one stubbed toe for the Treasury.
It is worth remembering, that despite increased growth, the much talked about deficit is expected to increase from £1.26 trillion to £1.36 trillion in the next financial year. That is a discussion for a later date.