With the Eurozone tottering it may be time we signed up for some Norwegian lessons
NORWAY is indeed a country of good fortune. Post World War II, the quality of living was relatively poor by Western standards, based upon the proceeds of an old-fashioned primary economy. Since the discovery of North Sea oil in the 1960s, this nation of only 4.9m has rocketed to fourth in the IMF’s league table, with GDP per capita of $52,000 (£34,000), while the UK languishes in twenty-first place, with a GDP per capita of $32,000.
Norway’s annual offshore revenue amounts to some $46bn. Norway’s sovereign wealth fund is now around $500bn – that provides a legacy of over $100,000 per capita, and grows annually.
To avoid runaway domestic inflation and provide the future legacy, Norway’s spending of the offshore revenues has been relatively muted. In preparation for a time when these natural resources are depleted, the Norwegians have maintained relatively high taxes (currently 47.8 per cent on income and 25 per cent on sales). While the UK now has tax levels approaching this, our wasteful spending as a nation means we are unable in the UK to deliver the world-class public services delivered in Norway.
The Norwegians have recognised for some time that EU membership would simply involve a transfer of wealth to profligate EU members, and voted “no” in referendums in 1972 and 1994 (both with turnouts in the high 70 per cents). At least they got the opportunity to vote on the issue, which is more than anyone much older than 50 in the UK can say.
Meanwhile Norway remains a member of the European Free Trade Association (EFTA), trading freely with the EU without hindrance and trade barriers, and limited fiscal consequences.
Here in the UK, despite 100,000 signatures on a petition and an unprecedented Tory backbench revolt over the EU referendum vote, the government blocked the motion. We have heard the patronising “this is not the right time for an EU referendum” soundbites. Yet the same politicians got us within a whisker of joining the now-so-discredited euro. So when exactly is the “right time”? Is not this a good time as any as we witness daily a dysfunctional EU, and its bankrupt economic system – or are we required to go down with the ship too? Norway is a reminder that there is another way.
Despite the Europhiles’ scaremongering, there is a meaningful debate to be had around EU membership, or rejoining Norway in EFTA. We get constant reminders that 40 per cent of our trade is with the EU (although there is at least 5-10 per cent of double counting here due to trans-shipment via Rotterdam), and therefore we risk loss of trade, jobs and so on. Here, trade figures released in October 2011 by HMRC speak for themselves. The total value of UK’s trade-in-goods exported to the EU to August 2011 was £92.5bn. The total value of UK’s trade-in-goods imported from the EU to August 2011 was £116.7bn. Call me old-fashioned, but this looks like a deficit position to me. Ten percent of our EU exports go to one country out of 27 EU members: Ireland, our fifth-biggest trade partner in the world. Despite the UK government kowtowing to the Bric countries, we trade with Ireland more than Brazil, Russia, India and China combined.
For 2010, UK exports to Ireland were £15.9bn, imports £12.5bn, a rare UK bilateral surplus of £3.4bn. Why would EFTA membership prejudice a trade relationship predating our EU membership? Taking into account the Rotterdam factor, 70 per cent of our trade may be outside the EU.
The net cost of the EU budget to the UK in cash terms is around £20bn per annum and climbing. Some estimates put the actual cost at £65bn, broken down as: £28bn for business to comply with EU regulations; £17bn food costs caused by the Common Agricultural Policy; £3bn value lost as the Common Fisheries Policy allows other countries to fish in UK territorial waters; £15bn paid to the EU budget and other EU funds; £2bn for Eurocrats, bureaucracy, MEPs and expenses.
VAT was brought in on 1 April (appropriately) 1973 as part of the UK’s membership of the then EEC. As we know, the main rate has climbed from 5 per cent to today’s 20 per cent. VAT is a Euro-tax, no doubt about it; EU VAT is compulsory for all membership states of the EU.
HMRC raises around £80bn per annum from VAT, a £15bn surplus over the real cost of EU membership. Were we to join the free EFTA club instead, we could reduce the basic VAT rate to 10 per cent or 5 per cent, giving an enormous supply side boost to hard-pressed consumers and shop-keepers alike.
Put this way, EFTA membership starts to sound more alluring by the minute.
Denying the public an EU referendum may prove a watershed moment as the euro crisis deepens. We are in this mess for a decade, and like the Norwegians it may be time to put our national interests first. Meanwhile as the euro and EU crisis deepens, and Europhiles fiddle while Europe burns, has anyone got a ferry timetable for Oslo?
Matthew Gash is a director of GGW Corporate Services Limited, the City columnist of Healthcare Business and lectures on banking and finance. www.ggwcsl.com