Switzerland offers the model for our new relationship with the EU

Despite all the sound and fury about the EU’s surcharge the truth is somewhat different – but no better for that – the UK’s net contribution is rising and will continue to do so. Thank goodness someone like Dan Hannan is working on an alternative that would give us a way out.

The announcement Britain should stump up a further 2.1bn Euros to finance the EU’s budget appears to punish Britain’s economic success while rewarding economically troubled France and Germany with handouts. That Greece and Cyprus have been asked to pay more too, by having to borrow to do so, just underscores the absurdity.

The reality is more mundane, however, for the additional bill is actually a correction to Britain understating its Gross National Income over more than a decade. The £1.7bn bill is a one-off adjustment, but simply reveals that we have been underpaying all of that time. The membership costs have actually been higher than anyone thought – some £200m a year extra over the last ten years. Compare this with Switzerland paying only £150 million a year – in total – for its access to the EU single market.

Add this to the fact that the UK’s net contribution to the EU has been climbing steadily and the trend is set to continue. The ONS Pink Book shows that back in 2002 Britain’s net payment was only £2.8bn but this had climbed to £11.3bn in 2013, rising £2.7bn alone last year. And that’s before the latest £1.7bn surcharge.

Rubbing salt in the wound Business for Britain has revealed a further 1,139 new regulations were passed by Brussels in the last year.

Thankfully, while everyone has been getting worked up by the apparently uncontrollable rising cost of the EU Dan Hannan MEP has been working with others on preparing an alternative – a free trade area across Europe modelled on NAFTA or ASEAN. At meetings across the continent, starting at Messina where the EU was born in 1955, Hannan has been beavering away on proposals for a new organisation that the UK and others could join – stretching from Iceland and the Faroes to Turkey and Armenia.

Speaking at a conference on the Future of Europe hosted by Global Britain, Hannan explained the new arrangement would have all the benefits of free trade with open markets, but none of the downside of heavy-handed political interference and those regulations that are a huge burden to British Business.

It would take us back to what the UK signed up to in 1975 – a free trade community – offering the advantage that countries could then go and make their own Free Trade Agreements with the US, the Commonwealth and China (like the Swiss have already).  Neighbours of the new European free trade area – like Morocco and Israel – could apply to join with ease because there would be no heavy political dimension to cause lengthy negotiating delays.

Attractively, without an unaccountable bureaucracy and countless dysfunctional subsidies through transfers such as the Common Agricultural Policy, Common Fisheries Policy and regional funds, the overheads and consequent membership costs would be considerably lower.

Supporters of the European Union talk as if removing the UK from its grasp would bring economic isolation when the reverse is more likely. While some three million British jobs may be connected to our trade with the European Union, there are also some five million EU jobs connected to its trade with the UK.

The UK is the EU’s biggest and best customer and the CEOs of EU businesses will be demanding it has to stay that way. The prospect of trade barriers is consequently zero. It’s not as if the US, Australia, India and China face huge obstacles in trading in the EU’s much overrated single market.

Switzerland, explained Hannan, is obliged to meet EU standards when it trades with its member states – but is free to apply its own laws for any other commerce.

The UK’s strength has always been its willingness to look beyond its immediate neighbours and trade with the rest of the world. Having a weaker vision that means all trade must be viewed through the prism of the European Union is hugely limiting and is holding us back. Hannan’s proposal, when it is finalised, could well provide the positive alternative an outward-looking Britain requires.