British exit could lead to Ireland paying more to EU

The prospect of a UK exit from the EU is raising concerns that Ireland and other net contributors to the European budget will have to increase payments to Brussels to make up for lost British contributions.

After receiving more than €42 billion in 40 years from Europe, Ireland quietly paid more into the EU budget than it received for the first time three years ago. A €53 million net contribution in 2013 was followed by another net contribution in 2014, estimated at €176 million.

The Brexit referendum on June 23rd has raised doubt over the membership of the third-largest net contributor to the EU budget.

London’s net contribution after rebates in 2014 was €7.1 billion, so a departure from the EU would present a major challenge to the remaining members.

EU programmes

At issue is whether net contributions should be raised to maintain EU programmes at present levels, whether programmes are curtailed or whether the EU itself raises “own resource” taxes in member states.

“Theoretically it’s possible that Ireland would have to put its hands into its pockets to pay more,” said Brian Hayes, Fine Gael MEP.

He said the question of when Britain stopped paying into the EU budget would be raised in a Brexit scenario.

“At that moment inevitably there is a hole in the EU budget because they are a net contributor. Then the question is: how is that hole filled? Is it filled by new taxation measures? A lot of people are talking about that. Or is it an increase in contributions from existing contributor countries?”

Britain might not exit the EU for several years after any vote to leave.

Still, the possibility of higher Irish contributions comes as the Department of Finance is already warning of increased EU budget payments as economic growth grows.

In a review last month of the economic situation in the State, the department said the likelihood of larger EU contributions would deplete some of the benefit from the lower cost of servicing the national debt.

"The favourable financial environment means debt-servicing costs are expected to decline over the forecast horizon," said the department's Stability Programme Update document.

Savings

“However, Ireland’s strengthening relative economic growth, which increases gross national income, is expected to increase our EU budget contribution, eroding some of these savings.”

In a report on Brexit implications for other EU states, ratings agency Fitch said a UK exit would “probably” lead to reduced EU budget contributions.

Fitch said Britain’s contributions would drop to zero if it reverted to World Trade Organisation membership.

“The loss or reduction of net contributions from the UK would imply that other net contributors (mainly in western Europe) would have to increase payments or that net recipients (mainly in eastern Europe) would have to accept lower net EU expenditures such as structural funds and agricultural support,” Fitch said.

Meanwhile, Chartered Accountancy Ireland, an all-island body of accountants, said its 24,000 members were overwhelmingly in favour of Britain staying in the EU.

“The prevailing message from our members is one of the negative impact of uncertainty on business,” said Liam Lynch, president of the group.