Think-tanks exchange fire over EU membership

Britain would be better off leaving the EU, according to the Institute of Economic Affairs, a free-market think-tank.

Oh no it wouldn't, according to the European Movement, a cross-party, pro-EU campaign chaired by Sir Edward Heath.

The great European divide shook the gentle world of think-tanks yesterday, with the publication of one pamphlet yesterday met by an immediate rebuttal by another.

The sceptics at the IEA, in a report by Brian Hindley and Martin Howe, reckon that without the Common Agricultural Policy (CAP), Britain would have been pounds 6.4bn better off in 1994. They think there are also indirect costs such as the imposition of more rigid European social legislation on the UK.

Against that, they argue that the costs of withdrawal would be small. British goods would have less access to European markets, and foreign direct investment into the UK could fall. But the authors assert that these effects would be small relative to the economy.

Not so, according to the European Movement's "rebuttal unit". Spokesman Danny Alexander said: "They seriously underestimate the benefits British companies get from the single market and the impact of withdrawal on inward investment."

He also cited Treasury figures showing that the CAP costs every Briton just pounds 16. While not defending the CAP, the European Movement points out that even without it the UK would be paying for some kind of farm subsidy regime.

The IEA authors accept that a full cost-benefit analysis of Britain's EU membership is a formidably difficult task, so they do not have a headline estimate of the net result. But they conclude: "Fear of adverse economic consequences should not deter a British government from seeking to change the relationship of the UK with the EU."

However, they do not challenge the importance of Europe in Britain's trade, taking 57 per cent of exports. The European Movement says having a market of 370 million people and the opportunity to influence the rules of the single market mean there is no alternative to staying in.