Do you know that the EU has outstanding, unfunded liabilities of around €340 billion? No? Maybe it's naive of me, but I just assumed that since we're voting in a referendum on whether or not to stay in the EU, at the very least, voters would have been informed about the organisation's financial operations.
The existence of these huge unfunded liabilties and the problems posed by their rapid growth have been noted by the EU Parliament's Committee on Budgets, the ECR Policy Group, the Court of Auditors, national parliaments, and even by the EU Commission itself. They've also been reported in the British press, albeit the Telegraph seems to be the only newspaper that has given the story any real attention.
The liabilities stem from two principal sources: underfunded pensions and the Reste à Liquider. There's not a lot we can do about underfunded pensions except pay, and pensions exposure is currently estimated to be in the region of €104 billion, of which the UK's share will be around £11 billion. This sum is over and above our normal EU budget contribution.
The Reste à Liquider is a fancy monicker for the EU's unfunded future liabilities. The EU commits to expenditure on the assumption that member states will continue to fund it. So it might agree to fund a €100 million infrastructure project over three years, but only receive the money for it over a much longer six-year period. This creates a gap between income and liabilities. The original idea behind the Reste à Liquider was to enable the EU to smoothly manage its commitments and not to be tied to receipts from member states.
The only problem is that the gap between income and liabilities has kept growing to the point where it now stands at around €220 billion. Total unfunded liabilities now equate to approximately 25% of the entire EU budget over the last six-year cycle, or over 140% of the EU's annual budget. The liability gap is so large that the ECR Policy Group has warned that the EU may soon be unable to pay its bills. The liabilities are starting to look a lot like an unapproved overdraft that's getting out of control.
The Reste à Liquider: An Unapproved, Out of Control Overdraft?
Source: The ECR Policy Group on Budgets
The EU Parliament's Committee on Budgets has said that in order to deal with the massive liabilities the EU must increase member contributions. If the EU decides to do this over the next budget cycle, Britain's net contribution could increase by over 40%, and this would only cover liabilities already incurred, not taking into account any planned increase in the forward budget.
In total, these liabilities mean the UK is on the hook for more than £34 billion in addition to our ongoing EU budget contribution. The sums involved are staggering, but perhaps more troubling is the fact that the EU Parliament's Committee on Budgets drew attention to this problem in 2012, and, four years later, nobody has done anything about it. The liabilities grow larger each year, and if members' contributions are not significantly increased, the EU will start to resemble a Ponzi scheme, with incoming funds rapidly dispatched to meet previously accrued liabilities.
This black hole in the EU's finances demonstrates how unaccountable the EU is. These liabilities have been accrued without our approval, but we are on the hook for them. Even after four years nobody seems to have the political will to tackle the problem, which has reached the stage where one of the EU's own policy groups warns that, if the problem isn't addressed, the EU could become technically insolvent. I suppose this is one of the dangers of giving an unaccountable organisation a blank cheque to spend our money as it sees fit.
If you're planning to vote leave, this revelation will only confirm your belief that the EU is undemocratic and unaccountable. If you're planning to vote remain and this is the first you've heard of the black hole in the EU's finances, I have two questions for you:
- Do you truly understand the organisation you want to keep us in?
- If a €340 billion black hole has been concealed from voters, what other nasties do you think are lying in wait for us if don't leave the EU?