Friday, 15 December 2017

Clarifying Norway's budgetary payments

One of the most curious things to characterise Britain's referendum discourse was the passive acceptance of falsehoods spread about the Norway option. Most of these lies came from senior Remain figures, who now beg and plead for a similar Brexit outcome and are likely to regret ever having propagated them. I have no sympathy for any of them. They made their bed and are now trying desperately not to lie in it.

Oddly enough, anti-Norway option myths have been quite strongly echoed by Leavers too. This might be down to a desire to act tough on free movement, having played a part in weaponising it over the past two years. I have always found this bizarre, given that the most ardent eurosceptics will always privately admit to being satisfied with EFTA if that is indeed our only suitable alternative to EU membership. A true eurosceptic would at least rationalise the options.

I will work with anybody to see the EFTA solution realised, but those on the Remain side who claimed, falsely, that Norway has no say in Single Market rules and pays for access to the Single Market must apologise and admit to their errors. Neither of these two claims is true in any meaningful sense, and since they make such a big deal about Leave falsehoods, it is only right that they take responsibility for their own misinformation.

This post will hopefully rebut the nonsense spewed over Norway's financial contributions, which are not what they seem. This pocket of debate has proved extraordinary in that it has unified both sides in ignorance. As a result, the Norway option has evolved into the target of identical and equally false critique from right across the referendum divide. I am routinely told that Norway pays for access to the Single Market, but as is often the case in politics, evidence does not stand with conventional wisdom.

So let's begin with the facts. The principles governing the structure and application of Norways financial contributions are outlined in Protocol 32 of the EEA Agreement. Norway's financial contributions can be divided into two categories: EEA Grants and full participation in cross-European and EU programmes. We should begin with the grant system, which also applies to both Iceland and Liechtenstein, who (being poorer per head and smaller) pay substantially less. According to the Norwegian government:

"The EEA and Norway Grants play a unique role in Norway’s cooperation with many EU countries. These grants are designed to reduce economic and social disparities in Europe. They are also an instrument for Norway’s European policy. The Government will ensure that the EEA and Norway Grants support Norwegian political priorities and lay the foundation for closer cooperation with the recipient countries and with EU institutions."

The grants play a significant part in Norway's cooperation strategy with the EU. They are aimed mostly at funding investment and research projects, but also help those countries in receipt to tackle broad issues like climate change and cross-border crime. Norway's access to Schengen's Information System helps in this regard. The money for the grants is divided between the three EFTA signatories and Norway necessarily contributes most of the funding. It is paid as good will to national governments, not to the EU budget.

The point about these funds being part of a strategy is important. To clarify, there is no support for the argument that this money is paid in exchange for full market access anywhere in EU literature. Norway gets full Single Market access by accepting fundamental EU freedoms. The money is irrelevant. EFTA itself points out that "the system is based on solidarity and not on fair return." These payments act as devices to enhance relationships, though I admit could well strengthen backhand leverage.

The second aspect to Norway's financial inputs is based on a series of EU and cross-European programmes designed to maximise cooperation, innovation and security. This is where things get tricky and where precision of research is vital, so let's work through this point by point. Firstly, Norway enjoys full participation in twelve EU programmes, which are listed here. They include Horizon 2020, Erasmus, Galileo and the Copernicus Programme, to name but a few.

The programmes are funded by the European Commission and each of the EFTA EEA states contributes to those allocated funds. The Working Group on Budgetary Matters is responsible for coordinating the procedure establishing the budget in close conjunction with the Commission. It also audits the final EEA EFTA budget. EFTA EEA states contribute on a GDP basis and in accordance with Article 82.1 of the EEA Agreement.

So far it sounds a lot like direct payments to the EU, the major operator of these programmes. But there's more. EFTA make clear in this document (page 55) that "EU programmes are financed through the Commission’s part of the EU budget. Since the EEA EFTA States do not contribute directly to the EU budget, EEA EFTA participation in a programme requires a yearly financial contribution to the relevant part of the Commission’s budget."

The relevant part is usually an administrative wing and will deal with expenses, office rents and general overheads. The contributing EFTA states also send policy advisers, who usually work for national or public institutions, to aid the Commission in kind. This is called secondment of national experts and helps to oil the machinery of the programmes. As for Switzerland, not an EEA but an EFTA country, participation is arranged separately and bilaterally.

Norway's decision to take part in twelve such schemes is taken at nation state level and remains unilateral. Liechtenstein is party to only three. The EEA Agreement enshrines no such requirement for uniform participation and the system is naturally subject to cherry-picking. I suspect for the UK this will be no different, though we may well end up retaining full access to a substantive list of programmes. It is in our interests to prevent a scenario in which too much disruption is inflicted upon significant, collaborative projects.

We benefit from participating and so do other European countries benefit from our participation. Our universities, for instance, are world-leading and EEA, Macedonian and Turkish students will always seek out opportunities to study here through continued operation of the Erasmus plus programme. Paying for membership seems to me fair and a no-brainer. Not even the headbangers will be able to complain about this concept. It is about what is fair.

What is important to note here is that the financial frameworks which exist between EFTA/EEA and the EU are based on principles of solidarity and close cooperation. In this regard, Norway provides us with a template on how to remain outside of political union whilst securing the best available trading terms and enjoying the fruits of trust and collective endeavour. The EU is rightly regarded as an important partner with which to work extensively.

This is the sort of relationship I have for years envisaged Britain managing with Brussels. The EU is here to stay and that is not always a bad thing. It ought to be treated as a valuable ally. Not all European institutions are worth pulling out of, much less for the sake of massaging hardline narratives. And, as outlined above, preserving participatory status within the fabric of existing programmes and offering reasonable grants need not entail payments for market access. Norway doesn't. Why should we?


  1. "If it waddles like a duck, and quacks like a duck, then there's a high probability it may actually be a duck by any other name."

  2. The Norway option certainly appears far more favourable in terms of funding and access to many of the EU schemes that we would willingly choose to participate, however the devil isn't in the detail, but the fundamental necessity to abide with the four freedoms. Bottom line is that the majority of the electorate understand that freedom of movement between the EU & UK results in mass migration from the EU to the UK. Whilst this is beneficial in keeping wages down and the demand of houses high thus feeding property prices the man on the street experiences lower wages, greater demand on the NHS and education which to them are day to day problems for many. Subsequently, stopping or limiting freedom of movement for the average man or woman on the street is more important to them and affects them more than a PLC company being able to sell their goods throughout the EU. So the average man on the street wants the UK to be able to control immigration which is seen as a priority, yet for many others trade and unfettered access to the EU's markets is their priority. The UK has our attractive benefits system including our free NHS and beneficial housing benefits combined with a service led economy as a carrot for immigrants, whereas the EU has mass youth unemployment and lower standards of living in Eastern Europe so it is no surprise that economic immigration occurs. A great deal is written about the UK's stance on immigration, yet very little blame is pointed at the EU who are seemingly relaxed about member countries where youth unemployment is as high as 20 - 40% leading to the immigration issues that the UK has experienced.

    1. I don't think there is any good evidence that migration pushes wages down at all. Most reputable economic studies suggest otherwise. And the devil is in the detail.

  3. The comment from Simon Wren Lewis last week was at best there is no evidence that immigration lowers real wages. To argue beyond that is not supportable? Not seen as caveated a sentence 'i have not seen Gordon assault people in that way'

    The price of housing someone mentioned is caused by subsidy, speculation and infrastructure more than anything else?
    It is a choice of UK Govt for last 30 years?

  4. Although the Article points out the 12 specific programmes,none of which is politically contentious the most important part of the Norway EEA document is the participation in 31 EU agencies including aviation, medicines etc. It is the payment towards the costs of these which puts Norway's per capita contribution to EU activities higher than UK as a member. And all, require ECJ oversight. But still shows that SEA membership far better than Canada or any other mad scheme of adjectives dreamt up by May.

  5. Putting wind power to use doesn't have to mean the antiquated system of days gone by, with gigantic Strømtest and the like.

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  7. Most importantly, one vehicle or other vehicle (for instance, cruiser) is permitted per individual to be imported to Norway. What's more, your vehicle must meet certain Norwegian directions and gauges including rules around discharges and security. kop norge