Charlemagne | Spoon feeding lazy journalists

Open Europe: the Eurosceptic group that controls British coverage of the EU

Shoot the messenger: the fault lies with lazy journalists

By Charlemagne

WHAT explains the fierce hostility of the British press towards the European Union? It is a complicated question, and any answer must take account of things like the ferocity of the British press in general (a product of culture and competition between lots of national titles) and the real scepticism of the British political machine towards the EU, which trickles down into public discourse.

But I think people in Brussels ignore at their peril the impact of a small, but assiduous Eurosceptic campaign group, Open Europe. Calling itself an independent think tank, which it is not, Open Europe does two exceedingly clever things to influence British press coverage of Europe. Its (admirably multi-national) team of young researchers reads the English-language, French, Dutch, Belgian, German and Nordic press every day, and translates and links to stories that show the EU in a bad light, in a daily press summary that has very wide circulation among political reporters. Secondly, they produce special reports that delve into the detail of EU legislation and the economics of the EU, and produce hack-friendly, pre-digested reports on how awful the EU is, which duly sail into the press.

I am sure that well over half the stories in the British daily press on the EU are directly inspired by Open Europe press releases and tip-offs. Many of those articles are one-sided, inaccurate and verging on the hysterical. But here is the thing, I do not really blame Open Europe. They are a political campaign outfit, and campaigning is what they do. I do not share their opinions on a lot of things, and I think they play fast and loose with complicated sets of data. But the real reason their work generates so much duff journalism is that Britain has such depressingly duff newspapers.

Open Europe feeds on three big facts about the average London based journalist. They are very, very lazy, so love being spoon-fed stories. They are pack animals: once the EU has become a target for vitriolic abuse in one paper, all the others follow, because it winds readers up into a nice frenzy and there is no danger of anyone from the EU suing them. The EU also alarms journalists in London at some level, because they do not understand it and it makes their brains hurt to try, so they yearn for someone to explain to them in simple terms why it is (as they suspect) a plot by foreigners to run Britain.

To explain what I mean, here is a report from Open Europe that came out this week, about the relative cost-effectiveness of EU regulation and domestic British legislation. It is a classic Open Europe operation. They have spent a lot of time and effort combing through thousands of cost-benefit analyses produced by the British government, and subjecting the numbers to a highly politicised analysis. The report contains three key conclusions:

1. They start by estimating an annual cost of regulation in Britain, and assert that, as an average figure over recent years, EU-originated regulations accounted for 72% of the cost of regulation in Britain. This allows them to make a political point: that a campaign promise by the Conservatives to slash regulation is not credible if it only touches on British domestic legislation. In their words:

The Conservatives have proposed a series of fresh regulatory reforms that are innovative and could cut the cost of regulation. However, the Conservatives have chosen to focus their regulatory reform agenda almost exclusively at the domestic level. This, in turn, could lead to contradictory or undeliverable policies since a future Conservative government will only have full control over 28 percent of the cost of regulation.

2. Next, they assert:

Since 1998, regulation introduced in the UK has cost the economy £176 billion.
This is roughly equivalent to the UK's entire budget deficit, or 12.6 percent of
GDP. Of this, £124 billion, or 71 percent, had its origin in the EU.

3. Finally, they assert that they have proof that domestic regulations are 2.5 times more cost effective than EU laws:


We estimate the benefit/cost ratio of the regulations we studied at 1.58. In other words, for every £1 of cost introduced by a regulation since 1998, it has delivered £1.58 of benefits. However, the benefit/cost ratio of EU regulations is 1.02, while the ratio of UK regulations is 2.35. This means that UK-sourced regulations deliver a benefit almost 2.5 times higher on average than regulations coming from the EU. For every £1 of cost, EU regulations introduced since 1998 have only delivered £1.02 of benefits. Expressed differently, it is 2.5 times more cost effective to regulate nationally than it is to regulate via the EU. This also means that EU regulations come dangerously close to failing an overall cost-benefit analysis. This is a clear argument in favour of regulating at the local or national levels as much as possible, and an indication that deregulation efforts should be targeted at the EU level.

Now, to me point 1 counts as tendentious but politically interesting. Tendentious, because the British government would have regulated in all sorts of areas even if we did not belong to the EU, and because not all regulation has benefits that can be directly costed. Environmental or labour market regulations may be wasteful and excessive, or they may bring public goods that make life better: it is ridiculously hard to put hard numbers on this stuff. It is also hard to put a price on British membership of the EU internal market (though lots of people bandy all sorts of numbers about).

But without regulation, there would be no single market. Some of that regulation will be designed to keep skittish, hygiene-obsessed German or Danish mothers (for example) calm about food safety, and ease their fears about dangerous salami being imported from the far corners of the EU to poison their blond-headed moppets. That may be expensive, but that fuss-potting gives political cover for the Danish and German governments to approve EU enlargement to countries like Romania or Slovakia, and that is really good for the long-term health of the EU. How do you possibly measure the costs and benefits of such things?

But point 1 is politically interesting, because it is a good point that the Tories, for all their bluster about slashing regulation are actually rather keen to avoid an all-out bust up with Brussels.

Points 2 and 3 are absolute shockers: an insult to the intelligence. What on earth is the relevance of comparing the overall "cost of regulation" over an arbitrary 12 year period with the size of the UK's "entire budget deficit"? Why pick the deficit, other than the fact that lots of British newspaper readers know it is a bad thing, though they may be hazy between the difference between overall public debt and an annual budget deficit. (You have to look to the footnotes to see that the budget deficit in question is for the financial year 2010/2011). You might as well say the cost of EU regulation is the same as buying everyone in Woking a new BMW (I just made that up).

And as for point 3, what on earth does it mean to say "UK-sourced regulations deliver a benefit almost 2.5 times higher on average than regulations coming from the EU." The EU and national governments regulate different things, because of the way legislative competences are divvied up by the EU treaties. So their comparison is between apples and oranges. It might well be that the EU regulates wastefully, but then again it might also be that the EU has powers to regulate in some expensive areas, like environmental law or health and safety law, where the main benefits are hard-to-cost public goods. In any case, it is certainly absolute nonsense to come up with precise ratios like "2.5 times more efficient".

Here is the revealing part. Just look at how different papers covered the same report. Two serious newspapers looked at point 1, and added their own sensible caveats. The Financial Times homes right in on the Tory story, and explains that Open Europe is a campaign group.

The Conservatives' ambitious proposals to cut red tape are at risk of failure because their reform agenda is too focused on domestic regulations rather than those imposed by the European Union, an independent report warns on Tuesday.

Open Europe, a business group campaigning to turn the EU into a looser trading area, says that on average 72 per cent of the cost of red tape derives from European regulations

The Wall Street Journal, though a strongly Eurosceptic newspaper, also reports the findings honestly, with its UK editor Patience Wheatcroft writing:

Today the U.K.-based lobby group Open Europe releases figures showing that EU legislation puts a heavy burden on member states. It calculates that, since 1998, EU regulations have cost the U.K. £124 billion ($185 billion). The truth is probably not quite so stark. Many of the regulations would have been implemented by national governments whether or not the EU had imposed them. Compliance, however, is costly.

Here is the Daily Mail. Their report amounts to an open mouth swallowing a spoon whole, without the slightest degree of editorial thought: budget deficit comparison, bogus "2.5 times more effective" point and all. Note that Open Europe is here described as a think tank.

Regulation has cost Britain £176billion since 1998 - equivalent to this year's annual budget deficit, research will reveal today. And a comprehensive study of the impact of new rules shows that European Union regulation accounts for 71 per cent (£124billion) of that figure. Since the Government launched its 'Better Regulation Agenda' in 2005, the annual cost of regulation has actually doubled, says think-tank Open Europe. 'This is in no small part due to a failure to stem the flow of new, costly EU regulations,' its report says. The research looked at 2,300 of the Government's 'impact assessments' - reports that calculate the likely financial implications of new rules. These suggest that regulation has cost the UK £176billion over the past 12 years. It is estimated that rules from Brussels have cost every household £5,000 over the past decade. The study estimated that for every £1 of regulatory cost, new EU rules have delivered only £1.02 of benefits. This compares with £2.35 of benefits from British regulations.

Here is City AM, read by lots of City types as they commute to work:

THE SOARING costs of red tape came under the spotlight yesterday as a new report found that regulation has cost the UK economy £176bn over the past 12 years. Of that amount, around 71 per cent – or £124bn – was spent on complying with legislation from the EU, according to think tank Open Europe. Open Europe, which is supported by the likes of Marks and Spencer chairman Sir Stuart Rose and Sloane Robinson founder Hugh Sloane, said it estimates the benefit to cost ratio of EU regulation at 1.02, meaning that for every £1 of cost, regulations introduced since 1998 have delivered just £1.02 of benefits. It puts the equivalent domestic ratio at 2.35.

I was sufficiently irritated by the stupidity of the cost effectiveness comparison between apples and oranges that [on Monday morning] I emailed the head of Open Europe, a genial Swede called Mats Persson. Come on, I said to him, you know this is nonsense. This is another very long posting, but in the interests of fairness, here is his full reply, so you can judge the arguments for yourselves. I note that the ratio 2.5 is not mentioned.

Dear David,

There are several areas where competencies overlap between member states and the EU, including employment policy and environmental legislation (other areas include, for example, transport and financial services). In these areas a comparison between EU and UK regulations in terms of efficiency is not only appropriate, but also crucial, as the EU and UK are effectively regulating the same parts of the economy. Using the Government's own impact assessments is not an exact science, but it does give us an idea of the cost-effectiveness of EU and UK regulations relative to each other - particularly in these 'shared' policy areas.

According the government's assessments, it is also in these overlapping policy areas that EU regulations tend to generate the heaviest costs relative to comparable UK laws. Social policy and environmental legislation are two obvious examples. In environmental policy the UK is responsible for 76, and joint-responsible for 5 of the 195 regulatory initiatives Open Europe looked at, so this is clearly a 'shared' policy area. The benefit/cost ratio for UK environmental laws is 0.68 on average, while for the EU it is 0.42. Indeed, these regulations generate benefits that are hard to quantify, but relative to each other, EU laws appear less cost-effective. In employment policy the situation is possibly even worse, although in our estimates we have excluded some IAs for EU employment regulations because they didn't quantify benefits at all, which we don't find plausible (e.g. the Working Time Directive).

As we argue in the report, the relative high cost arising from EU regulation is not surprising given the one-size-fits all nature of EU law. Trying to regulate member states' different economies, labour market systems and environmental regimes within one single framework is bound to produce some awkward arrangements and cost-ineffective solutions when laid on top of existing national regulations. In addition, since it's very difficult to change an EU law once it has been agreed (as it requires the agreement of 27 member states and the European Parliament) regulations can continue to generate heavy and unnecessary costs year after year without being addressed. Amending an overly burdensome domestic law is usually far more straightforward.

To us, this provides further evidence that the EU should be focussing on genuine single market legislation and leave the rest to be handled nationally, regionally or locally. In environmental legislation we advocate overall targets but national discretion in how to achieve them - which we believe would be a far more cost-effective way to reduce emissions.

This is not an ideological point: it's a practical one that is consistent with both economic reality and common sense.

Mats

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