Fact check: Can we take Danny Alexander's "3 million jobs" threat seriously?

In June, Liberal Democrat Chief Secretary to the Treasury Danny Alexander said that, according to Treasury analysis, more than three million British jobs would be at risk if Britain left the European Union. This is what he said:

“Indeed, the latest Treasury analysis shows that 3.3 million British jobs are connected to Britain’s place in Europe. That is the measure of the risk that isolationists would have us take.”

What new analysis could this be? So we asked the Treasury. You can read the full response here, but this is perhaps the key part:

“As set out by the Chief Secretary to the Treasury, the Treasury estimate that 3.3 million jobs in the UK may be related to exports to other European Union countries. This figure is based on the assumption that the share of UK employment associated with UK exports to the EU is equal to the share of output that is exported to the EU, making allowance for the composition of the UK economy. It is not an estimate of the impact of EU membership on employment.”

The Times also reported on the FOI response today. Now, there are at least three things that are problematic with Mr Alexander's claims:

1. First of all, this is not in fact 'new' analysis. As the response to our FOI makes clear, Mr Alexander's remarks were based on the following methodology, which has been used and cited countless times before. In 2003, Ruth Kelly told Parliament that:

"The Treasury estimates that 3 million jobs in the UK are linked, directly and indirectly, to the export of goods and services to the European Union. This figure is based on the assumption that the share of total UK employment associated with UK exports to the EU is equal to the share of total UK value added (GVA) generated by UK exports to the EU. The information necessary to apply the same method to derive comparable estimates for England, Scotland, Wales and Northern Ireland is not available."

In February 2014, Lord Livingston again confirmed this methodology as follows:

"The estimate of 3.5 million jobs linked to trade with the European Union is based on the assumption that the share of UK employment linked to trade with the EU is equal to the share of total UK value added (GDP) generated in the production of goods and services exported to the EU." 

"The calculation uses data from UK Input-Output tables to estimate the proportion of UK value-added content generated in exports of goods and services and applies this to the values of UK exports to the EU. This is then divided by total UK GDP and the resultant proportion then applied to the total UK labour force to estimate the proportion of the labour force linked to EU exports on a value-added basis."

In short, the methodology dates back more than ten years and does not seem to have been updated at all.

2. Perhaps most crucially, as the Treasury's response makes clear, this study "is not an estimate of the impact of EU membership on employment." So it is rather misleading, to say the least, of Mr Alexander to suggest that these jobs are at "risk". To say that X number of jobs are linked (directly or indirectly) to exports to the EU is clearly not the same thing as suggesting that they are dependent on EU membership. To be fair to Mr Alexander the Treasury's position on this is somewhat confused itself - it claims that this is not an estimate of the impact of EU membership on employment, however, that is exactly what the simplistic calculation and, importantly, its flawed counterfactual seem to suggest (see below). 

3. Thirdly,  is immediately apparent, it is a very simple approximation, not detailed analysis which one might have expected from HMT on such an important question. The methodology used is very simplistic, for a number of reasons:

• A flawed counter-factual: We have always stressed the importance of the counter-factual when assessing the future of the EU/UK relationship. The counter-factual here is essentially that these jobs would not exist without the EU.  This is odd for at least two reasons: first, it effectively assumes an end to all exports to Europe should the UK withdraw from the EU. We can argue about the level of market access a post-Brexit UK may be granted (we've done a lot of work on this) but one thing is clear: there will be exports from the UK to the EU under any scenario. Secondly, by definition the analysis assumes that all value added by jobs related to EU exports would not exist without the EU membership. A simple common sense check suggests that, actually many of these jobs may still produce some value even if the goods did not find their way to the EU and that the resources could be alternatively employed.
• Assumes productivity is the same across the UK economy: While it is claimed that the calculation "takes account of the composition of the UK economy" it is not clear exactly how this is done. On the surface the calculation also seems to implicitly assume that labour productivity (broadly output per worker or per hour) is the same across the entire economy (by saying the basic proportion of output corresponds to the same proportion of employment). Fundamentally we know this is not true - on the most basic level, we know that skilled and unskilled jobs will have different productivity levels. A quick glance at the most recent ONS labour productivity statistics confirms this and highlights that over the decade since this methodology was created, different sectors' and regions' productivity rates have grown in different ways. Unless this is accounted for in a detailed way in the methodology it is likely to distort the figure.

The final point above suggests that there is either some continuing lack of transparency with regards to the calculation or it really is just overly simplistic (if not both). This is all quite ironic given that UKIP and Better Off Outers in general are often criticised - and often justifiably so - for not establishing a credible counter-factual whilst relying on heroic assumptions.

Mr Alexander should know better.

Fact-checking the Clegg v Farage EU debate

The first EU debate between Nick Clegg and Nigel Farage on LBC was for the most part restrained with a surprising amount of detail and substance. Most of the key fault lines in the UK-EU relationship were touched on.

However, given that the two men represent the polarising ends of the debate, there were also a number of claims that struggled in the accuracy department. Here is our quick 'fact-check' of the key debating points:

Claim - Clegg: I supported a referendum on Lisbon

Verdict: Technically true but highly misleading

On the referendum question, Clegg said that when it came to new EU Treaties transferring new powers to Brussels,

"I've never wavered in that position, that's why the last time the rules changed, something called the Lisbon Treaty, I said there should be a referendum."

It is true that the Liberal Democrats called for referendum on Lisbon but crucially it was an in/out referendum which was not on the agenda at the time - the issue wasn't even put to put to a vote. There was however a vote on whether to have a referendum on the Lisbon Treaty itself on which the party abstained, despite the fact that together Tory MPs, Lib Dem MPs and Labour rebels could have passed it. Clegg is being highly disingenuous by blurring the distinction between an in/out referendum and a treaty specific one. Farage's quip that there was no point waiting for a new Treaty as powers were being transferred to the EU every week via directives and ECJ rulings was quite effective in this context.

Claim - Farage: Under EU rules we have a completely open door to 485 million Europeans 

Verdict - Partially true but unclear on the numbers

It is true that the free movement of labour is a fundamental principle of the EU and the UK cannot limit the numbers of EU migrants coming over. However, Clegg was right to point out that the right to free movement is not completely unqualified - under the free movement directive migrants have to be able to support themselves financially or have 'reasonable' prospects of finding a job.

In terms of Farage's 485 million figure though we have to say we are a bit confused as to where exactly this comes from - the population of the EU28 is around 506 million, which minus the UK's approximately 63 million leaves 443 million.

Claim - Clegg: 3 million jobs would be at risk if UK left the EU

Verdict - Highly unlikely - would depend on a range of other factors

Clegg cited the well-worn '3 million jobs linked to the EU figure' despite established doubts over its veracity. Recently those tending to cite this number have replaced "depend on" with "linked to" but it's still dubious. As we've argued in the past, this claim is one of the most conspicuous examples of a rogue statistic without any credible counter-factual attached to it. The assumptions behind the 3 million jobs figure is that there would be no trade at all trade with Europe if the UK left the EU, which of course is nonsense -  a similarly heroic assumption to that which Better Off Outers make when calculating the cost of EU membership based on all regulatory cost magically disappearing on Day 2 post-Brexit.

Claim - Farage: UK would hold the whip hand in negotiations over a new trade deal with the EU

Verdict - Very uncertain 

Farage argued that in the event of an exit, the UK would "hold the whip hand" in trade negotiations with the EU due to the EU's trade deficit with the UK. We've looked at this in detail - the key point is that while this is true in the area of goods, when it comes to services - a crucial and thriving area of the UK economy - this is not the case. So with that logic, EU countries would have incentive to strike a deal with the UK in goods but not services including financial services. Secondly, the process for leaving the EU - the so-called Article 50 - actually involves less control for the UK than is often assumed, including a Qualified Majority Vote on the final deal in which the UK will not take part.

Claim - Farage: 75% of UK laws come from the EU. Clegg: no it's 7%

Verdict - Both are wrong

The contentious topic of how exactly how many UK laws are derived from the EU also came up, with Farage gleefully citing Viviane Reding's absurd claim that 75% of UK laws are decided in Brussels (as we've argued many times, Reding must secretly be on the UKIP payroll). Clegg went with the House of Commons' Library's briefing which estimated this to be around 7%. Regular readers will know we've analysed this in painful detail and the truth is it is simply not possible to say exactly - what's clear is that it's neither 7% (this only counts primary legislation which isn't meaningful at all) nor 75%. (But basically too many).

Claim - Farage: We give the EU £55 million per day

Verdict - True if counting gross cost, untrue and misleading if counting net cost

Farage is correct that the UK's contribution to the EU works out as around £55 million per day. However, that it is a gross figure which does not include the UK rebate (cold, hard cash the UK gets back from Brussels every year) and nor the UK's receipts from the EU budget (even if this is only UK taxpayers' cash being re-routed via Brussels).

Claim - Clegg: Without the EAW we'd struggle to extradite criminals and terrorists

Verdict - The EAW makes the process faster but it is not indispensable

The European Arrest Warrant (EAW) is used by EU states to speed up extradition procedures. It is true that the EAW has been used by the UK to recover suspected terrorists and other criminals from other EU states who have subsequently been found guilty and locked up. It is however untrue to claim that suspects such Hussain Osman and Jeremy Forrest could not have been recovered without it. Also before the EAW was agreed, there were agreement on extradition and the UK managed to successfully extradite plenty of criminals from EU countries through bilateral procedures. These were considerably slower but it is highly unlikely that with or without the EAW Italy would have wanted to hang on to Hussain Osman or France to Jeremy Forrest.

Fact check: Has Germany's Foreign Minister really "isolated" Cameron on EU migration?

Update 1:20pm: The FT has told us that it was the German Perm Rep in Brussels that sent the FT the quote, in reply to the question: "I'm trying to understand what the German position is on this matter and I'd be keen to know whether Berlin shares the UK view of curbing free movement of European Union workers." If that's the case then the German Perm Rep should obviously share some responsibility for recycling the quote and not being clear about the source or context of it. That said, we still think it's an odd basis for such a major splash and, as we argue below, conflates the issues involved since Cameron has not actually advocated a cap on current EU migration.

The FT's front page claims David Cameron "faces EU isolation on anti-immigration stance". Exhibit A in the paper's case is a quote from Germany's SPD Foreign Minister Frank-Walter Steinmeier:

“Germany has benefited tremendously from this and surely more than others. Now many young people from southern Europe are coming to us, to learn and study. That benefits us and also helps the states from which they come. Whoever questions that damages Europe and damages Germany.”

However, a little digging in the German press reveals that there's something fishy about Steinmeier's apparent criticism of Cameron.

Firstly, his comments were first reported on 2 January by German daily Sueddeutsche Zeitung, so this is not a new quote. Secondly, and much more importantly, his comments were not in response to anything proposed by the UK at all. In fact, he was responding to proposals from his CSU coalition partner. The original story made no mention of Cameron or the UK. So, unless Steinmeier repeated the quote to the reporters, the FT effectively extrapolated from a quote that was given specifically in the context of German Coalition politics.

It so happens that the CSU's ideas on EU migration quite closely resemble much of what the UK Government would like to do to tighten rules on access to benefits. Nevertheless, Steinmeier appears to be quoted completely out of context. This was a domestic German dispute about tackling the abuse of EU free movement (the German coalition fought fiercely about this at the turn of the year).

Even disregarding this (which is pretty difficult), the article is unclear on what issue Cameron is isolated over. It mentions outright "curbs" on EU migrants. We agree talk of this is unfortunate and that there's very little appetite for this across Europe. Fortunately, curbs are neither an official Tory or Coalition policy. The article also makes a specific reference to beefed-up transitional controls on migration from future EU accession countries, based on new economic criteria (potentially a GDP per capita threshold) before their citizens are eligible for full free movement rights. We don't know how much support there is for this proposal.

And finally, it also cites rules on access to benefits, for which there is support in Germany and elsewhere (though the extent is still unclear).

Now, we may agree or disagree with Cameron's stated policy on EU migration, and as we've argued before, No 10 could have handled this situation a lot better.

But using a quote taken completely out of context as the key basis for a major splash does nothing to boost the quality of the wider political debate about the EU and immigration.

Fact-checking the Commission's EU budget claims (it ain't pretty)

The European Commission has its own dedicated "myth buster" which aims to explain to the masses and media how terrific the EU budget is, and that all claims to the contrary are "euro myths". Despite making some fair points, overall the list is generally silly and counterproductive. For example, it claims that an EU subsidy to a dog fitness centre in Hungary (that never was built) is a "myth", as the money was since paid back.  However, it fails to acknowledge that the dog centre was only forced to pay back the EU subsidies once Open Europe and others brought the sorry episode to the attention of international media. The Commission was blissfully unaware at the time we highlighted the example, and showed little interest in investigating the case (even claiming that the finding wasn't "serious"). To then come back and present it as a "myth" is laughable (for exactly how laughable, see here).

It illustrates how the Commission likes to take the moral high ground on facts and figures, but often itself engages in spinning exercises that would make Malcolm Tucker proud.

Its presentation for its proposal for the 2013 EU budget, which includes a 6.8% increase in spending, is a case in point. In fact, it was so full of dodgy figures that we felt it was in need of a serious fact-check. So this morning we published one. Here goes (the full fact-check note is available here):

FACT CHECK: THE COMMISSION’S EU DRAFT BUDGET 

1. IS THE EU REALLY CUTTING STAFF?

The claim: “[The Commission is] cutting its staff by 1%, the first step towards the goal of a 5% reduction of staff in 5 years”.

The reality: The EU will only cut 6 jobs net out of 41,000 jobs in 2013 while the Commission will reduce its workforce by 0.5%.

2. IS EU ADMIN SPENDING ACTUALLY FROZEN?

The claim: “[The budget] also freezes the Commission's administrative budget at well below inflation level…The vast majority of people across the EU feel the daily pain of the crisis as their national, regional and local governments have to make cuts, therefore a ‘business as usual’ attitude from the EU institutions is simply not acceptable.”

The reality: Overall EU administration spending to increase by 3.2%.

3. DO THE OTHER EU INSTITUTIONS REALLY SAVE “WHEREVER POSSIBLE”?

The claim: “[The draft budget] includes a strong emphasis on savings and cost efficiency…pressure was exerted on every EU institution and agency to seek savings wherever possible. Most EU agencies will actually see a real cut in their annual budget.”

The reality: Apart from the Commission, many of the EU’s other institutions, committees, quangos and agencies have seen their budgets go up despite adding no discernible value or duplicating tasks, although it is welcome that many of the EU’s decentralised agencies have indeed had their budgets frozen or cut in absolute terms.

4. WILL THE INCREASED SPENDING REALLY PROMOTE JOBS AND GROWTH?

The claim: “€62.5 billion in payments are devoted to job friendly growth in Europe”.

The reality: As several studies have concluded, the EU’s jobs and growth programmes are inefficient and their overall impact is inconclusive, while too much money is still wasted on farm subsidies to landowners with no link to any meaningful economic activity.

5. DOES THE COMMISSION REALLY HAVE NO CHOICE BUT TO INCREASE SPENDING?

The claim: “The EU budget must meet its contractual obligations of current and previous years vis-à-vis the Member States and other recipients.”

The reality: Yes the Commission is legally obliged to make certain payments based on previous years’ commitments. However, both national governments and households also have to pay bills at the end of the month or year. The Commission must likewise learn how to prioritise and find savings if there is not enough money in the pot (the last two years have produced surpluses in the EU budget).

 So as austerity sweeps Europe, is this a serious budget proposal? You decide....