and an inadequate rate of economic growth. The result is that we hav begun to drop seriously behind other countries, and particularly the members of the Community, in attaining a higher standard of living.
41. The Government believe that membership would provide the most favourable opportunity for achieving the progress which we all desire. Studies made by the Confederation of British Industries show that this belief is shared by a substantial majority of British industry. Our entry would not, of course, of itself bring about some automatic improvement in our performance and it would involve us in costs as well as benefits. The following paragraphs discuss the costs and advantages of membership in more detail.
42. All member countries contribute to a common budget for certain specific purposes, such as agricultural support, the European Social Fund, and administrative costs (see Annex A). We shall be required to pay a contribution to the Community budget which-after allowing for our estimated receipts from the budget-will involve a net cost to our balance of payments of some £100 million in the first year. The cost in later years will depend primarily on whether it becomes possible gradually to reduce the predominant share of the budget which agricultural expenditure at present takes up. If the structure of the budget were to remain unchanged the net balance of payments cost would rise to some £200 million in the fifth year. Thereafter our contribution will be limited for two further years (see paragraph 94 below).
43. Gradual adoption of the common agricultural policy will stimulate British farm output and open Community markets to our food exports, but at the same time will raise food prices in the United Kingdom and the cost of our food imports. The extent of this increase in food prices and import costs will naturally depend on the difference between Community and world food prices. This difference has narrowed significantly in the last two or three years. But assuming a continuation of the present price gap and allowing for likely changes in patterns of United Kingdom production and consumption, the additional cost to our balance of payments on account of food imports seems unlikely to amount to more than about £5 million in the first year, and £50 million a year by the end of the transitional period. On the same assumption about world and Community prices it is estimated that the rise in average retail food prices during the transitional period resulting from our adoption of the common agricultural policy will amount to about 2 new pence in the £ each year. As a result, the cost of living will increase by about half a new penny in the £ each year, but at the same time tariff reductions should lead to lower prices for manufactures which will go some way to offset this increase. The influence on wage movements of the increase in the cost of living is not expected to have any significant effect on the costs of industry nor, therefore, on our balance of trade. In addition, we should be asked to subscribe £37.5 million in sterling to the paid-up capital of the European Investment Bank: it is expected that the greater part of this sum will remain in the United Kingdom (see paragraph 136). We should also subscribe £24 million to the reserve funds of the ECSC; this would be primarily if not wholly spent in this country (see paragraph 160).
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