The Brexit divorce bill

The 'divorce' bill for the UK leaving the EU is proving a difficult and controversial subject. Leavers are using it to revive the narrative of 'no deal better than a bad deal' which has not been heard at all since the election. Those who advocate leaving on WTO terms should realise that it would allow a partial economic blockade of the UK.

Those who think that EU countries are motivated by the desire to maintain their exports to the UK should remember that their first priority is the integrity of the internal market. German firms want to maintain access to cheap production in the Czech Republic and Hungary.

There is no depoliticised formula which can resolve this problem. It is a highly political matter. The EU is faced with a net eight per cent hole in its budget and wishes to fill as much of it as possible. The UK wants to minimise its commitment. Indeed, poll evidence suggests that voters would find even €30 billion too much whereas the EU is (unrealistically) demanding €100bn.

These figures seem very high, but voters often forget that total public spending in 2018 is forecast to be £814 billion. Even if the euro was at parity to the pound, a €30 billion bill would be just 3.8 per cent of total spending. That is still a large amount, but it would be spread over three years at least. Reports in the Sunday Times that Britain would be prepared to pay €7bn to €17bn over three years, i.e., a maximum of around €50bn, have been denied.

I am not an expert on the EU budget. Robert Ackrill of Nottingham Trent Universityis and he has written an excellent summary of the subject which I commissioned and will appear in a future edition of Political Quarterly (advance publication is likely online).

There are some bills that the UK will have to meet. If it failed to make pension payments for UK citizens who have worked for the EU, they could sue the UK Government in the British courts (bill $9.6bn). I do not think that the EU can demand reste a liquidier, payment for all future projects decided while the UK was still a member (€36.2bn). It has a better legal case in 2019 and 2020 payments, mostly to farmers (€27.6bn).

There has to be a negotiation and a compromise, but this has to start by the UK making an offer. As the Financial Times said in a recent editorial, the UK Government has so far handled the negotiations 'shambolically'. It added, 'The British government has shown itself to be too much at the mercy of internal strife between its ministers to produce a coherent and detailed plan for Brexit.'