How strong a Brexit card is Britain’s money? by John Springford
Britain’s strongest card in the negotiations is the money that the 27 claim it owes to the EU. But the money card gives Britain a pair rather than a flush. Theresa May’s speech to the Conservative party conference on October 4th is expected to reaffirm her hard approach to Brexit. But her government’s position on the transition to the final relationship with the EU has become more confused. Before the general election, May spoke of an “implementation period” after March 2019, in which Britain and the EU would progressively enact a long-term arrangement that had been agreed before Brexit day. Now, the government has shifted, with Chancellor Philip Hammond pressing for a transition that will largely replicate EU membership, because Britain does not have enough time to set up new customs and migration systems, or the regulations and institutions required to enforce them. Nor is there time to replicate the trade deals that the EU has with third countries or do many other things before March 2019. At the time of writing, it is not clear whether May agrees with Hammond. For their part, the 27 say that only once “sufficient progress” has been made on the money, citizens’ rights and the Irish border will they move on to negotiations about the transition and the final deal. Britain’s new negotiating position is to hold out the possibility of paying if the EU agrees to a transition period. The British are trying to
convince the 27 to change their line that the divorce must come first. This is a reasonable strategy, but the EU is unlikely to back down. Britain’s strongest card in the negotiations has always been its sizeable contribution to the EU budget. Since 2011, its net contribution has averaged £9.6 billion (€10.6 billion) a year, the second largest of any member-state in absolute terms, and the sixth largest in per capita terms. The EU’s budget runs in seven-year cycles, with the current one running from 2014 to 2020. If the UK leaves the EU with no deal on the money in March 2019, the EU stands to lose two years of UK net contributions, in 2019 and 2020. Some spending agreed in this budget round – largely on infrastructure and other funding for economic development – will not be disbursed until after 2020. Add in EU officials’ pensions, contingent financial guarantees and loans, and farm payments in 2019 and 2020, and the upfront bill the UK is being asked to pay is somewhere between €82 and €113 billion, depending on the calculation made. (After a decade this would fall to between €42 and €75 billion, as the UK received its share of EU spending and was paid back for its share of loans.)