A €50bn Brexit bill? Britain shouldn't be quibbling over coughing up to the EU

 
Denis MacShane
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The UK should be paying what it's already agreed to pay (Source: Getty)

One of the more unfortunate aspects of the run-up to the UK-EU negotiations on a withdrawal treaty to allow a separation of Britain from Europe is the excessive focus on payment questions.

Boris Johnson, in urging Theresa May to resist paying any substantial Brexit bill, made the fanciful analogy with Margaret Thatcher’s famous settlement at Fontainebleau in 1984 when she obtained the rebate. Even today governments from the poorest nations in Europe send money to London as all join in paying the rebate from their national budgets.

Read more: Should we pay the EU's "hefty" Brexit bill?

But the real decision at Fontainebleau was Mrs Thatcher’s agreement to a major increase in the overall European Community budget. The UK’s contribution to Brussels went from £654m in 1984 to £2.54bn in 1990 – a fourfold rise.

When asked about this UK generosity in the House of Commons by an eagle-eyed young Labour MP, Jack Straw, Mrs Thatcher waved away his objections by saying Britain should help the new member states of Greece, Spain and Portugal to improve their economic infrastructure, benefiting UK exporters as post-dictatorship European nations became richer.

Over 40 years of membership, Britain has agreed to help finance any number of EU institutions, from Europol to Erasmus. These budget commitments stretch into the 2020s and the idea that the day the withdrawal treaty is signed – presumably March 2019 – all payments come to an end is silly.

I was in Bercy in Paris recently, discussing with French finance ministry officials the terms of Brexit. One patted a fat file saying that by their calculations the UK had outstanding commitments and obligations of €50bn.

It sounds a lot, but assuming there is a long transition period to negotiate trade access and the right of London’s financial sector to keep Single Market entry, as well as disentangling all the other aspects of a full Brexit, it is clear that the UK will be financially linked to the EU for some time.

Jean-Claude Piris, who was the EU’s top lawyer over many years, is quite categorical: “All legal and budgetary commitments, accepted by the UK before the day of withdrawal, shall remain legally obligatory for the UK and remain subject to the jurisdiction of the European Court of Justice after the UK’s withdrawal. The UK shall remain bound to fulfil its budgetary obligations created by regulations, directives and decisions adopted by the EU’s institutions when the UK was still an EU member state.”

Piris adds: “This obligation is valid both in classic public international law and in EU law.”

There is a confrontational alternative, as he explains: “Of course the UK might refuse to fulfil its legal and financial obligations after its withdrawal and the EU might lack effective legal means to enforce them. However, one wonders what would be the reactions of the EU institutions and of the 27 remaining member states when discussing future relations with the UK on trade or other matters.”

The chancellor, Philip Hammond, said at the time of the Budget that the UK always honours its international obligations but at some stage that has to be explained by the Prime Minister to her more hardline Brexit colleagues.

As Piris points out: “Trade relations with the EU are vital for the UK (about 49 per cent of its total external trade including goods and services). A period of transition of a few years would also be essential. While these two issues would also be beneficial for the EU, they would not be vital as they are for the UK.”

Read more: A £60bn bill for Brexit is outweighed heavily by economic gains

Of course once fully amputated from Europe, the UK would stop paying any contribution to the EU and the £350m a week for the NHS older voters were promised in the referendum campaign may materialise.

But until that time Britain will have to pay what it has agreed to pay. Closing down a business or negotiating a divorce is never painless, but outstanding liabilities have to be met.

It would be better if everyone accepted this and understood that any headline figure echeloned over a number of years does not amount to very much. The real lesson from Mrs Thatcher is that if the UK wants a successful relationship with Europe – in or out of the EU – then it is better not to quibble over paying the bill.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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