The UK should make a partial offer on the Brexit divorce bill to make sufficient progress, but withhold the final amount until a trade deal has been agreed, a new report claims.
The Cabinet is understood to have discussed making an offer of £40bn as pressure piles on Theresa May and David Davis to break the impasse in negotiations at next month's European Council summit. Today (Friday 24 November) marks the deadline imposed by EU27 chief negotiator Michel Barnier to put an offer on the table.
Although the £40bn figure is well below the sums previously mentioned by the EU27 - which go as high as £100bn - it is hoped this could grease the wheels enough to allow negotiators to begin discussing trade and transition.
A financial settlement "north" of the rumoured figure could be good value as long as it is used to secure a beneficial deal, the think tank said.
Julian Jessop, chief economist and head of the IEA’s Brexit unit, recommends a guaranteed payment of around £27bn to cover obligations until the end of 2020 which may pave the way for the EU27 to grant "sufficient progress" had been made, and allow the next stage of talks to begin.
Additional payments would be dependent on the outcome of those negotiations, he says. It would be "reasonable" to expect that might include fast-tracked talks on a comprehensive free trade agreement and a guaranteed transitional period.
"This might just about be acceptable to the British public too. But I don’t envy the job of those trying to sell it", Jessop said.
"This [£40bn] would be a huge sum, but still less than two per cent of UK GDP, or three years of the UK’s annual contributions to the EU. Viewed as a one-off payment with benefits lasting many decades, this could be a small price to pay," he added.