Cliff Taylor: The €60bn bill that threatens the Brexit talks
A big divorce row over the UK bill could poison or even derail Brexit negotiations
Theresa May: The British prime minister is under pressure to “deliver” a clean break with the EU. Photograph: Philip Toscano/PA
It’s not all about the divorce settlement. This is a central message Ireland will press in Brexit negotiations because there is a real risk talks will get off on the wrong foot – in an almighty row about what Britain owes to settle its bills before leaving the EU.
Little enough attention has focused on this. But unless this hurdle is jumped, there can be no agreement on how the UK and the EU will live side by side post-Brexit – or how to manage the move through the exit door. And these are the key issues for Ireland.
The UK can’t just up and leave the European Union; it has outstanding commitments to the bloc budget. The size of these commitments will be highly contentious. Estimates from Brussels are that Britain could owe up to €60 billion, payable over a period of years. Britain will dispute this, setting the stage for the first big row of the Brexit talks and one that could threaten the whole negotiating process.
Conservative MP Karl McCartney, who is a member of the House of Commons Brexit committee, told TDs and senators in Dublin this week that Britain will simply not pay this kind of bill. It is such a potentially contentious issue that Alex Barker, Brussels bureau chief of the Financial Times, warned in a recent paper for the Centre for European Reform that this political collision “could bring the Brexit talks to a sudden and premature end”.
And what then? Who knows – but we could then be looking at the hardest possible Brexit, with Barker suggesting the International Court of Justice could be called in to adjudicate on the exit bill.
Big player support
The precise sequencing of the Brexit talks has still to be agreed, but Michel Barnier, who will head the EU side, is insistent that the divorce terms must be settled first, at least in outline, before negotiations begin on trade arrangements. It appears Barnier has some support from the big players, France in particular and also Germany.
This EU negotiating stance will be thrashed out at a special leaders’ summit in early April, which could be one of Enda Kenny’s final key engagements. The Taoiseach needs to keep his eye on the ball, pushing specific Irish interests and an approach towards the exit bill that will keep the talks on track. The problem is that a big row over the bill could overshadow Ireland’s priorities and poison the entire negotiations.
It would be in the economic interests of Britain and the EU to sort out the divorce, the transition and some amicable arrangements to coexist afterwards. But this is about politics, not economics. Theresa May is under pressure to “deliver” a clean break with the EU. At least some of the other EU leaders – and the European Commission – will want to punish Britain and not make this easy, partly to discourage other potential “escapees”.
And the first test of all this will be the price Britain must pay to leave. Britain has committed to part-fund spending on parts of the EU budget, certainly up to the time it leaves, and arguably afterwards. It must also pay its share of bills, such as the pension liabilities of EU officials, and account for its various financial guarantees.
The politics of this is simply toxic. The prime minister has said that a key advantage of Brexit is not having to make big payments to the budget each year – but the first thing she will be presented with in the Brexit talks is a €60 billion bill. And some of this money will go in directions that will not play well with the pro-Brexit tabloid press, including regional development funding for poorer EU states such as Poland, and pension funding for EU “fat cats”.
For the EU negotiators, as well as the political goal of making it hard to leave, there is also hard cash in play. The bigger the hole left by Britain’s exit, the more the richer member states will have to pay in.
This risk of an early falling out is dangerous for us. We need the talks on the financial settlement sorted, or at least progressing, so that our key concerns on the Border, the North and the common travel area can be tied down as soon as possible. We also need as generous a trading deal between Britain and the EU as possible – and a negotiating environment that allows this to happen.
The final piece in the Brexit deal is vital for Ireland. This will be a transitional deal for what happens after Britain leaves, probably in spring 2019, but before a new deal on future trade arrangements with the EU is worked out, which could be some years later. Otherwise, we will immediately be heading into damaging trade barriers and some kind of customs checks on the Border.
On the flip side, a transitional deal that eases Britain’s exit could delay the worst of the Brexit hit to Ireland for another couple of years, giving industry precious extra time to adjust and prepare.
However, for all these big issues to come on to the table, the Brexit divorce bill must first be agreed. And there is a danger here of a big bust-up before talking on the really important issues of how Britain and the EU will trade and coexist even get under way.