UK preparing enhanced Brexit cash offer

The EU is pushing for Britain to pay at least RM293.4b to cover budgetary commitments, future liabilities

By BLOOMBERG

LONDON • The UK could be about to improve its financial offer to the European Union (EU) ahead of a crucial meeting of the bloc’s leaders in December.

Members of Prime Minister Theresa May’s divided Cabinet were scheduled to consider Britain’s divorce from the EU at a meeting yesterday of the Brexit sub-committee that could be key to unlocking the most controversial matter in the negotiations — money.

Britain is “on the brink of making some serious movement forward” and starting to break the “logjam”, Chancellor of the Exchequer Philip Hammond told the BBC on Sunday.

While Hammond is among the most pro-European members of Cabinet, his suggestion follows Brexit Secretary David Davis’ hint from Berlin last Friday that more details on a financial settlement would be presented within weeks. With businesses clamouring for clarity and the departure just 16 months away, pressure is mounting to break the impasse.

How Much?
The EU is pushing for Britain to pay at least €60 billion (RM293.4 billion) to cover budgetary commitments and future liabilities such as pensions for EU civil servants. So far, May has said she will make €20 billion of budget payments after Brexit, and is going through the other items line by line.

The Times said that while the government wouldn’t put a figure on it, it was likely to add another €20 billion to what it’s already agreed to. There’s a risk that might not be enough to unblock talks. It’s also unlikely to go down well domestically.

“If we start saying that we’re going to give €40 billion to €50 billion to the EU, I think the public will go bananas, absolutely spare,” Robert Halfon, a Conservative lawmaker and former minister, said late Sunday in a BBC radio interview.

“That is going to be very difficult if it is going to be that sum, amount of money.” Half on has a point: One of the main messages of the pro-Brexit wing in last year’s referendum was that it would put an end to sending large sums of money to the EU, and polling shows the British public are adverse to paying a large exit bill. A YouGov poll in September found that even a bill of £20 billion (RM110 billion) was unpalatable to 63% of voters surveyed.

How Much?
The EU is pushing for Britain to pay at least €60 billion (RM293.4 billion) to cover budgetary commitments and future liabilities such as pensions for EU civil servants. So far, May has said she will make €20 billion of budget payments after Brexit, and is going through the other items line by line.

The Times said that while the government wouldn’t put a figure on it, it was likely to add another €20 billion to what it’s already agreed to. There’s a risk that might not be enough to unblock talks. It’s also unlikely to go down well domestically.

“If we start saying that we’re going to give €40 billion to €50 billion to the EU, I think the public will go bananas, absolutely spare,” Robert Halfon, a Conservative lawmaker and former minister, said late Sunday in a BBC radio interview.

“That is going to be very difficult if it is going to be that sum, amount of money.” Halfon has a point: One of the main messages of the pro- Brexit wing in last year’s referendum was that it would put an end to sending large sums of money to the EU, and polling shows the British public are adverse to paying a large exit bill. A YouGov poll in September found that even a bill of £20 billion (RM110 billion) was unpalatable to 63% of voters surveyed.

Getting to Yes
Any offer would follow a flurry of diplomatic activity: May flew to a summit in Sweden last week to talk to EU leaders on the sidelines, while Davis has been touring European capitals.

Now, what remains to be seen is whether key players in May’s Cabinet play along. Environment Secretary Michael Gove, a prominent opponent of the EU, said last week he wouldn’t block May from “doing what she believed was right” on the exit bill, in what could signal a willingness from at least part of the pro-Brexit faction to allow some flexibility.

Boris Johnson, who’s said in the past that the EU can “go whistle” if it wants a huge financial settlement, has seen his influence — and ability to block a deal — reduced after a series of missteps as foreign secretary.

Ultimatum
Time is pressing on Britain to come up with an improved offer after EU president Donald Tusk said early December would be “the latest” for additional concessions on the bill if talks are to advance beyond the divorce and on to future trading arrangements after a mid-December summit.

“We will make our proposals to the EU in time for the council. I am sure about that,” Hammond said in an interview with the BBC on Sunday. Asked if time was running out for the UK to make an improved offer on its exit payment, he replied that “the council is in three weeks, so, yes”.

The UK has already agreed to pay into the EU budget for two years after leaving, which it considers a step toward what the EU wants, even if the Europeans say it doesn’t go far enough.

While May has said she intends to honour these obligations, her government hasn’t spelled out the exact items, or a methodology to calculate the dues. The process has been complicated along the way by what sometimes looks like a game of brinkmanship.

Whatever Britain offers ahead of the December summit will need to be significant enough to convince other EU leaders that it’s serious about paying what it owes, something Hammond said May’s government is determined to do.