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Brexit omnishambles - the 6 moments EU negotiations could end in chaos

Have British voters realised Brussels expects them to pay for EU officials' pensions yet?

Michel Barnier is growing frustrated. The EU’s chief Brexit negotiator wants to start talks on the UK’s withdrawal from the EU. In recent weeks, his team has consolidated the EU’s opening negotiating position. But Britain’s tumultuous election campaign and the shock election result have left our political class in disarray.

In the immediate aftermath of the election, the discussion about Brexit has turned to a rethink of what our future relationship with the EU should look like once we leave. But in reality, the first months – even years – of the negotiations will be focused on how to withdraw from the EU, rather than the new deal. The European Commission has made clear that no future relationship will be discussed until sufficient progress is made on the withdrawal arrangements, so the stakes are high for the UK. If it doesn’t get this stage right, then there is little hope of a future deal of any sort.

The common assumption in the UK is that the withdrawal agreement will come down to money: there’ll be some horse-trading over the total Brexit bill, and a final number will be hammered out that satisfies both sides. But there’s no guarantee this negotiation will be a simple administrative matter. There are major differences in principle that separate the two sides. In particular, there are six big challenges that could send the negotiations into a tailspin before they barely begin.

1. Who is an EU citizen in the UK?

The UK government generally refers to the three million EU citizens currently living in the UK and the one million UK citizens living in the EU. But the EU27 are clear that they want the rights of EU citizens who formerly lived or worked in the UK to be protected too, as well as their family members. This would shift the parameters of the discussion dramatically. To illustrate the difference, the UK’s data on National Insurance number registrations suggest that more than 5.6 million EU citizens have registered at some point in the last 15 years. The government may well balk at offering permanent free movement rights to this large group.

2. What free movement rights are protected?

The European Commission is clear that all free movement rights should be protected – including rights of residence and work, rights to benefits, and the right to be accompanied by family members. It’s likely that the UK government plans to dispute some of these rights – particularly those that have proved the most controversial among the public, such as the right to claim child benefit with respect to children not living in the UK. So expect further rows here.

3. How much is the Brexit bill?

Next comes the financial settlement. The most troublesome issue here is the matter of future EU spending commitments that will be made post-Brexit. The EU expects the UK to not only pay its fair share of unpaid spending commitments made in annual budgets up until it leaves in 2019; it also expects the UK to pay for spending planned in the 2014-2020 Multiannual Financial Framework that will not be formalised as annual budget commitments until after Brexit. From the EU’s perspective, these plans were agreed while the UK was still a member. But the UK may well argue that, given they will not appear as commitments in the EU’s annual budget until after it leaves, it is under no obligation to pay. The stakes here are high: Bruegel’s estimates put the UK’s gross contribution to these payments in the tens of billions.

4. What about pensions?

Another budgetary issue likely to dominate the negotiations is the payment of the pension liability for EU officials. The UK is likely to seek to cover the pension costs of UK officials only. But the Commission is "nationality blind" and will expect the UK to pay its proportionate share of the pension liability for all EU officials. The FT’s Alex Barker estimates that this could reach into the hundreds of millions of Euros annually.

5. Who keeps everyone in check?

Prime Minister Theresa May has made clear that Brexit will end the jurisdiction of the Court of Justice of the European Union (CJEU) in the UK. The EU, however, has argued that the CJEU should oversee the withdrawal agreement. The EU is only willing to countenance an alternative dispute resolution mechanism on certain matters if it guarantees the level of independence and impartiality offered by the CJEU. A disagreement on governance therefore seems inevitable.

6. And finally, what on earth do we do about Northern Ireland?

The other big question for the withdrawal negotiation is the Northern Irish border. But here there are tensions within the UK’s own position. On the one hand, the Brexit white paper commits to “as seamless and frictionless a border as possible”. On the other hand, the government is clear that it wants to leave the Common Commercial Policy and Common External Tariff, which would necessitate some form of customs border. In order to square this circle, the UK might try to negotiate a customs deal that precludes customs checks but allows the UK to set its own trade policy. This might well be dismissed by the Commission as impossible. Without creative solutions, this issue could reach an impasse.

Of course, none of these problems are insurmountable. With enough negotiating guile and imaginative thinking, solutions could be found. But in order to overcome these negotiating hurdles, the UK government will need to show an impressive degree of flexibility. The alternative will simply be a total breakdown in talks at the outset – and potentially the realisation of the "no deal" scenario that both sides want to avoid. With the countdown to Brexit underway, MPs reeling from the shock election result, and the government days away from embarking on the negotiations, now is the time for a considered, consensual approach to the forthcoming talks.

Marley Morris is a senior research fellow specialising in migration at the Institute for Public Policy Research. 

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Scotland's vast deficit remains an obstacle to independence

Though the country's financial position has improved, independence would still risk severe austerity. 

For the SNP, the annual Scottish public spending figures bring good and bad news. The good news, such as it is, is that Scotland's deficit fell by £1.3bn in 2016/17. The bad news is that it remains £13.3bn or 8.3 per cent of GDP – three times the UK figure of 2.4 per cent (£46.2bn) and vastly higher than the white paper's worst case scenario of £5.5bn. 

These figures, it's important to note, include Scotland's geographic share of North Sea oil and gas revenue. The "oil bonus" that the SNP once boasted of has withered since the collapse in commodity prices. Though revenue rose from £56m the previous year to £208m, this remains a fraction of the £8bn recorded in 2011/12. Total public sector revenue was £312 per person below the UK average, while expenditure was £1,437 higher. Though the SNP is playing down the figures as "a snapshot", the white paper unambiguously stated: "GERS [Government Expenditure and Revenue Scotland] is the authoritative publication on Scotland’s public finances". 

As before, Nicola Sturgeon has warned of the threat posed by Brexit to the Scottish economy. But the country's black hole means the risks of independence remain immense. As a new state, Scotland would be forced to pay a premium on its debt, resulting in an even greater fiscal gap. Were it to use the pound without permission, with no independent central bank and no lender of last resort, borrowing costs would rise still further. To offset a Greek-style crisis, Scotland would be forced to impose dramatic austerity. 

Sturgeon is undoubtedly right to warn of the risks of Brexit (particularly of the "hard" variety). But for a large number of Scots, this is merely cause to avoid the added turmoil of independence. Though eventual EU membership would benefit Scotland, its UK trade is worth four times as much as that with Europe. 

Of course, for a true nationalist, economics is irrelevant. Independence is a good in itself and sovereignty always trumps prosperity (a point on which Scottish nationalists align with English Brexiteers). But if Scotland is to ever depart the UK, the SNP will need to win over pragmatists, too. In that quest, Scotland's deficit remains a vast obstacle. 

George Eaton is political editor of the New Statesman.