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20 November 2017

The Brexit divorce bill shows the EU has taken back control

EU withdrawal has left the UK in a weaker negotiating position than ever. 

By George Eaton

Brexit was sold to the country as a benefit, not a cost. Outside of the EU, Leave campaigners boasted, the UK would “take back control” of £350m a week to spend on the NHS. But, as was predictable and predicted, Brexit is proving a cost in every sense. Far from reclaiming £350m a week (a figure that does not take into account the UK’s £4.8bn budget rebate and EU subsidies), Britain is forecast by the Office for Budget Responsibility to pay a Brexit penalty of £15.4bn by 2018-19: as much as £300m a week.

As Paul Johnson, the director of the Institute for Fiscal Studies, recently told me when I asked whether the UK would reap a fiscal bounty: “It’s nonsense! It’s always been nonsense. There may be a case for Brexit for reasons of sovereignty, or immigration, or a particular view of democracy – all of that is absolutely honourable. But to pretend that, at least in the short to medium run, it will have anything other than a negative effect on the economy and the public finances is just untrue.”

Meanwhile, the higher prices that have resulted from the pound’s sharp depreciation are costing the average household £7.74 a week – the equivalent of £404 a year. Finally, there is the Brexit “divorce bill”: the payment the UK must make to settle its liabilities (such as EU officials’ pensions and outstanding spending commitments). The Brexiteers have never denied that Britain faces such obligations – but they used to insist that they would extract a price. Divorce negotiations, they said, would only be conducted in parallel with new trade talks.Yet having promised a summer-long row, Brexit Secretary David Davis capitulated on the first day. 

The UK now faces making a payment of around £40bn merely to ensure that trade talks begin (Brussels having deemed Theresa May’s initial offer of £20bn insufficient). Thus, far from Britain “taking back control”, it is the EU that has. The UK may have voted to leave, but it is Europe that will decide how it does. 

Boris Johnson and Michael Gove, the cabinet’s senior Brexiteers, are demanding that the UK secure assurances on regulatory freedom before paying a divorce bill. They want Britain to have the freedom to diverge from European economic and social norms.

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But with impeccable timing, chief Brexit negotiator Michel Barnier has warned that EU parliaments could veto a new trade deal if the UK breaks with “the European model”. The illusion of sovereignty conferred by the referendum has long vanished. When the EU drew up the divorce proceedings it did so with the intention of maximising control. The withdrawal deal that Britain reaches must be approved by at least 72 per cent of member states, representing 65 per cent of the EU’s population.

Once Article 50 has been triggered, the two-year deadline for leaving can only be extended by unanimous agreement. Even the much-maligned European parliament has a pivotal role. Like its British equivalent, it has been guaranteed a vote on the final deal. Perhaps the greatest irony of Brexit is that it has the left UK more subservient to the EU than ever. 

Tory MPs, who have been restrained by historical standards, are already revolting at the prospect of a higher divorce bill. “If we start saying that we’re going to give 40 to 50 billion to the EU, I think the public will go bananas, absolutely spare,” warned former minister Robert Halfon. It does not follow that Remainers will benefit. The public may yet blame the EU for “punishing” Britan, rather than the Brexiteers. But, not before time, the magical thinking of the Leavers is being exposed.