Divorce, EU style: UK Brexit bill could hit £40 billion -- or more

Theresa May got what she wanted in the short term, but it will cost her and the UK plenty over the long haul. The British prime minister and her negotiating partner, EU Commission president Jean-Claude Juncker, announced that a framework for Brexit has been forged. The initial deal will allow for the next phase of negotiations, but May will still have some explaining to do back home over the cost of the deal, and perhaps that the UK will still find itself stuck with EU oversight anyway:

Theresa May has heralded an agreement with the European commission to move the Brexit negotiations on to trade discussions as “hard won” and “in the interests of all” after days of intense bargaining at home and abroad.

The British prime minister and the European commission president, Jean-Claude Juncker, announced the deal at a press conference early on Friday after May and David Davis, the UK’s Brexit secretary, travelled to Brussels for last-minute talks.

Juncker said “sufficient progress” had been made in the first phase of negotiations to allow movement to the next phase, while May said that the agreement ensured there would be “no hard border” in Ireland.

We’ll get back to the hard-border issue in a moment, but the first question will be how much the UK will have to pay to get out of the EU. The range of estimates at the moment for the divorce bill are running between £35-40 billion ($47-54 billion), which may not seem like much in terms of American federal spending. Their annual national budget is £809 billion, with latest annual deficit spending projection set at £40 billion. That’s no small chunk of change, but it’s also lower than many projected after the passage of the referendum.

And it could get worse, or it might even get a little better, although these estimates appear to be on the sunny side. These figures came from the British side of negotiations, which clearly has reason to minimize the financial impact of Brexit; the EU has refused to provide estimates. The agreement requires the UK to indemnify the EU for its share of the EU’s budget over the next few years, as well as pension funding for EU employees and a credit agency within the EU itself. If those costs remain at the British estimates, May will probably get credit for a win. Boris Johnson had previously said that the EU could “go whistle” if they demanded a huge settlement, but offered his endorsement on these terms:

Boris Johnson, who had previously said the EU could “go whistle” if it wanted a large divorce bill said yesterday he had only been referred to bills “in the region of £80 billion or £100 billion”.

“The financial offer we are making is very good but it is nowhere near the sums that I was first invited to comment on,” he said.

The financial agreement, along with deals on the Northern Ireland border and citizens’ rights, means Theresa May is likely to be given the green light to move onto trade and transition talks a European Council summit in Brussels next week.

What about other Brexit advocates? Let’s just say that the reaction has been mixed. Nigel Farage, the former UKIP leader and a leading voice for Brexit, lashed out at the agreement:

The Northern Ireland border might end up proving Farage’s point. The Republic of Ireland refused to go along with any Brexit plan that introduced a “hard border” with Northern Ireland, a position that the EU enforced during the negotiations. That creates a potential problem with trade and business traffic, as the UK’s Brexit plan intends to enforce its separate sovereignty across the board.

May’s first plan was to have Northern Ireland operate independently from the rest of the UK when it came to border and trade issues, which made some sense. However, the DUP — which is currently providing her parliamentary coalition enough seats to govern — completely balked at that plan, insisting that Northern Ireland get the same treatment as the rest of the UK. Instead, May had to agree to conditions which look very much like a back door to EU control over British trade and customs policies:

  • full alignment with the single market and customs union on the island of Ireland even if that means the entire UK adhering;
  • EU rights, entitlements and benefits for all citizens born in Northern Ireland guaranteed, because everyone born there is entitled to Irish citizenship;
  • complete compliance with EU equality and human rights frameworks;
  • all underpinned by the “1998 Agreement” which the DUP opposed, as did Michael Gove and other senior Tories and indeed which caused Arlene Foster to leave the Ulster Unionist Party and join the DUP; and
  • the icing on the cake for the Irish is the reference to single market and customs union rules applying to future – ie more expansive – north-south co-operation.

Note this phrase: even if it means the entire UK adhering. If the EU still controls British customs and trade policies, what’s the point of spending £40 billion on Brexit? Presumably, May will use the next phase of negotiations to work out a more palatable solution with Juncker and the Republic of Ireland, but neither has much incentive to make May’s job any easier. One has to imagine that Scottish independence advocates will take a very hard look at the eventual outcome and imagine how it can also be applied to their ambitions.

May’s political future has already been clouded by her poor decision to hold a snap election this year, which backfired spectacularly and forced her to rely on DUP to hold onto office. She desperately needs a friendly deal on Brexit. The question will be whether British voters feel as desperate as May does.