May 9, 2017

£100bn EU bill is codswallop

£100bn EU bill is codswallop

John Redwood discusses some of the fanciful figures that have recently intruded upon the political debate, including the proposed £100bn bill the UK is said to owe the EU.

Last week we saw a couple of sets of fanciful figures intrude on the debate. There was Labour’s 10,000 police at £30 a year salary, hastily adjusted to £8000 a year, still way below what we normally pay our officers. Then there was the FT’s take on the EU bill for the UK leaving the Union, at Euro 100bn.

The first sets of numbers were mistakes, and have been adjusted upwards as much Labour spending will need to be to make it realistic. £300m a year is nearer the mark.

The second story that the UK owes up to Euro 100bn is just silly. There are no legal obligations to pay beyond the sums we owe for our regular contributions over the next twenty-two months before we leave. If they want a political deal on money, then of course they would need to knock off our share of the assets. I don’t see that is a sensible or attractive way to proceed for them. They should just accept the Treaty that allows for no special bill.

The UK should continue to be friendly, outward going and positive about it all. We should continue to stress the great deal we are proposing for our future relationship. Free access to our market for all their exporters. Guarantees for all their citizens living and working in the UK. Continued large UK contributions to the defence, security, research and culture of Europe.

Stable and strong leadership is needed by the UK, to be optimistic but to be firm in resisting silly proposals that have no basis in law or political reality.
The EU’s disobliging briefings sound as if they are coming from people who suddenly realise their negotiating strategy of pressurising a member state into seeing it their way is not going to work. The EU thought the UK would want to stay in the Single Market Customs Union. They could then seek to charge us for that. It was always a silly assumption, as the UK clearly wants to make its own free trade agreements with the rest of the world which means leaving the Customs Union. The UK was also clear it wanted to stop paying the money. It is the Commission who are most worried about the loss of the UK’s contributions, as it’s their budgets and salaries that will suffer.

The way countries pay to trade with other reluctant countries is via tariffs. If the EU wants to put tariffs up against us, it can only do so to a limited extent under WTO rules. It would be a lot cheaper than the bills we are hearing about. In return we can impose more tariffs on them given the nature and volume of their exports to us. That is why I have always thought it likely in the end they will want tariff free trade. It is, of course, always possible they wish to self-harm. However, it seems it is more the EU Commission that favours a tough approach as the harm is to the member states, not to the Commission itself. The member states are more likely to wake up to the harm it could do their export companies and especially their farmers and want a more sensible approach.

If the EU seriously thinks we need to give them money to be able to sell them goods presumably they would need to give us money to sell us goods. I can’t see that idea catching on.

5.00 avg. rating (99% score) - 33 votes
John Redwood MP
John Redwood MP
John Redwood is the Member of Parliament for Wokingham in Berkshire. He was formerly Secretary of State for Wales in Prime Minister John Major's Cabinet. He is currently Co-Chairman of the Conservative Party's Policy Review Group on Economic Competitiveness.
  • digitaurus

    Let me get this straight. For every £1,000 some German hausfrau pays towards a UK manufactured Nissan Leaf, the EU Commission levies a £100 tariff on her and our government pays Nissan £100 in subsidy (presumably on the grounds that we are assuming Nissan dropped the price of the Leaf by £100 to shift it to the hausfrau in the first place). Net effect: EU Commission +£100, UK government -£100. Well that showed ’em.

  • digitaurus

    Prediction: they will demand a big sum. We will either end up paying the big sum or we will exit the EU with no deal. Our choice – they don’t give a damn either way.

  • digitaurus

    “They only benefit the Commission”. Quite. The EU Commission is leading the negotiation and actually benefits from a tariff regime, without bearing its costs, So we will end up with no deal.

  • digitaurus

    Yes. Your views are actually much more to the point than Redwood’s. We are destined for ‘no deal’ whatever we do, but you are correct that the strength of our negotiating position is determined strictly by the attractiveness of our best alternative – what Roger Fisher and Ury called your BATNA (Best Alternative to a Negotiated Agreement). If you want to improve your negotiation position, improve your BATNA. Theresa May’s idea that a big majority will improve her negotiation position is bullshit – ask the Greeks.

  • digitaurus

    The EC seems to be calling the shots, not the EU. As you point out, the EC has no incentive to compromise as the harm from no deal accrues to member states not to the EC while the political benefits of a ‘tough deal’ for the UK (whether a negotiated agreement with a large price tag or no deal) accrue to the EC. So the EC will offer the deal it has signalled and will not budge. Result: no deal (or a plainly awful deal). The Conservatives are going to be in trouble come 2022.

  • Dougie

    Fortunately, I don’t need your help. If you can’t grasp that current trade arrangements can easily be continued if the parties wish to do so, then you’re beyond help.

  • Otto von Bismarck

    If you can’t grasp the very simple point that we’re leaving the EU, and thus all its trade infrastructure, then I can’t help you.

  • Dougie

    Of course you can keep it in place, if there is the desire to do so. On the morning after Brexit, all the customs officers, meat inspectors etc. will carry on behaving exactly as they do now unless someone has ordered them to behave differently.

  • Otto von Bismarck

    Well you are ignorant if you think CETA is anything like as extensive as what we require, and what ‘detailed’ arrangements are in place please tell me. I mean we have dispute settlement via the CJEU, but we’re pulling out of that (good thing too) so what’s replacing it? We have seamless customs at the border because we’re in the EEA, so what structures are we going to have to replace that given we’re pulling out? We have market surveillance infrastructure, bilateral safeguard measures, conformity assessment, technical accreditation and so on and so forth via the EU. This is all built in as part of our EU membership, you obviously can’t keep it in place post-Brexit. That’s like saying ‘I moved house but I don’t need to bother getting gas, electric, phone, broadband etc connected up because I had it in my old house’.

    I could list a million and one things that need to be settled, and it’s only ‘in place’ because we’re in the EU. Once we leave, we leave the structures-this is a very simple thing to grasp.

  • Dougie

    We won’t have the same status; we will have a FTA just like the one the EU, eventually, managed to achieve with Canada. But, because the detailed arrangements are already in place, it can be quick to reach agreement. Of course, there are many who wish to punish the UK and who say you can’t have the benefits of membership without the obligations but these are the same people who allowed Greece the benefits of Euro membership when Greece clearly hadn’t met it’s obligations. The difference is that the latter was seen as furthering the “project” whereas the former clearly isn’t.
    Personally, I’ve always been very doubtful that an agreement will be reached: too difficult to get all 27 national parliaments, plus regional assemblies, plus the EP to agree when the various countries have such disparate priorities. But my point is that agreement is perfectly feasible, it just needs politicians across the Channel to put the economic well-being of their voters ahead of the perceived needs​ of a failing project. The fact that Barnier et al insist trade negotiations cannot start until other matters are resolved reinforces my belief that they ​don’t actually want an agreement.
    P.S. Thank you for stopping calling me ignorant. Personal abuse doesn’t help engender productive debate, does it?

  • Otto von Bismarck

    Those agreements took rather longer than two years to negotiate, and that’s not even factoring in the fact that the British Trade Department is not even a year old and has never done this before.

    How can the EU agree to keep current arrangements the same? Are you suggesting we stay in the EU? You can’t be out the EU whilst at the same have the status of being in it-it’s really quite bizarre you can’t see that.

  • Dougie

    Oh dear, you’re still not getting it, are you? The fact that the EU has negotiated a large number of bilateral agreements with various countries outside the EU demonstrates that it is perfectly possible for such agreements to be reached with the UK – if there is the desire to do so. The UK Government clearly has that desire so, if agreement is not reached, it will be because the EU, or certain elements within it, don’t want to.
    But wait … we don’t need to go through the time-consuming process of negotiating lots of separate agreements, we already have a comprehensive free trade agreement in place, covering almost everything (albeit a bit thin on services). All that is needed is for the EU to agree to keep it in place after Brexit. If a bit of rule-bending is needed to make it happen, the EU is good at that when it wants to be – how else did Greece join the Euro?
    If there is no deal it will be because of an act of self-harm inflicted on the people of the 27 by the unaccountable federalists of the Commission, egged on by the unaccountable zealots in the European Parliament. It won’t be the fault of the British Government and it certainly won’t be the fault of the British people who voted Leave.

  • Bosanova

    I sincerely hope we have the self respect to walk away from such a deal. Otherwise they can start paying us back for centuries of saving them from the continent’s tyrants. And if they’re nice we might allow them access to our capital markets at the next round of bailouts.

  • Bosanova

    Certainly with you on the Greek tragedy. An entire nation held in indentured servitude, with no hope of ever paying the debt, all to save the face and careers of other EU politicians and for the good of the “project”. It demonstrates just how downright immoral the EU is.
    If you want some uplifting news on the low risks of walking away from the EU without a trade deal just read this:
    https://capx.co/the-single-market-promised-much-but-delivered-little/

  • al
  • itdoesntaddup

    Regulation is no barrier to trade if it is the same in both countries. Only regulation designed to prevent trade is a barrier. Idiot.

  • Otto von Bismarck

    Once again, you show your ignorance. You’re looking at a very specific type of trade agreement known as an FTA, whereas most EU-US agreements are bilateral/multilateral, sector specific deals built up over time. It’s a bit like declaring Russia doesn’t exist because you looked at a list of South American countries and it wasn’t on there. If you want to look at US-EU trade agreements search for yourself:
    http://ec.europa.eu/world/agreements/AdvancedSearch.do

  • Dougie

    We’re talking about trade, not aviation. I think the US Government should have the last word about what trade deals the US has, don’t you? https://ustr.gov/trade-agreements/free-trade-agreements . And if the EU can reach a mutual recognition agreement with the US on medicines inspection, say, they can reach one with the UK – if they want to.
    Which brings me back to my first point: things don’t have to be bad – it’s perfectly possible for the EU to reach a deal that works for both parties should they wish to.

  • Nockian

    No one will keep her on course because she doesn’t make the decision. She’s the monkey not the organ grinder.

  • Nockian

    ‘We need strong and stable government to…….’

    We need a far more honest, smaller, cheaper, less interventionist government.

    Do you know where we can get one ? Because the current line up doesn’t fill any of those criteria. One of the Tory pledges could be a full British Brexit with no strings attached, or we get to watch Ms May commit sepeku on the steps of Downing Street. I wouldn’t trust her as far as I could throw that doddery old stick and her daft outfits.

    So for that reason Mr Redwood I’m afraid I’m out. I won’t be giving you my vote.

  • MrVeryAngry

    Nah. I like seeing him make a complete prat of himself.

  • John C

    Just block that sad joke.

  • dustybloke

    We do not have an inspection regime. We have a look at a piece of paper regime.

    And, as we know, that doesn’t always work.

  • nanumaga

    Very good piece and entirely logical as well as founded in legal fact based on the relevant treaties. Sadly our government is faced with a German Chancellor, EC President, and newly elected President of France who all subscribe to the view that for the EU to succeed Brexit must fail, and be seen to fail. There is no rational way to argue with people who are shackled to this belief and, should you doubt this, please look at the lengths they are prepared to go in reducing the Greeks to poverty in order to maintain the unity of the Eurozone. It’s ruthless, dogmatic and utterly non-negotiable. A convincing Plan B with a massive effort in setting up trade deals with the top 40 non-EU countries is urgently required. Time for the CBI, the City and the Chambers of Commerce to mobilise their members, with all the support they can get from the FCO and DIT and all British Posts in those countries, and get some new business developed. Funding for future export marketing initiatives can be raised from the import duties levied on German cars in 2020.

  • Otto von Bismarck

    Regulation is a barrier to trade, dumbass, hence why they are classified as ‘Non-Tariff Barriers’. They’re not making any judgement on their veracity it’s just classification.

  • DespiteBrexit

    … on the part of the EU.
    There, finished it for you.

  • itdoesntaddup

    You plainly do not understand the difference between a barrier and sensible regulation. The former is designed to be as obstructive as a tariff would be. Dolt.

  • CheshireRed

    Their demand that we ‘settle the account’ BEFORE even discussing trade terms renders any trade talks moot, simply because the demands they’re making are so ludicrous that we have no choice other than to walk away. I think they’ve just scored an own goal.

  • DWWolds

    And better than stuck in the 60s and 70s like Labour.

  • Maurice_Gosfield

    John Redwood says: The UK should continue to be friendly, outward going and positive about it all.

    I think it’s abundantly plain that however constructively we approach the negotiations, there is precious little goodwill or desire for a favourable Brexit settlement on the part of the EU. I’m no fan of Yannis Varoufakis and haven’t read his book but from the reviews and interviews that I have read, we can expect a brutal time of it. His experience suggests that whatever may be reasonable and apparently in the EU’s interests, there’s no guarantee that will inform their negotiating position or demands. Let’s not delude ourselves otherwise. May and Davies will have to play a very long game, always ready to talk but not be the ones to walk away.

  • Otto von Bismarck

    The exit bill is an opening gambit-it was £30-50 billion several months ago and that was their official position, while that £100 billion figure was made up by the FT. You’ve been had by fake news. The EU itself will have no idea as to the actual figures since it’s mainly to do with RAL payments which it can’t be certain of until 2021 when the current MFF ends, so this is guesswork. £30 billion is worth it as a bribe if we can reach a settlement that benefits us-we’d lose far more than that if we have to revert to WTO rules or even a simple FTA. Worse case scenario is if EU goods continue to flow one way, but UK services get clobbered going the other.

  • Otto von Bismarck

    Then you show your ignorance if you think that’s the case, because the US and China do not trade with the EU under WTO rules. They have a number of bilateral and multilateral agreements in place between them-the US alone has various deals on everything from mutual recognition to civil aircraft and much else in between. Indeed, very few countries around the world trade with the EU under WTO terms alone because they’re just a baseline. So for the UK to trade with its largest trading partner in that way would be highly unusual and a fairly stupid move.

  • naynaynay

    Don’t sell many financial services though do they. Hence the US behemoths currently located in Canary Wharf.

  • Dougie

    It’s not an inevitable result of WTO rules. It will only happen if the Commission wants it to happen.
    Amazing how the US and China, to name but two, manage to sell £Bs of goods to the EU under WTO rules without any apparent problems.

  • Otto von Bismarck

    You idiot-are you seriously suggesting you’d let baby formula laced with plastic into the country, or toothpaste adulterated with drain cleaner? Those are all examples of things that have made their way onto the Chinese market due to corruption.

    We have a border, and at that border we have an inspection regime to keep people safe. It also helps reduce fraud in the supply chain and gives people trust in what they’re buying.

    We have a regulatory regime, customs checks, dispute mechanisms and other infrastructure to facilitate trade. The only way to have totally free trade is to have a completely unregulated market with a ‘caveat emptor’ approach, in which case you’d have a lot of dead and ill people.

  • itdoesntaddup

    So you regard NTBs as free and fair trade? I think it’s you who is silly – or perhaps your heritage is really French, not German, since free and fair trade is largely unknown there, whereas at least bits of Germany had the Hanseatic ports.

  • MrVeryAngry

    Calais. Under international law migrants and refugees can have succour in the first safe regime, in this case the EU. We can just deport said poor people back to France. It’s theirs and the EUs problem.

  • MrVeryAngry

    Silly boy. That is entirely separate from arbitrary ‘non tariff barriers’. Of course if you want to sell products or services into, in this case, a customs union you have make sure your product or service conforms to locsl rules. As china dies when exporting to the EU.
    The supply chain meme is nonsense.

  • MrVeryAngry

    Wrong again (still?). What she has said, and what is always true when trying to broker any deal, is that if no deal is doable you must walk away. That is not a threat st all.

  • Otto von Bismarck

    All countries operate customs regimes and regulatory environments-nobody wants to let any old rubbish through their borders and the integrity of supply chains must be protected to eliminate fraud.

    The French could very well take the p*ss at Calais which is why we need to sort out dispute settlement mechanisms and the like as part of Brexit. Awful lot to do by 2019 isn’t there? Almost as if a transitional arrangement is needed….

  • Otto von Bismarck

    She’s threatened to walk out, which means ‘WTO rules’.

  • Otto von Bismarck

    Now you’re just being silly. Does that spell out exactly what structures should replace the SM for UK-EU trade? It’s just motherhood and apple pie comments about free trade.

  • The Art of the Squeal

    Ireland will not support Non Tariff Barriers.

    Tariffs collected by UK on imports from EU (40% German), will go to direct to UK Exchequer. EU Imports from UK will pass through the EU Commission budget to the R27, none will go to Germany as net contributor.

    Clearly Tariffs are not in the consumers, producers exporting nation or EU budget contributors interest. They only benefit the Commission and possibly nations who are net recipients of EU budget.

  • itdoesntaddup

    I suggest you read up on the EU’s commitment to “free and fair trade” in Article 3(5). Like all their other treaty obligations, do we suppose they will ignore it?

  • itdoesntaddup

    Were the EU to stop pensions to UK personnel it employed they would have the right to call on all remaining EU states jointly and severally for payment. I guess that means the Germans would have to pay.

    Pensions are the responsibility of the employing organisation, who pay them out of budget monies on a cash basis. Pension “contributions” made by EU employees simply get recycled back into the general spending pot. In early years, the pension scheme helped fund other EU spending. Unless they grow the bureaucracy rapidly, it will soon start to become a significant net spend.

  • MrVeryAngry

    Of course they have. That’s the one thing they can try and apply to make life difficult. The French are past masters at it. The fact that the EU wants to make life difficult is a condemnation of them, not us. Only it’s not the UK that suffers. It’s the citizens of the EU. All such machinations and tariffs are pretty well always incident on the state that applies them.

  • MrVeryAngry

    May has not ‘threatened’ WTO rules at all. All that has been said is that in the absence of a deal between the UK and the EU WTO rules will apply.

  • MrVeryAngry

    Better than being stuck in the 1850’s like you.

  • MrVeryAngry

    Say the EU sticks a 10% tariff on car exports (say) to the EU post Brexit. So we just cut the tax and regulation burden on UK domiciled car makers by at least 10%. (That ignores the fact that the EU tariffs are not incident on the exporters to the EU but on the EU’s own citizens.)
    I really don’t see the problem.

  • Otto von Bismarck

    That’ll be the result of WTO rules, which Mrs May has threatened.

  • Dougie

    Non-tariff barriers work both ways, of course. If there’s a queue of lorries from Dover to London, as M. Barnier has threatened, more than half the vehicles in that queue will be foreign ones, wasting time and money as they wait to get back to base so they can load up with more EU exports to the UK.

  • SeeYouAnon

    It should be at the forefront of discussions, but it isn’t. Instead we are hearing about £100bn bills before talks even commence.

    Whatever the reason, I just do not think it is lack of awareness.

  • Brigadier Zachary Zilch

    House of Lords report from the European Union Committee Brexit and the EU budget

    Please note:

    “the UK would not be obliged to pay anything at all.”

    “We concluded that the effect of Article 50 was that all EU law ceased to apply to the UK at the moment of departure unless the withdrawal agreement provided otherwise. This means that all legal obligations resulting from budgetary commitments made while the UK was still a member state would also cease to apply.”

    https://hansard.parliament.uk/lords/2017-04-06/debates/1BF99F95-8AA8-48D8-8C96-ECE7B9C96DF5/BrexitAndTheEUBudget(EUCReport)

  • Vengeful Fruitcake

    While I share your concern over the devastating impact of non-tariff barriers on UK trade, now that we are facing a ludicrous exit bill before we are even permitted to talk about trade arrangements post-Brexit we have no alternative but to walk away and hope that Germany, in particular, sees that this is a cliff-edge for them too and puts pressure on the Commission to do a deal with the UK. If the Commission remains of the view that “Brexit cannot be a success” we will have to take the hit. And so will EU nations.

  • Otto von Bismarck

    We’re leaving the Single Market and Customs Union, what do you think is going to replace it as far as EU-UK trade is concerned? Suggest you read up, because Brussels has mentioned post-Brexit NTBs a lot!

  • SeeYouAnon

    As far as I know neither side has made any mention of regulatory barriers (or equivalence).

    Perhaps it is seen as a completely separate matter.

  • Otto von Bismarck

    Awful piece actually, Mr Redwood is stuck in the 1990s.

  • Otto von Bismarck

    Again you’ve managed to talk about trade while focusing entirely on tariffs, which are no longer much of an issue in 2017. Your argument went out of date in the early 1990s. It matters little to my business if we face a tariff of 2.3%, which is the EU’s average MFN rate. It does matter if we face problems at customs in the form of delays, new inspection regimes, administrative charges and so on and so forth. Then we get on to product standards, import licenses, intellectual property, dispute mechanisms and every other non-tariff barrier under the sun. I couldn’t give a toss about tariffs, and nor could most of the people in British business.

  • Paul Robson

    They’re never funded. You are right, but there is always a short fall ; same thing happens in the public sector.

  • Paul Robson

    I’m rather hoping the likes of Mr Redwood – and the electorate will keep Mrs May on course. There are a bunch of fools who seem to think we should give in to the EU in the vain hope they will be nice to us ; which gives some indication of their intellect.

  • John Devon

    It will be a meet you in the middle horse trade.
    Prediction:
    We will offer a small sum, they will demand a big one, and we will end up paying between 25 and 30 billion euros but get none of the assets.

  • AlexanderGalt

    Great piece. If only the British government would take such a stance. Unfortunately we all know from long painful experience that it is our govt that will blink first and end up giving away billions of our citizens’ pounds away.

  • SonofBoudica

    One of the big problems for Brussels is funding the astronomical EU pensions for the apparatchiks in Brussels and Strasbourg. However, the UK never had any control over the terms of service for employees of the SuperState (including the penalty clauses for genuine whistleblowers who can be sacked and forfeit their pensions for uncovering fraud and going public when reporting this internally gets ignored) so I fail to see why the UK should pay a euro cent towards those pensions after the UK leaves. Indeed perhaps the EU could simply stop all pensions for present and future retired UK personnel. That would demonstrate fully the fraudulent economic world that is the EU, since it never funded those pensions and never required employees to pay a realistic sum towards their own retirements.

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