Florence speech set to see attempt to tackle European demands on Brexit divorce bill
yesterday by George Parker in New York and Alex Barker in Brussels
Germany’s Angela Merkel has been told by the British government to expect Theresa May this week to offer to fill a post-Brexit EU budget hole of at least €20bn, the first attempt by London to meet European demands to settle its divorce bill.
Olly Robbins, the prime minister’s top EU adviser, has contacted his counterparts in several European capitals to reassure them Mrs May’s Friday speech in Florence would include the financial offer, according to officials briefed on the discussions.
Mrs May’s team is hoping the offer will break a three-month deadlock in Brexit talks with Brussels and allow them to move to a second phase of negotiations that would open discussions about a future trading relationship between the EU and the UK.
UK officials have indicated Britain would ensure no member state would have to pay more into the EU budget or receive less money from it until 2020, the end of EU’s current long-term budget planning period. The expected hole in those two years after Brexit would be at least €20bn when payments the UK receives back from Brussels are excluded.
Mrs May is due to brief her cabinet on the Florence speech on Thursday, and British officials said they would be “surprised” if details of the address had yet been shared with foreign capitals. The German chancellery declined to comment.
London’s contacts came after Boris Johnson, foreign secretary, published a treatise at the weekend proposing Britain make no payments to Brussels to access the EU’s common market after a transition period. The calls from UK officials have sought to reassure EU capitals Mrs May has not been knocked off course by Mr Johnson.
Mujtaba Rahman, head of Europe for the Eurasia Group risk consultancy, said back-channel contacts were vital in building trust, but added: “The message from the EU is clear: covering budget holes is only a start; for a deal in October May also has to acknowledge that the UK will pay to settle past debts.”
The EU’s opening position claims the UK has liabilities of up to €100bn, which would net out at €60bn when British receipts are stripped out. A €20bn net offer would allow the EU to avoid reopening its long-term budget plan prematurely, and would cover unpaid projects Britain signed off before its 2019 exit. It would not, however, cover long-term liabilities or spending promises made during the transition period.
Britain’s overture is likely to elicit a guarded response from remaining EU member states. While the move opens space for discussions on a financial settlement, negotiators are clear it would be insufficient.
“We will at least have something to talk about,” said one EU diplomat involved in Brexit. “But it is not where the landing zone is.” Another senior EU diplomat said: “Transition payments do not cancel the bill.”
Indeed, the two-year offer of payments — tied to a transition or “implementation period” — may fall short of expectations in some capitals. Before Mr Johnson published his plans, some EU diplomats had speculated Britain would suggest a three-year transition with approximately €30bn in net payments.
Mrs May has not spoken to Mr Johnson since publication of the 4,000-word article, even though the two are in New York attending the United Nations general assembly. Her spokesman declined to say whether she would speak to her foreign secretary before they returned to London.
Asked about speculation Mr Johnson might resign in protest over her Brexit strategy, the spokesman insisted the foreign secretary was doing a good job. Asked if Mrs May expected him still to be in the cabinet at the weekend, he said: “Yes.”
Mr Johnson has denied the cabinet was split over Brexit. Speaking to reporters in New York in his jogging gear, he insisted: “We are a nest of singing birds.” Asked if he would resign, he said: “No.”
Mr Johnson’s allies insist his Daily Telegraph article was intended as a warning shot to Mrs May against agreeing to pay ongoing access payments to the EU single market after a transition deal.
EU capitals will be watching Mrs May’s speech closely for signs she is willing to continue contributions after a transition as part of a trade arrangement. Mr Johnson believes Britain should have a much looser relationship with the single market, modelled on Canada’s free-trade deal.
However his allies say he “accepts the payments of our dues during the transition period”. Mrs May is thought to favour a transition of two years, while her chancellor Philip Hammond believes it could be as long as three years.