by Brian Monteith, CityAM, 5th April 2017
Why all the alarm that the Brexit waters are getting choppier? Advocates of leaving, like myself, never denied the EU would play tough in any negotiations; it is what one would expect for the opening gambits of any hard-nosed business deal. And that’s what it is, a deal.
Likewise, supporters of remaining tied to the EU warned us we would face a metaphorical plague of locusts were we to abandon their sinking ship.
If, as EU Council president Donald Tusk says, trade talks cannot commence until good progress is made on severance, then we should be prepared to sit down to their empty chairs.
When you leave a club – be it boules or bowls – you are obliged to pay for any outstanding bar bill, but you would tell the club secretary what to do with any request to pay for the greenkeepers’ pensions. You have paid your membership fees dutifully every year to cover such costs, but after you depart they become the responsibility of the remaining members.
Fortunately, this is the approach being taken by our own chancellor Philip Hammond, who has said he does not recognise the sum being mentioned. While this riposte is to be welcomed, it still reflects the unreal world of politics – what is required is for proper negotiations to open up by discretely letting it be known the UK has its own request for compensation after leaving.
Not with the intention of receiving a cent, but to point out the absurdity of the severance argument and to provide a suitable cancelling-out sum.
At the very least, the UK could legitimately claim that Britain’s share of the assets that we have paid for from all of our net contributions over the last 44 years is worth at least as much as that €60bn.
Think of all those politicians’ palaces in Brussels and Strasbourg, the eurocrat offices in European capitals, the consular buildings around the world, and the courts of justice in Luxembourg. Then there’s the countless miles of roads we funded in Ireland and Spain, those beautiful promenades on Iberian beaches, the bridges and tunnels, the airports and community centres. We’ve all seen the blue flags and signs telling us we’ve paid for them – so surely we must be entitled to a share?
Back in the 1980s and 90s we even refitted the entire Spanish fishing fleet. Can we have our boats back please?
More seriously, British consultants such as Miles Saltiel and Bob Lyddon have already done some useful work on this by estimating the liabilities the EU could be in for.
Lyddon has written a number of papers for Global Britain on subjects such as our involvement in the European Investment Bank. We have a right to have our €35.7bn subscribed-but-not-called share capital expunged and the €3.5bn paid-in portion repaid because, as the UK will no longer be a party to the EU treaties, we have no obligation to remain an EIB shareholder.
We could also claim a share of the reserves the EIB has accumulated over the lifetime of the UK’s membership, in the same proportion as we have of the EIB’s share capital – 16 per cent. That would require a comparison between the EIB’s reserves in 1973 and their level at our exit – they stood at €42bn at the end of 2015.
At the same time, the UK should buy out the €40bn or so of loans that the EIB has made to UK borrowers by issuing gilts to take over the loan book. It would not be a cost of exit because the UK would obtain an asset.
It is preparing the detailed arguments such as these that should expose the EU bargaining position as an unreal bluff, for Article 50 makes no mention of a severance fee.
In the real world we could walk away, and that’s what we should be prepared to do.
Brian Monteith is a director at Global Britain.