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Tuesday, June 11, 2019

What happens if we don't pay the EU divorce bill?

As the Tory leadership campaign gets underway, some of the candidates have taken a hard line on how we will leave the EU, even going so far as to propose us not paying the £39 billion divorce bill, previously agreed in negotiations.

On first glance this is a compelling line for hardliners, but the consequences of us with-holding this money are severe and any candidate suggesting that it the UK can default on the payment cannot be a serious candidate for Prime Minister.

The Independent has looked at what those consequences would be. They say that the £39bn is mostly the UK's outstanding budget payments that would have been paid in 2019 and 2020 were Britain not leaving the EU, and also some other commitments like pension contributions for civil servants. It is an estimate, based on the formula agreed in the withdrawal agreement.

The sum covers commitments already made by the UK at an international level, notably it is the multi-year EU budget which was signed by the UK in 2013, running from 2014 until 2020. The likes of Boris Johnson believe that we can opt out of payment because after the UK has left the EU, it is no longer subject to the jurisdiction of the European Court of Justice. However, there are other ways that these agreements can be enforced.

The UK is, for instance, part of the international arbitration court in the Hague. As the Independent points out, this has nothing to do with the EU and they could potentially rule on the case. We wouldn't know whether the UK would be legally bound until the tribunal ruled.  There are more serious consequences:

The EU line is that it would not negotiate any kind of trade deal with the UK after a no-deal, unless three things were settled: the Irish border, citizens' rights, and the financial settlement. So any neglect of any of those things would see the UK locked out of a trading relationship with its largest neighbour. That means the EU strategy in the case of the UK not paying the divorce bill would be to wait for it to be paid.

When the UK was set to leave in 29 March 2019, the EU set up a system that would have allowed the UK to voluntarily pay the divorce bill even in the event it left with a no-deal. The British government would have been given a few weeks - to indicate that it would pay by April 18, and pay the money by April 30. In the end this facility wasn't needed, but you can expect a similar approach to be taken if there is no other extension October.

What would the practical effects of withholding the money be?

The money would probably require emergency cuts to the EU budget - which means EU-funded projects that had planned on the basis of being funded would probably lose their funding. This would be the case unless other EU member states stepped up to cover the gap.

The UK would also be reneging on pension payments for some EU civil servants who had served while the UK was in the EU, some of whom are in fact British. This might be politically difficult for the government.

£39 billion is a lot of money, but not enough to actually cripple the EU. It's unlikely, given the statements of EU officials and leaders, that they would change their red lines to get it back. But you could expect them to sue the UK at the Hague.

Equally as serious is the impact that withholding payment would have on other trade arrangements. Why would any country sign a deal with us when we have a reputation for walking away from our international commitments?

Not paying up is a rogue's charter. We would be branded the untrusty con-men of international relations. It would take years to re-establish trust. In the meantime our economy would go down the pan. Yet another reason why Boris Johnson and those who take the same line, are not fit to be Prime Minister.
This is very interesting, but as we all remember there was David Davis clear statement that "Nothing is agreed until everything is agreed." I'm sure the EU would not like it if the UK did not pay, but legally it would seem that the EU may be on a sticky wicket if they went to law.

Of course this does not in any way mean that the EU would agree to any sort of trade deal without this payment.
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