Why it is fair that the UK would have to pay into the EU budget after Brexit

UK newspapers have been awash with outrage over Michel Barnier, the Commission’s chief negotiator, pointing out that the UK will face a bill of £50bn for leaving the EU (e.g. http://www.telegraph.co.uk/news/2016/12/15/britain-will-handed-50bn-exit-bill-eu-theresa-may-triggers-article/ ).  This outrage can however only be either mock, or based on a lack of understanding of how the EU budget works.  I won’t go into the number itself, as estimations seem to vary between EUR 40bn and EUR 60bn at the moment, but here’s a quick explanation of why the EU budget system makes a large exit bill inevitable and equitable, and not, as some seem to think, an act of retribution by the EU.

The EU Budget

The annual EU budget is based on the “Multi-annual Financial Framework”, or MAFF, which is agreed by Council (All Member States) for a 7-year period.  The current MAFF runs from 2014-2020.  You’ll probably remember that David Cameron, the PM at the time, (rightly) claimed credit for a freeze in this for the first time ever in 2013 (https://www.gov.uk/government/speeches/prime-minister-david-cameron-statement-on-the-eu-budget ).   The MAFF sets out the maximum levels in each of the areas of spending for the EU over that 7 year period.

Each year’s Annual Budget s then proposed on the basis of the MAFF, and agreed by Council (All Member States) and the European Parliament.

The 2017 budget is here.  The UK’s share of this, after the rebate, is approximately 14%.Screen Shot 2016-12-16 at 12.25.46.png

[Source: http://ec.europa.eu/budget/news/article_en.cfm?id=201611170947]

Commitments

Unlike many national budgets, it includes two columns – Commitments and Payments.

Commitments represent, as the title suggests, the amount that the EU can commit to spending during the budget year.  These commitments usually take the form of Commission proposals for individual projects and programmes.  Member states (and in some cases the EP) are then asked to give their comments and consent to the projects and programmes through ‘commitology’ committees that their representatives attend. These are usually government experts, mandated to vote for or against proposals by their department’s Minister.

Payments

Projects and programmes of course often last more than one year though, so the EU budgetary system is set up so that the actual payments related to a commitment can be made over the 2 or 3 year period following the year the commitment was made.  The is known as the N+2 or N+3 rule, with N being the commitment year. Whether the period is 2 or 3 years depends on the area, and the individual piece of EU law the action is carried out under.  For example, Structural funds have the N+2 rule.  This has the benefit for budget discipline of meaning that, if the committed funds are not spent within N+2 years, they are returned to the EU budget and not spent.  (The Scottish Government’s helpful explanation of this is here: http://www.gov.scot/Topics/Business-Industry/support/17404/Nplus2Rule )

So, for example, a programme that is committed to in 2016 will appear as a debit in the Commitments column of the 2016 budget, but it will only appear in the payments column in 2017, 2018, and possibly 2019, depending on the payment schedule of the project and the N+ rule that it falls under.  So, an given annual budget’s payments column has to cover payments for projects committed to in the previous three years.

The UK

So, what has the UK committed to? It committed to pay 14% of the 2014-2020 Multi-Annual Financial Framework.  This means that it would have to pay for the commitments and payments made in 2020, even if it were to leave the EU in 2019.  The UK agreed to this framework in 2013.

It also means that, if it were to leave in 2019, it would have to pay its share of the outstanding payments for commitments made in 2018, 2019 and 2020.  This means that it would have to pay its share of the payments part of the budget until 2023 at the earliest, and more probably 2024 (There are always some projects and programmes, which, for good reason, and with the consent of Member States, have their payment deadlines extended).

As for the number, which I know I said I wouldn’t deal with, it’s easy to see how, with the UK’s liabilities being 14% of an annual budget’s payments of, in 2017, EUR 134.5 bn, this ratchets up to around EUR5 50-60 bn when the additional years are added.

So, this is not revenge or retribution, but a fair split of the cost of things the UK has committed to and agreed at the very highest level to pay for.  If I cut up my credit card, it does not mean that I am exempt from paying my bill. Neither is the UK government.

p.s., this is all before we even get into the question of what happens to the UK’s membership of the European Investment Bank (EIB).

[Edit, 06/04/17:  This does not take into account the pensions of UK citizens who are EU staff, which the UK is also liable for.  This would need to be included as a one off settlement, or as a binding commitment to pay these as they are drawn.]

Labour falls willingly into Government Article 50 Trap

Labour has fallen headlong into a Government trap to tie it, and the rest of Parliament’s hands on on Article 50.

The Government has accepted a Labour motion to publish and debate their plans for Brexit before triggering Article 50.  The Government has accepted the motion with its own amendment.  Labour is hailing this as a great victory for opposition and Parliament, and some of the press is painting this as a Government climb-down (e.g. The Guardian).  But it is not a victory for Labour or Parliament.  It is a trap that Labour have willingly plunged themselves into.

Here is Labour’s motion:

screen-shot-2016-12-07-at-02-41-39

The Government accepted this with the following amendment:

screen-shot-2016-12-07-at-02-41-19

It really isn’t a victory at all.  Quite the opposite.

The Government amendment clearly commits Parliament, politically at least, to agreeing to invoking Article 50 whatever the terms. It also commits Parliament to accepting and facilitating the PM’s own March 2017 deadline for invoking Article 50 whatever happens.

My prediction is that the Private Members’ Bill on Art.50, which has a second reading on Friday 16th December, will either miraculously shoot up the order paper with tacit government support so that the government can dare MPs to vote against it, or that there will be attempts to slip it through without debate. The Government can then claim, just after the SC rules, that, since Parliament has ordered them to invoke Article 50 by the end of March, the only way to do that will be to use this handy Private Members’ Bill that is only 3 lines long (see: Article 50 Private Members’ Bill tabled).

If this does not happen, expect to see a Government tabled, 3-line Article 50 bill the day after the Supreme Court rules in January, and articles in the press about MPs who dare to dissent, or even try to amend it, being enemies of the people for going back on Parliament’s promise.

 

Article 50 Private Members’ Bill tabled

 

[Update 13/12/17 – The bill’s second reading has been put back to 27th January, suspiciously just after the ruling of the Supreme Court is expected.  I think it is now fairly likely that the UK government will give the bill their support and government time in Parliament, and  use it to get Parliament’s agreement to them invoking Article 50.  It is hard to see how they could get a bill through by their end-of-March deadline otherwise.  You’ve been warned!

screen-shot-2017-01-13-at-23-25-38

http://services.parliament.uk/bills/2016-17/withdrawalfromtheeuropeanunionarticle50.html

[UPDATE 16/12/16 – This bill was not rejected at second reading, but has been rescheduled for Friday 13th January

Screen Shot 2016-12-16 at 17.58.52.png

https://www.parliament.uk/business/news/2016/december/commons-pmbs-16-december-2016/ ]

Conservative MP Peter Bone has tabled a Bill in Parliament requiring the Government to give Article 50 Notification by 31st March 2017.  This has been passed off by many as a stunt by a Eurosceptic MP to try to tie the government to their own deadline, and that it is bound to fail.  I don’t think that it necessarily is a joke.

If I was the government, this is precisely what I would do. A nice, silly private members’ Bill that nobody really notices because it’s done just before a by-election and the release of the new immigration figures.  This can get through the formalities of the first reading without much fuss, and be ready for a second reading on 16th December (according to the Independent). This avoids the government being contemptuous of the Supreme court by preempting it, and puts them in the position of having a Bill ready in January after the Supreme Court ruling that just needs a little tweak or two before it is bullied through.
Private Members’ Bills have been used similarly by governments in the past (remember the 2013 attempt on an EU referendum when the Coalition government hadn’t agreed to one), and it is not unusual for the Government to pledge support for, and give Government time to, Private Members’ Bills (for example, the recent Homelessness Bill).
The Government is well aware that it may not have time to get a Government Bill through by the end of March if it can only begin the process after the Supreme Court has ruled.  By the second reading of this one the government and others can trot out the ‘People have spoken’ argument, and MPs will be too scared to vote against it. By the third, the Supreme Court will have ruled, and they can crack on having saved a couple of months in the preparation of the Bill while everyone was looking elsewhere.  The government can also propose amendments changing or removing the date if it doesn’t suit them.

 

I might be wrong.  I hope I am.  This might just be a Tory MP making a point or seeking media attention.

Call me paranoid if you will, but, when it comes, the Bill that would take the UK out of the EU will not have a big red sticker on it saying “Remainers get angry now”.  It will say almost exactly what this one says, which is “A Bill to Require Her Majesty’s Government to notify the European Council by 31 March 2017 of the United Kingdom’s intention to withdraw from the European Union.”

The Bill is here: http://www.publications.parliament.uk/pa/bills/cbill/2016-2017/0104/cbill_2016-20170104_en_2.htm

Some commentary from the Independent here: http://www.independent.co.uk/news/uk/politics/the-government-could-be-forced-to-trigger-article-50-by-april-a7448011.html

[Edited to add BBC link on process and the possibility of a ‘Trap-Door’]

http://www.bbc.com/news/uk-politics-parliaments-38173167