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Theresa May ready to increase £20bn Brexit divorce offer

The Financial Times logoThe Financial Times 10/11/2017 George Parker in London, James Politi in Rome and Alex Barker in Brussels

Theresa May posing for the camera: Britain's Prime Minister Theresa May addresses delegates at the annual Confederation of British Industry (CBI) conference in east London, on November 6, 2017. / AFP PHOTO / Daniel LEAL-OLIVASDANIEL LEAL-OLIVAS/AFP/Getty Images © AFP Britain's Prime Minister Theresa May addresses delegates at the annual Confederation of British Industry (CBI) conference in east London, on November 6, 2017. / AFP PHOTO / Daniel LEAL-OLIVASDANIEL LEAL-OLIVAS/AFP/Getty Images Theresa May is ready to increase Britain’s offer to the EU over the Brexit divorce bill, after signs that the hard Eurosceptics in her party will tolerate paying more money to break the deadlock in negotiations.

Mrs May has said that Britain “will honour commitments we have made during the period of our membership” and her team are working on different scenarios that would see her considerably increase the €20bn she has already put on the table.

No big breakthroughs on money were made in the sixth round of Brexit talks, which conclude on Friday in Brussels.

But there was quiet progress as the two sides touched on the delicate choreography of a possible December deal, where a UK financial pledge would be tied to an agreement in principle on a transition period after Brexit.

“It is tactical but the situation is delicate,” said one senior EU official. “She has to move soon.” Michel Barnier, the EU’s chief negotiator, on Thursday called for Britain to offer some “real clarification” on the financial settlement.

If the UK does not move on money before the end of the month, France and Germany have warned they may try to hold out until next year before offering assurances on transition.

Sir Ivan Rogers, Britain’s former EU ambassador, said last month that Britain might have to pay a further €30bn if were to pay for its full 12-13 per cent share of the EU’s €240bn of outstanding commitments, known as “reste a liquider”. Long term liabilities, such as pensions, would add another €10bn to the bill.

British ministers and officials have told the Financial Times that although the negotiations leading up to the European Council on December 14-15 will be complex, they believe the money issue can be resolved.

Watch: '90% chance' of a Brexit deal being done? (Bloomberg)

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“The money isn’t the problem,” said one senior minister. “The real problem is deciding what our end-state relationship with the EU will be.” Another government figure said: “The domestic political obstacles to a deal may not be as high as they once seemed.”

Mrs May’s room for manoeuvre on the exit bill has until now been limited by hostile Tory Eurosceptic MPs, some of whom have argued that Britain should not pay any money to leave the EU.

But in recent weeks, the mood has softened. One senior Eurosceptic MP agreed with the Treasury’s assessment that an exit bill running into the tens of billions of pounds was a small price to pay for a good trade deal with the EU. “It’s money down the back of the sofa,” the MP said.

Most Eurosceptics are focused primarily on questions of sovereignty and are prepared to swallow a bill to ensure that Britain becomes “free” again in March 2019. One said: “There’s a range of options. But if it was packaged as paying for past commitments, not market access, and if it wasn’t too big, I think most people would go along with that. We would be free, after all.”

They also fear that if talks break down in December that Mrs May’s own fragile position could be further weakened. Some Tory MPs fear the Brexit process will be thrown into chaos if Mrs May is forced to resign.

Bernard Jenkin, a veteran Eurosceptic viewed by Mrs May as a sounding board for backbench opinion, said: “There will be a balanced judgment to make about whether a very expensive deal is worth it. That depends on the quality of the deal they are promising to make at the end of an implementation period.”

Jacob Rees-Mogg, a rising star of the Tory right, said it was “perfectly reasonable to give some money” but Mrs May should make it clear that it was contingent on a final deal being agreed. He said a €60bn figure was “ridiculous”.

There is much haggling to be conducted in the next three weeks on the details of Britain’s financial commitments.

Some EU diplomats fear time may be too short to strike a deal and that the gap on a financial settlement may be too big to bridge before the December summit.

British negotiators are not expected to move before the Budget on November 22, while Mrs May will seek assurances from European leaders that any offer on money will be reciprocated with a decisive breakthrough in the talks. “The next step has to be a big single jump,” said one government figure.

Both sides believe the future relationship may prove an even more challenging negotiation. On Thursday, Mr Barnier warned Britain against regulatory “dumping” after it leaves the 28-member bloc, delivering a blunt speech on the challenges ahead in the talks.

At an event in Rome, Mr Barnier raised comments by Wilbur Ross this week, saying the US commerce secretary had “publicly and openly” urged Britain to diverge from the EU and converge towards the US on social, environmental, health, food and financial standards. “The UK has chosen to leave the EU. We regret and respect the decision. Will the UK also want to distance itself from the European model? That’s another question and a serious one.”

NOW SEE: Expert reveals how Brexit will unfold: 'We'll get a deal - but at a price'

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