The Reality of the Brexit Divorce Bill

The Brexit “Divorce Bill”

As we approach the eleventh hour in negotiations, the EU, under the guidance of chief negotiator Michel Barnier, has demanded that the UK pay an immediate “Brexit bill” before continuing with negotiations. But what liabilities does Britain actually have to the political union; and instead of asking how much we should pay, perhaps we should be asking whether we should pay anything at all?

The term “Divorce Bill” has been used by most major news outlets; however, it is actually a misleading term that is being used to frame an argument that does not exist. When a couple divorces, assets are split fairly, and provisions are made for the “dependent” partner; who would be the dependent partner in a relationship between the UK and the EU? One is touted as a global power and the largest trade partner available; the other is being told that it cannot survive without support from the stronger partner.

So let’s approach the discussion and multitude of reasons why Britain should pay no leaving fee not as a “divorce,” but as a contract termination. Here are some of the main arguments in support of this proposition.

Division of Assets

To date, Britain has paid the European Union around ￡500 billion since 1973, and even with the rebate for a portion of the membership fees, surely after paying in such a huge sum, the UK should be entitled to a share of the assets it has jointly paid for? The buildings, properties, furniture, wine collections, and even stationery has, in part been paid for by the British taxpayer; it is only just that either the value of these owned assets or a share of said assets is given back.

Not only this, but the UK has at least a 16% share in the EU Investment Bank. Estimates vary regarding the value of this percentage at between ￡3.1 billion and ￡8 billion, yet the EU has suggested that this money may not be paid back until around 2054. The idea that a debt owed should not be added to the equation for a settlement is not only unjust but legally unjustifiable.

The Legal Responsibility

It has been widely covered that under Article 50 of the Lisbon treaty Britain would cease to be liable to the provisions upon its exit. It states, “The Treaties shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement,” which in this case would be two years after the Article was triggered.

The Lisbon Treaty is a legal document that was signed by the UK and the EU representatives; it clearly states that no part of the treaty shall continue after the member state has left in accordance with the articles. So where does the idea come from that a bill should be paid by the leaving member? Article 50 says that measures will only continue if the leaving member and the other member states are in agreement that they should. Quite simply, unless Britain agrees to pay money, Britain doesn’t owe anything.

Paying for “Free” Trade

Free trade implies that the arrangement would be free. If the UK agrees to pay a tariff (or a set yearly fee) on goods and services coming in from the European Union, then it is not a free trade deal, it is a trade deal, similar in fact to ones held by every other nation in the world that is not a member of the EU.

The reality is that when Britain leaves the EU, people will be able to buy food, clothing and shoes from non-EU nations without paying the EU tariffs that are presently imposed to satisfy member state lobbying groups. Estimates suggest that the average Briton could save more than 20% on these goods which make up the largest part of many household bills. 

Being outside of the EU would extricate Britain from the EU’s trade-weighted average Common External Tariff (CET) which imposes tariffs (in some cases very high tariffs) on products brought into the EU from outside to ensure EU manufacturers stay competitive. It is a form of protectionism that benefits corporations but not the consumer who would be paying less for non-EU products.

Trade Imbalance

The fact that Britain holds a major trade deficit with the EU is grounds enough to refuse any form of outside payment. The UK is a huge EU customer, and buys far more from the continent than it sells; this puts Britain in the position of a real customer. If the EU is unwilling to do business on the same terms with arguably its best customer, there are many other nations keen and willing to take up that spot. 

In 2016, the UK had a trade deficit with the EU of around ￡60 billion. And while some may argue that this doesn’t necessarily mean the EU needs the UK more than the opposite position, it is individual businesses in Europe that would be impacted, not the Eurozone as a whole. These businesses use lobbying firms in the EU to put their case forward and will not allow their industries to be trashed by greedy demands.

In summary, it is not the fact that Britain has no legal obligation to pay a fee, nor the fact that the EU actually owes Britain a large portion of its assets that should negate the need for a so-called divorce bill, but the reality that Britain has options of where to purchase its goods and services. The rest of the world is clamoring for customers, and Britain has shown that she is a willing one; if the EU chooses to demand a payment, then there are a wealth of other nations that will not.