29 March 2017

Date as title

At 8.04am this morning, Sir Tim Barrow’s Eurostar left St Pancras to arrive in Brussels at 11.05am local time. Later today he will deliver Theresa May’s letter, serving notice under Article 50 of the United Kingdom’s intention to leave the European Union. Everyone agrees that now it gets serious. It remains my sense that the negotiators will shortly find themselves in stormy seas, with the chances of an outright breakdown better than evens. At least four reasons weigh with me.

The negotiation period is only two years over four big EU elections, two in France and one each in Italy and Germany. This will make it tricky for Brussels to obtain timely buy-in for agreed positions.

Jean Claude Juncker is right: Brussels will struggle to herd its cats. This is no panacea for the UK’s negotiators. It would be roseate to expect (for example) Germany to let its automakers’ wish to trade freely with the UK prevail over the country’s commitment to European solidarity. Even so, France (agricultural and industrial exports), Poland (immigration) and Spain (fishing) will challenge EU unity.

The UK will be unable to finalise third-party deals until all concerned know what’s what. If the UK is serious about opening up to the world, then (for example) Australia, Canada, China, Japan and the US need a measure of certainty to negotiate against.

This takes us to the general conclusion: if HMG is unable to reduce the character of uncertainty, it will wish to reduce its duration. This means getting out of talks if it becomes clear that they are going nowhere.

If this occurs, it will become essential that the UK shows up as a good leaver. One way of achieving this is to turn the tables on the famous €60bn bill trailed by the EU’s chief negotiator, Michel Barnier. At the beginning of the month, I circulated a note ventilating a claim for €1tn, which invoked the provisions of the Treaty of Lisbon obliging the EU to assume liability for its actions (II, Part Seven, Article 340) and which the UK might just have up its sleeve for such purposes. The original note has been expanded to include supporting calculations in this discussion paper for the Civitas think-tank, with the claims summarised as follows.

1. Return of the current value of contributions accumulated since the UK’s accession to the EU, where expended fraudulently, extravagantly, so lethargically as to defeat their purpose, under protest by HMG or UK MEPs, failing to satisfy auditors, or otherwise at odds with good practise: €200bn.

2. Compensation for the accumulation of past increased military expenditure, arising out of EU recklessness in the Western Balkans (taken as incurred from 1992 to 2001) and the Ukraine (taken as incurred from 2009 to date): €65bn.

3. Compensation for the accumulated loss of past output since 2009 for the failure since then to honour commitments to implement the Service Directive in full: €35bn.

4. Compensation for the accumulated loss of past output since the UK’s accession to the EU for its failure to ratify Free Trade Associations (FTAs) in a timely manner with Canada, Korea, Singapore, South Africa, and Vietnam: €15bn.

5. Compensation as (4) for the EU’s failure to initiate FTAs with Australia, China and Taiwan; and to conclude FTAs with Brazil, India, Japan and the US: €80bn.

6. Present value of the accumulated and post-Brexit incremental NHS, social care and other expenditures for treating persons adversely affected by diesel and other pollution from motor vehicles, conforming or purporting to conform to emission regulations stemming from the Vehicle Directive (2007) and thereby represented by EU or member-state regulators as safe: €200bn.

7. Present value of the accumulated and post-Brexit costs of economic output forgone, plus converting electrical power supply to efficient operation, to reverse the adverse effects of the Renewable Energy Directive (2009): €180bn.

8. Present value of the post-Brexit costs of incremental education, health, security and welfare expenditures, arising out of persons residing in this country by reason of failings of border security falling out of the Schengen system, detrimental judgements of the ECJ, or other EU or member-state dysfunctions: €35bn.

9. Provisions for the loss of output and stabilising the UK financial system in the event of failures by UK branches of European banks, passported into this country under EU single-market rules and whose prudent and timely recapitalisation has been frustrated by the ECB or member-state regulators: €55bn.

10. Provisions for the loss of output and stabilising the UK financial system and economy in the event of the failure of the Euro; reserving the right to obtain punitive damages for such injuries should it be shown that the ECB has interpreted its mandate at odds with the intentions of its framers; to the detriment of the public good; under protest from pertinent central banks, regulators or international bodies; at odds with the advice of its auditors; or otherwise recklessly: €200bn.

11. Finally, token compensation for loss of reputation for association with the EU's chronic dysfunction and maladministration: €25bn.

If they were ever to emerge, claims along these lines may be expected first to surprise Britons, then to rally them. There will always be Greens who feel that no price is too high for the Renewable Energy Directive, but even they will baulk at the undesirable effects of the emissions regulations. Elsewhere moreover, a costed complaint on such far-reaching bases is likely to inflame lay sentiment and hamper popular buy-in for any subsequent concessions. This means that lodging a counter-claim may make sense only as prepping opinion ahead of a breakdown in the talks. The UK would be after the more attractive optics of reluctantly leaving the negotiating table after the EU rejected its well-founded complaints, rather than baldly walking out in the face of a disagreeable bill.

What with one thing and another, it looks far better not to reach such a point. But if we ever do, the UK’s negotiators will be able to join the kiddies in the playground by drawing the attention of Mr Barnier to his own remarks: after all, he started it.