Thread by @pmdfoster

So #BorisJohnson and friends are not signed up to €40bn-€60bn #BrexitBill - as we reported

Does that matter? Are they right to be cautious? Where are May/Davis/DexEU on this? Where are the EU? 1/Thread

telegraph.co.uk/news/2017/11/1…

First the bill.

In Florence speech May made two commitments.

1) No EU member will "pay more or receive less over the remainder of the current budget plan" (2014-2020) - so UK pays 2 x €10bn - viz €20bn to fill hole in current EU budget left by Brexit /2

2) "The UK will honour commitments we have made during the period of our membership."

Mrs May did NOT specify what this mean. The EU wants to know.

Given EU emphasis on filling 2014-2020 budget hole, the UK had 1) would be enough for 'sufficient progress'. It wasn't. /3

So what do the EU want now?

They say that the Brits should utter just 'one sentence'.

This would be something like: "UK will honour commitments during the period of membership....*including RAL, pensions, contingent liabilities*

Easy-peasy, no? So why doesn't UK say it? 4/

Several reasons:

1. The EU does not just want the sentence. They want what @MichelBarnier called an "objective interpretation" of those Florence undertakings.

So it's not just 'a sentence'. UK officials clear it is EU wants to define number in a "narrow band" 5/

So in practice, the UK argues, the EU wants the bill pretty much agreed *before* discussion on transition/trade/future relationship.

UK does NOT see this as fair definition of 'sufficient progress' OR as a good use of €40bn-€60bn 6/

This is particularly true if the EU offer on trade/future remains a binary Norway v CETA choice

€40-€60bn is a lot to pay for a poor trade deal that favours EU goods over UK services.

Of course, UK can walk at end of A50 and pay nowt, but in real world that's a non choice 7/

2. The UK does NOT agree on shape and size of RAL - the 'reste a liquider' which is the approx €250bn share of outstanding commitments that will be left after Brexit.

cf
bruegel.org/2017/03/divorc…

The UK disputes fair UK share of RAL, which fluctuates according to value of sterling - weaker pound shrinks basis of UK share, which could make €billions of difference if it is say 12%, 13% etc /9

The UK also disputes basis of calculation for pension liabilities as @BrunoBrussels has reported. Depending on what investment return rate you use as basis for calculation of liability could make €5-7bn difference. /10

Then there is question of UK share of EU assets (are they netted off?) and other much more minor questions like 'decommitment rates', ie factoring in the share of unspent EU commitments in any budget cycle.

In short, the UK reckons plenty to haggle over /11

3. As noted above, Boris is not apparently squared off on the €40bn-€60bn bill, and the need to pretty much agree it up front in order to progress.

The result is, for now, a political vacuum - the absence of a plan, until the cabinet can agree one. /12

The difficulty of that is that Boris - and to some extent Davis - are right to argue that the EU, when given concessions, just pocket them and move on.

May *did* move in Florence, but EU simply asked for more.

If UK writes *that* sentence, they'll ask again. /13

The problem is that the EU, led by France and Germany, are not being 'helpful'. They are playing serious hardball.

When Michel Barnier suggested twin-track transition/bill talks in October to ease deadlock, he was told 'no'. /14

This is why breaking the deadlock is not just about choreography - though there is an element of that - but about substantive issues.

The EU is demanding May not so much climbs down, but capitulates entirely.

As I have said, Article 50 gives them that option. /15

But the danger is equally that the terms are so grim, that Mrs May cannot sell the cabinet on the idea of blowing UK's entire chip-stack before the serious talks have even begun.

The UK may have no choice but to fold. But on these terms, it might not be without drama

/16 ENDS