Can we really hold back the £39bn EU exit bill, as Boris Johnson suggests?

Politics Explained: It’s one of the most talked-about areas of Brexit, but there are many misconceptions about the divorce bill

Boris Johnson pledges to deliver Brexit by 31 October 'do or die'

One plank of Boris Johnson’s Brexit plan is to threaten to withhold the £39bn exit fee, negotiated by Theresa May, to put pressure on the EU to give him a better deal. He told Laura Kuenssberg, the BBC political editor, on Monday: “I think there should be creative ambiguity about when and how that gets paid over.”

This seems unlikely to work, as it would mean unpicking the first phase of the Brexit negotiations, and is certainly unlikely to be resolved by 31 October, by which time Johnson promises the UK will leave, “come what may”.

But it does seem like a lot of money. Donald Trump, for whom the figure is converted to $50bn, said: “If I were them I wouldn’t pay $50bn. That is me. I would not pay, that is a tremendous number.”

This sentiment is a powerful element of support for a no-deal Brexit: no wonder many think we should simply walk away and let the EU – as Johnson said as foreign secretary two years ago – “go whistle”.

Naturally, life is more complicated than that. If the UK did “walk away”, it would still have to trade with the EU. That could either be on the worst possible terms, paying the maximum tariffs under World Trade Organisation rules, or we would have to agree better terms. If we wanted to trade on more favourable terms, we would have to reach an agreement with the EU.

So the moment Prime Minister Johnson sought to negotiate terms, the EU would ask for the £39bn exit bill to be settled.

There are many misconceptions about this amount. For one thing, it isn’t £39bn. The Office for Budget Responsibility estimated in March that the total came to €41.8bn, which is currently about £37bn, because the euro has fallen against the pound since the original estimate.

Since our EU membership was extended to October, the amount has been reduced to about £32bn, because the transition period, which is still planned to end in December 2020, will be shorter. This is a key point, because a large part of the exit bill is a payment that replaces the UK’s net contribution to EU funds, and during the transition period we would continue to be treated as an EU member.

This is money that we would be paying anyway if we were in the EU – indeed, it is money that we will pay if we don’t leave in October. The part of the bill that is to settle our debts on departure comes to about £22bn: that is the amount for pensions and EU schemes we want to remain part of.

The question asked about this sum is whether we are legally obliged to pay it. The short answer is no, but it is an obligation that arises from international agreements and it would be bad for the UK’s reputation to renege on it. Why would other countries – including those in the EU – want to sign new deals with a country that went back on old ones?

No-deal Brexiteers, even now, cite an old House of Lords report that said the EU would have no legal authority to claim the money if we refused to pay, but they don’t usually quote this bit: “The political and economic consequences of the UK leaving the EU without responding to claims under the EU budget are likely to be profound. If the UK wants a preferential trading relationship with the EU, including a transitional arrangement, the EU partners may well demand a financial contribution post-Brexit.”

The idea that we could simply repudiate our obligations is one of the many fallacies of a “clean break” Brexit. Johnson also says we could continue to trade without tariffs under Gatt 24, which allows favourable trading terms to continue temporarily while a trade deal is being negotiated.

But the Gatt 24 provision applies only by agreement. The EU would have to agree to allow tariff-free trade, and would be bound to set conditions. It would ask the UK to pay the bill, guarantee the open Irish border, and sign up to all the other parts of the withdrawal agreement.

The idea of a clean break with the vast economy on our doorstep is a fantasy. The UK will have a relationship with it that will have to be negotiated, in great detail, at great length, and continuously. Johnson is promising things that he cannot deliver.

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