Brexit budget offer conditional on trade, say officials

LONDON: The UK will leave a 20bil (US$23bil) hole in the European Union’s budget unless the bloc agrees to give Theresa May the sweeping Brexit trade deal she wants, according to senior British officials.

Britain won’t fulfill May’s offer to cover the UK’s share of the EU budget through 2020 without a broader Brexit deal, said the officials, speaking on condition of anonymity. The UK also hasn’t accepted that it’s liable for a share of the pensions of EU staff, they said.

The comments from officials in May’s administration help clarify the premier’s intentions, which she laid out last month in a speech in Florence.

In an attempt to unblock stalled talks, May said the UK would honor its financial obligations and keep paying into the EU budget. “I do not want our partners to fear that they will need to pay more or receive less over the remainder of the current budget plan as a result of our decision to leave,” she said.

A spokesperson for the Brexit Department said the financial settlement should be “in accordance with law and in the spirit of the UK’s continuing partnership with the EU.”

May is negotiating with Brussels while struggling to keep a united front within her Cabinet, whose members have differing ambitions for what Brexit should look like.

While May’s speech in Florence divided Conservatives at home, it did help unblock negotiations in Brussels, the thorniest element of which is the financial settlement, or how much money the UK will pay towards the EU’s ongoing liabilities when it leaves in 2019.

Talks ended acrimoniously over the issue in August, but May seemed to have spurred progress with her offer.

She proposed a transition phase lasting around two years after Brexit day in 2019, and said that during that period Britain would continue to pay its full share of the EU’s budget.

On Monday, Chancellor of the Exchequer Philip Hammond also qualified May’s offer on the transition.

He said at the conference that transition was a “wasting asset,” suggesting that the longer it takes to secure, the less it’s worth to the UK. “Our European interlocutors know that,” he said, amid calls from business to lock down the deal by year-end.

The prime minister’s Florence speech – and in particular the offer to pay up – were welcomed in EU capitals. The bloc’s chief negotiator, Michel Barnier, hailed the speech last week for creating the “new dynamic” that he saw in the latest round of talks.

However, Barnier said that it was still not clear where the UK saw its liabilities beyond the two-year transition period, and warned that talks on the future trade relationship could still be “months” away. The EU says negotiations can’t move on to future ties until there’s an outline agreement on the bill.