£40bn divorce bill ‘will only be paid once trade deal is agreed’

A BREXIT divorce payment of up to £40billion will only be handed over if Brussels agrees a comprehensive trade deal, MPs were told yesterday.

Treasury chief secretary Elizabeth Truss sought to reassure Eurosceptics by insisting any payment was ‘contingent on us securing a suitable outcome’ in trade negotiations.

Theresa May also made it clear that the UK would not make a unilateral offer to the EU without guarantees on trade, saying the two sides would ‘move in step together’ towards a settlement. Ministers have agreed a formula that would raise the UK’s offer to about £40billion in the hope of securing a breakthrough at a crunch summit in Brussels next month.

EU sources have suggested the offer may be enough, despite some previous demands of as much as £90billion.Boris Johnson, who has resisted paying a large bill, yesterday indicated he was satisfied the money was justified. The Foreign Secretary said: ‘We’ve been waiting for this for a long time – 18 months or so. Now is the moment to get the ship off the rocks and move it forwards.’

The prospect of a breakthrough was also welcomed by businesses, with the pound rising to its highest level in weeks. However, members of the Tory pro-Brexit European Research Group were last night seeking a meeting with government Chief Whip Julian Smith over the issue – with some even warning they could vote down any payment in the Commons. Conservative MP Peter Bone told The Guardian: ‘Giving billions to the EU is completely the reverse of what people voted for.

‘If the deal is voted down we come out on World Trade Organisation rules.’

Fellow Tory Jacob ReesMogg said the Government seemed to be ‘dancing to the tune of the European Commission’. But other Tories, including former party leader Iain Duncan Smith, were willing to countenance a substantial divorce payment, provided it was ‘absolutely hinged on a free trade arrangement’.

Miss Truss said the Government was ‘not dancing to anyone’s tune’, telling MPs: ‘Nothing is agreed until everything is agreed. Any settlement that we make is contingent on us securing a suitable outcome.’

Business leaders welcomed her comments. The British Chambers of Commerce said firms would welcome any development that ‘brings us closer to discussions on a future trade deal’. The Federation of Small Businesses said members urgently want to see Brexit negotiations move on to discussions over trade. However, EU chief negotiator Michel Barnier last night insisted there was ‘still much work to do’.

Britain was last night named the best country in Europe in which to do business in a major vote of confidence ahead of Brexit. It was ranked above Germany and France for its ‘business environment’ in the latest Prosperity Index from the influential think tank, the Legatum Institute.

The UK was praised for its flexible labour market, entrepreneur-friendly laws and the ease of raising credit to plough into a business.