William Hague:

Brussels needs the UK’S money, so agreeing to pay some back will give us the upper hand in negotiations

Nearly every negotiation comes to a crunch moment, following which it is highly likely to end in agreement or alternatively doomed to failure. When we Tories were negotiating our coalition with the Liberal Democrats, the crunch came over whether, in return for them backing us on the economy, tuition fees, Europe and many other issues, we would offer a referendum on electoral reform.

We decided there was so much at stake and the prize of ousting Gordon Brown so worthwhile, that we would indeed give them such a referendum. That decision was vindicated when the sensible voters rejected changing the voting system, leaving the Liberals following most of our policies with little in return, and therefore well and truly kippered.

The Brexit talks are now quite clearly coming to such a crunch, where the UK has to decide whether a major and unpalatable concession is worth making in order to secure a large number of highly desirable objectives. In this case, the potential concession involves the vexed subject of money. To the average voter it is readily apparent that the European Union wants our money and we don’t want to give it to them, but exactly why they want so much of it so adamantly must be just as obscure as why Liberals have a passion for different voting systems.

Are they trying to punish us? They certainly don’t mind us being in an awkward spot, but that is not the whole explanation. Are they demanding “money for access” to their markets? That would seem a bit rich when we would give them access in return.

No, the main reason they want a big pile of cash from us is because they need it, having in effect run up a vast debt on behalf of British people and everyone else in the EU. In the obscure terminology of Brussels, this is called the RAL, the Reste à Liquider. It is the difference between the amount the EU has committed itself to spending – on infrastructure, regional grants and so on – and the amount it has actually paid out. The polite explanation of this is that committing money years ahead but not paying it until much later allows projects – a new bridge for instance – to be planned for the future.

The less charitable way of putting it is that the EU is like a giant overbooked airline, hoping that not everyone turns up at the same time for what they have been promised. If they did they would find that the Commission is short of something like €250billion. It only keeps going on the basis it will never come to an end.

Gaining an understanding of this is not likely to make Britons keener to stay in the EU. Indeed, people around the rest of Europe perhaps need to notice that they, like us, owe something like £400 or £500 for every man, woman and child to Brussels – it is just that our share crystallises because we are leaving.

But understanding it is very important to working out what the UK should do about it, along with a similar €100billion run up in pension liabilities for which no money has been set aside. The EU might not be a good advertisement for how to run your finances, but it is understandable that when someone is leaving it wants a share of these accumulated debts.

The reason this matters is because psychologically and politically it is easier to pay a debt, even if someone ran it up on your behalf, than to bow to a ransom demand. In addition, it is quite obvious that making some contribution to these amounts is an inevitable part of coming to any agreement about future trade and relations.

So if Theresa May and David Davis declare at some point before the next European summit on December 14 that we will indeed pay some share of these liabilities, there is no point people responding with outrage and denouncing them for giving in to Brussels. Anyone who thinks there has ever been a chance of a free trade deal with the EU without doing this has been kidding themselves.

Of course, any such payment should be dependent on a final deal being signed, sealed and ratified – without that the UK should not pay a single penny. That way, the UK retains some leverage right to the end. And agreeing to pay a share need not mean being committed now to a specific amount. A “share” could be calculated as the British population in the EU (12.5 per cent) or the proportion of the budget we pay in any one year (about 8 per cent after deducting our receipts) and since the RAL varies unpredictably, the choice of the year on which to base this calculation will be important. British taxpayers will also expect to get back their share of the capital invested in the European Investment Bank – if we’re paying debts we have to receive our slice of the assets.

There are thousands of such details to haggle over. But as ever at a crunch point, there is now a key judgment to be made: is it worth making this offer in order to unlock a deal on a transitional period for leaving the EU and talks on a full free trade area to follow? Those who want Brexit to be a success – whether or not they favoured it – should be clear that it is worth it, because the alternative of no deal at all is deeply unattractive for everyone doing business with the continent or who wants an open Irish border.

In our domestic politics, the great schism over Brexit is fracturing politics more widely and still undermining the Government. Ministers in trouble – which means quite a lot of them – seem to lack the robust support of colleagues for being on the other side of the European debate. The Conservative Party, which alone stands between the country and the most socialist government in our history, should be able to unite behind a rational approach to delivering what the people voted for.

Only those closest to the negotiations can judge the right moment to acknowledge that we will pay a fairly calculated amount towards these huge liabilities. They will want to know that the transition talks will quickly be on the table in return. But it will be the right thing to do, to break through to a more hopeful outlook, in a Government that needs simultaneously to do the right thing and pull itself firmly together.