Brexit and the EU Budget (EUC Report)

Lord Jay of Ewelme Excerpts

Thursday 6th April 2017 Lords Chamber

[Lord Jay of Ewelme (CB)]

My Lords, it is a pleasure to follow the noble Lord, Lord Taylor. I speak as a member of your Lordships’ European Committee, though not as a member of the sub-committee which produced this report. I congratulate the members of the sub-committee and its chairman, the noble Baroness, Lady Falkner, on the report. The noble Baroness and I were in Berlin yesterday on behalf of the EU Committee talking to the Bundesrat about Brexit and indeed about this report. I very much agree with what was said earlier today about the importance of contacts between this House and your Lordships’ European Union Committee and the Parliaments of other EU states.

This report is timely, since it is clear that negotiations on the withdrawal agreement to which the negotiations on the UK’s financial contribution will be a large and key part will take place towards the beginning of the two-year process now under way with the implementation of Article 50. It is not entirely clear to me when the real negotiations will start. But, if as expected, formal European Council guidelines are to be agreed towards the end of this month, with the negotiating mandate given to Michel Barnier shortly thereafter, we may be engaged in at least preliminary skirmishes among officials by around the middle of May.

Like others who have spoken today, I see no great advantage in trying to guess exactly how much the bill will be. I note that the draft European Council guidelines talk of a single financial settlement of the budget question. That does not seem to me to be the same as a single figure and my guess is that the single financial settlement will consist of a combination of liabilities, contingent liabilities and payments, or potential payments, over a number of years. I do not think that we can sum those up into one single figure. Furthermore, on the UK side, there will be a case for continuing contributions in return for some continuing advantages. European research and co-operation is one area sensibly mentioned in the report we are discussing today. Another possibility would be continued payments for both sides of the border between the Republic of Ireland and Northern Ireland which would otherwise fall away when we leave the European Union. It is encouraging that the need for sensitive and sensible handling of the implications of Brexit for Ireland are recognised both in the Prime Minister’s letter and in the draft Council guidelines.

It should also be said that on the EU side, one effect of the withdrawal of the UK’s net contribution will be the need to cut back on expenditure or shift the pattern of distribution of expenditure with really very difficult decisions, particularly in eastern and central Europe for recipients, and also difficult decisions for contributors, notably Germany. There will, therefore, be a tough and fraught negotiation carried out at least on this side of the channel in the full glare the press. It will not be a pretty sight.

It would, I suppose, be foolish to rule out completely a breakdown in talks leading to the two-year period specified in Article 50 ending without agreement. But, like the noble Lord, Lord Shutt of Greetland, I cannot see that that would be in anybody’s interests. Talk of WTO terms for our trade that in my view would be deeply unsatisfactory ignores the crucial issues that fall outside the trade and economic relations, which would fall away too if there were no agreement at the end of two years. I think of justice and home affairs, foreign and security policy, and the fate of EU citizens in Britain and of British citizens in the EU. To reach the stage of complete collapse would be a colossal failure of negotiators on both sides, and it would be directly contrary to the statement by the Prime Minister in her letter at the end of March to Mr Tusk and the draft European Council negotiating guidelines on the importance of a longer term co-operative relationship between the UK and the EU, which as others have said in this debate, will be so important for our future.

Against that background, I cannot see that the conclusion that the UK will be under no legal obligation to meet the outstanding financial obligations after leaving the EU will, in practice, be particularly relevant to the way in which these crucial negotiations will evolve over the next two years.