Article 50 Triggering Day

Question: How much money will the EU have to payback to the UK after Brexit? An Explanation for Politicians

Answer: Nothing. Zero. Zip. Unless…

Mobile Phone Contracts

When you have a mobile phone contract, say for 24 months, at £25 a month and you leave it early, say after 12 months, you are expected to pay the remaining 12 months or an early termination fee, if your contract has one of those (the majority don’t, but the termination fee is about the price of the remaining portion of the contract — basically, there is no practical difference). The total value of the contract, your commitment, over the two years is £600. Leaving in 12 months means you’ve paid one year’s worth, which is 12 months and you have to pay the remaining portion of the contract. i.e. 12 months worth, which is another £300.

  1. 80% of all import tariffs into the EU from outside it (the remaining 20% goes to the member state as a referral fee for the “introduction”)
  2. 0.3% of the VAT charged via a member state (for every £100, we pay 6 pence).

Front Loaded Costs

The EU will have spent money from the last budget cycle in this one. Like a mobile phone company pays for your phone up front, sends it to you for free, and charges a proportion of it within the monthly charge (often 50:50). So in our example, it may be that £12.50 a month of the £25 charged is actually to pay for the phone.

Outstanding Commitment

The last budget cycle covers the period of 2014–2020 inclusive. Our membership fee, net of rebates is around £11.8 bn (the rebate is paid as an offset against current funds — i.e. the rebate money doesn’t leave the UK in the first place and won’t even need to be reviewed for 7 years — it’s not even allocated to the EU at UK level either). Hence our total balance sheet commitment is 7 x £11.8bn = £82.6bn.

Jurisdiction and Bad Debt

This seems to me like pretty much the least understood part of the process by David Davis and most, if not all Leavers. They imply that if we leave the EU, and don’t pay the debt, then the EU can’t chase us, because there is not legal framework in which to do so…

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Source: World Trade Organisation
  1. The WTO have dispute resolution procedures, including sanctions, which they can and will place on countries that fail to address the dispute. They already apply them to Iran and many other countries.
  2. All EU countries are members of the WTO, the EU is a member of the WTO and so are we. Membership of the EU is a subset of the WTO rules.
  3. So we are subject to the same dispute procedures as any other country. 27 members of the 168 members immediately engage their 100 trade partners and you suddenly have a majority of 127 countries to vote on the UK receiving sanctions, if we didn’t resolve it after the first 2 stages. We’d be done for in a heart beat. We couldn’t trade with anyone, including the USA.

Summary

The UK’s position in this is not strong at all. It appears that the UK government are simply planning to run the clock down of their contributions over 5 years, given the release of a 2022 idealised timeline. That way, they’d pay another EU budgetary contribution, and then aim to get the rebate for the period of 2014–2020.

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EA, Stats, Math & Code into a fizz of a biz or two. Founder: Automedi & Axelisys. Proud Manc. Citizen of the World. I’ve been busy

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