30 January 2017

A stupid metaphor could end in disaster for Theresa May. Here’s why

John Redwood is wrong as usual. But the bad news for Theresa May is he's only half-wrong.

John Redwood, the Brexiteer’s Brexiteer, has the following gem on the question of whether we should continue paying into the European Union after we’ve left.

“Being in the EU is a bit like being a student in a college. All the time you belong to the college you have to pay fees. You have to obey all the rules of the institution. When you depart you have no further financial obligations.”

It’s difficult to know where to start with this. Among other things, this is quite literally the opposite of how tuition fees work. In both further and higher education, you pay nothing up front and repay the cost after you’ve left.

Of course, what Redwood is really talking about is the question of whether or not Britain should pay a so-called “divorce bill”: its share of agreed costs accrued during its time as a member of the European Union: its liabilities for pensions, and so forth.

But even if tuition fees worked the way Redwood thought, the metaphor wouldn’t work. Trying to waive the “divorce bill” is a lot more like if you drop out of university and expect your flatmates to absorb the costs of your vacated room without finding a new flatmate to fill it.

But Redwood’s wrongheaded metaphor does reveal a serious headache that’s coming along the tracks for Theresa May: the tricky question of that divorce bill.

As he says, the British government:

“could not make such a payment legally under our own law and system for controlling public spending. Ministers can only authorise spending and sign cheques for approved expenditure under UK legislation and with parliamentary authority for the budget provision that covers the payments”

The final divorce bill could fetch up to anything up to £60bn – potentially higher should the pound fall further against the euro – but although that bill will be negotiated by Theresa May and the rest of the EU27, the sign-off for that payment will have to clear the House of Commons.

For context – this year the government expects to spend £102bn on education and £145bn on health. £60bn is serious money and at some point, if the British government wants to leave with a deal, the British government is going to have to ask Parliament either for an extra £60bn or real terms cuts to public spending to afford that extra £60bn. The government expects to pay around £50bn to the European Union this year but that includes money that we’ll likely reallocate on existing schemes, like farming subsidies, once we leave the European Union.

The money would likely be paid in installments, but there’s the difficult part – the government will likely have a tricky fight with its own Eurosceptic ultras not just once, but in every budget until the divorce bill is paid off. And you can bet that every year the full amount, rather than the outstanding bill, would be in almost every headline.

Don’t forget that the EU27 has agreed the order it wants to discuss Britain’s Brexit deal: exit, transition, and only then any future deal.

So May has two options: either whatever deal she strikes will be measured, inevitably, by Eurosceptics in Parliament and the press, against whatever the “divorce bill” ends up being, or, any attempt to reach a deal within the two year time limit falls at the first hurdle. Oh, and all that assumes that whatever deal she strikes can secure parliamentary approval if it comes with a £30bn to £60bn exit bill.

All of which means the smart money must be on Britain leaving the European Union without a deal.