Here’s how the EU calculated that 100 billion euro Brexit bill
They've got to stop talking about numbers like this.
So, politicians really need to stop doing that thing where they use numbers so massive they don’t make any sense to anyone anymore.
Unfortunately, they’ve done it again this morning. Which is all the more annoying because it means we’ve got to talk about that B word we’ve been talking about way too much recently – of course, Brexit – with two more B words attached: Bill, and Billions. Lots and lots of billions.
What’s happened now?
You might have seen earlier this week Theresa May said that EU chief Jean Claude Juncker was going to find out what a ‘bloody (B word again!) difficult woman’ she could be? It seems like that’s the spirit these negotiations are going to take – a dog-eat-dog approach.
Here’s the disagreement: The UK basically wants to negotiate the exit from the EU alongside a new ‘trade deal’ – in other words, they want to sort out the terms of how the UK will be allowed to continue trading with the EU at the same time as deciding how much they pay to leave.
But the EU wants to separate them out – first, sort out how much the UK will pay to leave (the ‘exit bill’) – and then decide on what terms they’ll get back in (without actually being in, of course) later.
Not only that, but they’re also likely going to up their exit bill by about 40 billion euros, to a total of one hundred billion.
The problem with these figures is that it’s just impossibly difficult for us to really get what these numbers mean. Dear politicians: when you find yourselves “somewhere between €60bn and €100bn”, you’ve seriously got to be more specific. Love, Economy.
How did they get to a one hundred billion euro bill?!
The idea is that when a country leaves the EU (not that anyone’s done this before), they have to give the EU enough money to stay true to the commitments they made when they were still in.
A lot of what the EU does is pooling money together from all 27 member states and loaning it out to the one that needs it most – often on programs that take a few years to be carried out. That means Britain’s already agreed to paying for things like refugee funds to Turkey and economic aid to Portugal and the Ukraine.
The EU wants to make sure Britain doesn’t wriggle its way out of paying that money. At first, the EU was playing it nice, only wanting the UK to pay back the bare minimum on the loans it had committed to – but now that the tone around Brexit seems to be turning nasty, they’re asking for more.
The silver lining is that because most of the money Britain’s already committed to spending in the EU is a loan, it’ll obviously (hopefully) get paid back at some point. So although the UK still needs to cough up €100bn in 2019, they’ll get their share back if the loans are repaid. In econ terms, the ‘net’ payment – or the total sum when all is done and dusted (that’s the opposite of ‘gross’, the number before it’s all done and dusted – i.e. €100bn) – is closer to around €50bn.
Still, €50bn is obviously still quite a lot of money – so what’s it all for? A lot is administration fees for being part of the EU up until the end of negotiations, and some is paying towards some of the benefits EU members get, like
Also, before things got tense, the EU was going to let Britain keep part ownership of some EU buildings and other assets like that, but in these dog-eat-dog days, that’s over too.
Is the UK going to pay up?
For someone who’s currently representing the country being painted as the underdog in the face of 27 pretty unforgiving ‘overdogs’ (is that a thing?! Who knows), Brexit secretary David Davis seems confident that it’s all going to be okay. “I don’t think that’s where we’re going to end up,” he said on the BBC today when asked about the bill. “I know that’s not where we’re going to end up.”
And hey – he might be right. The actual figures won’t be determined until discussions are over and the exit date is set. The chief negotiator of the EU (not jealous of that job right now) has insisted that they should decide on the process by which payments will be made before they pin down the total sum. And Britain is going to have demands of its own that need to be discussed – which will vary depending on who wins the snap election on June 8th.
Let’s just hope that the next time they throw a figure our way, it’s a little less vague than “a hundred billion-ish.” That’d be really helpful.