Brexit: Preparations and Negotiations - Motion to Take Note

Part of the debate – in the House of Lords at 9:32 pm on 23rd July 2018.

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Photo of Baroness Falkner of Margravine Baroness Falkner of Margravine Chair, EU Financial Affairs Sub-Committee 9:32 pm, 23rd July 2018

My Lords, I chair the EU Sub- Committee on Financial Affairs. The committee also has responsibility for the UK contribution into the EU budget, so the current discussion about cannot pay or will not pay is also pertinent to our role. I was also part of the EU Select Committee’s delegation to Brussels last week to Mr Barnier, under the distinguished chairmanship of the noble Lord, Lord Boswell. It was my fourth discussion with Mr Barnier. In the light of what I heard there, I will concentrate my remarks on three things: the budget contribution in the light of calls for a second referendum; the cost of the Norway option and the EEA; and the exit fee. In doing so, I remind the House that I speak in a personal capacity. I could hardly do otherwise, having heard the rather diverse speeches of other members of the committee, such as the noble Lords, Lord Butler of Brockwell and Lord Cavendish of Furness, excellent members as they all are.

Several noble Lords talked about the possibility of holding a second referendum or a people’s vote on the outcome of negotiations. A lot of people believe that if you put the facts to the people they will change their minds and remain, as if no facts were available last time around. We heard that in the Chamber today. If facts were distorted last time, people nevertheless thought that they would pay less to the EU if we left and more money would therefore be available for UK priorities. The next vote will also focus on money, so the question is what the offer of “remaining” in that future referendum would involve.

Noble Lords may not know that the negotiations for the EU’s next multiannual financial framework are currently under way. The Commission intends to conclude them in May 2019, just weeks after the UK’s projected leaving date. We are not present during those negotiations on the basis that they do not concern us, as they cover the period from 2021 till 2028. We are not there and are not fighting for our interests.

One issue under discussion is the phasing out of the rebates paid to member states over a period of five to seven years in that MFF. It is likely that net contributors will try to resist this, or at least to prolong the period, but the rebate is unlikely to last in its current form. Other aspects under discussion are an increase in the EU’s own resources through the EU raising direct taxation, which the UK fiercely resists on the basis that tax-raising powers belong to member states alone. It is envisaged that some €200 billion will be raised directly by the EU in the next period, through visitor taxes, environment taxes and a tax on plastic among others.

What will happen if the UK does not retain its rebate? The Office for Budget Responsibility shows that the net contribution to the EU budget paid by the UK in 2016 was £8.1 billion. This was equivalent to £123 per head. The UK rebate was worth £5 billion, or £76 per head, so the UK contribution to the EU budget if we did not have the rebate would be £200 per head. Several people to whom I speak in Brussels who are experts on the budget and have knowledge of the MFF negotiations confirm that it would be difficult for the UK to swan back in and keep its happy rebate.

If the figure on the side of arguments last time around was based on £123 per head, the new figure would be some 60% higher. Do those who want another people’s vote really think that they would win a referendum on the basis that the UK would pay more than it currently does? Several noble Lords believe, as the EU negotiators told us last week, that the only other option—