Keir Starmer’s ‘reset’ talks between the UK and EU are continuing. Having agreed in principle to renewing the post-Brexit diplomatic and economic relationship in May, there is now negotiation over the details. Naturally enough, some of these negotiations concern money – and specifically how much the UK will pay to Brussels.
Many EU programmes require funding for complex administration – the processes and institutions agreeing, detailing and enforcing common rules – and set-aside funds to deal with contingencies. Obviously the UK isn’t seeking to rejoin the EU as a whole, so its participation in these programmes will be circumscribed and, accordingly, any financial contribution it makes will be likewise less than that of EU member states overall. Brussels is also demanding Britain contribute to several of its regional funds, which seems much less defensible in principle. In addition, there is talk of the UK being asked to pay into the EU’s defence rearmament scheme so UK defence contractors can sell to EU governments, though the UK has reportedly rejected these demands so far. It’s a negotiation, so naturally enough the EU is asking for more than it will probably anticipate getting and the UK is offering less than it probably anticipates agreeing to.
Starmer’s ‘reset’ covers very limited territory
One reference point those briefing from the EU negotiators’ side mention is Switzerland. The Swiss aren’t EU members. Neither are they technically part of the European Economic Area (EEA). Instead they have a series of treaties with the EU that recreate a situation close to that of being EEA members, including a free movement arrangement, a no-tariffs trade deal and regulatory measures such as an aviation accord. To fund the administrative and legislative costs of these agreements, the Swiss pay about €375 million (£330 million) annually into the EU Budget (almost precisely twice the cost of a Chagos Islands giveaway deal). The Swiss also pay about €350 million (£310 million) into the EU’s cohesion funds to support poorer member states. The demand for participation in the EU defence scheme appears to be about €6 billion (£5.3 billion).
EU trade with the UK is rather larger than with Switzerland (about half as much again), but the Swiss deal with the EU is much broader than anything anticipated in the EU-UK ‘reset’, so presumably payments would accordingly be much less relative to the trade covered. If, say, UK payments covered one-fifth of the ground the Swiss payments do, and the amount were scaled up for the difference in trade volumes, that might suggest a UK payment of something of the order of €100 million per year (around £90 million). A larger sum might be paid for participation in the Erasmus+ student exchange programme, of around £140 million.
Setting aside the apparently-rejected £5 billion ask for participation in the defence market scheme, the monetary sums involved are modest. A £100 million administration fee is neither here nor there in the context of the scale of UK-EU trade of over £800 billion. But it adds to the political difficulties Starmer faces with his whole UK-EU ‘reset’ concept.
If the UK were to agree to pay into EU cohesion funds (and some of the figures talked of there are much larger – in some cases, of a similar order of magnitude to UK payments when still an EU member, into the billions of pounds per year) that would be much more politically difficult. The UK-EU trade deal wasn’t perfect (what in life is?) but it was pretty good – the most comprehensive trade agreement the EU has with any non-EEA country other than Switzerland. Starmer found it politically convenient to pretend that the Tories had negotiated a ‘thin’ trade agreement and that it needed to be extensively redone and deepened, but in truth everyone knows that was nonsense he felt he had to say.
The reality is that Starmer’s ‘reset’ covers very limited territory, including a few modest improvements that could have been made without any grand ‘bargain’ complete with some foolish errors (such as risking reintegrating UK and EU rules on lab-grown meat, thereby sacrificing the UK’s current lead in that important new technology). For all the hype involved in promoting it, associating such a poor achievement with making payments to the EU leaves Starmer vulnerable to the charge that he is raising income taxes on UK citizens so he can send money to the EU – particularly at a time when the government’s Budget is already risking crisis and income taxes are rising. This is a ready-made campaign leaflet for every Reform candidate in next spring’s local and regional elections.
In A Man for All Seasons, Sir Thomas More famously mocks how cheaply his accuser Richard Rich agreed to perjure himself with the line ‘Why Richard, it profits a man nothing to give his soul for the whole world. . . but for Wales?’ Labour MPs might ask if breaking their solemn manifesto promises not to raise income taxes, and promises after Rachel Reeves’s Budget last year not to seek more tax rises, for so small a prize as the EU ‘reset’ is really worthwhile.
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