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A question of money: The flow of Capital between the UK and the EU

Euro and Pound - Econ Alerts

The ‘What we should pay’ debate

The question of what we pay to be a part of the exclusive trading group known as the European Union was a heavily contested debate during the referendum. That infamous red battle bus that housed Boris and Gove’s Leave campaign embraided with the insubstantial claim that “we send the EU £350 million a week, let’s fund our NHS instead”. The debunked figure remained for many (despite being proved to be wholly misleading) a major factor for some people voting to leave the European Union.

It is important to remember our financial commitments to the EU, such as the budget which we signed up for to run up to 2020, this having been agreed before our exit. Additionally, the EU will be aware of how much investment has come from Britain to fund their own infrastructure ambitions. The irony of Britain’s economic future being decided in the halls of Brussel buildings that they had helped fund.

Let’s hope that when the topic of money is discussed further with our European neighbours that Secretary of State for Exiting the EU, David Davis has a greater understanding of what Britain owns in EU assets and is owed as well as our contribution, or as some in the media have dubbed, our ‘Brexit bill’ should rightly total.

What we owe the EU

“London will have to transfer funds to Brussels at least until 2020”

These are the words of the European commissioner for budget and human resources, Günther Oettinger. The belief is that the U.K. agreed to these terms long before Brexit. However, Article 50 being triggered should overrule it, as after the two-year negotiation period; we’re out, this could involve having a deal or not, but one thing for sure, it will mean there will be no more contributions to the European budget and should, therefore, mean that any outstanding contributions be cancelled. One use of the funds expressed by Mr. Oettinger was to “bring Turkey closer to Europe” However, the political situation in Turkey is not one that can be solved with European integration. Additionally, since the budget was drafted the situation has developed exponentially within Turkey to the point where the European Union need to consider whether they want a country currently like that to be an active member state.

Mr. Oettinger, is a German politician, standing up for his own countries interests when he says Britain should keep paying in until 2020. Otherwise, the German economy would have no choice but to pick up the bill left by the U.K. This being as the German economy is the only one truly thriving with the Euro, whilst countries like Greece and Italy are struggling. Therefore, it is in the interest of Germany, not directly the EU, that the U.K. keeps its commitments set out in the budget.
Any talk of payment to the EU will not satisfy hard-line Brexiteers in the Conservative Party like Eton educated champion ‘man of the people’, Jacob Rees-Mogg for North East Somerset, who might share the same view as our Foreign Secretary when asked for his comments on our EU exit price.

“If they want a penny piece more they can go whistle?”

What the EU owe us

We have been in this exclusive trade club for decades, and in that time we’ve invested a lot of money in its growth. It is for that reason that when we discuss what Britain owes the EU, it is equally important to determine what the EU owes Britain.

The EU has a total net worth of assets of around €153.7bn. This is in political buildings and different institutions and bodies. As Britain has been a member for so long, it is undoubted that a portion of these assets belongs to the U.K. This means the EU will have to buy the U.K. out of their stake in the building, which could go towards funding the Brexit bill the U.K. may need to pay. Additionally, a stalemate agreement could be reached where the EU doesn’t give the U.K. a bill and the U.K. no longer stakes a claim over EU assets.

When all is said and done

Like during the referendum campaign, the question of money and who owes who has carried forward to the negotiation table. One thing is for certain, neither side will be short pocketed when the lump sums are given out. When it comes to the U.K. and the EU, one can only thrive as the other does as well. Therefore, it is in the economic interests of both parties to have a clear fiscal breakdown of who gets what.

Many senior figures in the EU have stressed they do not wish to punish the U.K. It’s best summed up by European Council President, Donald Tusk. This is when he said Brexit was “punishment enough”

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