We are hearing from our government that an extension to Brexit will cost the UK taxpayer one billion pounds a month. Is this true? (hint, look at the title)
So, first off, where does this figure come from?
It appears that this was originally something that a Downing Street Spokesperson said.
James Grove, political editor of the Daily Mail (oh, what a surprise) tweeted on the 3rd of September 2019:
No 10 says rebel efforts to delay Brexit will cost the taxpayer ‘roughly £1 billion a month’ in additional EU budget contributions if successful.’
Now, you might want to stop me at this point and bring the Brexit Bus to my attention, which claimed we paid £350million a week to the EU (times by 52, divide by 12 to get a rough monthly figure) which means that Boris had already claimed we were giving the EU about £1.5billion a month, so we are saving money already.
But even then, £1billion a month is huge. Have they checked their maths?
After arch comedian and Foreign Secretary Dominic Raab quoted this figure in an interview, the BBC did a Fact Check on this figure and they discovered:
‘Reality Check verdict: Mr Raab is right that staying in the EU would cost £1bn a month in budget payments. But his figure excludes any money the government gets back from the EU in grants for things like regional development or supporting farmers. When you factor these in, the figure comes down to about £744m a month.’
Well, what is £256million a month between friends. If the government would like to round it up to £1billion and pop the rest in my bank account, I am sure that I could make this dissapear.
But £744million is a huge amount.
Yes, it is. But bear with me while I look at our Divorce Bill with the EU. It will all make sense, I promise.
When we enacted Article 50, to leave the EU, it was calculated that we would have a ‘divorce bill’ of about £39billion. This is money that we owe the EU to cover our financial committments. It should have come due when we were due to leave.
There is some argument between the Hard Right and reasonable people over whether we would actually have to pay this bill.
Now let’s stop being silly and consider what we are actually saying by threatening to not pay our bills.
We are saying that the United Kingdom would reneg on it’s legally agreed commitments, rather than pay up. What would that do to the UKs credit rating? We have already dropped from AAA to AA with a negative outlook (in other words we are at risk of dropping further). Not paying our bills will have the same effect on the country as not paying our bills at home would have on us.
But who cares about that?
Well, you should. Standard and Poor produce these ratings for countries so that investors can see how good a country is to invest in. It helps world banks to see if a country is acceptable to lend money to. It helps countries to work out what sort of trading relationship they might have with another country.
Look at it this way, if we don’t pay we can expect Europe’s Baliffs to come knocking on our door.
‘Nice Country you’ve got here. We need to come in and start working out what we are going to take away in order to cover your debt.’
And don’t forget, if we don’t pay we will accrue interest on our debt, and who knows what the rate will be.
‘Hi, this is PayDayLendingBastard.com. How can I help you?’
‘Yes, I’m looking to borrow some money to tide me over until my fantasy country appears.’
‘OK, well, late me take a few details, can I take your name?’
‘Yes, it is Boris Johnson’.
‘And do you have a job, Boris?’
‘Yes, I am Prime Minister.’
‘And how much are you looking to borrow?’
‘£33billion.’
‘OK, well your credit rating is plummeting, but we may still be able to help. Let me talk to my manager.’
Muzak on the telephone.
‘Hello Boris, my manager says we can offer you the full amount you need, but we would need to take London, Cardiff, Edinburgh and Belfast as security. And your interest rate would be 1266% APR. Remember, your Country may be at risk if you do not keep up repayments on your loan. Do you want to go ahead with that?’
‘But the taxpayer would suffer so much! Nah, only joking. Can a take out the loan in the name of H M Government please…’
We risk becoming like a third world nation if we don’t pay our bills. We have already fallen from 5th richest to 6th richest country in the world since the Brexit vote. Lots of our biggest companies have moved their headquarters overseas to Paris and Frankfurt, and five minutes Googling will give you a frightening list. We have to pay our debts or we will cause a massive shock to our economy.
And before you get too hung up on the £744million a month bill, don’t forget that the EU currently gives grants and funding to British Business totalling about £192million a month. That is not even looked at in these figures.
But why do we need to keep paying £1billion to the EU every month if we delay Brexit?
We need to understand what this money is doing when we pay it to the EU. It is not wasted money, it goes towards paying our EU membership, and also our Brexit Bill.
The Office for Budget Responsibility say that the delay in Brexit (March to October) means that the current bill would be about £33bn because the UK’s continuing membership of the EU means that some of those payments have been made as normal budget contributions instead of as part of the Brexit Bill.
But doesn’t that mean this figure is completely irrelevent, as the longer we take to leave the EU, the less we will owe?
Thank you, yes, that is exactly what this means. Boris will keep repeating it, because not everyone is an economist and not everyone has taken the time to find out the full facts. Also, if he decided not to pay the EU divorce bill, then obviously leaving in October means less money to the EU than if we leave in January. But as we have seen, this is silly.
The claim that we will be giving £1billion a month to the EU if we don’t leave on October the 31st is a bit of a relief. I notice that Boris isn’t saying that we need to leave on the 31st October and pay the EU £33billion in one hit!
The reality is that, apart from inflating or rounding figures, Boris is not lying (which makes a change), he’s just not telling the whole story. A sin of ommission perhaps.
And don’t even start on the economic horror that is a No Deal Brexit. We stand to lose more than £1billion a month if we leave without a deal… and we will still have to pay the divorce bill. But that is a story for another day.