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Please can someone explain? Will we pay if we leave EU without a deal?

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HappydaysArehere · 17/10/2017 19:53

With all this talk of billions of pounds which we are supposed to owe if we leave and talk of continuing to pay after we leave, I am in the dark. If we walk away with no deal will we pay anything like the amounts talked about? If we are able to do that surely the EU will be big losers as well as us! I am at a loss. Grateful for your input as I am bewildered. I voted to remain but must say the shenanigans being played by the EU are showing them as more like the Mafia than a democratic institution.

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Spinflight · 18/10/2017 03:37

The short answer is no Happydays.

We owe our subs, which are made up in three parts, whilst we are still members. In other words until March 2019.

These subs comprise of a contribution based upon the size of our economy ( properly GNI), a proportion of all the VAT paid in the country and what the EU euphemistically calls it's 'own resources'.

The latter comprises our fish stocks, which the EU parcels up amongst the various EU fishing fleets, and revenues from 'their' customs union.

Which is a bit like a European car boot sale. As we are in it and pay our dues, we can buy and sell from other cars ( EU countries) without paying duties or tariffs.

If however someone from outside the EU wants to sell us stuff then the EU charges tariffs ( EU external tariffs) on that trade.

Hence currently 55% of our trade is with the rest of the world, and the EU takes 80% of the tariffs which they impose on that trade.

After March 2019 we leave the car boot sale, no longer pay our subs and can decide our own tariffs ( preferably none).

When we sell things to the EU our companies will have to pay their external tariff. Similarly when the EU sells us something they will have to pay any tariffs we impose. Anyone selling us things from the rest of the world too, though we'll keep all of the revenue rather than 20%.

Which is where WTO rules come into the equation. Basically international agreements on maximum tariffs.

The EU's argument is that we signed up to their entire budget cycle, which lasts to 2021. Hence they've planned to spend stuff on things until then and assumed our money would fund it all, not just till early 2019.

Us leaving blows a hoge hole in their budget which other nations would have to fill, or they'd have to reduce spending. Germany reckoned about £35 billion a year, which sounds about right.

Our contribution based on GNI is £18 billion. VAT sent to Brussels £2-3 billion. External tariff revenue about £12 billion ( though our own government and the EU are rather shy about publishing the figure). Fishing for leave reckons £5 billion, but think this is a bit low myself, and it doesn't really affect Germany.

Whatever the actual figure is the EU will be out of pocket by this amount times three years hence has it's knickers in a twist. Hence the demands ( £100 billion etc).

Of course outside their little car boot sale another component is added, namely that of the tariffs in trade between ourselves and the EU. Due to the massive trade imbalance though this is very much in our favour. Under WTO rules our companies would pay about £5 billion a year, and the treasury would receive £12.7 billion in extra receipts. I like to think of this as BMW and Volkswagon paying my taxes for me. :)

There's no legal reason why we should give them a penny past 2019. Also no deal would mean increased revenues for the treasury.

Trouble is it would also upset lots of powerful people in London.