Brexit: Now What? Part III

[GnaGnaMan]

No.

I'm not taking the summary of the current EU demands from the UK press but from the EU negotiating guidelines, and yes the EU positions look extreme. The problem is that the EU has to move a long way before they get to a position that the UK could accept. It doesn't matter to me who wins or loses the negotiations but whether both sides can get to a sensible compromise.

Can you explain what you mean by extreme?

The EU wants to keep as much of the status quo ante as possible. In practice this means minimizing the disruption to the lives of millions of people as possible. I find it difficult to see how that could be characterized as extreme.

That the EU would defend the reasonable interests of its citizens seems nothing more than common sense. I don't see how its people should expect less of the EU.

Either that or the EU does not want an agreement at all to penalise the UK for leaving.

Why do you see no deal as penalizing the UK? The UK government seems to think otherwise.

 

[Aber]

4% of GDP over 15 years is about 50 billion pounds a year lost from government coffers, plus an equal amount out of private pockets. This is a yearly loss, not a one time lump sum.

The 4% of GDP is the total loss over 15 years, not an annual one. So annual government loss in revenue is c £2bn on my workings.

 

[Archie Gemmill Goal]

The 4% of GDP is the total loss over 15 years, not an annual one. So annual government loss in revenue is c £2bn on my workings.

I don't think that's correct but I am ready to stand corrected if you can show the working. The figures I have seen for all GDP losses have always been the annual impact at the end of the period.

 

[McHrozni]

The 4% of GDP is the total loss over 15 years, not an annual one.

It's a total loss of growth over 15 years, but since the GDP is still smaller every year than it would be under a different scenario the corresponding revenues are smaller and as such the loss compounds every year until the two scenarios become equal one way or the other.

In theory it could be until the end of time. A Brexiteer-like approach would be to calculate the loss over a century or so. You get to about the current GDP of USA in case you're wondering. That's quite steep next to the measly 100 billion pounds EU is asking, no?

McHrozni

 

[Aber]

Why do you see no deal as penalizing the UK? The UK government seems to think otherwise.

Evidence?

The UK government position is "no deal is better than a bad deal". Not that no deal is good for the UK.

Can you explain what you mean by extreme?

It will depend on your point of view, and I have explained what I think the EU justification may be.

The current EU position could easily be characterised as a neo-colonial one "we decide what rights our citizens have in your country". Imagine after Irish independence the UK saying that UK citizens rights in Eire are enforceable through British courts.

 

[Aber]

I don't think that's correct but I am ready to stand corrected if you can show the working. The figures I have seen for all GDP losses have always been the annual impact at the end of the period.

I think you're right, having gone back to the Treasury report, rather than press reporting.

 

[Archie Gemmill Goal]

I think you're right, having gone back to the Treasury report, rather than press reporting.

That being the case do you revise your view at all?

 

[GnaGnaMan]

Evidence?

The UK government position is "no deal is better than a bad deal". Not that no deal is good for the UK.

How can it be punishment if the UK government says that it will voluntarily seek the option?
The UK has decided to abandon its privileges as a EU member. It has also decided not to seek the lesser privileges of the "Norway-option". These were deliberate choices made by the UK.

The current EU position could easily be characterised as a neo-colonial one "we decide what rights our citizens have in your country". Imagine after Irish independence the UK saying that UK citizens rights in Eire are enforceable through British courts.

I see that the issue of citizenship post Irish independence is quite a lively one:
https://en.wikipedia.org/wiki/Briti...ess_to_British_citizenship_for_Irish_citizens

Are you sure you want to use Irish independence as a model?

 

[Aber]

That being the case do you revise your view at all?

Yes, post #1682 is rubbish and should be ignored.

I think the rest of the arguments still stack up, apart from when I was trying to link the loss in GDP with other numbers.

Overall the Brexit bill is going to be mostly a political rather than an economic argument and who is seen to win/ lose is going to be more important than the actual numbers.

 

[Archie Gemmill Goal]

Yes, post #1682 is rubbish and should be ignored.

I think the rest of the arguments still stack up, apart from when I was trying to link the loss in GDP with other numbers.

Overall the Brexit bill is going to be mostly a political rather than an economic argument and who is seen to win/ lose is going to be more important than the actual numbers.

OK i think I agree that it probably is a political argument from the UK side anyway. But given that the bill being presented is one years worth of the likely loss from not agreeing to it...don't you think the political argument is based on ignorance from the mass? Much like the entire Brexit.

 

[Aber]

OK i think I agree that it probably is a political argument from the UK side anyway. But given that the bill being presented is one years worth of the likely loss from not agreeing to it...don't you think the political argument is based on ignorance from the mass? Much like the entire Brexit.

Depends which year's loss you're talking about. As I now understand it the loss is cumulative and so the one years loss equivalent is the loss in 2030 compared to a bill today, or the cumulative loss for the first 5 or 6 years.

The metric that I think will be used is to compare the bill to the UK's annual contribution as a member of the EU, which should be understandable to most voters. Ignoring the fun of whether you use gross or net figures, I can't see most voters accepting that more than 2 or 3 years equivalent fees for a club that the UK is leaving will be seen as 'fair'. Whether it is economically sensible will be less important.

I can see Theresa May getting a lot of popular support during the negotiations, up to the point where there is a draft deal. After that she will get attacked from both sides, and so she needs to be able to convince the population that the deal is 'fair'.

Currently I'm pessimistic that there will be a deal because I think the EU has started from a point that gives them little room for manoeuvre. In particular getting 100 bn down to something that most people in the UK would agree with will look like a big loss for them.

For the record I voted Remain, but can't see how the vote can be ignored, unless we want Farrage as PM.

 

[Archie Gemmill Goal]

Depends which year's loss you're talking about. As I now understand it the loss is cumulative and so the one years loss equivalent is the loss in 2030 compared to a bill today, or the cumulative loss for the first 5 or 6 years.

The metric that I think will be used is to compare the bill to the UK's annual contribution as a member of the EU, which should be understandable to most voters. Ignoring the fun of whether you use gross or net figures, I can't see most voters accepting that more than 2 or 3 years equivalent fees for a club that the UK is leaving will be seen as 'fair'. Whether it is economically sensible will be less important.

I can see Theresa May getting a lot of popular support during the negotiations, up to the point where there is a draft deal. After that she will get attacked from both sides, and so she needs to be able to convince the population that the deal is 'fair'.

Currently I'm pessimistic that there will be a deal because I think the EU has started from a point that gives them little room for manoeuvre. In particular getting 100 bn down to something that most people in the UK would agree with will look like a big loss for them.

For the record I voted Remain, but can't see how the vote can be ignored, unless we want Farrage as PM.

I don't think the vote can be ignored either. But I still hope that some of the parties will suddenly have a revelation and decide that telling the truth to the electorate might be the best way forward.

They've been lied to. They should know that. Pandering to the delusions of people who are wrong isn't morally or ethically superior.

If people still want to commit economic suicide when they are availed of the facts then fine. What is wrong is pretending that somehow there is an upside to all of this and that if we are just strong and stable enough then we can get the pot of gold at the end of the rainbow.

 

[McHrozni]

Depends which year's loss you're talking about. As I now understand it the loss is cumulative and so the one years loss equivalent is the loss in 2030 compared to a bill today, or the cumulative loss for the first 5 or 6 years.

The metric that I think will be used is to compare the bill to the UK's annual contribution as a member of the EU, which should be understandable to most voters. Ignoring the fun of whether you use gross or net figures, I can't see most voters accepting that more than 2 or 3 years equivalent fees for a club that the UK is leaving will be seen as 'fair'. Whether it is economically sensible will be less important.

UK is leaving the club in 2019, it needs to pay are dues for 2020 to negotiate. I suspect the numbers are grossly inflated and include payments for 2017 and 2018 UK is in no position to dispute for reasons I don't understand. Both sides are trying to use it as a leverage, I suspect.

Here's the explanation:

https://www.instituteforgovernment.org.uk/brexit-explained/eu-divorce-bill

There is about 1-1.5 years' worth of contributions (15-20 billion pounds or so), 9-12 billion euros worth of contingent liabilities which could be eventually recovered by the UK, pensions and "other". Pensions amount to 5-10 billion euros as a lump sum, but UK could also agree to pay it's share until these people pass away. "Other" appears to be stuff that won't even reach a billion, but let's call it three to make sure. The total is about 45 billion pounds on the upper end of the scale, but you can make it look 10 billion pounds without EU missing out on any money. All you need to do is assume contingent liabilities will be someday recovered, pay the pensions in yearly installments instead of a lump sum and use the net payments to the budget instead of gross payments under a system where UK is treated as if it were a EU member for the duration of the budget contributions (which is a realistic concession from the EU).

The only way I see this coming to anywhere near 100 billion pounds is to include payments into EU budget for between now and April 2019. For all I know it could be all a show for the gullible Brits to sell them whatever kind of Brexit they'll get convinced they've robbed the EU blind where in fact the opposite happened.

For the record I voted Remain, but can't see how the vote can be ignored, unless we want Farrage as PM.

That one is easy, start a public debate on what kind of Brexit is desired and hold several referendums. After a while people will get tired of talking of it and exposing frauds as frauds several times a week can't be good for their personae.

This would work before A50 was triggered at any rate.

McHrozni

 

[Aber]

UK is leaving the club in 2019, it needs to pay are dues for 2020 to negotiate. I suspect the numbers are grossly inflated and include payments for 2017 and 2018 UK is in no position to dispute for reasons I don't understand. Both sides are trying to use it as a leverage, I suspect.

Here's the explanation:

https://www.instituteforgovernment.org.uk/brexit-explained/eu-divorce-bill

Nice summary but it does not explain some of the main issues which come from the complexities of EU accounting:

Reste à liquider (RAL)
Roughly translated as “yet to be paid”, the reste à liquider is essentially a €241 billion bill that has ballooned since 2000 as the EU has piled on projects to its schedule of works and investment. While that €241 billion must be paid by all member-states of the EU, it represents the biggest portion of the Brexit charge.

It effectively arises from political divisions over the EU budget, which mean the EU systematically commits to more spending projects than its member-states are willing to pay for in a given year. This is managed through a forked accounting method. Inspired by a bygone French bookkeeping technique, the EU adopted a system of budgeting that splits its accounts into ‘commitments’ (basically appropriations to spend money for a specific purpose or project) and payments (to actually execute those commitments).

The EU’s long-term budget sets ceilings for both annual commitments and payments. But crucially, the annual commitment ceiling is almost always bigger than payments. That leaves a (usually increasing) overhang of unpaid commitments. So in a typical budget year, the EU can be paying for the implementation of commitments first registered in the EU’s annual budget anywhere from one and 20 years previously. Most commitments from the 2014-20 budget are supposed to be paid for by 2023.

That largely worked for London. But Brexit may have dramatically changed the calculus. The RAL will stand at up to €241 billion by the end of 2018, a few months before Britain’s expected exit date from the EU. More than half is made up of cohesion spending, and a fifth each by research and agricultural spending. As a result of the latest long-term budget being delayed, the EU is off to a later start on big project spending than usual; most of the cohesion spending is backloaded, to be executed in the years after the UK has left.

https://www.cer.org.uk/sites/default/files/pb_barker_brexit_bill_3feb17.pdf

The EU treaties talk about 'commitments' and 'binding commitments' (which only applies to the EU's annual budget). As I understand it, legally only the 'binding commitments' can be enforced.

Therefore much of the bill is for projects that will happen after the UK has left, which have been agreed in principle (subject to the cash being available in the year it is to be spent), but would still need to be agreed by the UK in each annual EU budget.

 

[Archie Gemmill Goal]

All of this suggests that some long transitional arrangement would probably be the get out here. The uk continues to pay for say five years and gets the benefits of membership but no voting rights all future commitments are made on the understanding that the uk won't be funding anything. Uk continues to contribute to the pension pot for the foreseeable based on some reasonable accounting.

Does that seem too straightforward to be agreed?

 

[McHrozni]

All of this suggests that some long transitional arrangement would probably be the get out here. The uk continues to pay for say five years and gets the benefits of membership but no voting rights all future commitments are made on the understanding that the uk won't be funding anything. Uk continues to contribute to the pension pot for the foreseeable based on some reasonable accounting.

Does that seem too straightforward to be agreed?

Something like this is probably planned by both sides, but both sides are hyping up that Brexit bill, as if it were the most important thing to discuss. It could be a mutual understanding that the Brexiteer public must be sold a victory against teh evil EUians in order to accept everything EEA membership will include or something like that.

Either that or categorizing the British cabinet as clowns plus assorted circus animals is grossly insulting to clowns and circus animals. We'll know in a year or two I guess.

McHrozni

 

[Aepervius]

We'll know in a year or two I guess.

I am guessing we'll know earlier. if it is posturing to get the public to accept this or that (be it on EU side or UK side) then they will keep the public updated and on its toe on the issue. otherwise the public will shrug and forget be very surprised in 2 years. Politically if you want it to accept something you keep it on its toe rather than before a fait accomplie.

 

[McHrozni]

I am guessing we'll know earlier. if it is posturing to get the public to accept this or that (be it on EU side or UK side) then they will keep the public updated and on its toe on the issue. otherwise the public will shrug and forget be very surprised in 2 years. Politically if you want it to accept something you keep it on its toe rather than before a fait accomplie.

We'll be able to deduct earlier than that, true

McHrozni

 

[GnaGnaMan]

The EU treaties talk about 'commitments' and 'binding commitments' (which only applies to the EU's annual budget). As I understand it, legally only the 'binding commitments' can be enforced.

You keep making this difference between commitments and binding commitments (or legal obligations). My understanding of the english language is that binding commitment is a tautology. I did look it up to see if there was some nuance I was missing but it doesn't seem so.

Can you explain how a commitment is not binding here?

 

[Aber]

You keep making this difference between commitments and binding commitments (or legal obligations). My understanding of the english language is that binding commitment is a tautology. I did look it up to see if there was some nuance I was missing but it doesn't seem so.

Can you explain how a commitment is not binding here?

It's not a great analogy but:

Political party manifesto and white paper commits to building 1 million houses a year for the life of the Parliament. Year 1 budget agreed by Parliament only has enough money for half that number.