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Brexit latest: May to run £40bn divorce bill past cabinet

The UK Prime Minister is set to meet with her cabinet to ask permission to pay the £40 billion divorce bill.
The UK Prime Minister is set to meet with her cabinet to ask permission to pay the £40 billion divorce bill.
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The UK Prime Minister is expected to meet with her cabinet to ask whether she is able to pay the £40 billion divorce bill to leave the EU. The Tradefair team brings you the latest in UK politics...

"It’s not about demands, it’s about what is properly due from the UK to the European Union under international law in accordance with the European treaties."

- Philip Hammond, Chancellor of the Exchequer.

Theresa May is set to meet with her cabinet to ask permission to offer the EU a £40 billion divorce bill to progress Brexit talks.

It's thought that her senior ministers will give her the necessary support to break the deadlock of negotiations so far.

The matter of the UK paying a fee to the EU to honour commitments it had made before Article 50 was triggered has been a contentious issue. Many ministers believe the bill is unnecessary and that it won't be a popular move with the general public.

Doubling the amount to pay

In September May gave a speech in Florence offering the EU £20 billion but this amount failed to move Brexit negotiations forward. The Financial Times reports that the UK Prime Minister will now double the amount, gifting £40 billion if the European Council President Donald Tusk will agree.

Up to now, the divorce bill has been a sticking point preventing talks from moving towards what trade arrangements will be in place between the EU and UK post-Brexit. May is also prevented from making agreements with countries outside the single market.

Speaking on the Andrew Marr Show, Chancellor Philip Hammond backed the Prime Minister's move to increase the payment, saying it was essential to making progress in the discussions at the December Council.

'Not about demands'

He said: "It's not about demands, it's about what is properly due from the UK to the European Union under international law in accordance with the European treaties.

"And we have always been clear it won't be easy to work out that number but, whatever is due, we will pay. We are a nation that honours our debts."

Even if Tusk is happy with May's higher offer, which he may not be as the EU estimated Britain's financial obligations were around £53 billion, there remain a number of other problems.

Other problems ahead

Major factors such as what will happen to the Irish border, the rights of EU citizens living in Britain and those of Brits living elsewhere in the bloc are yet to be agreed. These have proven to be major obstacles in May's plan to progress talks and avoid a "no-plan Brexit".

The Prime Minister's cabinet are expected to give the offer their full support on Tuesday, and an official offer will then be made to Tusk at the end of the week.

Foreign Secretary Boris Johnson and other pro-Brexit cabinet members are unhappy about the divorce bill being doubled. They believe Britain is offering to pay out a big sum of taxpayers' money without clear guidelines of what the EU will give in return.

May has also been warned by the former deputy chairman of the Conservative Party Robert Halfon that the general public will not be happy.

What will the public and markets think?

He said taxpayers would "go bananas" if the Prime Minister offers £40 billion or more to the EU at a time when public services are struggling for funding, the Telegraph reports.

This extended period of uncertainty is continuing to have its impact on the financial markets. The initial shock, which resulted in a quarter-point cut soon after the referendum, has been balanced out by the Bank of England's first rate rise in a decade.

However, there is still a great deal of instability among investors. Insight from KPMG found that since the Brexit vote the UK50 was down 4.8% while the non-UK50 was up nearly 34%, suggesting that people are hesitating when it comes to investing in companies that earn a large proportion of their revenue in Britain.


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