The government has acknowledged it is willing to pay Brussels for maintaining access to Europe’s single market even after the UK leaves the EU, for the first time opening the door to British contributions to the EU budget for years after Brexit.
Both David Davis, the Brexit secretary and a proponent of EU divorce, and chancellor of the exchequer Philip Hammond, who campaigned to remain, conceded a trade deal that exchanged EU budget payments for remaining inside the common market — a financial arrangement similar to those of Norway and Switzerland — was one of the options under consideration.
“The major criteria here is that we get the best possible access for goods and services to the European market,” Mr Davis told the House of Commons. Mr Hammond later told reporters Mr Davis was “absolutely right” not to rule out “the possibility that we might want to contribute in some way to some form of mechanism”.
Until now, senior government ministers have refused to say whether they would seek to remain in the EU’s single market as part of negotiations with the EU’s other 27 members. Some Brexit advocates, including those in the Cabinet, have urged a “hard Brexit” that would cut ties completely.
EU leaders have warned Downing Street that staying inside the common market would also require Britain to accept free movement of labour, a red line for many Brexiters in the government.
And later on Thursday Mr Davis — in what was seen as another clue to his flexible approach to the Brexit negotiations — indicated that the government would not crack down on immigration at the expense of the “national interest”.
“As we take back control of immigration by ending free movement as it has operated before, let me also say this: we won’t do so in a way that it is contrary to the national and economic interest,” he told a CBI dinner in Wales.
“Because as the chancellor has said, Britain must win the global battle for talent. No one wants to see labour shortages in key sectors. That wouldn’t be in anybody’s interest.”
The UK is one of the biggest contributors to the EU budget, paying about £8bn net every year. Norway’s contribution was €306m in 2014, rising to €550m in 2020. In net terms, it is similar to the UK’s current payments, according to estimates by Zsolt Darvas of the Bruegel think-tank.
As a percentage of national income, Norway contributes 0.16 per cent, compared to Britain’s 0.25 per cent. However on a per capita basis Britain currently pays €79 per person, a figure significantly lower than Norway’s €115 contribution.
Mr Davis’s comments are likely to anger some Eurosceptics who believe Britain has the economic and financial clout to negotiate a deal that would not involve any payments to Brussels beyond 2020, when the current multiyear EU budget expires.
But Steve Baker, a leading Brexiter who chairs the pro-Brexit European Research Group of Conservative MPs, said: “Paying for market access would not be free trade but the government is right not to speculatively rule ideas in or out, however left-field those ideas may be.”
During the referendum campaign, the Vote Leave group said taxpayers gave £350m a week to the bloc — Britain’s gross contribution — and suggested that the cash could be spent on domestic programmes after Brexit.
Maintaining access to the EU’s market has been a priority for Britain’s financial sector, which is used by many US and other foreign banks as a regional hub to sell services into Europe through EU “passporting” rights.
Theresa May has said her Brexit priorities are for Britain to control its borders and throw off the jurisdiction of EU judges, a position that has led many in London and Brussels to conclude that UK-based banks and insurers will inevitably lose the passporting rights.
Downing Street said the government wanted the “best possible access” to the European market for British businesses. “What [Mr Davis] said in the House this morning is consistent with what we have said to date: it will be for the UK government to make decisions on how taxpayers’ money will be spent.”
Hilary Benn, Labour chairman of the House of Commons Brexit select committee, urged the government to publish details of what it wanted for Britain, including what might happen to “future contributions” to the EU after Britain leaves.
Peter Bone, a Eurosceptic Tory MP, said: “People will be absolutely outraged if we came out of the EU and then carried on paying them £15bn a year, £20bn a year, whatever the figure is — no I don’t think it’s going to happen. In that very hypothetical case people will be exceptionally upset about it. But it’s just not going to happen.”
Mr Davis’s remarks came after an accidentally published memo earlier in the week — written by a visitor to Downing Street — said the UK wanted to “have its cake and eat it” over Brexit.
The note, which was photographed in Downing Street as it was carried by an aide to a Conservative party vice-chairman, said it was “unlikely” that Britain would be given the chance to remain in the single market after it left the EU.
It said Britain was likely to pursue a “Canada-plus” trade deal with the EU and that remaining a member of the European Economic Area — which includes non-EU member’s Norway and Iceland — would be “not good”.
Additional reporting by Alex Barker in Brussels
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