Pound surges after Brexit secretary says he would consider contribution to EU budget in order to get ‘the best possible access’

Britain could pay into the EU budget in exchange for access to the single market, David Davis has told MPs, because ministers are considering all options to get the best Brexit deal. The Brexit secretary said the government would not rule out making future payments indefinitely in order to secure favourable access to European markets, in remarks that were endorsed by the prime minister’s spokeswoman and the chancellor.

During questions in the House of Commons, the Labour MP Wayne David asked if the Brexit secretary would “consider making any contribution in any shape or form for access to the single market”.

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Davis said the government would look at the options during the article 50 process over the next two years. “The major criterion here is that we get the best possible access for goods and services to the European market,” he said. “And if that is included in what he is talking about, then of course we would consider it.”

Wayne David (@WayneDavid_MP) In reply to my Question, David Davies has stated that govt is prepared to consider 'paying' for access to Single Market. Significant #brexit

Such an approach would see Britain adopt a similar model to Norway, which pays €869m a year to trade in the single market, take part in EU research programmes and for criminal justice cooperation. Similar access could cost the UK €5bn a year, according to some MEPs.

Sterling leapt up 1% against the dollar to $1.26 after Davis’s remarks, its highest level in three weeks. Against the euro, the pound added 0.63%, rising to €1.18, aided by the eurozone currency’s struggles in the face of the Italian referendum on Sunday.



The chancellor, Philip Hammond, said Davis was “absolutely right” and stressed that the UK would need to make concessions to secure the most favourable deal. Risking irritation from his party’s Eurosceptic wing, Hammond said the UK needed to give way to Brussels and other EU member states on some issues or face the clear risk that any deal would collapse. Hammond said that Davis meant that the UK had to go into the talks with “as many tools in our toolbox as possible”. He was speaking in Edinburgh before he met Scotland’s first minister, Nicola Sturgeon.

“You can’t go into any negotiation expecting to get every single objective that you set out and concede nothing on the way,” he said. “It will have to be a deal that works for both sides. I think David Davis is absolutely right not to rule out the possibility that we might want to contribute in some way to some form of mechanism.”

The prime minister’s spokeswoman said Davis’s view on EU budget contributions was “consistent with what we have said to date, which is that it will be for the UK government to make the decision about how taxpayers’ money will be spent”.

Downing Street stressed that no decision had been made, but that options were being kept open. “Let’s not get ahead of ourselves. We are at the stage of preparing for negotiations,” the spokeswoman said. “What we have said is that we will look at how we get the best possible deal. People are suggesting we should consider [paying contributions], and that was the response he [Davis] gave.”

Iain Duncan Smith, the leave supporter and former cabinet minister, said he did not believe Davis was necessarily talking about paying for access to the single market.

“I don’t think he was answering the question that was posed to him, what he was talking about here is: how do you get a deal that allows British and Europeans to access each other’s markets without tariff barriers or artificial barriers for services?” he told the BBC’s World at One. “I don’t think there’s any deal where you can say, we’ll pay money in and you’ll allow us access, because you might as well have tariff barriers.”

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German Christian Democrat MEP Reimer Böge, the former chair of the European parliament’s budgets committee, has said the UK could pay up to €5bn a year for the highest levels of access to the single market, equivalent to the status of Norway. “If you want something, you are obliged to pay for it. This is part of the deal,” Böge said. “If you take the Norway calculation for the UK, it will be €4bn to €5bn.”

The UK’s net contribution was £8.5bn a in 2015, so a Norway-style deal would amount to around half the current annual EU bill based on current exchange rates).

Theresa May has repeatedly stressed that she will seek a bespoke deal for Britain, rather than plucking an existing model “off the shelf”. EU diplomats are also sceptical that the UK would opt for maximum access to the single market, which would require accepting EU rules on free movement of people and the writ of the European court of justice.

EU politicians say it is up to the UK to spell out what this bespoke deal means. Jens Geier, a German Social Democrat MEP, who negotiated the 2016 EU budget, said recently it was impossible to come up with an estimate without knowing the government’s Brexit plan. “It is on the British government to make a proposal,” he said. Only then would the European commission be able to outline how much the British bespoke model would cost.

During departmental questions in parliament, Davis said he was keen not to rule out any option before the end of March, the government’s self-imposed deadline for triggering article 50. “There is one chance in this negotiation. It’s unlike almost anything else that comes in front of this house. Anything else, we can come back and repeal it, change it or amend it,” he said. “This is a single-shot negotiation.”

The shadow Brexit minister, Matthew Pennycook, also asked Davis whether the government was expecting to pay an estimated “divorce bill” of up to €60bn to the EU after the UK leaves. Davis described the figure as “an opening bid, that’s all it is, nothing more, the maximum price on departure”. He said: “I’m not going to start chipping away at that bid. We will start from scratch when we go in that door before the end of March, when the negotiation starts.”

Hammond said that Scotland had no chance of securing its own favourable deals or opt-outs on either immigration controls or enhanced access to the single market. “You only need to think about it for a few moments to realise a separate immigration deal for any part of the UK would be impracticable,” he said. There would be no other opt-outs for Scotland. “This is a UK issue and the will of the people of the UK was to leave and we’re clear that we can’t have a different deal or a different outcome for different parts of the UK.”

The shadow Brexit secretary, Keir Starmer, said Davis’s department’s strategy was being revealed by “leaked memos, notes caught on camera and the foreign secretary to any one who will listen to him.” He said: “This is serious, because it is damaging the prospects of negotiations getting off to a good start. The secretary of state must realise this will go on for two years unless he releases the basic plan.”