LONDON (Bloomberg) - British Prime Minister Theresa May is said to be weighing whether to accept for the first time the need to discuss the European Union's demand for a "Brexit bill" of tens of billions of pounds, in a move designed to kick-start stalled negotiations in Brussels.
May will hold talks with her Cabinet ministers before deciding how far she can go in promising money to the EU when she makes a landmark speech on Brexit in Florence, Italy, on Friday (Sept 22), a person familiar with the matter said.
May is likely to say Britain will continue to pay into the EU until 2020 when the budget period runs out, even though the country is scheduled to leave the bloc on March 29, 2019, the person said.
Despite this offer to avert what would be a budget black hole - estimated at 20 billion euros (S$32 billion) - May is said to be considering whether she can go further.
The EU wants Britain to pledge to pay the so-called Brexit bill, which includes long-term liabilities for items such as the pensions of EU staff. One option under consideration, the person said, is whether May will signal clearly that she will discuss the EU's demands for payments beyond Britain's current commitments to its budget.
The money question has poisoned the negotiations between the EU and the country, which broke down in acrimony last month as a result. A new round of talks was postponed to accommodate the timing of May's speech.
EU negotiators were unmoved by British legal arguments that Britain could leave the bloc without owing anything.
Despite this hardline stance, May needs to make progress on the Bill and the other divorce terms. Without it, the EU will not agree to move on to discussing the future trade agreement that May wants to come into force after Brexit. And the clock is ticking.
Her speech comes at a critical moment for Brexit and for the prime minister's position at home. While she wants to say something to reassure the EU and allow talks to advance, she is also wary of angering euro-skeptics in her Conservative party, such as Foreign Secretary Boris Johnson. He staged a one-man rebellion this week over the direction he feared May was steering Brexit policy.
For Johnson - and others who support his position - payments to the EU must cease after Brexit and any transition period must be kept short. The speech is being redrafted constantly in an attempt to accommodate the competing demands between the EU and Tory euro-skeptics, officials familiar with May's thinking said.
In her speech, May will discuss money, the transition period arrangement, and the terms of a future trading deal between Britain and the EU after the country leaves the single market and customs union, the person said.
Despite Johnson's concerns earlier this week, the transition period May will outline is likely to last years rather than months and to resemble as closely as possible the current terms of EU membership, according to the person.
This so-called "status quo" transition is intended to make it easier for businesses, giving them more time to adjust to Brexit and avoiding the need for them to adapt more than once to a change in the rules of trade.
Johnson will be joining May on her flight back to London from New York, where they have been at the United Nations together. They are likely to discuss her speech in the air and she will then preside over a special meeting of her Cabinet on Thursday to run through her plan. The person familiar suggested the text of May's address is likely to be altered continually until she steps up to deliver it.