This article was originally published on the City AM website.
The EU is trying to make it as hard as possible for the UK to leave the bloc.
It has been well reported that the exit bill keeps going up and up, and that the rights of EU citizens living here will be subject to the jurisdiction of the European Courts of Justice.
But at the same time as demanding that Britain must settle its divorce bill before trade can even be discussed, the EU has decided that the UK must wait decades to have what rightfully belongs to us.
Werner Hoyer, president of the European Investment Bank (EIB), has declared that the UK won’t get back its 16 per cent stake in the bank – worth several billions euros – until 2054.
So what is the EIB, and how will Britain exit from it affect investment in the UK?
The EIB was set up by the Treaty of Rome as the financial arm of the EU, and has risen to become the world’s largest lender and borrower, with a portfolio of loans that spread across the world worth around €500bn.
As a bank, it has a distinctly political nature – its mission is “to finance viable projects that promote the achievement of the EU’s policy objectives within all EU member states, as stipulated in Article 309 of the Treaty on the Functioning of the European Union”.
Translated out of Eurospeak, the EIB will only lend money to projects that further the cause of the EU and are intended to be part of the process of deeper integration and federalisation.
Sometimes the EIB loans have become mired in controversy. The Volkswagen Group received more than €4bn from the EIB over the last decade, with much of the money going to research aimed at developing “cleaner engines”. We know what happened at Volkwagen instead – and the “Dieselgate” emissions scandal is all the more ironic given the EU’s position on improving air quality across member states.
The UK has been a beneficiary of EIB loans, yet all of these have been contingent on the projects being consistent with EU policies. In the period 2012-16, the EIB provided €32.3bn in loans to the UK, of which 30 per cent were designated for the (green) energy sector, 28 per cent for waste projects as part of the EU’s Circular Economy strategy, 23 per cent as part of the EU’s transport and telecommunications strategy, 11 per cent for education projects, and five per cent for industrial and agricultural policies. Just three per cent have provided funding for SMEs.
Most of the UK’s allocated funding has gone to huge projects: the National Grid Upgrade, Crossrail, and the Thames Tideway Tunnel. The question should be asked: if these projects made such clear economic sense, why was the money not raised privately?
More curious still is that the EIB provided €216m in credit lines for George Osborne’s pet project, the Northern Powerhouse. This might go some way to understanding the former chancellor’s enthusiasm for the EU.
Withdrawing from the EIB and returning some transparency to the way national investments are funded is crucial. However, the UK must also be cautious about winding down its stake in the EIB too quickly, especially if it is set to take over 35 years for us to get our money back. Without preparation, projects that have been left under EIB control will be at risk.
Since 1998, the EIB has provided €3.2bn for social housing (a key component of new build housing stock) in the UK, principally via the Housing Finance Corporation. This body is a financial aggregation vehicle that disburses funds to scores of housing associations across the UK.
Any sudden redemption of funding could jeopardise its key work. Housing minister Alok Sharma would do well to provide immediate assurances that the government will guarantee this, and any future, funding post Brexit. Instead, there has been silence.
It is bizarre that the UK’s housing stock has been financed in such a way by the EU, when the public have been told year after year that it is the UK government that is addressing the housing shortage.
These issues highlight both an irresponsible lack of planning on the part of the UK government over the years, and an unjustifiable double standard from the EU. Any Brexit financial divorce bill should have involved giving back what belongs to UK taxpayers – including UK holdings in the EIB.
If the EU won’t wait decades for the money it claims it is owed, neither should Britain.