Crunch meeting may back £36bn Brexit pay-off

The Chancellor has said the Government is “on the brink” of unblocking Brexit negotiations, as the Prime Minister weighs up increasing her ‘divorce bill’ offer by a further €20bn (£17.8bn).

It is understood Theresa May will chair a Cabinet sub-committee this morning to discuss which additional financial commitments ministers might be prepared to sign off.

The Exit and Trade (Strategy and Negotiations) sub-committee – dubbed the ‘Brexit war cabinet’ – includes key pro-Leave Cabinet members such as Michael Gove, Liam Fox and Boris Johnson.

Mr Johnson has previously voiced his opposition to a large Brexit bill, saying the EU could “go whistle”, but Sky News understands he will cautiously back an increased offer on the condition UK negotiators ask for more clarity on what end relationship the EU is willing to accept.

Video: EU leaders tell Britain ‘much more’ Brexit progess is needed

The financial offer set out by the Prime Minister in her recent speech in Florence was widely seen as committing the UK to paying the EU around €20bn (£17.8bn at today’s exchange rate) for past commitments.

It is thought any new offer would need to factor in future commitments, such as pensions, and could add up to a further €20bn (£17.8bn).

EU negotiators have indicated the UK must change its current proposals on both the financial settlement and the Irish border question if EU leaders are to agree to move talks on to trade and the future relationship in December.

Although Downing Street has dismissed reports of an increased offer as “speculation”, Philip Hammond has suggested some “movement” is likely.

Video: Irish foreign minister: Brexit talks need ‘four to five years’

“We are now I think on the brink of making some serious movement forward in our negotiations with the European Union, and starting to unblock that logjam so that people can start to see clarity about the future,” the Chancellor said in an interview on BBC One’s Andrew Marr Show.

“The Prime Minister is clear that we will meet our obligations to the European Union and as you know, we want to make progress in the discussions at the December Council at the European Union and the Europeans have asked us for more clarity on what we mean by meeting our obligations.”

The Chancellor went on to suggest progress was vital to securing the outline agreement for a post-Brexit implementation period – something which businesses have said they need to see as soon as possible.

EU flag flies outside the European Commission in Brussels

Video: McDonnell on Brexit: ‘We would secure a deal’

Mr Hammond said an implementation period was a “wasting asset” that would be “much less useful” in 12 months time as businesses need to decide whether to execute contingency plans to move jobs and investment early in the new year.

Today’s meeting of the Cabinet sub-committee comes ahead of a meeting of the full Cabinet tomorrow.

But even if the Cabinet were to approve upping the offer on the Brexit divorce bill, the Prime Minister may face political push-back from backbenchers in her party.

Speaking on BBC Radio 4, former minister Robert Halfon said the public would “go bananas” if the UK offered more than €40bn in negotiations at a time when the budget is expected to lay bare the pressures on public finances.