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Brexit: Theresa May rejected EU offer to break deadlock because it would add billions to divorce bill

Theresa May rejected an EU offer designed to rescue a Brexit deal because it would add billions more to the £39bn “divorce bill”, The Independent has learned.

Brussels floated a one-year extension to the post-departure transition period, until the end of 2021, to make it less likely the Irish border “backstop” would be needed – and, therefore, easier for the UK to accept.

But an extension would require paying billions extra to the EU, when the exit bill has already angered Tory MPs, prompting the prime minister to stamp on the idea.

An EU source told The Independent that the UK’s response to the offer, made during last week’s aborted talks, suggested the “financial implications would be complicated”.

Even a short extension would add around £5bn to the divorce bill, MPs heard earlier this year – while the £39bn figure itself could rise if EU pension and project liabilities are higher.

The revelation underlines the huge difficulty Ms May faces in trying break the deadlock over the Irish border, which threatens to wreck her hopes for a Brexit agreement with the EU.

She admitted this week that Brussels had rejected her plan for the entire UK to remain in the EU’s customs territory temporarily, to avoid a return to a hard border in Ireland.

Instead, the EU is insisting Northern Ireland alone remains in the EU customs union, risking a border in the Irish Sea until a future trade deal and technology provide an alternative solution – which the prime minister has called “unacceptable”.

The longer transition is a fresh idea to resolve the impasse by creating more time for new solutions, making the “backstop” easier for the UK to sign up to.

Asked about an extension, a Downing Street spokesperson did not deny the proposal had been put forward, saying only: “That is not our position.”

Simon Coveney, Ireland’s deputy leader, confirmed the idea, saying the EU wanted to “ensure that the backstop is never likely to be used by creating the space and time”.

“We have always said that we are happy to show flexibility in terms of how we get to a destination where-by there is a backstop, or an insurance mechanism, in place to reassure people on the island of Ireland that they are not going to see the re-emergence of physical border infrastructure,” he said.

“The EU side, certainly, is willing to allow more time in the transition period to agree an alternative solution to a backstop.”

The proposal was put forward during the intense talks that ended with Dominic Raab, the Brexit secretary, returning empty-handed from Brussels on Sunday, after meeting Michel Barnier, the EU’s chief negotiator.

Plans for further talks between officials were abandoned – and the EU reported “no grounds for optimism” ahead of the Brussels summit getting underway on Wednesday evening.

The source said: “A one-year extension to the transition was suggested by Michel Barnier suggestion, not the UK.

“The financial implications [UK budget contributions] would be complicated. We don’t think it will fly.”

However, some doubt a longer transition would allow Ms May to wriggle off the hook of the Irish border – because the EU would still insist she signs up to the backstop.

The 21-month transition period is due to run from next March until the end of December 2020, but will only be implemented if a withdrawal deal is struck.

The transition will also seal the UK’s legal commitment to the divorce bill – about half of which is for outstanding obligations from EU membership, with the other half “subs” for the 21 months.

Pro-Brexit Tories remain angry, because the money must be paid even if talks after Brexit day fail to strike a favourable trade agreement.

Officials have also acknowledged that the figure of £39bn – to be paid in instalments for nearly 50 years – could go up.

Arriving in Brussels, ahead of make-or-break appeal to EU leaders to soften their stance, the prime minister ducked questions about the offer to extend the transition.

Instead, she said: “We’ve solved most issues in the withdrawal agreement. There’s still the question of the Northern Ireland backstop, but I believe everyone around the table wants to get a deal. By working intensively, we can achieve that deal.”