Britain’s Brexit “divorce bill” has ballooned to €47.5bn (£40.8bn), according to estimates from the EU that far exceed Downing Street’s forecasts.
Brussels and London are “locked in a dispute” over how much the UK could be obliged to pay under the deal for exiting the bloc that was negotiated by Boris Johnson, reports the Financial Times.
The EU’s final figure, which was buried in its consolidated annual accounts for 2020, is significantly higher than the £35bn-£39bn estimated by UK government officials in 2017.
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But the UK Treasury has “insisted” that the Brexit divorce bill remains within the previously given range, said the paper.
“This is just an accounting estimate, and does not reflect the exact amount the UK is expected to pay to the EU this year,” a UK government spokesperson said. “We will publish detail on payments to and from the EU made under the financial settlement in the EU finances statement later this year.”
Ministers believed the final divorce bill would be less than their expected top-end figure, because “numerous Brexit extensions meant that the total was decreased thanks to the UK’s contributions to the EU Budget”, reports The Telegraph.
British and European officials disagree not only about the size of the figure, but also its finality.
“While the 2020 EU consolidated accounts published by the Commission are as of yet provisional, the court has completed its audit work on these accounts,” said Tony Murphy, Ireland’s member of the European Court of Auditors, reports RTE. “Therefore, for all intent and purposes the figures published by the Commission are definitive.”
The divorce bill was one of the “three big issues” agreed with the EU in the Withdrawal Agreement signed by Johnson in January 2020, says The Guardian. The other two were citizens rights and the Irish protocol – which, as the paper notes, “the UK is now seeking to change”.
The first “tranche” of the payments, totalling €6.8bn (£5.8bn), is due by the end of this year, although the bulk of the bill will be paid over a period of decades.
Why does the UK have to pay anything?
Britain’s membership fees over the past four decades have gone towards financing the EU and its projects, including some future plans to which the UK had already committed to contributing. There are also other liabilities incurred during the UK's membership that will need to be funded.
The issue of Britain owing the EU money after Brexit had been a controversial one during the lengthy parliamentary negotiations. When he was foreign secretary in 2017, Boris Johnson agreed with a Eurosceptic Conservative backbencher who said the EU “can go whistle” if they expected a divorce payment to be made.
But, as The Guardian reports, the now prime minister “later accepted that the UK had to clear its debts in order to negotiate a trade deal” with the EU.
How did the EU decide on the figure?
According to RTE, the bill is broken down into two amounts.
These are the UK’s remaining share of spending commitments as of 31 December 2020, when the Brexit transition period came to an end. The second is money related to EU liabilities, such as pensions and sickness insurance of retired EU staff, which the UK owes under Article 143 of the Withdrawal Agreement.
With regard to the first amount, the UK is liable for 12.6% of the EU’s overall budgetary commitments as of 31 December 2020, based on calculations agreed upon in the Withdrawal Agreement.
The EU’s overall budgetary commitments on 31 December 2020 were €303bn. However, this figure has been adjusted down to €294bn because of a number of programmes the UK did not participate in during the transition period, says the Irish news organisation.
Overall it means the UK owes €35bn in outstanding spending commitments from when it was a member of the EU.
The second amount – how much the UK owes towards EU liabilities – stands at €14.3bn according to EU calculations. This is because the overall amount of these liabilities is €116bn, with the UK responsible for paying at 12.6% of the total amount.
The total bill is €49.3bn, but this figure is offset by €2.1bn in fees owed to the UK by the EU.
Is the UK legally obliged to pay?
In 2017, a House of Lords committee concluded that, once the UK leaves the bloc, any treaties relating to the EU no longer apply and so there is no legal mechanism to force the country to pay. However, legal opinion on this is divided.
According to The Sunday Times, in 2019 Johnson ordered government lawyers to calculate how much of the £39bn the UK is legally obliged to pay, and they have concluded the figure could be as low as £7bn.
Before Britain’s exit, Full Fact stated: “It’s not clearly set out that the UK would be obliged to pay anything if we left with no deal, but the EU could take the case to the International Court of Justice on the grounds of the UK’s repeated commitments to pay.”
Beyond the legal issues, there are other problems associated with not paying the bill, says Channel 4’s FactCheck website.
“If we did not pay our debts […] there would be political consequences when we seek to negotiate trade agreements with new partners,” Emily Reid, professor of international economic law at Southampton University, told the site.
“In my view we would be both legally and morally at fault were we to do so, which would have repercussions in our future dealings with potential partner states,” she added.
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