Issue of having to pay for Brexit shaping up as ‘battle royal’, according to economics expert
about 21 hours ago
Positions on Brexit are likely to toughen as the UK’s extraction proceeds. Photograph: PA Wire
The UK faces an EU divorce bill of up to €20 billion, according to a Financial Times analysis that shows the union’s shared budget is emerging as one of the biggest political obstacles to a Brexit deal.
More than €300 billion of shared payment liabilities will need to be settled in the divorce reckoning, according to EU accounts. It is a legacy of joint financial obligations stretching back decades that Brussels will insist the UK must honour.
The sheer size of the upper estimate, which some EU officials reckon is too low, threatens to poison the break-up and derail a Brexit transition and trade deal, according to several senior European figures involved in the process.
The €20 billion upper estimate covers Britain’s share of continuing multiyear liabilities, including unpaid budget appropriations of €241 billion, pensions liabilities of €63.8 billion and future contractual and other spending commitments totalling about €32 billion.
British Eurosceptic MPs are likely to react badly to news that UK taxpayers might have to pay billions to Europe as the price of Brexit. One minister said: “It will have to be explained very carefully, to explain what we are getting in return for market access.”
Iain Begg, a London School of Economics expert on the EU budget who described the premise of the FT calculations as “completely sound”, said the issue was shaping up as a “battle royal”.
The analysis is a first attempt to fully quantify the UK’s legacy liabilities in the EU budget. To date, analyses of Brexit by bodies such as the UK Treasury have not taken full account of the cost of untangling EU budget commitments.
The precise withdrawal bill is impossible to calculate and will depend on a political deal. However, officials from four non-UK EU countries who reviewed the FT’s estimates said they reasonably represent the sums at stake.
Some questioned certain FT assumptions that cut Britain’s exit bill, arguing the UK must make good on all spending promises, not just to 2019 but to the end of the EU’s long-term budget in 2020.
Brexit blows a hole in the EU’s budget with potentially far-reaching political consequences. It confronts Germany, Italy, France and other net contributors with the dilemma of filling any gap or scrapping programmes that Brussels and eastern and central European countries see as legally binding promises.
Britain’s €20 billion reckoning would cover only projects already approved within the remaining 27 EU members, not the future shortfall created after 2019 by Britain’s withdrawal from the long-term EU budget. It also excludes EU spending on UK organisations.
Brexit campaigners claimed the UK could save some £350 million a week by leaving the EU. But one former UK minister said: “We could actually end up paying more into the EU budget – that will be a big story in the next two years.”
Copyright The Financial Times Limited 2016