Brexit divorce bill: what do we owe Brussels?

The EU will demand a multibillion-pound increase to the Brexit divorce bill in exchange for an extension of Article 50, reports suggest.

With hope running out of a deal being reached before 29 March, attention in Brussels has already turned to the price that can be extracted from Britain for agreeing to an extension, says The Daily Telegraph.

EU sources “made it clear that while Britain is likely to be granted a delay, it will come with strings attached”, the newspaper reports.

Sources told the Telegraph that even a three-month delay to the 29 March departure date would add billions to the agreed financial settlement.   

But what exactly does the UK owe Brussels? And why haven’t its past payments already covered this?

What’s already been agreed?

As part of Theresa May’s withdrawal agreement, which has yet to pass through Parliament, the UK will pay £39bn when the UK leaves the EU, in order to cover outstanding budget contributions.

“I do not want our partners to fear that they will need to pay more or receive less over the remainder of the current budget plan as a result of our decision to leave,” the prime minister said in 2017. “The UK will honour commitments we have made during the period of our membership.”

Why does the UK have to pay the EU 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 has already committed to contributing. There are also a few other liabilities incurred during the UK’s membership that will need to be funded.

The Institute for Government and the Financial Times define four areas that make up the gross bill:

  • payment for projects that have been committed to but not yet fully paid for
  • pensions for EU civil servants and politicians
  • outstanding loan payments and money to cover the potential liability of loan repayments not being made
  • costs of the withdrawal itself

Set against this, the UK would be entitled to any outstanding budget rebates, payments for EU-funded projects in this country, eventual repayments on loans and from contingencies set against them and, potentially, a reflection of its share of assets such as buildings.

What happens if there’s no deal?

Both May and her former Brexit secretary, David Davis, have suggested that the UK might not have to pay a divorce settlement to Brussels if the UK leaves the EU without a deal.

Asked what would happen in the event of a no-deal Brexit, the PM has said the government’s position would change. “The specific offer [of £39bn] was made in the spirit of our desire to reach an agreement with the EU,” she said last year. 

However, Chancellor Philip Hammond has said the UK would still be obliged to pay the majority of the total £39bn bill without an agreement on trade.

Is the UK legally obliged to pay?

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.

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Legal opinion on this is divided, however, and there is an argument that Article 70 of the Vienna Convention on the Law of Treaties will still apply and oblige the UK to pay what is deemed to be due under existing EU agreements.

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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