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Brexit: the exit bill

Published Tuesday, September 12, 2017

When the UK leaves the EU it is expected to make a contribution towards the EU’s outstanding financial commitments. The media have labelled this as an ‘exit bill’ or ‘divorce bill’, the EU see it as a matter of ‘settling the accounts’. The issue will be discussed in the first phase of Brexit negotiations, under the title of the ‘single financial settlement’ (the settlement).

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The first phase of negotiations between the UK and EU must make sufficient progress on the settlement (and other areas that will disentangle the UK from the EU) before they can move on to areas of the future EU-UK relationship, such as trade arrangements. The EU says a methodology for calculating the settlement should be agreed before talks move on.

The EU set out its position on the settlement ahead of negotiations. So far the UK has made no formal response to the EU’s position.

Estimates of the net payment reported in the media have ranged from €6 billion to €75 billion. The range of estimates highlight the fact that almost every element of the settlement is subject to interpretation and negotiation.

The EU’s position

The EU’s position is built on the principle that the UK should honour its share of all the financial commitments made by the EU while the UK was a member. On the same basis, the EU says that the UK should be able to participate in EU funding programmes – such as agricultural funding – until the programmes close, which in most cases is 2020.

The EU expects the settlement to include:

  • the UK’s participation in the EU budget
  • the termination of the UK’s membership of institutions such as the European Investment Bank and the European Central Bank
  • the UK’s participation in specific EU funds and facilities that don’t come under the EU budget, such as the facility for Refugees in Turkey.

Most of the EU’s outstanding financial commitments arise from the EU Budget. The EU expect the settlement to include spending committed in the EU Budget but not yet paid to recipients – often described as ‘reste à liquider’ – and the outstanding funding agreed for EU spending programmes up to 2020. The EU’s liabilities and contingent liabilities should also be shared by the UK, according to the EU.

The EU’s accounts do not apportion the outstanding financial commitments to Member States. The EU proposes that the UK should share them in proportion to its share of total contributions to the EU Budget over 2014-2018.

The EU also proposes that the UK should cover the costs of Brexit – such as the cost of moving EU agencies from the UK – and that the UK’s shareholdings in the European Investment Bank and European Central Bank should be returned.

The EU does not expect the UK to make one payment. They would like a schedule of payments to be established in the second phase of exit negotiations.

The UK has made no formal response to the EU’s position; there has been no position paper from the UK on the settlement. However, the UK Government has recognised that the UK has financial obligations to the EU, and vice-versa, and that they need to be resolved. Ministers have said that they don’t expect the UK’s payment to be as large as some of the figures reported by the media.  

Negotiations

During exit negotiations the UK have interrogated the EU’s position on the settlement line by line and presented its legal analyses of the settlement. The EU would like the UK to set out its own position on the settlement, but the UK has not yet done so.

The Secretary of State for Exiting the European Union, David Davis MP, has said that the two sides ‘have very different legal stances’ on the settlement. Michel Barnier, the European Commission’s Chief Negotiator, has said that the UK does not feel legally obliged to honour obligations after its departure. This is at odds with the EU’s position. The EU believe that the UK should contribute for all financial commitments undertaken by the EU while the UK was a member, some of which extend to after the UK’s departure date.  



Commons Briefing papers CBP-8039

Author: Matthew Keep

Topics: EU budget, EU external relations, EU grants and loans, EU institutions

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