After the UK leaves the EU it is expected to make a contribution towards the EU’s outstanding financial commitments – spending that was agreed while the UK was a member. 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 was discussed in the first phase of Brexit negotiations under the title of the ‘single financial settlement’ (the settlement).Jump to full report >>
On 8 December 2017, the European Commission (the Commission) and the UK Government published an agreed methodology for calculating the settlement. The agreement reached on the settlement was part of a joint report agreed by the Commission and the UK on progress during the first phase on negotiations. The first phase also included other ‘separation issues’ such as citizens’ rights and the Irish border. The joint report is a political agreement on the ‘separation issues’ and will not be legally binding until it enters into a final Withdrawal Agreement.
The UK Government estimates that the settlement will cost around £35 billion-£39 billion. However, it is very difficult to put definitive figures to the settlement as the actual payment will be based on outturns – rather than current estimates – which depend on future events. For instance, the settlement is exposed to changes in the exchange rates as payments will be calculated and paid in euros.
The political agreement
The agreement reached on the settlement means that the UK will:
The UK and EU agreed some principles for the settlement:
The last of these principles means that payments arising from the settlement will continue well after the UK has left the EU. The Office for Budget Responsibility (OBR) – the UK’s public finances watchdog – expects that relatively small payments (of around €50 million) will still be made in the 2060s. However, they expect around 75% of payments to have been made by 2020.
Turning the political agreement into a legal agreement
The UK Government and European Commission have made progress on translating the political agreement of the joint report into legal text. They have published a 129-page draft withdrawal agreement (WA). The negotiating teams aim to finalise the entire WA by October 2018.
Articles 127 to Article 150 of the WA deal with the financial settlement. Broadly speaking, each area of the settlement agreed in the joint report is included in an article or series of articles in the WA. The WA fleshes out some of the details and logistics of the settlement.
Although the WA is currently a draft no significant changes are expected to the articles that relate to the financial settlement, they will only be subject to technical legal revisions.
Commons Briefing papers CBP-8039
Author: Matthew Keep