The financial settlement - often labelled the 'exit bill' or 'divorce bill' - sets out how the UK and EU are settling their outstanding financial commitments to each other.Jump to full report >>
In the financial settlement (the settlement), the UK and EU have set out how they will settle their outstanding financial obligations to each other. The obligations arise out of the UK’s participation in the EU budget and broader aspects of its EU membership.
The settlement says which financial commitments will be covered, the methodology for calculating the UK’s share and the payment schedule. The settlement is part of the Withdrawal Agreement, which is the legally binding treaty setting out the negotiated terms of the UK’s departure from the EU.
There is no definitive cost to the settlement. The final cost to the UK will depend on future events such as future exchange rates and EU budgets. Estimates suggest a net cost to the UK of around €33 billion (£30 billion). Much of the cost will come in the early years of the settlement, but the Office for Budget Responsibility (OBR) – the UK’s public finances watchdog – forecast that relatively small payments will continue until the mid-2060s.
The UK and EU agreed some principles for the settlement:
Broadly speaking, the settlement can be split into three components:
Not everything in the settlement fits neatly into these three components. For instance, the UK has agreed to continue to contribute to the EU’s main overseas aid programme – the European Development Fund – until the current programme ends. This programme is funded directly by Member States, rather than through the EU budget. The UK’s contribution counts towards its commitment to spend 0.7% of national income on overseas aid.
The Library briefing Brexit: the financial settlement – the detail covers the settlement in more depth including topics such as the settlement’s origins, negotiations and the legal form it takes in the Withdrawal Agreement.
Commons Briefing papers CBP-8822
Author: Matthew Keep