A wide range of figures are flying around regarding how much the UK’s “divorce settlement” from the EU will cost. This is nothing to do with retaining market access or agreeing to a trade deal – it’s the bill that the EU may send Britain for outstanding budget obligations. The most widely quoted figure is €60 billion. We asked two academics to investigate.
Robert Ackrill, Professor of European Economics and Policy, Nottingham Trent University
The €60 billion figure is several times the UK’s annual net contribution to the EU budget (which has ranged from €7 billion to €14 billion a year in recent years), but a small fraction of the UK government’s expected total annual expenditure in 2016-17 (€900 billion).
Recent experience of political outcomes warns us against relying too much on information from the media, especially “lies, damned lies and statistics”. So it’s worth unpicking where this figure came from and what legal obligations the UK has to pay it, if handed a bill of this sum.
The €60 billion figure comes from research by a Financial Times reporter, Alex Barker, who produced a detailed report for the Centre for European Reform on the owed budget contributions that the EU would charge the UK.
There are three principal items included in this figure. Commitment Appropriations are spending commitments for projects which last for several years, such as regional development and rural development projects. Commitments entered into for several years before the official Brexit date will, therefore, have spending commitments beyond that date.
Another EU policy is the Investment Plan for jobs and growth. This too has ongoing spending commitments. These two, together, will see only some of their total budgets assigned and spent by the time that Brexit takes place. There are also ongoing pension commitments, in particular for UK staff, who have worked in the EU’s institutions.
A look at the law
Legally, the UK’s obligation to these payments is unclear. John Redwood, for example, has argued that, under Article 50, exit from the EU leaves a country with no further commitments. That said, the UK is committed to the legislation pertaining to spending on individual policies.
Being without legal precedent, there is no simple answer to whether the EU Treaty, to which all members are signatories, or the secondary legislation arising from it, would apply to a state that is leaving.
Further, even if a “hard Brexit” means exiting the authority of the European Court of Justice, the UK remains a part of the international community. This means that, as Barker reports, the EU could go to the International Court of Justice if no agreement is reached on this. Article 70 of the Vienna Convention would be crucial. It states:
Unless the treaty otherwise provides or the parties otherwise agree, the termination of a treaty under its provisions or in accordance with the present Convention:
(a) Releases the parties from any obligation further to perform the treaty;
(b) Does not affect any right, obligation or legal situation of the parties created through the execution of the treaty prior to its termination.
Would clause (a) remove any financial obligation from the UK? Or would clause (b) confirm the financial obligation on the UK?
What may prove more important, however, is pragmatic politics. We can expect a lot of posturing in the coming negotiations. An agreement that left the UK with no further financial commitments after Brexit would see those costs picked up by other EU member states, each of which therefore has a clear incentive to take a hard line in the talks. Indeed, some reports suggest agreement on this might be needed before talks over trade deal negotiations begin.
There’s a case to be made that €60 billion is an upper limit – a negotiation tactic to manage expectations – with the potential for the final figure to be rather lower than this. One thing we can expect, based on years of experience, is that negotiations involving the EU budget are always highly-charged politically. Whatever the final deal, it will be hard-fought by both sides.
Giacomo Benedetto, Jean Monnet Chair in European Union Politics, Royal Holloway
The article is a fair assessment. Its strength is its brevity but there are some missing details.
The figure of €60 billion allows for EU expenditure to continue to be made to recipients in the UK over the next few years. Whereas payments for agriculture and administration are usually made in a very short space of time, the committed spending that would continue applies to research and innovation, and to regional development, from which the UK benefits. This sort of payment is usually made within three years of commitment, so the amounts due after 2022 will be negligible.
Plus, pension payments made to former EU staffers are equivalent to 1% of the EU’s budget. The UK liability is not to British citizens but to all pensioners who served the EU’s institutions, while Britain was a member (1973-2019) in proportion to its share of the total EU economy. In reality, the pension cost is likely to be modest.
Robert Ackrill has received funding to support his research from the Economic and Social Research Council, the British Academy, the Leverhulme Trust and the European Union.
Giacomo Benedetto consults for the European Parliament and the European Commission. His Jean Monnet Chair is co-funded through the Erasmus-plus programme of the European Union.