Final sum for Brexit divorce bill 'shrouded in uncertainty'

A senior MP has claimed the final figure for the Brexit divorce bill is "shrouded in uncertainty", after a watchdog stressed the current estimate is based on a number of assumptions.

The Government has put forward £35-£39bn as the likely sum, an estimate the National Audit Office (NAO) has described as "reasonable".

But the financial watchdog has warned "relatively small changes to some assumptions about future events" could see that sum rise further.

It also said the EU Commission could "skew future decisions and impact the total value the UK will have to pay back" before the final sum is agreed at the end of Britain's transition period in December 2020.

How much the UK contributes to the EU's budgets in 2019 and 2020 will be calculated on the basis of its future economic outlook, something which will also play a part in determining Britain's share of outstanding commitments and liabilities post-2020.

The NAO said that because of EU financial rules, the UK could have to pay up to £3bn more in budget contributions after Brexit day in March 2019 than estimated by the Treasury in order to offset earlier payments being lower.

Britain could also have to contribute towards other costs that were not included in the Government's estimate, such as potential liabilities that could depend on future events.

In addition, the UK will also have to provide a guarantee worth €37.5bn (£32.4bn) to the European Investment Bank.

However, the NAO said in its report that the Treasury and EU "consider the risk of these liabilities crystallising to be remote".

A payment of £2.9bn to the UK European Development Fund for overseas aid is also not included in the estimate because the fund was not set up under EU treaties.

There is also uncertainty surrounding Britain's contribution to the EU pension scheme and how this may weigh on the exit bill.

It could last until 2064, but the Government could opt to settle its commitments earlier in a lump sum which would present "risks and opportunities to the total value the UK may be liable to pay back".

Fluctuations in the exchange rate could also be a factor, according to the NAO, as the divorce bill will be paid in euros.

Sir Amyas Morse, the head of the NAO, said: "The estimate reflects a number of moving parts, so the range of costs in it could have been wider than £35bn to £39bn. But overall we think it is a reasonable estimate.

"As the vote on the draft withdrawal agreement approaches we expect that Government will provide a substantial amount of material for Parliament to consider."

Meg Hillier, chairwoman of the Commons Public Accounts Committee, said she feared the "cost of the UK leaving the EU could increase further".

"Our children and grandchildren risk being saddled with paying off this bill for decades to come," she said.

"As negotiations continue and the real costs of the divorce bill come to light, the Government must be clear with the British public what we are paying for and why. If not, taxpayers will feel we are being sold a raw deal."

The Commons Treasury Committee asked the NAO to look at the issue of the divorce bill.

Its chairwoman Nicky Morgan said: "It has judged that the Government's estimate of the UK's withdrawal payment to the EU is 'reasonable', but it appears to be shrouded in uncertainty.

"As the report states, the Treasury didn't incorporate some of the main uncertainties - of which it was aware - in its figure.

"For example, the settlement estimate doesn't include the UK's commitments to the European Development Fund, which the Treasury expects will cost £2.9 billion after the UK leaves the EU."

A Government spokesman said: "We have always been clear that we will honour commitments made while being part of the EU, and we have negotiated a settlement that is fair to UK taxpayers and means we will not pay for any additional EU spending beyond what we signed up to as a member.

"The NAO has confirmed that our estimated figure is a reasonable calculation and we are now discussing our future relationship."