Brexit: UK could quit EU without paying a penny, say Lords

Jennifer Rankin in Brussels
The European commission headquarters in Brussels. Photograph: pbombaert/Getty Images

The UK could walk away from the European Union in 2019 without paying a penny, the House of Lords has said, in a report bound to raise tensions with Brussels in the run-up to Brexit talks.

The British government would have no legal obligation to either pay a €60bn (£52bn) Brexit bill mooted by the European commission or honour payments into the EU budget promised by the former prime minister David Cameron, according to analysis by the House of Lords EU financial affairs sub-committee.

In a report published on Saturday, the committee argues that the British government would be on strong legal ground if it chose to leave the EU without paying anything, adding that Brussels would have no realistic chance of getting any money.

The peers stress, however, that if the government wants goodwill from EU countries and a deal on access to European markets, agreement on the budget will be important.

“The UK appears to have a strong legal position in respect of the EU budget post-Brexit and this provides important context to the article 50 negotiations,” said Lady Falkner of Margravine, the Liberal Democrat peer who chairs the sub-committee.

“Even though we consider that the UK will not be legally obliged to pay into the EU budget after Brexit, the issue will be a prominent factor in withdrawal negotiations. The government will have to set the financial and political costs of making such payments against potential gains from other elements of the negotiations.”

Ingeborg Grässle, a German centre-right MEP who chairs the European parliament’s budget control committee, said she was astonished at the “really disappointing” conclusions. “It is not about the money. It is about responsibilities. The question is, do you stick to your engagements?” she told the Guardian.

Grässle, who gave evidence to the Lords committee, described their conclusion as “putting the knife on the table” and said, if taken, the approach would damage Britain’s Brexit negotiations.

“Do you start with a view to let everything go straight to the wall or do you want a result?” she asked. She suggested the UK was not taking Brexit talks seriously. “The EU feels that we have to organise a real divorce and we have to sort out the money, the kids, who gets the dog and the cat … and for the British, it is as if they are leaving a golf club,” she said.

The peers’ argument will be toxic to the EU’s chief Brexit negotiator, Michel Barnier, whose staff drew up the mooted bill ranging from €55bn-€60bn (£47bn-£52bn). This covers the UK’s share of EU civil staff pensions, unpaid bills and decommissioning nuclear power plants.

Barnier is expecting the UK to pay into the EU budget in 2019 and 2020, putting the UK on the hook for payments worth £12.4bn, agreed by Cameron in 2013.

The EU’s €1tn, seven-year budget was negotiated in late 2013 by EU leaders including the British prime minister. It is due to expire at the end of 2020, although bills may be trickling in until 2023. This reflects that payments for EU-funded infrastructure projects, such as roads or airports, are not settled until two to three years after being promised.

A commission spokesperson said: “During the time of its membership, the UK has taken – and will take – financial commitments. They should be honoured in full. This will be an essential element of the negotiations on the orderly separation.”

The report is likely to cause alarm among the 2,900 British nationals who work or are retired from the EU institutions and fear their futures, including pensions, will become a political football.

Barnier is seeking to move the debate away from figures: early in the talks, he will seek to agree principles of liability with the British government, rather than presenting a bill – an approach backed by member states, who agree that the UK should pay its share.

Brussels sources acknowledge that the Brexit bill varies depending on the assumptions, with estimates ranging from €20bn to more than €70bn.

Grässle said the €60bn estimate looked reasonable when the UK’s share of EU liabilities, pensions and budget promises was taken into account.

The Brexit secretary, David Davis, has hinted that Britain may pay into the EU budget to get single market access, but large payments would be a political problem for the Conservative government. Setting out her Brexit vision last month, Theresa May said: “The days of Britain making vast contributions to the European Union every year will end.”

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