Brexit and the EU Budget

The EU Financial Affairs Sub-Committee of the House of Lords EU Committee published a report on Brexit and the EU budget on the 4 March 2017.

Contributions to the EU budget will be a politically sensitive and important element of the forthcoming withdrawal negotiations. The Committee’s report sought to address three things:

+ the permutations of determining any 'exit bill'
+ the legal obligations on the UK to make payments and
+ the costs of maintaining access to EU programmes and the single market

It placed these elements in the context of the wider negotiations under Article 50.

Key findings
The budget is going to be a contentious early issue during the UK's negotiations over leaving the EU. It is crucial for both parties. The UK provides approximately 12% of the EU’s budget, and is a significant net contributor. The Government has stated that it is open to making payments towards specific programmes in order to cement a cooperative future relationship with the EU, but there are already demands from the EU for much wider contributions.

There are strong advantages to negotiating an orderly exit in the form of a withdrawal agreement as envisaged under Article 50. This would mean that the apportionment of existing commitments and, potentially, the EU's assets, would be a matter for political negotiation. Any such division would be enormously complex and there are disagreements over how any final 'bill' could be determined.

A demand of €60 billion is being currently attributed to the European Commission, but the Committee found that it was possible to arrive a wide range of figures for any possible EU claim. However, it should be noted that the strictly legal position of the UK on this issue appears to be strong.

Article 50 also provides for a 'guillotine' after two years if a withdrawal agreement is not reached. Although there are competing interpretations, legal evidence suggested that if agreement was not reached, all EU law would cease to apply, and the UK would not have an obligation to make any financial contribution at all—although this would only apply in a 'disorderly' or 'cliff-edge' Brexit.

This possibility must be set against the immense damage to UK-EU relations that a disorderly withdrawal would inevitably cause. If the Government wished to include future market access on favourable terms as part of the discussions on the withdrawal agreement, it was likely to prove impossible to do so without also reaching agreement on the issue of the budget.

UK: Parliament: House of Lords: EU Committee: News, 04.03.17: UK payments to EU budget could end but political consequences would be profound http://www.parliament.uk/business/committees/committees-a-z/lords-select/eu-financial-affairs-subcommittee/news-parliament-2015/eu-budget-report-publication/

ESO: Background information: The €60 billion Brexit bill: how to disentangle Britain from the EU budget http://www.europeansources.info/record/the-e60-billion-brexit-bill-how-to-disentangle-britain-from-the-eu-budget/

BBC News, 04.03.17: Brexit: UK 'not obliged' to pay divorce bill say peers http://www.bbc.co.uk/news/uk-politics-39154218

Politico, 04.03.17: Tory MPs: Britain’s Brexit bill is ‘zero’ http://www.politico.eu/article/tory-mps-britain-owes-zero-brexit-bill-europe/

The Guardian, 04.03.17: UK could quit EU without paying a penny, say Lords https://www.theguardian.com/politics/2017/mar/04/uk-could-quit-eu-without-paying-a-penny-say-lords

The Times, 06.03.17: Britain will happily pay its EU bills, pledges Hammond http://www.thetimes.co.uk/article/britain-will-happily-pay-its-eu-bills-pledges-hammond-tcv0wz77n

EurActiv, 06.03.17: UK could escape post-Brexit EU bill if no deal agreed, say British lawmakers http://www.euractiv.com/section/future-eu/news/uk-could-escape-post-brexit-eu-bill-if-no-deal-agreed-say-british-lawmakers/

CAPX, 24.03.17: How much will the Brexit divorce cost? https://capx.co/how-much-is-brexit-going-to-cost/

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