UK and Brussels clash over £40bn Brexit divorce bill

Brussels and London were on Thursday locked in a dispute over the size of the UK’s Brexit bill, after the EU suggested that Britain would be obliged to pay €47.5bn (£40.8bn) as part of its post-Brexit arrangements.

But the UK Treasury insisted that the Brexit divorce settlement remained within its previous central range of £35bn-£39bn. An updated estimate is to be published next week.

The higher sum was reported for the first time in the EU’s annual accounts for 2020, which were released by the European Commission late last month.

The obligations relate to past commitments made when the UK was an EU member state and during the post-Brexit transition period, which finished at the end of December.

An agreement on the Brexit divorce was one of the first key parts of the talks between London and Brussels after the 2016 vote to leave the EU — and one of the most difficult to resolve.

The methodology was agreed by the two sides in the withdrawal agreement, but any increase in the expected bill would irritate Conservative Eurosceptics.

The sum in the EU accounts, which will be paid over a period of many years, exceeds earlier estimates from the UK.

A House of Commons library paper on the Brexit divorce bill said there was “no definitive cost to the settlement” but that the Office for Budget Responsibility, the UK’s fiscal watchdog, said the net cost to the UK might be £34bn.

The House of Commons paper, produced in December 2020, showed UK payments to the EU budget falling from about £9bn a year in 2020 to around £1bn in 2025 before gradually tailing off over a number of years.

Under the final deal, the UK paid into the EU budget as if it was a member state until the end of the Brexit transition period on January 1 2021. The UK received funding from EU programmes during this time.

The overall liability relates partly to the UK’s share of outstanding EU spending commitments as of the end of December, for which payments will be made in subsequent years. It also reflects Britain’s share of obligations linked to the EU’s role as an employer — for example pensions and sickness insurance for retired staff.

Among the offsetting factors are the UK’s slice of competition fines in cases that had been decided upon before the end of last year.

The EU plans to provide twice-yearly reports to the UK on the actual amounts due, with payments set to follow on a monthly basis.

The Treasury said the EU document was an accounting estimate rather than accurately reflecting the true figure of what would be paid. The €47.5bn figure was reported earlier by Irish broadcaster RTE.