Friday 1 December 2017

Financial settlement with EU - a note

December is with us and Brexit continues to dominate the headlines.  Here is a brief note on the vexed question of the financial settlement over which the EU and UK negotiators have been locking horns.

As far as I can see, the only publicly available details of any Financial Settlement arising on Brexit are those published by the EU earlier this year (12th June) - European Commission Position Paper which this blog took a brief look at HERE.

In March 2017, the House of Lords EU Committee 15th Report for session 2016-17 "Brexit and the EU budget" examined the potential financial demands in Chapter 3 and the UK's legal obligations in Chapter 4. At para. 137 the report said - " ..., the political and economic consequences of the UK leaving the EU without responding to claims under the EU budget are likely to be profound."

A useful addition to this documentation was prepared by Anouk Berthier and Iain McIver for the Scottish Parliament's Culture, Tourism, Europe and External Relations Committee - Brexit: The Financial Settlement and the Withdrawal Agreement (4th September) in which it is stated that - "The UK Government's position appears to be based on a belief that the financial obligations the European Commission has set out in its position paper on the financial settlement have no legal basis. The UK Government has yet to publish a position paper setting out principles for how a financial settlement should be concluded ahead of Brexit though it has acknowledged that it is likely the UK will make a payment to the EU. David Davis accepts that the UK has“obligations” from its 44 years of EU membership, but thus far the UK Government has refused to say what they are."

The Guardian 28th November - UK could pay £50bn Brexit divorce bill after bowing to EU pressure -  comments that "The UK has bowed to EU demands on the Brexit divorce bill in a move that could result in the UK paying £50bn to Brussels, in an attempt to get France and Germany to agree to move negotiations to trade.  Non-stop behind-the-scenes negotiations have led to a broad agreement by the UK to a gross financial settlement of £89bn on leaving the bloc, although the British expect the final net bill to be half as much."   According to this report - "The final sum is 13% of the £660bn total liabilities the UK has committed to as a member state, including the seven-year budget ending in 2020, pension costs and outstanding loans, such as those to Ukraine, and to cover the costs of keeping Chernobyl safe.  The sum is reduced when payments that would have been made to EU projects in the UK, including structural funds, are taken into account, along with the UK’s capital share in the European Investment Bank. The divorce bill will not be paid in a lump sum but over time ....."

Further developments are awaited and may be imminent.  In my view it is a pity that the UK government has not published its own legal arguments over the financial settlement.  We know that these arguments were put to the EU during Round 3 of the Brexit negotiations - Post 1st September

Whatever is agreed regarding this settlement will presumably be incorporated into the Withdrawal Agreement (required by Article 50).    Of course, on leaving the EU, the usual contributions would cease.  The actual NET amount paid in membership contributions to the EU is a matter of some complexity as shown by Office for National Statistics - The UK contribution to the EU budget.

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