This morning has seen the EU confirm that each year Theresa May attempts to avoid applying the “Northern Ireland backstop” by instead extending the so-called “transition period” will cost British taxpayers at least £10 billion in extra “divorce bill” payments. In the transition period the UK will remain a member of the EU Single Market and Customs Union but will have no say on the rules and no representation in the European Court, which will rule on how those laws should be applied.
The People’s Vote campaign has today also published its analysis of the divorce bill provisions of the legally binding Withdrawal Agreement, which shows that the divorce bill has evolved into a blank cheque – with payments being made in Euros (and so likely to rise if the Pound keeps falling), and the bill being reassessed every year until at least 2029 (or later if the transition period is extended).
The People’s Vote campaign also highlighted evidence from the National Audit Office that the Government’s claim that the cost of the divorce bill will be between £35 – 39 billion is almost certainly a serious under-estimate, and that the true cost to taxpayers is more likely to be close to £50 billion.
Commenting, Pat McFadden MP, leading supporter of the People’s Vote campaign, said:
“Perhaps the Prime Minister’s most significant answer in Parliament this week was her inability to say her draft agreement would make the UK better off than the current arrangements. The draft agreement sets up what could be an open-ended bill for the UK. If the transition is extended, for which provision is made in the draft agreement, billions more will need to be paid. Plus, the question of how to secure the frictionless trade the government is aiming for remains unresolved in the political declaration. The bottom line is the country is going to be paying tens of billions for a worse deal than we have at present. “
The analysis shows:
1. The total size of the outstanding bill will not be fixed until after the end of the Withdrawal Agreement:
The Union shall calculate the amount of commitments referred to in paragraph 1 on 31 December 2020. It shall communicate that amount to the United Kingdom by 31 March 2021, adding a list with the reference key of each commitment, the associated budget lines, and the amount for each associated budget line.
The bill will be fixed in Euros and not Sterling and so if the pound continues to take a kicking on the foreign exchanges the bill will continue to rise.
Without prejudice to the applicable Union law concerning the Union's own resources, all amounts, liabilities, calculations, accounts and payments referred to in this Part shall be drawn up and implemented in euro.
2. After that the bill will be subject to annual revisions:
The Union shall, by 31 March of each year, starting in 2022, with regard to the commitments referred to in paragraph 1, communicate to the United Kingdom: (a) information on the amount of commitments outstanding on 31 December of the previous year and on the payments and decommitments made in the previous year, including an update of the list referred to in paragraph 2;
3. The earliest that any bill can be fixed (and then settled in full) is 2029.
At the request of the United Kingdom, made at the earliest after 31 December 2028, the Union shall make an estimate of the remaining amounts to be paid by the United Kingdom under this Article, on the basis of a rule taking into account the amount of outstanding commitments at the end of the year and an estimate of any decommitments on those outstanding commitments, any financial corrections and any proceeds from the infringement procedures after the end of the year. After the confirmation by the United Kingdom of the acceptance of the proposal to the Committee on the financial provisions referred to in point (f) of Article 165(1) and the Joint Committee, the United Kingdom shall pay the estimated amount, as adjusted in accordance with paragraph 4 of this Article, in relation to the payments made by the United Kingdom in the previous year. The payment of the amounts referred to in this paragraph shall extinguish the remaining obligations of the United Kingdom or the Union under this Article.
The NAO’s report “Exiting the EU: The financial settlement” has already identified significant under-reporting of the costs of the divorce bill.
Additional costs to the public purse they identify include:
- Up to £3 billion of additional budget contributions at the request of the European Commission through the normal application of EU budget rules (Summary point 13)
- £7.2 billion of payments claimed by the Treasury as reducing the divorce bill will actually go to the private sector and so will not be of benefit to the public sector’s accounts (Summary point 14)
- Commitments to the European Development Fund of £2.9 billion – these will be payments to the EU that the Government have committed to make but has not included in the divorce bill even though they will be made after the UK has left the EU (Summary point 15)
- Other contingent liabilities in the form of guarantees – these may never be called in but amount to almost €40 billion - about £35 billion at current exchange rates (Summary point 16)
Notes to editors:
Since the announcement of the Withdrawal Agreement the fall in the Pound has added £565 million to the divorce bill, even on the Government’s own £39 billion figure.
The NAO’s report can be read here: https://www.nao.org.uk/report/exiting-the-v-settlement/