Extended transition will add to £143 billion divorce bill – new figures - People's Vote

Extended transition will add to £143 billion divorce bill – new figures

By 2025 Britain’s “divorce bill” from quitting the EU is set to be four times higher than the official estimate of £39 billion, as the prospect of lower growth and an extended transition period sees costs spiral out of control, with an extended period of limbo such as that endorsed today by the Prime Minister, adding more than £8 billion alone.

The real cost of Britain’s divorce from the EU is more than quadruple the official suggestion of a £39 billion cost, new analysis published by the People’s Vote today reveals.

The research shows that an array of Brexit-related costs will be borne by the British taxpayer in addition to the widely reported Brexit “divorce bill”. 

And the prospect of another year of transition sees costs rise by another £8.2 billion but the bulk of additional costs identified are down to the £75 billion economic hit identified by the independent Office for Budget Responsibility as an unavoidable cost of any Brexit that matches demands for the UK to leave the Single Market and Customs Union.

The full costs include:

  • Another year of EU budget payments as a result of extending the transition period
  • HM Treasury’s Brexit “war chest”
  • Lower economic growth forecast by the OBR
  • The cost of two new Whitehall departments
  • Extra resources and help for departments estimated by the IfG
  • New NHS payments for the treatment of Brits abroad
  • Higher debt interest payments due to downgraded ratings
  • The economic hit of Brexit so far concluded by the Bank of England
  • Consultancy services and seconded experts for Whitehall
  • DEFRA’s guarantee to keep subsidies for British farmers until 2022
  • Continued UK participation in EU schemes announced in the Chequers agreement

These Brexit related costs add up to £143.50 billion until 2025, pushing Britain’s divorce bill to £180 billion overall by that year. After this, the total cost of Brexit may rise further due to the long-term impact on Britain’s trade caused by severing economic ties with our biggest market.

The revelations come as thousands of people prepare for a March for the Future on Parliament this Saturday to demand a People’s Vote on Brexit.

Chris Leslie, the former Shadow Chancellor and a leading supporter of the People’s Vote campaign, said:

“The Government wants you to believe that their botched Brexit costs ‘only’ £39 billion. But the real cost of Brexit is much higher, as these new figures show.

“It’s clear that this is not a price worth paying for the Government’s botched Brexit. But more worryingly, many of these costs are annual, meaning the costs of leaving the EU will continue to pile up every year. Any ‘deal’ will not be the end of a process where everyone can breathe a sigh of relief, but just the beginning of a decade of fresh costs, endless arguments with further trade negotiations.

“While hard Brexiteers hijack the Prime Minister’s negotiations, it is taxpayers up and down this country who will have to pick up the tab for the mess created. No wonder that thousands will march on Parliament this Saturday to demand the right to choose a different course – by securing a People’s Vote on Brexit.”

Ends

 

Notes to editors

Overview of Brexit costs until 2025

Element

Cost (£ billion)

Nominal exit fee from Government deal

39.00

Additional year of EU membership in extended transition

8.20

HM Treasury Brexit “war chest”

3.00

Economic hit forecast by OBR

75.00

Two new Whitehall departments

0.37

NHS payments for Brits abroad

1.28

Higher debt interest payments

20.00

CER estimate of hit to public finances so far

23.00

Consultancy services and seconded experts

2.50

Keeping subsidies for farmers until 2022

6.80

EU schemes set to continue under Chequers agreement

3.35

TOTAL

182.50


Full detail of additional Brexit costs excluded from Government spin

During the transition period the UK will pay into the EU budget until 2020, which is estimated by the OBR to amount to £16.4 billion. Cost: £16.4 billion

            “UK participation in EU annual budgets to 2020 - £16.4 billion” (OBR, March 2018, link)

 

It is now being reported that the transition period will be extended for a further 12 months. Based on OBR calculations of EU budget contributions for 2019-2020, this would add a further £8.2 billion to the bill. Cost: £8.2 billion.         

“UK participation in EU annual budgets to 2020 - £16.4 billion” (OBR, March 2018, link)

 

The Chancellor has announced a Brexit “war chest” of £3 billion set aside by the Treasury to help departments cover additional costs caused by Brexit. Cost: £3 billion

“The £3 billion war chest covers the two years 2018/19 and 2019/20, and Mr Hammond said the Treasury was now looking ahead to longer-term pressures on resources.” (ITV News, 6 September 2018, link)

 

The OBR has estimated that Brexit will hit the public finances by £15 billion a year by 2020-21 when Britain is currently set to leave the EU. Cost: £75 billion

“The OBR has already incorporated some, but not all, of the potential impacts of Brexit into its forecasts. In the November 2016 Autumn Statement, it downgraded its forecasts for investment, productivity growth and immigration, as well as raising its inflation forecast relative to what it thought would have happened without Brexit. The implied hit to the public finances is about £15 billion per year by the early 2020s” (Institute for Fiscal Studies, 24 January 2018, link)

 

The Government has set up two new Whitehall departments to deal with Brexit and the replicating of our existing free trade agreements. Cost: £372 million

“Department for Exiting the European Union: £23 million
Department for International Trade: £349 million”
(Institute for Government, 8 November 2017, link)

 

The Centre for European Reform has estimated that since the vote to leave, our public finances have already been hit by a Brexit cost of £23 million. Cost: £23 billion

“New analysis by the CER – which we will update quarterly – estimates that the UK economy is 2.1 per cent smaller as a result of the vote to leave the EU. The knock-on hit to the public finances is now £23 billion per annum – or £440 million a week. (CER, 23 June 2018, link)

 

Government departments are spending taxpayers’ money on seconded experts from private companies and consultancy services at high costs, estimated to cost £5 billion over the next decade. The cost of this for the time after the Treasury war chest runs out and 2025 would therefore be £2.5 billion. Cost: £2.5 billion

“Whitehall officials believe that at least 5,000 extra civil servants will have to be recruited to deal with Brexit, but extra lawyers and management consultants paid on a daily basis will push the costs up further. The bill could reach £5 billion over a decade.” (The Times, 2 July 2016,link)

 

The Government has guaranteed to keep subsidies for UK farmers at current levels until 2022, which is two more years than the current CAP funding cycle the UK participates in. Based on 2017, this requires an annual £3.4 billion. Cost: £6.8 billion

“The environment secretary told farmers the government would guarantee subsidies at the current EU level until the 2022 election. There would then be a "transitional period" in England.” (BBC News, 4 January 2018, link)

 

The amount spent by the Government on its debt interest payments has increased by billions of pounds a year since Brexit, with £5 billion per year attributable to Brexit. Cost: £20 billion

The Government spent almost £10 billion more on in interest on its debts in the year 2017/18 than in the year 2015/16. In 2015/16 debt interest cost the taxpayer £45.1 billion, whereas in 2017/18 it cost £55 billion, an increase of 22%. In this time, the national debt increased by only 11%, meaning that at least £5 billion of the extra £10 billion a year we are paying comes from Brexit induced changes in the interest and inflation rates.

The interest rates on Government debt have gone up following the downgrading of the UK’s credit rating straight after Brexit. Moody’s downgraded the UK from Aa1 to Aa2 in September 2017 (source). Further the high inflation since 2016, which is a direct result of the Brexit referendum have resulted in higher repayments for the Government.

Furthermore, government forecasts for the next 5 years suggest they will be paying at least £5 billion more than they did in 2015/16 every year. Inflation is currently running at 2.7% as of August 2018 (source) while the interest on a 10-year UK bond has risen from under 0.7% just before the referendum to 1.46% today (source).

 

As the UK exits the European Health Insurance Card scheme, the NHS will now have to cover the medical costs of Brits being treated in other EU countries. According to the Department of Health this comes at an annual cost of £155 million. Cost: £1.28 billion

“The Department of Health data, obtained under the Freedom of Information Act, shows that it cost £30m in 2013-14 to meet the costs of European visitors using the National Health Service. This is less than one-fifth of the £155m cost to other states in the European single market for treating ill British tourists.” (The Guardian, 7 April 2015, link)

 

EU schemes after Brexit

The Chequers Agreement sets out a range of EU schemes, programmes, and agencies that the UK wishes to remain a part of. The agreement further states that the UK will make budget contributions where appropriate to gain this access. The below list is all schemes the Chequers Agreement outlines, with the UK budget share per annum (except where highlighted), calculated on a basis of a 13% UK contribution (the current share of the EU budget borne by Britain, including the Rebate). These annual costs have been calculated until 2025 as an indicative price of post-Brexit contributions. Cost: £3.35 billion.

 

EU scheme

Budget period

Current budget (EUR)

UK share (GBP)

Contribution until 2025

European Medicines Agency

Annual

22,400,000

£2,562,560

£10,250,240

European Aviation Safety Agency

Annual

37,000,000

£4,232,800

£16,931,200

European Chemicals Agency

Annual

59,400,000

£6,795,360

£27,181,440

Rapid Alert System for Food and Feed

Annual

7,356,197

£841,549

£3,366,196

Erasmus+

2021-2027

14,700,000,000

£1,681,680,000

£1,681,680,000

European Criminal Record Information System and SIS

2019-2027

461,000,000

£52,738,400

£52,738,400

Europol

Annual

122,245,520

£13,984,887

£55,939,548

Eurojust

Annual

38,364,737

£4,388,926

£17,555,704

European Union Satellite Centre

 

12,243,591

£1,400,667

£5,602,668

European Defence Fund

2021-2027

13,000,000,000

£1,487,200,000

£1,487,200,000

TOTAL

 

 

 

£3,358,445,396