UK payment to the EU as a ‘Brexit settlement’ confirmed at £33.4bn

A Post-Brexit briefing to MPs from the Office of National Statistics confirms the cost of Brexit payable as a ‘cash settlement’ to the EU at £33.4 billion.

The basis and principles of the settlement were agreed during withdrawal negotiations and form part of the ‘Withdrawal Agreement’ – a legally binding Treaty that sets out the negotiated terms of the UK’s departure from the EU.

There are four elements to the settlement:

  1. The UK left the ‘political’ union in January 2020.  However, during the 11-month ‘transition period’ that ended on 31 December, the UK continued to pay into the EU budget ‘almost as if it were a Member State’.  In return, it received funding drawn from EU programmes – such as ‘structural funds’ and ‘farming subsidies’ – as if it were a Member State.
  2. EU annual budgets commit to future spending without member states making cash payments up front.  Before leaving the bloc in January 2020, the UK had ‘signed up’ to a number of commitments. They agreed to honour committed payments when they become due.  In return, the UK recipients will receive funding on where commitments were made to them by the EU.
  3. The UK will share the ‘financing of some EU liabilities as at the end of 2020’ – and ‘any materialising contingent liabilities.’  It will receive back a share of some assets.  The pension fund of EU staff is likely to be the most significant of these liabilities.  The most significant item likely to be returned to the UK is the capital it paid into the European Investment Bank.
  4. The UK has agreed to continue contributions to the EU’s main overseas aid programme – the European Development Fund – until the current programme ends.  This programme is funded directly by Member States, rather than through the EU budget.  The UK’s contribution counts towards its commitment to spend 0.7% of national income on overseas aid.

Some uncertainties remain, for instance the cost of the settlement in sterling is dependent on the £-€ exchange rate.  The lower the pound falls, the more it costs in sterling to buy the euro needed.

The ONS has prepared a detailed spreadsheet – available online – that lists all the elements and calculations.

The £33.4 billion estimate comprises:

£   8.5 billion:        Net contribution through the ‘transition period’ to 31 December 2020

£ 19.8 billion:        Net sum ‘commitments’ to EU programmes

£   5.1 billion:         Net sum of future non-programme liabilities

 The bulk of the payments will be made to programmes running within the present EU budget cycle – that is, by 2025.  The final liability ends on the retirement of the youngest EU employee in the current pension scheme – and that could be as far away as 2065!