COMMONS

Treasury should provide assurances on transition extension costs

26 October 2018

Following the October European Council, and the Prime Minister’s subsequent statement to the House of Commons, the European Scrutiny Committee today warns that any extension to the post-Brexit transition period will leave the UK liable to "substantial subsidies" to the EU budget above and beyond the existing £39 billion Brexit bill.

In a letter sent by Committee Chair Sir William Cash to Chief Secretary to the Treasury Elizabeth Truss (PDF PDF 211 KB), the Committee also calls on the Minister to provide urgent reassurance about the Government’s proposed financial mechanism that would apply in calculating the cost of any extension.

Three areas of concern

 Extension to the transition period

  • The Committee warns that an extension of the transition period beyond 31st December 2020 would see the UK required to contribute to the EU budget for participation in EU programmes and structures in 2021

Cost

  • Should such an extension come to pass, “the Committee is concerned that the practical effect of the extension would be to require a net contribution broadly equivalent to what the UK would have paid had it remained a Member State”, which implies “an additional potential cost to UK taxpayers of billions of pounds, on top of the estimated £39 billion cost” of the existing Brexit financial settlement agreed in December 2017.

"No significant influence"

  • Equally concerning to the Committee is the prospect of the UK "paying towards EU policies and programmes over which it had no significant influence."  The UK will, in accordance with the Withdrawal Act 2018, from 29th March 2019 no longer be at the table nor retain a veto in negotiations over the EUs next Multiannual Financial Framework.  This framework would determine how large the UK’s contribution from January 2021 would be (and how it would be spent).  Any extension would create "a significant risk that UK taxpayers will provide substantial subsidies for policies that may not be in our interest or provide little added value."

Chair's comment

Sir William Cash said:

"The extension of the transition would allow the EU to fleece the UK as a massive net contributor for at least another year. There is a real risk that from January 2021 we would be spending taxpayers’ money on EU policies and programmes that were decided without the UK in the room, with no control over the laws that govern how that money would be spent.

The net public sector contribution to the EU in 2016-17, before the rebate, was almost £13 billion – close to the additional money pledged by the Government to the NHS by 2024 – that is money that could instead be spent on domestic priorities controlled by Parliament if – as the Government itself agreed in March - the transition ends on 31 December 2020. This financial hit would only be compounded by the all-but-certain loss of the UK’s rebate for any extension."

The European Scrutiny Committee, which assesses the legal and political importance of around 1100 documents per session deposited before Parliament by Government, has published a number of reports on the EU budget and what it might cost the UK in various Brexit scenarios, most recently on 12 September 2018

Further information

Image: iStockphoto

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