On Thursday 6 April, the House of Lords debates the Committee’s report on Brexit and the EU budget. The report examined the scale of the UK’s contributions to the EU budget, whether, following Brexit, there would an ‘exit bill’, and, if so, how large it could be. The report also sought to identify the UK’s legal position following its exit with regard to any liabilities it may have entered into while a member of the EU.
Contributions to the EU budget will be a politically sensitive and important element of the forthcoming withdrawal negotiations. The Committee’s report sought to address three things:
- the permutations of determining any 'exit bill’;
- the legal obligations on the UK to make payments; and
- the costs of maintaining access to EU programmes and the single market.
It placed these elements in the context of the wider negotiations under Article 50.
- The budget is going to be a contentious early issue during the UK's negotiations over leaving the EU. It is crucial for both parties. The UK provides approximately 12% of the EU’s budget, and is a significant net contributor. The Government has stated that it is open to making payments towards specific programmes in order to cement a cooperative future relationship with the EU, but there are already demands from the EU for much wider contributions.
- There are strong advantages to negotiating an orderly exit in the form of a withdrawal agreement as envisaged under Article 50. This would mean that the apportionment of existing commitments and, potentially, the EU's assets, would be a matter for political negotiation. Any such division would be enormously complex and there are disagreements over how any final 'bill' could be determined.
- A demand of €60 billion is being currently attributed to the Commission, but the Committee found that it is possible to arrive a wide range of figures for any possible EU claim.
- The strictly legal position of the UK in respect of an ‘exit bill’ appears to be strong. Article 50 provides for a 'guillotine' after two years if a withdrawal agreement is not reached. Although there are competing interpretations, legal evidence suggests that if agreement is not reached, all EU law will cease to apply, and the UK would not have an obligation to make any financial contribution at all—although this would only apply in a 'disorderly' or 'cliff-edge' Brexit.
- This possibility must be set against the immense damage to UK-EU relations that a disorderly withdrawal would inevitably cause. If the Government wishes to include future market access on favourable terms as part of the discussions on the withdrawal agreement, it is likely to prove impossible to do so without also reaching agreement on the issue of the budget.
Baroness Falkner of Margravine, Chairman of the EU Financial Affairs Sub-Committee, will open the debate on the report Brexit and the EU budget.
Lord Young of Cookham will respond for the Government.