During the
2016 United Kingdom European Union membership referendum,
Vote Leave claimed that the UK was sending £350 million to the EU every week (the
Institute for Fiscal Studies estimated the true net figure as being about half this.). Following the referendum, the UK signalled that it may consider paying the EU to attain preferential access to the
European Single Market and may offer to pay liabilities on a moral and co-operative basis, even if not legally obliged to do so, to secure a preferential working relationship with the EU. In
Prime Minister Theresa May's speech on 17 January 2017 setting out the UK's plans to negotiate Brexit, she stated: "And because we will no longer be members of the single market, we will not be required to contribute huge sums to the EU budget. There may be some specific European programmes in which we might want to participate. If so, and this will be for us to decide, it is reasonable that we should make an appropriate contribution. But the principle is clear: the days of Britain making vast contributions to the European Union every year will end." Despite the claim, ministers and officials, including
Secretary of State for Exiting the European Union David Davis, had already indicated that some kind of payment to the EU might have to be part of a future trade deal and the
House of Lords were told in January 2017 that the UK may have to contribute to the EU's budget after Brexit because of previous obligations entered into, unless a deal is done. The leaders of France and Germany both stated that the UK would need to agree to terms regarding departure, including in relation to a divorce bill, before discussing future relationships. This was reinforced by EU27 guidelines issued to the remaining 27 countries. Estimates of over £50 billion appeared for a divorce bill and there were concerns raised about whether, and how much, the UK would owe the EU and that such a dispute could lead to an early end to negotiations, with the UK leaving the EU without a deal.
Secretary of State for International Trade Liam Fox claimed it would be “absurd” for the UK to pay a large sum and
Conservative Party MP John Redwood said there was no legal basis to the demands.
House of Lords report A 4 March 2017 report of the
European Union Committee of the House of Lords acknowledged that the EU may claim for (1) part of the current budget (which runs from 2014 to 2020) post March 2019, because it was approved by the UK (2) part of the EU future commitments which amount to €200 billion and (3) a contribution if the UK is to continue with access to some EU programmes. The report concluded that the UK had no legal obligation to make "exit" payments to the EU if there was no post-Brexit deal.
Trigger of Article 50 Theresa May's letter of 29 March 2017 to
President of the European Council Donald Tusk triggering
Article 50 noted that she wanted "fair settlement of the UK’s rights and obligations as a departing member state, in accordance with the law and in the spirit of the United Kingdom’s continuing partnership with the EU". On 29 April 2017, the
EU27 heads of state unanimously accepted negotiating guidelines prepared by Donald Tusk. The guidelines take the view that Article 50 permits a two-phased negotiation, whereby the UK first needs to agree to a financial commitment and to lifelong benefits for EU citizens in Britain, before the EU27 will entertain negotiations on a future relationship. The Prime Minister insisted to
President of the European Commission Jean-Claude Juncker that talks about the future UK-EU relationship should start early and that Britain did not owe any money to the EU under the current treaties.
Secretary of State for Foreign and Commonwealth Affairs Boris Johnson claimed that the amounts being discussed were extortionate and said that European leaders can 'go whistle' over the EU divorce bill.
EU position paper In June 2017, the EU drafted a 11-page position paper setting out the essential principles for a financial settlement and the methodology for calculating the obligation. Two different legal approaches arose in determining the financial element of the
Brexit withdrawal agreement and (at least initially) the UK and EU negotiators differed on which would be the more appropriate. David Davis said that the "UK wants to go through the Brexit bill line-by-line to work out what it owes the EU."
UK assets In 2017, the UK had a 16% share in the
European Investment Bank (EIB) worth £8.8 billion based on data submitted by Lawyers for Britain. As part of the financial settlement, the UK's liability resulting from the guarantee for the financing made by the EIB while the UK was a
Member State is to be maintained and its level decreased in line with the amortisation of the EIB portfolio outstanding at the time of UK's withdrawal, at the end of which the paid-in capital of the United Kingdom in the EIB will be reimbursed to the UK. The BoE has also made loans to the ECB. The ECB set up the
European Financial Stability Facility in 2010, which has a borrowing facility of €440bn and in addition used a guarantee from the
European Commission and the EU Budget as collateral to borrow a further €60bn. The paid-in capital of the UK in the ECB will be reimbursed to the BoE. Boris Johnson, the UK's Foreign Secretary at the time commenting on the Brexit "divorce bill" in May 2017, stated that the valuable EU assets the UK has paid for over the years should be properly valued, and that there were good arguments for including them in the negotiations. The assets were not included in the settlement.
Agreement on scope of commitments and methods for valuation On 11 December 2017, Theresa May confirmed that the UK and the EU had agreed “the scope of commitments, and methods for valuations and adjustments to those values.” The UK's obligation is to be fixed as a percentage of the EU's obligations calculated at the date of withdrawal in accordance with a methodology agreed in the first phase of the negotiations. The estimated settlement was made up of: • £16.4bn (€18.5bn) towards the UK's contribution to the EU budget to December 2020 (after offsetting for the
UK rebate); • £18.2bn (€20.2bn) towards outstanding commitments for projects that have been signed off but not yet paid for by 2020 (The Reste à Liquider ("RAL") from successive
Multiannual Financial Frameworks) to be paid up to 2028; and • £2.5bn (€2.7bn) for other financial liabilities, being an estimate for pension liabilities of €9.5bn offset by other assets totalling €6.8bn.
Article 50 extensions As the UK did not leave the EU on 29 March 2019, the UK continued to contribute to the EU as a member. Article 50 was extended until 31 October 2019 and the UK's contributions for the period from 30 March to 31 October 2019 were £5 billion, leaving an estimated £32.8 billion (€36.3 billion) remaining to be settled at 31 October 2019. Article 50 was further extended to 31 January 2020 and despite additional contributions to January 2020 and favourable currency fluctuations reducing the amount payable in sterling, an increase in pension liabilities of £2.6 billion saw the estimate of the financial settlement at 31 January 2020, the date the UK left the EU, increase to £32.9 billion. The financial settlement was not binding until the UK Parliament approved the Withdrawal Agreement, which was approved on 24 January 2020. ==Transition period==