26 June 2017

Institute of Economic Affairs: Should the UK pay an EU divorce bill?

• One option would be simply be for the UK to cease payments at the end of March 2019 (with no bills thereafter). The UK would be on strong legal ground if it decided to do so. Article 50 is clear that, in the absence of any other agreement, EU treaty obligations will cease to apply after that date.
• However, a more flexible stance could help secure better terms on other aspects of the negotiations, including any transitional arrangements before a comprehensive free trade deal can be concluded.
• It seems fair that the UK should be asked to make some contribution towards long-term financial commitments undertaken when the UK was a member – even if the money is spent after the UK has left.
• A sensible cut-off date would be the end of 2020, when the EU’s current multi-year budget process is completed.
• If the UK continues its planned payments until then, the bill would ocme to around €25 billion, which might be topped up to €30 billion (£26 billion) with a few reasonable extras.
• However, the EU is demanding a lot more than this, including large contributions to spending likely to take place long after 2020, and upfront payments for contingencies that may never materialise.
• If the EU is unwilling to compromise, the UK can, and should walk away without paying a penny.

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