Brexit divorce bill will surpass Â£39bn, warns Whitehall watchdog
Brexit Brexit divorce bill will surpass Â£39bn, warns Whitehall watchdog
Extra Â£3bn budget payout and $2.9bn overseas aid fund will raise Mayâs estimate says NAO
The cost of the Brexit divorce bill for the UK could be billions high er than the Â£35bn-Â£39bn figure put forward by Theresa May, a report by Whitehallâs spending watchdog suggested.
The National Audit Office (NAO) has warned that the UK could pay an extra Â£3bn more in budget contributions as well as an additional Â£2.9bn to the European Development Fund.
Auditors have concluded that the Treasuryâs estimate includes Â£7.2bn of receipts which will go directly to the private sector and not to the governmentâs accounts.Government loses two House of Lords votes on EU withdrawal bill â" as it happened Read more
The findings will anger Eurosceptic Tory MPs who have previously questioned whether the government should pay the lower estimate of Â£35bn.
Philip Hammond, the chancellor, will be questioned about the NAOâs conclusions next Wednesday when he appears before the Treasury committee.
Responding to the report, Meg Hillier, the Labour chair of the public accounts committee, said there c ould well be an increase in the overall costs. âWhereas the promises made by some Brexiters of the bounty that our public services would receive post-Brexit are likely to be downgraded, I fear the cost of the UK leaving the EU could increase further.â
May told parliament in December that the bill would be between Â£35bn and Â£39bn, a fee jointly agreed in a meeting between the Treasury and the EUâs chief Brexit negotiator, Michel Barnier.
Auditors found that the total amount that the UK would contribute to the EU annual budgets in 2019 and 2020 would be calculated on the basis of the UKâs economic outlook, which would also partly determine Britainâs share of outstanding commitments and liabilities after 2020.
Britainâs exit settlement could not be defined until there was more certainty in areas such as the economyâs performance in 2019 and 2020, auditors said.
Costs still to be worked out include those relating to pension liabilities, the amount British organisations will receive in EU funding after withdrawal and exchange rate fluctuations because the divorce bill will be paid in euros, according to the study.
âRelatively small changes to some assumptions about future events could push the cost outside of HM Treasuryâs Â£35bn to Â£39bn range,â the report says.
Due to EU financial rules, the UK could have to pay up to Â£3bn more in budget contributions than Treasury estimates after forma l withdrawal in March 2019. The UK might have to pay towards other costs, which are not in the government estimates, such as potential liabilities that could depend on future events.
The UK will also pay Â£2.9bn to the European Development Fund for overseas aid, which is not featured in the exit settlement estimate because the fund was not established under EU treaties.Brexit uncertainty is jeopardising public finances, watchdog warns Read more
Britainâs contribution to the EU pension scheme might last until 2064 unless the government decides to pay off its commitments earlier in a lump sum, which would present ârisks and opportunities to the total value the UK may be liable to payâ.
The NAO states: âThe terms of the settlement, which mark 31 December 2020 as a key date for determining the UKâs share of liabilities, mean the EU commission could skew future decisions and impact the total value the UK will have to pay back.â
Britain is seeking a transition period between officially exiting the EU in March 2019 and the end of 2020.
The government is dependent on information it receives from the EU to calculate the final settlement, but can appoint auditors to review such figures, according to the NAO. The government should consider âhow it will update parliament with revised estimates as new information becomes availableâ, it said.
Sir Amyas Morse, the head of the NAO, said the Â£35bn-Â£39bn estimate was âreasonableâ but could have been wider to reflect the many âmoving partsâ. He added: âAs the vote on the draft withdrawal agreement approaches, we expect that government will provide a substantial amount of material for parliament to consider.â
Nicky Morgan, the chair of the Treasury select committee, said the costs would be examined further when Hammond and Morse gave evidence on Wednesday and Tuesday respectively.
She said: â[The NAO] has judge d that the governmentâs estimate of the UKâs withdrawal payment to the EU is âreasonableâ, but it appears to be shrouded in uncertainty.
âAs the report states, the Treasury didnât incorporate some of the main uncertainties â" of which it was aware â" in its figure. For example, the settlement estimate doesnât include the UKâs commitments to the European Development Fund, which the Treasury expects will cost Â£2.9bn after the UK leaves the EU.âTopics
- Government data
- European Union
- Article 50
- Philip Hammond
- Conservative leadership
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