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Analysis

Time to come clean: Brexit bill could be billions more

by Luke Lythgoe | 20.04.2018

Independent auditors say the Brexit divorce bill could be billions more than the Treasury’s £35-39 billion estimate. And that’s even if all goes to plan and we don’t have to extend the transition period. It looks like another case of the truth about Brexit having to be dragged out of the government.

The National Audit Office (NAO) has published a report digging deeper into the Treasury’s sums. While the independent watchdog says the £35-39 billion figure is “reasonable”, the report warns that “relatively small changes to some assumptions about future events” could push the costs outside this range.

Remember, no precise figure for the divorce bill has been written into the joint agreement between the UK and the EU. The £35-39 billion is just the government’s estimate.

The NAO flags up a whole host of assumptions and uncertainties in the Treasury estimate: how the UK economy performs, EU loans being paid off in full, the exchange rate. Below are three examples which could add a significant amount to the final divorce bill.

  • Paying for overseas aid. The government has agreed to pay £2.9 billion into the European Development Fund during the transition period. But because this is not technically in the EU budget, the Treasury has simply missed it out from its divorce bill estimate.
  • Budget contributions left to be paid after Brexit. EU rules allow the European Commission to request five months’ worth of annual budget contributions in the first three months of any year. The UK’s estimate assumes this will happen – meaning a big chunk will have been paid before Brexit day on March 29 2019. But if the EU requests less, the NAO says that could mean as much as £3 billion extra added to the divorce bill.
  • EU money going to UK organisations. The Treasury has predicted how much EU money will go to British businesses and other groups up to 2020. This is important because the divorce bill estimate is a “net” figure. We’ll pay more out to the EU, but officials have deducted money expected to be paid back to UK organisations as EU funding. However, the Treasury’s figures on this could be inflated. The simple fact that Brexit is on the horizon means fewer groups might apply or fewer funds be granted.

The government has a track record of trying to keep the more awkward details of Brexit hidden from the public – just think of the painful process to extract its analysis showing that all forms of Brexit meant a hit to economic growth. And make no mistake, a bigger divorce bill is awkward. Tory backbench Brextremists weren’t even happy with £35 billion.

There’s an even bigger elephant in the room. A 21-month transition period isn’t long enough to negotiate the complex “bespoke” deal Theresa May wants. Five years is more reasonable. At current rates – and having lost Margaret Thatcher’s famous budget rebate – that’s about £12 billion per year, or another £40 billion on top of the original divorce bill.

There are lots of new facts about Brexit – and many the government is refusing to admit. All the more reason for a People’s Vote on the Brexit deal.

InFacts is a founding member of the People’s Vote campaign.

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Edited by Hugo Dixon

2 Responses to “Time to come clean: Brexit bill could be billions more”

  • It doesn’t matter how bespoke any deal is. This Brexit train is derailing. It began as a spat within the Tory party that, unaccountably, David Cameron put to the British people.

    Brexit won by a extremely thin majority.

    Theresa May let that outcome stand so that today, Brexit lacks popular support. It is a non-stop Andrew Marr show. Any argument today _ pro or con Brexit _ confirms that unhappy 50-50 national split.

    Hidden Brexit costs, you ask?

    Here’s one: Watch the faces of Brits opening their first post-Brexit cellphone bills!