Lord Sharkey, Chair of the House of Lords EU Financial Affairs Sub-Committee, said: “When he was the Brexit Secretary, Dominic Raab told us that ‘Her Majesty’s Government and the United Kingdom always pay their dues’. Deal or no deal, the UK should honour its financial obligations.
“Seeking to revisit or disown the agreed financial settlement would have profound implications for the UK’s future relationship with the EU and its reputation more broadly.”
The EU Financial Affairs Sub-Committee of the UK Parliament’s House of Lords published today its report on the financial settlement contained in the Withdrawal Agreement negotiated by former PM, Theresa May, and also in the revised Brexit agreement discussed with the current UK PM, Boris Johnson, which has been endorsed by EU Council on 17th october.
With the new Withdrawal Agreemet still on a technical “limbo”, the 31st October around the corner and still no extension of the Article 50 agreed by the European Union, the point of the financial settlement included in the UK-EU “divorce deal” is not something to forget as it means that the UK must keep contributing to the EU even if the country leaves the Union with no deal. In the event of a hard Brexit, the settlement agreement included in the Withdrawal Agreement in fact sets a bill to be paid besides the dammages to the UK economy that would cause a no deal scenario.
UK Government estimates the financial settlement value from £35 to 39Bn
The Withdrawal Agreement establishes a methodology for calculating payments under the financial settlement, rather than setting a fixed sum.
The Government has estimated the financial settlement’s value to be £35–39 Bn, but there is significant uncertainty involved in reaching this sum.
Assuming a UK departure on 31 October 2019, the Office for Budget Responsibility now estimates the financial settlement’s value to be £32.8Bn . An extension until 31 January 2020 would further reduce the financial settlement to around £29.8 billion, or possibly less. While these adjustments do not change the total amount that the UK will transfer to the EU if the Withdrawal Agreement is ratified, they do reduce the amount that could in theory be retained by the UK in the event of ‘no deal’.
The report concludes that “Legal experts continue to disagree over the extent to which the UK would have outstanding financial obligations to the EU, or vice versa, in the event of a no deal Brexit. While Article 50 TEU is the correct starting point for a legal analysis of this question, it is silent on how to resolve any outstanding financial obligations in the absence of a Withdrawal Agreement. Article 50 must also be considered in the context of international law, notably Article 70 of the Vienna Convention, which makes provision, under Article 70(1)(b), for pre-existing obligations to survive the termination of a treaty.”
We note, however, that honouring these financial obligations is a matter of politics as well as law, EU Financial Affairs Sub-Committee points.
Some other key findings in the report
Among the 13 conclusions included in the report they are explained here some of the main risks tht the Uk would face if the country does not pay wht it tis owed under the financial settlement of the Withdrawal Agreement.
1.- Honouring the UK’s financial obligations is a matter of politics as well as law. Seeking to revisit the terms of the financial settlement could have implications for future negotiations with the EU and the UK’s wider reputation.
2.- While it would be difficult to enforce the UK’s financial obligations in any international court or tribunal, this does not mean that such obligations do not exist.
3.- Failure by the UK Government to honour the financial settlement would be received negatively by the EU. Statements by the EU institutions suggest that they are currently unwilling either to renegotiate its terms or to start negotiations on a future relationship until this issue is solved.
4.- If the UK does not honour its financial obligations this may cause disruption for recipients of EU funding in the UK: UK Government has said that it would guarantee certain EU funding in a ‘no deal’ scenario and has already committed to maintaining EU programmes after Brexit, including farm support, structural funds andscience and education programmes.
The EU has agreed to maintain funding for the PEACE IV Programme to provide support for peace in Northern Ireland and Ireland, as well as ongoing Erasmus+ learning mobility activities involving the UK.
But there remain some questions about how these guarantees will function in practice. In particular, there is uncertainty over the fate of research funding agreed under the Horizon 2020 programme, which in many cases involves teams of researchers from more than one Member State.
A bill to pay besides the economic dammages in a hard Brexit scenario
“Our baseline assumes that there will be an agreement and that the transition will be smooth. In the absence of that, if there were to be no agreement and a no‑deal Brexit, then that would reduce the level of GDP in the U.K. by about 3% over the long run and between 3 to 5 percent, depending upon how disruptive the exit is, over a two‑year period.”
“So those are the numbers that we have. It is about 3 to 5% over two years, if there was, depending upon how disruptive the Brexit is. And in the long run, we are talking about 3%,” Gita Gopinath (Economic Counselor and Director of the Research Department, IMF) said last 15th October during the press conference explaining the latest World Economic Outlook releases byt the International Monetary Fund.
Image over the headline.- The House of Lords. Photo provided by the UK Parliament through Wikimedia Commons
Related external links:
OBR, Economic and fiscal outlook, March 2019
Related Eastwind links (Spanish edition):
Los Comunes niegan a Johnson la tramitación exprés del acuerdo de Brexit
(The House of Commons says no to a quick vote on Johnson’s new Brexit agreement)
Related Eastwind links (English edition):
Leaders of UK Labour party and the DUP will not support Johnson’s new Brexit deal
