Brexit: the bill is coming home

09/07/2021

This is the "divorce bill" that had the cretin Johnson, back in July 2017, telling Brussels that they could "go whistle".

Still foreign secretary then, he was saying that the chances of Britain crashing out of the union without a trade deal were "vanishingly unlikely" and that no plan B was being drawn up. Yet, on the other hand, he was dismissing talk that Britain would have to pay eye-watering amounts to the EU, "as much as 100billion euros (£84.5bn)".

However, while the sum of €100 billion always was a fiction, the so-called "divorce bill" was real. Eventually, reality caught up with the cretin and he conceded that the UK would have to pay its dues.

As finally settled in the Withdrawal Agreement (Article 140 et seq), there were to be three components to the bill.

The first was UK's standard, annual EU contribution, as outstanding on 31 December 2020. The second was the UK's liability for the pension rights and rights to other employment-related benefits "as regards pensions of the Members and EU high-level public office holders". The third is the UK's share of the commitments made in 2021 on the carryover of commitment appropriations from the budget for 2020.

What has now catapulted the issue back into the public domain is that RTÉ News "has learned - to quote its own pompous phrase – that the total liability will be €47.5 billion (for the second and third items), compared with UK's Office for Budget Responsibility prediction of €41.4 billion.

Actually, this is what RTÉ News thinks it has learned – gleaned from the EU's consolidated accounts of the Union for the financial year 2020. These accounts set out the respective liabilities, on which the broadcaster's reporter, Tony Connelly, bases his story.

And, in the way of things, this has been copied out by the likes of the Telegraph, the Guardian and many more media outlets.

As it stands, though, Connelly has got the detail wrong – as he so often does. The only definitive figures, on which we can rely, relate to the first two categories – the first of which – the standard EU contribution - will have already been paid. This is estimated at €18.5 billion after deducting the rebate.

Of the other two components, the only definitive figure we have is the pensions, etc., liability. The EU-wide figure, says Connelly, is recorded at €116 billion, putting the UK's share – set at 12.6 percent - at €14.3 billion. This has to be paid to the EU in 10 instalments starting on 31 October 2021.

As to the third component, this is the so-called reste à liquider (RAL) liability, about which Booker and I were writing as early as April 2013, only to be completely ignored by the legacy media, even though by the end of 2014, I was noting that it had increased to €222.4 billion and was set to go much higher.

Having been thus ignored, the very existence of this liability seems to have come as a surprise to both the media and the political establishment, once the Brexit negotiations started – hence the fatuous outburst from Johnson.

This was in the context of the total "divorce bill" in January 2017 being estimated at €60 billion by the EU, having been raised at the end of 2017 - with the share of the RAL liability in the order of €24 billion.

To bring us right up to date, Connelly is claiming that the UK's RAL liability has now been set at €35 billion. This, with the pension, etc., liability – less reimbursements of €2.1 billion – gives him his headline figure (which is not exactly new – The think-tank, Breugel, was predicting the UK share of €35.5 billion in 2019).

However, Connolly's estimate is based on a misreading of the Withdrawal Agreement which, to say the very least, is complicated. We do not pay the RAL liability in the basis of the figure in the consolidated accounts.

As per Article 143, the EU in 1919 had to provide the UK with "a specific report", which essentially set out the overall liabilities. But these "contingent liabilities" are by their very nature estimates. The UK is required to pay its share of the amounts that come due each year, based on notifications made by 31 March of the year, "until the amortisation, expiry or termination of the financial operations".

Then, the actual figure that will become due will be reduced by any amounts recovered by the Union from defaulting debtors or related to undue payments, and any net revenue resulting from the difference between financial and operational expenses. The bulk of the monies will be paid by 2027.

This is picked up in the Guardian version of the story, which notes that UK government sources say the exercise is "an accounting estimate, rather than an official figure". Some liabilities may never materialise, for example if recipients of EU loans pay back all the money rather than default.

Thus, we have a UK government spokesperson saying that this accounting estimate " does not reflect the exact amount the UK is expected to pay to the EU this year". He adds: "We will publish detail on payments to and from the EU made under the financial settlement in the EU finances statement later this year".

To be fair to the Guardian - which converts Connelly's headline figure into pounds sterling - while its headline states: "Brexit 'divorce bill' higher than UK's forecasts, Brussels estimates", its sub-heading reads: "Figure of £40.8bn buried in EU's 2020 accounts dismissed by UK as not reflecting amount it will pay".

Unsurprisingly, this detail is not conveyed by the Telegraph, which reports that the figures were first reported by the RTE broadcaster, which said that the EU accounts had not yet been signed off by auditors. It then cites Tony Murphy, Ireland's member of the EU's Court of Auditors, who says the figure was unlikely to change.

Connelly's citation is more detailed: "Following internal adoption procedures the Court is set to issue an unmodified opinion on the reliability of the 2020 EU consolidated accounts, as we have in previous years. Therefore, for all intent and purposes the figures published by the Commission are definitive", Murphy's statement goes.

That, of course, is correct. The estimate in the EU's consolidated accounts is unlikely to change. But it is still an estimate. In truth, no one knows what the final bill will be, and there is means of knowing until all the original payments have been settled, which will not be for many years.

Nevertheless, the Telegraph, joined with RTÉ News, is not the only media organ to get it wrong. The Mirror entertains itself with the headline, "UK liable to pay £40bn billion to EU as part of post-Brexit financial settlement", and there are many others that are conveying a similar message.

The Mirror does add, though, that as part of the withdrawal agreement "the Government must reportedly pay £5.8bn this year while the remaining balance is expected to be be (sic) settled over several decades". And that is the crunch figure – well over £100 million a week. Only enough, we didn't see that figure deducted from the £350 million on the side of that red bus.

Of the £5.8 billion mentioned. By far the greater amount is repayment of the RAL, a liability that, before we left the EU, most people didn't even know existed. Oddly enough, for the UK, it only becomes due in the form of a cash payment, because we have left the EU. The other Member States simply carry the liability forward, with the commitments paid from the EU budget.

To that extent, whatever happens on Sunday, the EU's bill is truly coming home. "Europe" will have the last laugh.

Also published on Turbulent Times.