Following the June 2016 Referendum result, the House of Lords’ Subcommittee on EU Financial Affairs decided to launch an enquiry on “Brexit and Budget” and several academics and practitioners (yours truly among them, see here) were invited to contribute with their insights to help better inform the judgement of the UK Parliament. It may seem ruthless to table the budgetary implications of Brexit, given the manifold human dimensions of this train-wreck in the making. Yet, recasting the financial balance between the UK and the EU has stayed on top of the Leave campaign until the very end, and the financial stakes of Brexit for the UK, yet undetermined, will undoubtedly affect essential economic sectors in the United Kingdom for years (and probably decades) to come.
To date, the UK government has not officially triggered article 50 of the Treaty of the European Union, although PM May’s self-imposed deadline will expire within two months. The recent UK Supreme Court in Miller has complicated things further by confirming that legislation is required to activate article 50 and thus the Houses of Parliament must step in the process. As a reaction, the government has published a draft Bill (currently subject to legislative approval) conferring power to the Prime Minister to notify the UK’s intention to withdraw from the Union. If everything goes according to plan and Parliament (or others) do not delay or stop the UK government, activation of article 50 will set in motion a two-year period during which both parties (the EU and the UK) need to achieve a comprehensive withdrawal agreement to enter into force by, at the latest, 1 April 2019.
This post represents a first attempt at approaching Brexit from the perspective of its impact on the budgetary relations between the EU and the UK. For now, only the basic background is laid down, while the main ongoing debates will be expanded in future contributions.
Which questions does Brexit raise from the budgetary perspective?
The UK is a net contributor, meaning its contribution to the EU budget is higher than the funds received from the EU in the form of grants and subsidies, although not as Brexit campaigners tried to convey through repeated statements in the media. Recent fact-check studies (see, for instance, the Institute for Fiscal Studies here) feature the UK at the lowest end of net contributors, behind notably Netherlands, Germany and Sweden. This, of course, from the perspective of a cold calculation of budget exchanges that fails to reflect the immaterial benefits of access to the internal market and other related EU policies. But that is a matter for another post.
In view of the withdrawal, the main questions raised by the House of Lords reflect a profound common sense and can be summed up as ‘how much?’ and ‘how long?’.
- How much can the UK claim from EU assets (eg. buildings, budget, EIB)?
- How much can the UK be requested to pay as a share of EU liabilities (multiannual commitments, pensions, long-term loans, among others)?
- How much would the UK pay in exchange for market access?
- How long will the UK have to pay budget contributions to the EU and how long will EU spending programmes apply to the UK?
Further posts will feed the debate on these and other questions in the months to come.