Warning of row over UK’s Brexit divorce bill

The dispute over the size of the bill Britain will have to pay Brussels as part of its EU divorce bill could blow up at a very early stage, one of the country’s leading Brexit experts has predicted.

Edgar Morgenroth, a research professor at the Economic and Social Research Institute, said political opposition in the UK to paying even a small amount of money will be immense.

The divorce bill is expected to cover outstanding payments Britain owes for items such as pension liabilities to bureaucrats in Brussels and a settlement for Britain’s part of the multi-year expenditure the EU has committed to countries across the world.

Estimates of the size of the British bill range from around €10bn to as much as €60bn because calculating the UK’s liabilities is highly complex and must take into account its share of the bloc’s assets.

However, Mr Morgenroth said that, even if the bill were to amount to as little as a few billion or tens of billions, many British MPs will baulk at paying “a cent” to Brussels.

Officials could settle on the terms of the bill quite easily, but British politicians will not favour a sensible settlement because the Brexit campaign had promised Britain would secure a windfall from its exit from the EU.

“There is a significant probability that they will go badly wrong,” he said. “Potentially this ought to be easy but I think this is potentially politically quite tricky. And not enough attention has been paid to this [issue].”

A disagreement between the British and the EU’s chief negotiator Michel Barnier over how to run separate talks over the divorce settlement and the trade talks showed up the “potential cracks” as the discussions get under way in the coming months, Mr Morgenroth said.

Referring to calculations that must put a valuation on the liabilities and the assets of the two sides, he said: “It is very much like a divorce. If you are supposed to split things, putting a value on things is difficult. We have had some of these issues before when countries split for example over which embassy buildings does each get.”

Mr Morgenroth said that, in the case of the split of Czechoslovakia, the process was amicable but that such an outcome was most unlikely in the case of Brexit.

Capital Economics in London last month said that the UK’s divorce settlement “or the degree to which the UK will cover its share of pending EU commitments and liabilities” will loom large in the talks once the UK triggers Article 50.

The London economics firm believes the estimates that the UK will have to pay €60bn is an “opening gambit” but that even a smaller bill “may still prove unpalatable for the UK, suggesting that the issue may not be resolved particularly quickly”.

Capital Economics said that the divorce settlement can be broken down into three components: The gap between the EU’s past spending commitments and payments which it said amount to “a whopping” €241bn; items which Brussels sees as legally binding and are owed by the UK in the EU budget up to 2020; and pension payments the UK may owe to EU officials.

“But there will probably still be a disagreement about whether the UK will pay the costs of British workers in EU institutions [who make up about 4% of all workers], or if the UK is accountable for its share of commitments made to all EU workers,” Capital Economics said.