The UK’s Brexit divorce bill from leaving the EU could rise to £42.5bn, potentially adding billions to payments, the government says. Treasury minister Simon Clarke said inflation meant the bill could be up to £7.5bn higher than initially estimated.
The UK struck a deal to pay the EU for outstanding spending commitments after leaving the bloc in January 2020.
Originally, the government estimated the bill, which covers spending commitments made during the UK’s membership of the EU, would be between £35bn and £39bn. A ministerial statement, published on Thursday this week as Parliament broke up for summer, says “the latest estimate of £42.5bn shows an increase against the original range”.
Mr Clarke’s statement says the increase is “primarily due to the most recent valuation of the UK’s obligation under Article 142 for EU pensions”.
He cited assumptions about inflation - in other words rising prices over time - as one of the main drivers of the increase.
“However, given this is a multi-decade liability, the variables used in this forecast will continue to fluctuate up and down,” Mr Clarke said.
Global economic turmoil has sent inflation soaring to 40-year highs this year, drastically increasing the cost of food and fuel.
The Brexit divorce bill - agreed to by Prime Minister Boris Johnson’s government - covered pension contributions for EU staff, as well as funding for three of its research programmes.
Meanwhile, the EU will pay back money the UK committed to the European Investment Bank (just over £3bn) and the European Central Bank (about £50m), among other things.
In July 2021, Mr Johnson’s government rejected an EU estimate of a £40.8bn total bill.
Downing Street insisted the bill stood between £35-39bn, and the Treasury put the latest overall net estimate of the financial settlement at £37.3bn.
A pox on BJ and his Tory government … 