German business magazine says any Brexit deal will be blocked until Britain settles up. We examine whether the claim stands up

The claim

A German magazine has claimed the UK owes the EU €25bn (£21.2bn) in unpaid debts, its share of €200bn owed by all member states to the bloc, and that any Brexit deal will be blocked until London settles up. The report in Wirtschaftswoche quoted an anonymous EU official who said: “A deal with Great Britain is unimaginable if the British do not pay their outstanding debt.”

Is it true?

Like any divorce, splitting the money will not be easy. Neither European commission or UK government officials would confirm the €25bn figure, but unwinding Britain’s contributions to the EU budget will be more complicated than simply writing out a cheque.



Britain must pay EU membership dues until Brexit

Britain’s contributions to the EU budget were central to the success of the leave campaign. Brexiters such as Boris Johnson and Gisela Stuart drove around the country in a red bus emblazoned with the slogan “We send the EU £350m a week”, ignoring the consensus among statistical experts that the figure was misleading. The true figure is about £136m a week.

The UK has voted to leave, but remains a member of the EU and will continue to pay into the common pot for several years. It is due to contribute £45.3bn between 2016 and 2020, the net total once the British rebate and payments to British farmers, scientists and regions have been stripped out.



If Theresa May fires the starting gun on EU divorce talks next year, the earliest possible moment under current thinking, the UK could be out by 2019. But the EU’s €960bn seven-year spending plan does not expire until 2020.



Some Brexiters might want to stop the cheques the day after the UK’s EU membership lapses, but that might not be so easy. David Cameron signed up to the seven-year budget plan in 2013. Other member states are unlikely to welcome the UK wriggling out of its commitments early.

Nor is it necessarily in the UK’s interests. “Possibly it makes sense to stay in the framework until 2020 when it runs out,” said Pawel Swidlicki, a policy analyst at Open Europe. In that case “local authorities, scientists, farmers – all the current recipients of EU funds – are guaranteed payments”. He points out that the UK could be paying into the EU until 2023, because of the time lag built into the budget.

It is this lag between “commitments” and “payments”, to use EU jargon, that will complicate the Brexit divorce.

The EU budget is like a credit card. The EU might agree, for example, to fund a university campus in Swansea or a motorway in Slovenia one year, but not pay the bill until months or years after the work is complete.

Maxing out the EU credit card

For years the EU has been agreeing to fund more projects - commitments - than it makes payments. By the end of 2015 the difference amounted to €218bn, up from €190bn the previous year. Essentially, the EU has maxed out its credit card in the last decade, after splurging on new motorways, airports and other shiny new infrastructure projects in central and eastern Europe.

The overspend rolls from one year into the next and is not seen as a problem in Brussels, but now the UK is leaving there has to be a reckoning.

You say debt, they say outstanding commitments

According to Wirtschaftswoche, the UK’s share of that “debt” amounts to €25bn.

A European commission spokeswoman said it was not possible to confirm the figure because there was no breakdown by member state. “Outstanding commitments are not debt. No member state has outstanding debts to the EU budget,” she said.

The British government has not confirmed the figure. A spokesperson said: “We are about to begin these negotiations and it would be wrong to set out unilateral positions in advance. Brexit means Brexit and we are going to make a success of it.”



Verdict

The €25bn figure sounds like a back-of-the envelope calculation. The UK has an eighth of the EU population so could be liable for an eighth of the EU’s unpaid bills. It won’t be that simple, say EU sources who are familiar with far more elaborate formulas that take into account relative wealth. Poorer member states might also expect Britain to chip in more.

Swidlicki thinks budget negotiations could soon get quite fractious. The government will be under pressure from Brexiters to “bring back a chunk of EU funds”, while the EU side may demand payment to the common budget “if we are going to get a good deal on free-market access and free movement” he said.



In parallel, talks will be ongoing about the UK’s share of the EU’s €59bn pension liability, which guarantees income for 1,730 retired British officials as well as other nationalities.

All these issues are on the table, but it is too soon to tell what the final Brexit bill will be.