The UK has conceded to EU demands to honour its financial liabilities, but who decides what they are and when does the UK have to pay up?

How much could Britain pay?

Is it £44bn, £50bn or even £90bn? Numbers are flying around in regards to the Brexit divorce bill after it emerged the UK has conceded to EU demands to honour financial liabilities accrued during more than four decades in the European club.

Estimates of the bill by Bruegel, a Brussels-based thinktank, range from €24bn (£21bn) to €65bn. The top figure is a reference point used by EU diplomats in the past, who have talked of a Brexit bill of €60-65bn.

Downing Street has dismissed reports that the UK has agreed to pay €55bn. British officials think the EU have hugely over-egged their demands and say they will fight hard to reduce the bill.

References to sums in excess of €100bn, or £88bn, are based on gross calculations: the maximum gross sum is €113.7bn, according to Bruegel, but this falls significantly when taking into account the UK share of EU assets, such as buildings and cash, as well as the British rebate being taken off the total.



What is included?



First are the British contributions to the EU budget for 2019 and 2020, payments worth €22bn, which were agreed by David Cameron when he negotiated the EU seven-year funding programme in 2013. But the largest single item is the UK’s share of the EU’s unpaid bills, worth a theoretical €39bn and known by the French accounting term as reste à liquider. These are projects the EU has agreed to fund, but not paid for, reflecting the lag, for example, in deciding to build a road and paying the construction bill. Then there are pensions for EU officials, with a total maximum liability to the UK estimated at €10bn. And finally a long list of other items: loan guarantees to Greece and Ukraine, money promised to Syrian refugees in Turkey, schemes aimed at stopping migration from Africa.

Why is there no figure?



The final number is unlikely to be agreed until the 11th hour of Brexit divorce negotiations in October 2018. EU negotiators have not been pressing the UK to name a number. Instead, they wanted the British government to agree a methodology to calculate the bill that included a promise to meet obligations on unpaid bills, pensions and other liabilities.

Both sides are content with this smoke and mirrors method, for now. The British government could come under unbearable pressure if forced to agree to a large upfront sum. EU negotiators, keenly aware of the fragility of Theresa May’s government, want to try to help the UK government sell the final divorce deal at home.

When will the Brexit bill be paid?

The prime minister said earlier this year that “the days of Britain making vast contributions to the European Union every year will end”. But all evidence suggests, not any time soon. British payments to Brussels will be spread over years, potentially decades, taking into account pensions for EU officials, including those just beginning their working lives.

Moreover, the Brexit bill is about settling the debts of the past and offers no guarantee of access to EU programmes in which the UK may want to participate, such as scientific research or the Erasmus student exchange programme. That reality will become clearer if and when negotiations advance to Britain’s future relationship with the EU. The UK hopes that its promise to meet its obligations will now unlock the door to talking about the future.