The toxic issue of how much Britain pays into the EU budget is a long way from being settled, writes Iain Begg. None of the pro-Brexit ministers in government now claims the (highly misleading figure of) £350m the UK ‘sends to Brussels’ each week will be available for domestic spending. Indeed, the cost of Brexit to the public finances has been put at £12bn a year. And significantly, neither Theresa May nor David Davis have ruled out continuing to pay into the EU budget.

A big question about Brexit is whether it will ultimately lead to stronger or weaker public finances in the UK. The Leave campaign’s now notorious promise that Brexit would enable the UK to ‘take control’ over the £350 million a week we ‘send to Brussels’ means that the issue of the UK’s contributions to the EU budget, both before and – perhaps – after Brexit, will remain high-profile politically, and potentially a source of considerable embarrassment to the government.

The £350 million figure emblazoned on the red bus was always at the very least ‘misleading’, in the phrase of the UK Statistics Authority, because even under the most favourable assumptions the true figure was around half that amount. It is notable that none of the senior members of the Leave campaign now serving in government has been prepared to repeat the £350 million figure, or suggest that anything like such sums are available for redeploying on domestic priorities.

More broadly, the impact on the public finances of reductions in the UK’s EU budget contribution needs to be considered alongside the other effects of Brexit on tax revenue and the level of public expenditure. The data presented in the Chancellor’s Autumn Statement in November included projections not only of a reduced growth rate for 2017 onwards but also of lower tax revenues, leading to a further increase in public debt. In subsequent evidence to the Treasury Committee, Robert Chote, the head of the Office for Budget Responsibility (OBR), put the cost of Brexit to the public finances at £12 billion per annum over the rest of this Parliament. If the OBR’s forecasts are accurate – and at this point they are just forecasts – the costs of Brexit to the Treasury will significantly exceed the true saving available from no longer paying the EU ‘membership fee’. Any ‘Brexit bonus’ for the UK public finances, allowing more to be spent on the NHS, will at best be delayed, will certainly be much smaller than claimed, and may well be negative.

What happens next?

In the short term, the UK has obligations under the seven-year EU budget deal covering 2014-20. It is open to question whether the UK would remain liable for the full period, irrespective of when it actually leaves. Commitments entered into before the spring 2019 deadline for concluding the Article 50 negotiations will probably still have to be honoured, unless a large one-off ‘divorce’ settlement is part of the Brexit deal. Figures emerging from the European Commission negotiating team suggest the bill could be as high as €60 billion (around £50 billion). Ironically, some UK beneficiaries from EU programmes will contribute to this problem: a professor at a British university securing one of the prestigious European Research Council grants in 2017, lasting the usual five years, could expect funding until 2022.