Cheque please: how the Brexit bill works out

Brussels – Britain and the EU have reportedly reached a deal on the thorny issue of London’s divorce bill, but details remain sketchy, and are likely to do so even after it is made public.

Brussels has long demanded that Britain must pay for its share of the budget until it leaves the bloc in March 2019, and then for future commitments made while it was a member.

The financial settlement would be between 45 and 55 billion euros ($53-63 billion), according to the Daily Telegraph, while the Financial Times said the net figure was 100 billion euros but would be structured over time.

Here is a breakdown of how the bill is being calculated.

– ‘Reste a liquider’: 30 billion? –

Known even by English-speakers in Brussels by the French term Reste a Liquider (but translatable as ‘amount to be settled’), these outstanding budgetary commitments represent the lion’s share of the Brexit bill.

Each year the EU budget has two columns: payments and commitments. These arise because some payments in a given year relate to commitments made in past years for multi-annual projects.

This has been one of the main sources of public disagreement in the Brexit debate, with Britain saying it should not be forced to pay for EU issues after it leaves, but Brussels insisting it must pay the tab for things it has already agreed to.

The Breugel think tank in Brussels estimates that the net total RAL on Brexit day will be between 30 billion euros and 39 billion euros.

– Multi-year budget: 20 billion? –

The EU approves “multi-annual financial frameworks” in blocks of several financial years, and the current one, which Britain has signed up to, runs from 2014-2020.

Although they are not officially budgets, with that term reserved for annual budgets, they are viewed by the EU as a legal commitments.

Brussels says that although Britain will leave the EU in March 2019, London is liable for everything in the budget for the rest of 2019 and for the whole of 2020.

With Britain’s annual contribution estimated by the European Commission — depending on what parameters are used — as between 10 and 13 billion euros, the net figure for this part therefore comes to between 20 and 27 billion euros.

British Prime Minister Theresa May’s earlier pledge to honour this part of its commitment gave rise to the figure put on Britain’s original Brexit bill offer of 20 billion.

– Pensions: 7 billion –

One of the key commitments that the EU claims Britain has made is to the payment of pensions for EU officials.

These payments should continue after Brexit because the officials were employed during Britain’s four decades of membership, the argument goes.

Breugel estimates the net pensions figure at between 7.7 billion euros and 10 billion euros.

– Other commitments: dozens of billions –

Brussels wants to include other commitments in the final bill that aren’t included in the budgets or reste a liquider, potentially amounting to several dozen billion, but probably far less.

These include pledges for migration such as the EU’s deal with Turkey, and other strategic investments.

Then there are “contingent liabilities” — possible expenses including contributions to possible future bailouts that Britain has agreed to be part of, in Ireland for example, or to accession funds for future members whose membership ambitions began when Britain was part of the EU.

The EU 27 also want Britain to pay for the cost of moving the European Medicines Agency and European Banking Authority from London to their new homes in Amsterdam and Paris respectively.

– Net total versus actual total –

The net total of all the British commitments above could add up to around 100 billion euros, the figure cited by the Financial Times.

But for its part Britain would be owed several billion euros by the EU including its stake in several EU buildings, and its shares in the European Investment Bank.

That would bring the final figure far lower, coupled with what the FT said was tapering of payments over several decades.