The front-runner in the contest to succeed Theresa May as Conservative Party leader – and prime minister – has raised the issue of the UK’s “divorce bill” from the European Union (EU) as part of his Brexit strategy.
Boris Johnson has threatened to withhold the money until he gets a better deal with the EU than the one negotiated by Theresa May.
So, what does the UK owe, and what could happen if the money isn’t paid?
What is the “divorce bill”?
This is the money the UK agreed to pay the EU after leaving on the 29 March (this Brexit date has been delayed until 31 October).
Officially it is called the financial settlement (unofficially, the “divorce bill”) and was negotiated as part of Theresa May’s Withdrawal Agreement.
The withdrawal agreement was the deal which would see the UK leave the EU on 29 March, and then enter a transition period until 31 December 2020.
During this period, the UK-EU trading relationship would stay the same – allowing both sides to try to sort out a future trade deal.
Although no longer an EU member, the UK would pay into the EU budget as it does now (and receive funding back).
But the deal was rejected three times by MPs at Westminster.
How much is it?
The Withdrawal Agreement (agreed in November 2018) set out calculations, rather than a figure, for how much the UK would need to pay to settle all of its obligations.
The UK Government estimated that the settlement would cost between £35bn (€39bn) and £39bn (€44bn).
The biggest part of the bill were the UK contributions to the 2019 and 2020 EU budgets.
The Office for Budget Responsibility (OBR) – the UK’s public finances watchdog – estimates this at £16.4bn (€18bn).
After 2020, the UK would contribute towards EU budget commitments made while the UK was still a member of the EU, but not yet paid. This is estimated at around £19bn (€21bn).
It would also contribute about £9bn (€10bn) towards EU staff pensions incurred before 31 December 2020.
The UK would receive some money back: the £3bn (€3.5bn) of capital it had paid into the European Investment Bank as well as a small amount of capital paid into the European Central Bank.
The OBR expects that most of the money – around three quarters of the total – would be paid by 2022, with some relatively small payments, of around €100m, still being made in the 2060s.
Withholding the money?
Some have suggested withholding the money – using it as a bargaining chip in future negotiations with the EU, or injecting it into the UK economy to try to avert the effects of a no-deal Brexit.
This could have legal and other consequences.
The Institute for Government (IFG) think tank, says refusing to pay could lead to a legal challenge. It says: “The EU might seek redress through the International Court of Justice or the Permanent Court of Arbitration, both located in The Hague.”
But a House of Lords report into Brexit and the EU budget stated: “While the legal advice we have received differed, the stronger argument suggests that the UK will not be strictly obliged, as a matter of law, to render any payments at all after leaving.”
Catherine Barnard, professor of EU law at Cambridge University, says that because such a situation has never arisen before “no one is quite sure what might happen”.
When it comes to future talks with the EU – such as negotiating a free trade agreement – withholding the money would sour relations.
The EU has said consistently that it will only begin trade negotiations once the issue of financial obligations, citizens’ rights and the Irish border have been sorted.