The European Union wants to agree with Britain on a formula for calculating how much it will owe the bloc after Brexit.
This is rather than defining a concrete sum in advance, EU officials said. The European Commission’s chief negotiator for Brexit, Michel Barnier, briefed the 27 remaining countries on Monday. Furthermore, they went deep into methodology the EU was considering. At the seminar, he said some components are still undecided. Therefore, it is impossible to fix a precise sum now.
“A possible approach … was that we negotiate a methodology.” “We take a snapshot of EU accounts at the moment of Britain’s exit, we do a quick audit and we agree on how to calculate the British share of the accounts,”. “If we agree on that, the final number will come out after the audit.” “We will throw all the numbers into a formula on which we all agree, and the formula will produce an exit bill”. EU officials say the possible bill will be 55 to 60 billion euros. That was mentioned in Brussels since last year. However, it was only a very rough estimate.
“I would expect a number quite close to that (after Brexit), but it should be treated more as an order of magnitude than a precise number, the EU official said.
The key variable would be Britain’s share of all EU assets and liabilities at the moment of leaving.“The thing is, nobody knows what that share is.” “And the Commission has no definitive answer to that,”. “It could be 12, 13, 14 or 15 percent, or something else. And we need an exact figure because one percentage point is several billion euros.”
The starting point for calculating Britain’s share of EU assets and liabilities is its annual contribution to the EU budget.
But, this can vary dramatically. In 2014, Britain paid 11.34 billion euros and, in 2015, 18.21 billion. This was after a rebate. It was originally secured by prime minister Margaret Thatcher. Now, that has fluctuated between 6.25 billion euros and 3.56 billion over the past decade. The Commission has plans to consider basing the calculations on an average of several years. However, the question is which ones. Also, how to reflect fluctuations in the pound’s exchange rate. Moreover, national contributions are calculated on the basis of Gross National Income (GNI). This can be revised up to four years later.
In 2014, prime minister David Cameron challenged an EU demand for an additional 2.1 billion euro contribution. This was following an upward revision of Britain’s past GNI numbers. EU governments will likely agree on the formula they want the Commission to employ by the time they issue a detailed negotiating mandate. Whatever final exit bill they agree upon will be paid by Britain in instalments rather than a lump sum. Britain will also probably contribute to pensions of EU officials, British or otherwise. They will also address the issue of longer-term guarantees. These are provided by the EU budget for institutions such as the European Investment Bank.