Oral answer (Lords) on Brexit: Outstanding Commitments - Feb 6

To ask Her Majesty’s Government what agreement, if any, has been reached with the European Union concerning payment in the event of a no-deal Brexit of £39 billion for the United Kingdom’s estimated outstanding commitments.

My Lords, the Government are committed to getting a good deal for the UK, and have agreed a fair financial settlement with the EU. Even if the UK leaves without a deal, the Government have always been clear that the UK has obligations to the EU—and that the EU has obligations to the UK—that will survive its withdrawal, and that these obligations would need to be resolved.

My Lords, I am sure everyone in the House will agree that we—be it as individuals or as a nation—should pay our debts. But I suspect that most of us would also agree that we should not pay bills when we have received nothing in exchange. I hear that the European Commission is demanding that, whatever happens—should we leave without a deal—it would expect £39 billion from us. This probably has more to do with the hole it will have in its budget when we leave, rather than anything else. Could my noble friend reassure me that we will definitely renegotiate any financial deal should we—regrettably—leave without a deal on 29 March?

The position on the financial settlement was that it went alongside the withdrawal agreement. It is, if you like, looking at our obligations to the EU as a result of our membership. It is not connected to the future economic partnership that we hope to negotiate with our European friends and partners. Were we not to honour that financial settlement, which is part of the withdrawal agreement, that would probably have a significant bearing on our ability to get a good deal for the UK in the future.

My Lords, I thoroughly agree with everything the Minister just said: if we do not honour an obligation that we signed up to, we will have difficulty negotiating a sensible deal with the EU. Does he also recognise that the way we handle this is being watched around the globe? If we are seen as people who do not meet obligations—trying to find some technical angle or way to weasel out of a commitment that we have made—we will have no chance of getting future trade agreements of any value.

The noble Baroness is right. We need to remember that our net contribution, because of the way it is calculated, is made up not just of what the UK sends to the European Commission but of what the European Commission sends to the UK. Therefore, there are two parties to this; both are making contributions, and both need to honour their obligations. We believe that the financial settlement does just that.

My Lords, would the Minister not confirm that the £39 billion was entered into in good faith by the Prime Minister and the Government in December 2017, and simply represents what the two sides—the Commission and the British Government—believe is owing in respect of various commitments over many years? If that is so, the suggestion that we do not owe this money if we leave without a deal has no basis.

In that sense, that is correct. The range of the figure in the financial settlement is between £35 billion and £39 billion. The OBR has put it at the top end of that range. When we went into that negotiation, one thing the European Commission wanted to do was discount the rebate, which is a significant element of our contributions and benefits the UK. That was included in the final calculations, so I believe it represents a good settlement, alongside the withdrawal agreement, and should command support on all sides of the House.

My Lords, is it not right for us to assume that the majority of British people who voted to leave the European Union did so because they had a different perspective on the future of the United Kingdom—particularly on control over decisions? The idea that the country is full of animosity towards the European Union—when, after all, the initiative to leave was taken by us—is false. Therefore, the people expect us to meet the obligations that we entered into as far as the European Union is concerned.

I am very happy to agree with that sentiment. We want a deep, ongoing relationship with our European friends; part of that means honouring what we signed up to. This was what we signed up to at the Council meeting back in November, and we should support it.

My Lords, was not the £39 billion made up of our annual contributions for the two years of the implementation stage? I cannot see how we would owe that if we were to leave with no deal. Did a committee of your Lordships’ House not say that we would not owe the EU anything with no deal?

That position, which was taken by the House of Lords committee, was looked at by the Government, who took a different view, believing that there were obligations. They observed that there was no existing legal mechanism to enforce them, but they said that the European Union would be entitled to pursue litigation through courts to recover payments. As I say, the best way to resolve all these issues is through a deal, and through the deal that is on the table.

My Lords, the Minister has been extraordinarily helpful to the House today. Maybe he could just confirm something for someone like me, who sometimes finds it very difficult to follow these arguments. Is he saying to people who say that there is some way in which we can just wave aside this £39 billion commitment, that that is bogus and misleading the British public? Can he also confirm that the British Government believe that when they have international obligations, they should meet them?

I agree with all of that. We certainly agree with my noble friend Lord Hamilton, who made the good point that part of the £35 billion to £39 billion covers the implementation period, which is the two years of ongoing contributions to the European Union. He is also therefore correct to point out that if we left without a deal, there would not be an implementation period, so that money would not be paid. However, there would need to be some mechanism to reach a negotiated settlement, or it would be as a result of a legal challenge in some court.

My Lords, how will we deal with things such as the £1 billion we have invested in Galileo, which we will now not be able to use? How will that be resolved—as part of the £39 billion, or separately?

All these figures went into the financial settlement; that is how we arrived at those numbers. As regards our future relationship, that is a matter for the future economic framework, which, once we get the withdrawal agreement through your Lordships’ House and on to the statute book, we can look forward to negotiating with our European friends.