UK COUGHS UP FOR EU DIVORCE.

It's being reported today, with a degree of fanfare from some and fury from others, that the UK government has 'agreed' its bill for leaving the EU. A sum in the region of £45bn has been suggested and it's said that this has been the subject of communications between the UK and EU over the last few days.

Given that the UK and EU have yet to agree the details of their relationship after the UK has left the bloc, I find it difficult to understand how the size of any 'divorce bill' can be agreed. Yes, the UK undoubtedly has commitments relating to agreements it entered into whilst a member of this profligate club and these should be honoured, but how can any other costs be assessed at this stage in the negotiations ?

The EU has a 7 year budget cycle and its members agree the basic principles for each cycle before agreeing individual budgets for each of the years concerned. Thus, the current budget cycle, to which the UK agreed and for which the UK is committed, runs from 2014 to 2020. Allowing that the UK will be leaving the EU in March 2019, this means that we have a basic commitment to continue to make payments up to and including the 2020 budget year. As the UK's net annual contribution is around £10bn, a 'divorce bill' of about £18bn to cover that period might be a reasonable starting point, and this was the initial suggestion made by UK negotiators; anything more than that figure is all about perceptions and negotiations.

The EU expects the UK to pay for future costs which have already been initiated, such as for the pensions of EU employees, an amount which is not exactly easy to calculate; additionally, it wants payment for other long term costs which are equally nebulous. It now seems that these largely unquantifiable costs have been assessed at around £25bn, bringing the UK's bill up to its latest estimate.

Inevitably this won't be the end of things. There is continuing discussion about the nature of the UK's relationship post-Brexit and we will undoubtedly finish up paying for membership of an assortment of EU organisations as well as being expected to contribute to whatever trading arrangements are eventually arrived at. Nonetheless, things are progressing, it seems.