Walking away from the EU without paying a ‘divorce bill’ – or only a small one – would have major consequences for the remaining member states, because they would be forced to make up the shortfall for EU projects until 2021. That would leave the UK short of goodwill, writes Michiel Scheffer, a regional minister in the Netherlands, and would probably sour the prospects of future trade deals.
One of the most contentious elements of Brexit is what has been branded the ‘divorce bill’. It is sometimes regarded as a punishment, but it can also be seen as the consequence of the EU’s budgeting. Unlike Member States, the EU has a multi-annual financial framework (MFF) with programmes of the same duration – from 2014-2021.
Discussing the implications of this in July at the Lords select committee on the EU, the EU’s chief Brexit negotiator Michel Barnier said:
“There are thousands of town halls, municipalities, businesses and universities that have undertaken projects on the basis of those undertakings and commitments. If we are to cut 15 per cent or whatever – that is the UK share – there will be an explosion everywhere across the board… There are literally thousands of programmes all over Europe – under the CAP, Erasmus, universities – that have been committed to and to which we have said we are going to pay this much money or that much money. And if the British share of that commitment were to go missing, thousands of programmes would have to be interrupted. That is why I am saying that that is the main risk of failure that we run.”
I am one of those town hall politicians. As regional minister of the Dutch province of Gelderland (our capital is Arnhem – the ‘bridge too far’ in 1944), I share responsibilities for a regional operational programme for innovation and energy transition (part of the European Regional Development Fund), a cross-border programme, Interreg Germany-Netherlands (also part of ERDF) and a rural development programme (part of the Common Agricultural Policy). We are also involved in Interreg B and C projects and Horizon 2020, as well as a regional strategy to maximise the use of EU funds by universities and SMEs. Our target is to obtain a total of €2bn in project funding for the 2014-2021 period.

What does Brexit and the divorce bill mean for us? Firstly, the Netherlands is a trading nation, so a substantial part of our industrial output is exported to the UK. The best-known product we supply to the UK is Heinz HP sauce, which is made near Arnhem. We also export carpets, machinery, flowers and fruit to the UK. Brexit will certainly cause disruption, but it may lead to opportunities: it is too soon to say. We regret Brexit, because it will distract the EU from tackling issues such as climate change. But we have a reputation for commercial astuteness and our products are much in demand.
Now to the divorce bill. As good housekeepers, our strategy is to allocate funds swiftly and efficiently to the best possible projects, and to ensure they have meaningful results in terms of innovation and social impact. In practical terms, this means that by the end of 2017 90% of our funds are linked to projects lasting on average three years. This means that at the moment of Brexit in March 2019, a substantial amount still has to be paid out to projects and their partners – to pay for real costs such as wages and equipment. For our programmes, this may amount to several hundred million euros – and that is only for a province with two million inhabitants and an annual budget of €1bn.
So what will happen if the divorce bill isn’t settled? European projects are funded from several sources: the EU, national funds, regional funds and cash and payments in kind from project partners. In the worst case scenario, the EU loses 15% of its budget. The MFF’s rule is that if EU revenues decline, the size of the MFF declines accordingly. The EU cannot foot the bill. The first fallback is that member states cover the difference. The second is that regions cover it. If neither of those happens, the funds will be cut. Our programmes would lose between €50m-100m.
I will not speculate about how the shortfall will be made up, since that is a political process that has yet to happen. Each programme has its own funding rules and political dynamics. One solution, however, should be excluded on principle. Cutting university and business funding would be politically unacceptable because it would mean those who benefit from EU membership would bear the cost of Brexit. Some may say that savings can be made by better management and control of funds, but Dutch management is already excellent: 98% of project funding is well-attributed, managed and controlled. The result, therefore, is that national and regional budgets will be called on to make up the shortfall.
Michel Barnier is right. National, regional and local governments will be forced to cover the cover the cost if Britain defaults on its divorce bill. We will have less money to fund better social services, education, infrastructure and speed up the transition to renewable energy. The political price will be hefty because local and regional politicians influence their national governments and their stance towards post-Brexit relations between the EU and the UK. A favourable divorce settlement for the UK – or none at all – may come at a high price for the UK in the long run.
This post represents the views of the author and not those of the Brexit blog, nor the LSE.
Michiel Scheffer (@MichielScheffer) is a regional minister in Gelderland in the Netherlands, a member of the EU Committee of the Regions and an LSE alumnus.
The article “goes round the houses” but can be quickly summed up as “when you leave, pay a hefty sum into the EU coffers to enable a variety of current projects to continue”, the carrot being this may buy us some goodwill.
We are talking billions here, so this “potential” goodwill comes at an eye watering price and the question has to be, goodwill apart, why should we? HP isn’t the only brown sauce on the market and the authors patch isn’t the only one which grows flowers.
If the EU wants to have these projects, then let its member countries pay for them, if that means the largest contributors have to pay more and some countries having to contribute for the first time, so be it, we have a variety of needs in this country which need funding.
There was a time when the Brits were gentlemen. A gentlemen doesn’t pass the bill for things he ordered to others, even if he changes his mind.
This is like ordering a dinner and sneaking out as the desert is served.
It’s one thing for Britain to opt to stand alone in the world, it’s quite another to do so without friends and without a reputable reputation.
There is no need to pay anything. When you leave a tennis or golf club you don’t have to make a final payment for all the projects planned during your membership period. It’s tough luck, the members who are left, and those who join in the future have to find a way of covering the costs.
What does Article 50 say about withdrawing nations payment obligations? The UK should honour its obligations within the rules that are identified. The issue really seems to be that Article 50 doesn’t obligate outgoing nations to pay anything once they have left.
I get that the EU didn’t want to raise any prospective members concerns by raising punitive fines for leaving the EU if it didn’t work out and thereby “encourage” new members, but that leaves the possibility of having a weak or non existent case should one member decide to do so.
Can someone please identify what Article does or doesn’t say about nations that wish to leave the EU and their ongoing financial commitments?
How can you default on an illegal arbitrary bill? Any monies paid to the EU after we exit would be on a purely goodwill basis and should be appreciated as such. Just because the EU budget system is not in line with the article 50 system is not the fault of the UK. The EU should of thought of this when adding article 50. Britain cannot be forced to pay because the EU screwed up.
The author needs to understand the responsibility that the EU needs to bear for Brexit. All the EU negotiators and heads of EU states needed to do was give Cameron something on immigration, welfare to sell to the British people and the vote would be the other way. But no, the EU had to show how tough it was and give nothing. Then in May before the vote the head honcho of the EU had to stick his oar in by insulting the British and calling them deserters.
In English we have a saying “if you have made your bed, then you need to lie in it” or sort your own funding out deserters do not pay.
You forget that the United Kingdom is just one of 28 member states. As such, it has a say in European matters, but no more than other countries. Given that the EU is not a British colony, the UK does not have the right to impose its will on the other member states. If Mr. Cameron wanted to change EU rules for immigration, he could have done so within the existing structure. The idea that the EU is somehow a compromise between the UK on one hand and the 27 other countries on the other, show exactly what’s really responsible for Brexit: staggering arrogance on the part of the British and a complete and utter lack of understanding of what a cooperation of more than half a billion people in the largest economy on earth entails.
Quite an irresponsible statement. If the UK is just one 28 states, why the hell are we responsible for a whopping 15% of the EU’s budget.
There has been some talk of a two-year transitional period, after the Article 50 deadline expires in March 2019. This would take us through to March 2021, which is also conveniently the date the current EU Multi-Annual Financial Framework (from 2014 to 2021) expires.
So it seems to me this problem would be largely solved if there was indeed a two-year transitional period.
I see that the EU annual budget (about which I am not an expert) runs from January 1st to December 31st each year. So the exact dates of the latest EU Multi-Annual Financial Framework (for 2014 to 2020) are from January 1st 2014 to December 31st 2020.
Friedrich – if there is a problem, it is the EUs problem, not ours and as far as I am aware, March 2019 is when we leave, with no transitional period tacked on.
Andor Admiraal – “There was a time when the Brits were gentlemen”
And many still are but when you are dealing with those who are not gentlemen / gentlewomen you are likely to be taken advantage of, so you have to deal with those differently.
“A gentlemen doesn’t pass the bill for things he ordered to others”
I agree, so it is fortunate that we haven’t ordered anything we expect others to pay for.
“It’s one thing for Britain to opt to stand alone in the world, it’s quite another to do so without friends and without a reputable reputation”
Friends do not try to extort money from you to pay the bills that they incurred.
Andor Admiraal –
“Given that the EU is not a British colony, the UK does not have the right to impose its will on the other member states”
It is not a German colony either but that didn’t stop Merkel inviting all and sundry to come to Europe and when they came in their hundreds of thousands, insisted on various countries taking them in and threatening hefty fines for those who refused.
Is it punishment? Is it blackmail? Is it to discourage the others? To want to be a member of a club which is run like the EU, you are either given a lot of money you don’t deserve or else you are daft beyond belief. Utter BS.
March 2019 – December 2020 = 21months x (350m x 52 ÷ 12) 1,516m= 31,850m – the rebate = about 17 billion, so even if we were daft enough to pay for upto 2020 then it would be nowhere near what the EU are trying to rob us for. Where is this bill anyway?.
Germany has made clear that nonpayment will mean a case against the UK at the International Court of Justice in the Haguw, which is a UN body competent to oversee such cases. David Cameron signed on on the EU budget which runs till 2020 this is a contract and there are penalties for breach.
John Gerard = It has already been established that there is no legal basis for us to continue paying any monies to the EU after we leave, so they are going to have to find another country daft enough to give them its taxpayers money to fritter away.
The article seems to miss an important point: the budget essentially takes money from 28 countries, largely to spend in those 28 (plus some minor external activities like aid). When one leaves, the other 27 will be funding those activities in the remaining 27 countries, and the UK will take over funding UK activities.
If the burden matched the benefits, there would be no net loss to either side. Of course, it doesn’t: because the UK has long shouldered more of the costs than we received, our departure leaves the EU out of pocket.
One observer pointed out recently that if it were a net recipient of EU funds leaving, such as Greece, would the first Article 50 topic for agreement have been how much more money the EU would give them in lieu of continued benefits? I think we all know the answer to that, don’t we?
In reality, if the UK’s contributions stop at the same point as the UK’s receipt of funds, the extent of any shortfall will be limited to the extent of any previous imbalance in the EU’s favour – which, of course, is hardly something anyone could expect the UK to pay for!
(If we go out for a meal each week, and I normally put in £10 even though I only eat £8 of food, then I move away from the area, would my former dining companions demand I keep sending them the extra £2 every week? If so: I shouldn’t have been dining with them in the first place!)
The e/u has already taken 2years of our money loads of time to get its act together.To even think of paying(which will be much more than stated)the e/u is a disgrace.How long would it take to make this back in trade with them,as we already lose billions per year as it is.This amount would support our loss &see us through,whilst we sort out? Would the e/u collapse with in a couple of years or so with out this huge sum our p.m.is throwing away,thus no deal needed,?