The Government today conceded that Britain’s divorce bill could rise to a staggering £42.5 billion for exiting the EU.
Finance Minister Simon Clarke has revealed the size of the Brexit payment is now set to be up to £7.5bn higher than originally estimated.
It had originally been calculated that Britain would pay between £35 billion and £39 billion as part of leaving the bloc.
But that is now estimated at billions of pounds higher, with the government blaming the current rising rate of inflation.
The height of the Brexit divorce law has been a major dispute between London and Brussels during the tough negotiations over the UK’s withdrawal agreement.
This was eventually signed by Boris Johnson in January 2020.
A large part of the UK’s current payments to Brussels consist of so-called “reste à liquider”, which are outstanding EU budgetary commitments.
According to the new estimate published today by the government, these are estimated at 23.8 billion euros.
Britain is also paying off some of the EU liabilities from its 47-year membership in the bloc.
The most important of these are the pensions and other benefits of EU officials.
The government now estimates that “assets and liabilities” from the UK’s EU membership will now cost 7.5 billion euros as part of the Brexit divorce bill.
This is above a previous estimate of two to four billion euros.
Overall, the Brexit divorce bill is now estimated at €50.2 billion, equivalent to £42.5 billion.
Last year, the Treasury estimated the size of the Brexit divorce bill at £37.3 billion.
Finance Minister Simon Clarke has revealed the size of the Brexit payment is now set to be up to £7.5bn higher than originally estimated
It was originally calculated that Britain would pay between £35 billion and £39 billion to leave the EU. This has now risen to £42.5 billion
In a written statement to Parliament, Mr Clarke said: “The latest estimate of £42.5 billion shows an increase from the original range of £35-39 billion, mainly reflecting the recent assessment of the UK’s obligation under Article 142 for the EU is due to pensions.
‘The main drivers are the latest discount rates and inflation assumptions set centrally by the government for long-term debt valuation.’
But despite the increase in the estimated cost of Brexit, Mr Clarke suggested the sum actually paid by the government might not be that high.
He added: “Because this is a multi-decade commitment, the variables used in this forecast will continue to fluctuate up and down.
“The agreed size of the underlying liability will remain unchanged and the UK will continue to pay those liabilities when due at their actual value at that point in time.”
The exit agreement was signed by Boris Johnson in January 2020 after tough negotiations between London and Brussels
A Treasury document released today shows how the UK has so far paid £11bn as part of the financial deal
Over the course of 2021, more than £5.8 billion was paid to the EU under the Withdrawal Agreement
A Treasury document released today shows how the UK has so far paid £11bn as part of the financial deal.
Over the course of 2021, more than £5.8 billion was paid to the EU under the Withdrawal Agreement.
Referring to the increased estimated size of the total Brexit divorce bill, the Treasury document states: “The latest estimate is outside the range of the original reasonable estimate.
“This is primarily due to the increase in the estimate of the UK’s share of Article 142 pension costs due to current economic conditions, namely additional inflationary pressures.
‘The modeling of all Treasury Department assets and liabilities is based on the latest economic and fiscal data to ensure the accuracy and reliability of the estimate.’
A Tory Brexiteer said they were “not very concerned” about the estimated increase in the divorce bill.
Former Brexit Secretary David Jones told MailOnline: “It’s always been an estimate and will move both ways before it’s settled.”
A Treasury spokesman said: “These figures are an estimate which will fluctuate up and down over time, but the agreed underlying payment terms remain unchanged.
‘The unprecedented recent increase in inflation and changes in discount rates have increased our pension liability, which is the main reason for the increased estimate.
“The true cost of the settlement is confirmed when payments are made based on what it was at the time.
“The Treasury Department continues to monitor and verify these payments in accordance with the negotiated agreement.”