Brexit: Financial Settlement

Tuesday 11th September 2018 Lords Chamber

Question

14:37

Asked by

[Lord Balfe]

To ask Her Majesty’s Government what assessment they have made of the extent to which the financial settlement agreed with the European Union will be justiciable, in part or whole, in European Union, national or international legal systems, in the event of the United Kingdom renouncing the agreement.

[Lord Balfe (Con)]

My Lords, I beg leave to ask the Question standing in my name on the Order Paper and draw attention to my entries in the register of interests.

[The Minister of State, Department for Exiting the European Union (Lord Callanan) (Con)]

My Lords, the Prime Minister has been clear that the financial settlement reflects the UK honouring our outstanding commitments made during the period of our membership. Our estimate, based on current assumptions, is that it will fall within the range of £35 billion to £39 billion. This settlement has been put forward within the context of an overall agreement, under Article 50, of the UK’s withdrawal, taking into account the future relationship.

[Lord Balfe]

I thank my noble friend the Minister for his Answer. Do HMG realise that while any doubt remains as to whether the debts owed to the EU 27 Governments will be honoured, no Minister or civil servant in any member state can contemplate the UK taking part in any other activities, such as Galileo, which might add to those liabilities and thus increase the debt that might not in the event be paid?

[Lord Callanan]

Of course we are committed to the financial settlement in the context of the withdrawal agreement, but if we do not have a withdrawal agreement, that commitment falls away.

[Baroness Hayter of Kentish Town (Lab)]

Does it? It would be quite nice to hear from the noble Lord whether he really means that it would fall away. But whether or not the Government will honour the commitment they have given, can he confirm that they will honour the promises they made to our farmers, and indeed the recipients of other EU funds—whether structural or research money—to maintain the full amount that they receive from Brussels at the moment?

[Lord Callanan]

Yes, we stand by our commitments.

[Lord Marks of Henley-on-Thames (LD)]

My Lords, the December agreement on the divorce bill was accepted by the Minister in his first Answer as settling the UK’s existing obligations. Do the Government now accept the Institute for Government’s view that if we reneged, the EU could seek redress, if not in the CJEU, then in the International Court of Justice in The Hague, under Article 70 of the Vienna convention? Does the Minister also agree that such a dispute would not only undermine future co-operation with the EU, as the noble Lord, Lord Balfe, said, but trash the UK’s reputation for honest dealing and would encourage other WTO members to object to our schedules, which any one of the other 163 members could do?

[Lord Callanan]

Of course, we will respect our legal obligations. We are a law-abiding nation; that goes without question. But there are several conflicting legal opinions as to our liabilities. Your Lordships’ House held a committee of inquiry under the chairmanship of the noble Baroness, Lady Falkner, on which I was privileged to serve. Its conclusion was:

“On the basis of the legal opinions we have considered, we conclude that, as a matter of EU law, Article 50 TEU allows the UK to leave the EU without being liable for outstanding financial obligations under the EU budget and related financial instruments”.


There are alternative legal opinions—in fact, I have spent the morning reading most of them—but it is a complicated area of law. Of course, we want none of these scenarios to come to pass; we want to reach an agreement. Indeed, we have reached an agreement, and we will honour our commitments within the context of the withdrawal agreement.

[Lord Kerr of Kinlochard (CB)]

Did the Minister notice that the head of the NAO has said, formally and on the record, that we will be responsible for paying the bills whether or not there is a withdrawal agreement? Does he accept that the costs of £39 billion are the costs of past commitments, not of future access? They are computed as the cost of the commitments we have already entered into. Is he seriously contemplating that the UK would become a defaulted state?

[Lord Callanan]

At the risk of repeating myself, I said we will honour our legal commitments, but it is a complicated legal area. There are some great legal brains in this House who would, no doubt, want to opine on the matter, but there are different opinions. Ultimately, I suspect this will come down to a matter of politics. We do not want to get into a dispute on these matters and so we have negotiated a settlement. It is hugely complicated, there are a number of different financial areas involved, but we remain confident that we will reach a withdrawal agreement and meet those commitments.

[Lord Hamilton of Epsom (Con)]

Can my noble friend confirm that nothing is agreed until everything is agreed, and that includes the financial settlement?

[Lord Callanan]

Yes, that applies to us. It also applies to the European Union.

[Lord Watts (Lab)]

Could the Minister follow on from the earlier question and give some indication of whether an assessment has been made of how much the liability will be for the UK Government if there is no deal?

[Lord Callanan]

We are confident that there will be a deal but, as I said, if there is no deal, the financial commitment agreed to in the context of a deal will no longer apply. As I said, we will meet our legal commitments.

[Lord Butler of Brockwell (CB)]

My Lords, as a member of the EU sub-committee chaired by the noble Baroness, Lady Falkner, I can say that the Minister quoted it correctly. There is no enforceable action by law, but the committee never denied that the UK would have moral commitments.

[Lord Callanan]

I hope we will not get into these scenarios. The Vienna Convention on the Law of Treaties 1969 has been mentioned and that might also apply in such circumstances but, as I said, we do not want to get into these scenarios. We are confident that we will reach a deal and as part of that deal we have agreed a financial package.

[Lord Mackay of Clashfern (Con)]

My Lords, it will not surprise any of us that there should be differences of legal opinion about this sort of question. I hope the Government will be able to press forward with the best proposal I have seen—the one agreed at Chequers—in order that this becomes a purely academic question.

[Lord Callanan]

Obviously, it is to be hoped that we do not get into any disputes. We remain committed to the Chequers deal; as I said yesterday, we are awaiting a formal response from the EU. We think it is a good proposal, involving compromise on our behalf. We need now to see similar movement and compromise on the EU’s behalf.

[Lord Bassam of Brighton (Lab)]

The former Foreign Secretary says that the EU can “go whistle”. Would the Minister like to comment on Mr Boris Johnson’s remark?

[Lord Callanan]

I think it is best if I stay away from these particular arguments.

[Lord Craig of Radley (CB)]

Galileo has been mentioned. Can the Minister give the House any information as to the likely future involvement of this country in Galileo after Brexit?

[Lord Callanan]

This matter is the subject of ongoing negotiation. We have already made a substantial commitment to Galileo but we will need access to all parts of it if we are to continue to participate. That is what we want to do and it is what we are negotiating for. These matters remain subject to discussion.