Post-Brexit Financial Settlement

Lord Frost Excerpts

Thursday 15th July 2021 Lords Chamber

[Lord Moylan]

To ask the Minister of State at the Cabinet Office (Lord Frost) what assessment Her Majesty’s Government have made of the European Union’s consolidated budget report for 2020, which states that the United Kingdom has liabilities of €47.5 billion as part of the post-Brexit financial settlement.

[The Minister of State, Cabinet Office (Lord Frost) (Con)]

My Lords, the Government’s regular update to Parliament on EU finances has been published today by my right honourable friend the Chief Secretary to the Treasury. The Treasury estimates that the current cost of the net financial settlement is £37.3 billion. This remains within the previously published central range. The €47.5-billion figure is an estimate produced on a different basis by the EU for its internal accounts processes.

[Lord Moylan (Con)]

My Lords, these are large sums—larger even than those we were discussing yesterday when we discussed the cuts to overseas aid. It appears that the EU is the final arbiter of what we should pay. I understand that there are circumstances when you might want to give a trusted friend details of your credit card, including the three numbers of the back, but if that trusted friend is abusing the card, is it not the right policy to cancel it?

[Lord Frost (Con)]

My Lords, it is of course a legal obligation to make the payments to the EU that were agreed in the withdrawal agreement. They were heavily negotiated in some detail at the time, and of course we stand by them. It was a general difficulty, with a very large sums that we were paying to the European Union, that underlaid the referendum vote in June 2016.

[Lord Foulkes of Cumnock (Lab Co-op)]

Surely the Minister is not surprised by this figure, which was predicted not just by the European Union but by the OBR and other organisations. He will recall the campaign that claimed we were paying £350 million a week to the European Union when the reality was less than half that. How can we now believe Ministers in a Government where the Prime Minister is a stranger to the truth?

[Lord Frost (Con)]

My Lords, we are not surprised by these figures. As I said, the details of how they are calculated are set out in the withdrawal agreement in exhaustive detail, through several dozen articles. The question to which the noble Lord alludes has been sufficiently debated. There are different views on this question but what is clear is that, before we left the EU, we were paying very substantial net sums into it.

[Viscount Ridley (Con) [V]]

My Lords, RTE reports that our 2021 payment is to be €6.8 billion whereas, in the latest Budget Red Book, table C.6 on page 97 shows our 2020-21 sum as £10.4 billion—nearly twice as much. The sum for 2021-22 is £11 billion, so the discrepancy is not likely to be due to year-end differences. The difference is several billion pounds, which is a big number by any standard. As Senator Everett Dirksen said 60 years ago:

“A billion here, a billion there, and pretty soon you’re talking real money.”


Can the Minister explain the discrepancy?

[Lord Frost (Con)]

My Lords, I do not think that any of us on this side of the House feels particularly comfortable paying large sums to the European Union, but it is an agreed outcome in the withdrawal agreement and we stand by it. There are differences in the calculation methods between the EU arrangements and ours. For example, their figure does not include all the receipts we will receive in future, there are different ways of forecasting and so on. We are not surprised that there are some differences. What matters is our own calculations and that we are comfortable with the bills when they arrive, which we are.

[Lord Jones of Cheltenham (LD) [V]]

Does the Minister accept any responsibility for failing to negotiate this bill properly, or are he and the Prime Minister unfamiliar with how divorce works?

[Lord Frost (Con)]

This is one of the occasions when I can disclaim direct responsibility for that particular part of the negotiation in the previous withdrawal agreement. I have been known to be a little uncharitable at times about every aspect of the work that was done by my predecessors but, in this case, on the withdrawal agreement, they did a good job. Given the legal framework and commitments, it was always likely that the outcome would be in this broad area.

[Baroness Chapman of Darlington (Lab)]

The Minister negotiated at length to agree a formula for calculating the UK’s contribution. Whatever we think of the amount, there was some degree of transparency in this. In the interests of transparency, can the Minister tell us whether he played any role in advancing the interests of Aquind Ltd, owned by a former Russian executive, in the Brexit negotiations? I would welcome an answer to my letter to him on this important matter, but perhaps he could tell the House now whether he ever raised the Aquind project in negotiations with the EU.

[Lord Frost (Con)]

My Lords, I welcome the noble Baroness to the Front Bench. I look forward to debating such issues with her on what I hope are many occasions in the future. The link between the EU budget and the question she asks is possibly a little tenuous, but nevertheless I am happy to say that I received her letter and obviously will reply shortly. I have never met Mr Temerko and I have no recollection of discussing his business with any Ministers or anybody else. We are establishing what correspondence, if any, there was with me or my office last year, and will reply.

[Lord Balfe (Con)]

My Lords, certain people have tried to make mischief with this figure. What we need—I think we have now had it from the Minister—is a clear statement that we will stand by the agreement that we negotiated. If he can say that, I am sure that it will find favour on both sides of the negotiating table.

--- Later in debate ---

[Lord Frost (Con)]

We certainly stand by the financial agreement that we negotiated in the withdrawal agreement. As I said, it was very carefully negotiated at some length, and of course we stand by it and the payments that are due under it.

[Baroness McIntosh of Pickering (Con)]

My Lords, I am particularly grateful to my noble friend for committing the Government to this legal obligation; that is very welcome. Will he further confirm that the sums of money being discussed in this Question are going towards the Horizon programme, which is in the present spending review, and from which many UK companies will benefit greatly?

[Lord Frost (Con)]

My Lords, yes, these are significant sums, and the sums involved in the Horizon project and programme are also significant. We have a difficulty with the Horizon programme, in that, at the moment, our participation is still being blocked by the EU, even though all the legal processes behind it are in place. We very much hope that that block can be lifted soon and that UK universities and others with an interest can participate in the programme.

[Baroness Hoey (Non-Afl) [V]]

My Lords, just this week, the Minister told the protocol sub-committee in this House that the European Union had dumped 800 regulations on the UK to apply to Northern Ireland without any consultation or prior warning. As the European Union continues to show intransigence and a determination to show no flexibility whatever to the working of the protocol, is it not time for Her Majesty’s Government to hold back any more payment until the European Union shows itself to be more reasonable?

[Lord Frost (Con)]

My Lords, where threats have been made in this process, they have overwhelmingly come from the European Union side, and we regret that. I do not think it would be right for us to hold this legal obligation in hock to progress on the protocol, which is not to say that we do not think the progress on the protocol and implementing it in a pragmatic, proportionate and appropriate way is not important. It is extremely important, but it is not the same thing as the exit bill.

[The Lord Speaker (Lord McFall of Alcluith)]

My Lords, all supplementary questions have been asked, and we move to the second Oral Question to the Minister of State.