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Annual European Union Finances Statement

Volume 718: debated on Thursday 21 July 2022

I am today laying before Parliament a document entitled “The European Union Finances Statement 2021 on the implementation of the Withdrawal and Trade and Cooperation Agreements” (CP 732). This is an annual publication and the 41st in the series.

This year’s statement continues to include an updated Government estimate of the financial settlement. As detailed below, the estimate can be found in annex A and contributing figures in chapter 2 and 4.

This year’s edition is the first in the publication series to cover the UK as a non-member state and having completed the 11-month transition period. Now that the UK has left the EU and is no longer involved in the EU’s multiannual financial framework, detailed financial reporting on participation is of diminishing relevance.

This year’s edition follows the recommendations from the European Scrutiny Committee in relation to how the information is presented in this year’s document. The cut-off date for reporting for this edition of the EU finances statement is December 2021, as these statements will continue to be published on a yearly basis. However, the statement also provides brief details of the invoice received subsequently to this period in April 2022, and which will be reported on in detail in next year’s statement. This year, the April invoice provides a single net liability for the UK of €3,419,693,252.35 (£2,877,500,887.19)

The focus of this statement, therefore, is on the implementation of the withdrawal agreement and the trade and co-operation agreement, in effect turning the formerly annexed chapters into the main body of the text. The presentation of both payments and the outstanding liability under the WA has changed accordingly.

This year the statement separates backward-looking reporting on the payment of net liabilities made by the UK from HM Treasury’s forecast of outstanding liabilities. Chapter 2 gives a breakdown of the April and September 2021 invoices received from the EU and their payment during that calendar year. It gives an updated figure for the total paid up to 31 December 2021 of £5,812,719,159.

Chapter 3 of the statement provides detail on the verification arrangements that HM Treasury has undertaken in relation to the financial settlement under the WA and which was reflected in domestic law in the European Union (Withdrawal Agreement) Act 2020.

HM Treasury estimates that the current net value of the financial settlement is £35.6 billion. Chapter 4 breaks down the forecast outstanding UK net liabilities to the EU from 1 January 2022 onwards, providing a point estimate of the total outstanding of €29.0 billion (£24.6 billion).

This statement reports on the status of EU programme association in chapter 5. In this edition we give the current estimate for the total cost of participation in all three programmes over the seven-year MFF (around £17 billion). This breaks down to in the region of £15 billion for Horizon Europe, £1.2 billion for Euratom R&T and Fussion4Energy, and £0.8 billion for Copernicus.

As all payments will be made from departmental accounts, HM Treasury do not plan to replicate or consolidate financial reporting on the TCA in future editions of the statement. Nor do we intend to report annually our revised estimate of liabilities expected under the TCA, because actual costs will, in future years, appear in the departmental resource accounts.

The latest estimate of £42.5 billion shows an increase against the original range of £35-39 billion, which is primarily due to the most recent valuation of the UK’s obligation under article 142 for EU pensions. The primary drivers are the latest discount rates and inflation assumptions, which are centrally set by the Government for valuing long-term liabilities. However, given that this is a multi-decade liability, the variables used in this forecast will continue to fluctuate up and down. The agreed scope of the underlying liability remains unchanged, and the UK will continue to pay those liabilities as they come due, according to the actual value at the time.