Theresa May's Brexit divorce bill could cost billions more than her estimate, warn auditors

The “divorce bill” Theresa May has agreed to pay as part of the Brexit deal could cost billions more than her £39bn estimate, auditors warn today.

Even “relatively small changes” to government assumptions – on economic performance, ongoing payments into EU schemes or the exchange rate – would throw out the calculation, their report says.

The government has also deliberately excluded a £2.9bn commitment to continue paying foreign aid through the EU’s European Development Fund (EDF), the National Audit Office (NAO) points out.

“Relatively small changes to some assumptions about future events could push the cost outside of HM Treasury’s £35bn to £39bn range,” the report states.

The chairwoman of the Commons Public Accounts Committee seized on the conclusions to demand ministers “be clear with the British public what we are paying for and why”.

“I fear the cost of the UK leaving the EU could increase further,” the Labour MP Meg Hillier said. “Our children and grandchildren risk being saddled with paying off this bill for decades to come.

“As negotiations continue and the real costs of the divorce bill come to light, the government must be clear with the British public what we are paying for and why. If not taxpayers will feel we are being sold a raw deal.”

The watchdog also called on the government to consider “how it will update Parliament with revised estimates as new information becomes available”.

Head of the NAO, Sir Amyas Morse, said: “The estimate reflects a number of moving parts, so the range of costs in it could have been wider than £35bn to £39bn. But overall we think it is a reasonable estimate.

“As the vote on the draft withdrawal agreement approaches we expect that government will provide a substantial amount of material for parliament to consider.”

Nicky Morgan, chair of the influential Treasury Committee in the Commons and senior Conservative MP, said that while the NAO had judged the government’s withdrawal estimate as reasonable, “it appears to be shrouded in uncertainty”.

“As the report states, the Treasury didn’t incorporate some of the main uncertainties – of which it was aware – in its figure. For example, the settlement estimate doesn’t include the UK’s commitments to the European Development Fund, which the Treasury expects will cost £2.9bn after the UK leaves the EU,” she added.

In the report, the auditors add that Britain could be paying for the exit settlement until at least 2064 when EU pension liabilities are taken into consideration.

The Treasury has previously estimated that the UK will settle around 60 per cent of settlement payments by the end of 2021 but may be making some payments for several decades.

Among several uncertainties found in the Treasury’s estimate, the auditors also point out that the terms of the settlement, which mark the end of transition period in December 2020 as a key date for determining the UK’s share of liabilities, mean “the EU Commission could skew decisions and impact the total value” Britain will have to pay back.

A government spokesman said: “We have always been clear that we will honour commitments made while being part of the EU, and we have negotiated a settlement that is fair to UK taxpayers and means we will not pay for any additional EU spending beyond what we signed up to as a member.

“The NAO has confirmed that our estimated figure is a reasonable calculation and we are now discussing our future relationship.”