Prolonging Brexit transition beyond 2020 could cost Britain billions, MPs warn

Britain could be stung with an extra £4-£5 billion Brexit "divorce bill" if a post-withdrawal transition period runs into 2021, MPs have warned.

The European Scrutiny Committee said prolonging the "status quo" transition beyond the EU's preferred end date of December 31 2020 could make the UK liable for extra contributions to the Brussels budget.

Theresa May has only agreed to cover the EU budget to the end of 2020 as part of a £35-£39 billion divorce bill.

So if the transition goes beyond this it could make the UK liable for further payments as it would effectively be staying in the single market and customs union, the committee warned.

Britain could also end up tied to new EU spending programmes such as the Common Agricultural Policy without having a say over how they are designed or spent once Brussels' new long-term budget comes into effect on January 1 2021.

The transition, described as an implementation period by the Government, is set to begin when Britain formally leaves the EU on March 29 2019.

Countdown to Brexit: key events (PA Graphics)
Countdown to Brexit: key events (PA Graphics)

Committee chairman Sir Bill Cash said: "If the transition lasts beyond 2020, then this could require the UK to make payments into the EU budget for 2021 as well, and therefore from January 2021 we'd then be paying into the EU's new long-term budget and the net result of this is that the additional costs could run into billions of pounds, and the estimate is between £4 and £5 billion."

The length of the transition period has become a source of debate since the emergence of a UK negotiating paper which suggested it could be prolonged indefinitely, although ministers made clear a fixed end date would be stated in any deal, and it would be around two years after formal exit.

Before agreeing a date, the Government has asked the EU to explain its reasons for wanting the transition to finish at the end of 2020, which are likely to be linked to the budget.

Responding to Sir Bill at a hearing of the committee, UK ambassador to the EU Sir Tim Barrow said: "While there has been some discussion in Brussels among the 27 about the duration, the (EU) negotiating directives point to end 2020 and that is the basis on which we are currently talking to the commission about the logic of how they derive that figure.

"But ... it is absolutely in the same scope of what we have said, of around two years."

Brexit minister Robin Walker added: "I think it's important that we (the UK and EU) are both aligned on the rough duration of the period, clearly there are negotiations still to come in exploring exactly where we draw it to a close."

The committee has written to Chief Secretary to the Treasury Liz Truss calling for an assurance that the UK will not have to pay into the post-2021 EU budget without a right to vote on how the money is spent.