Brexit bill revealed as £35 to £39 billion

The size of the so-called ‘divorce bill’ emerged after European Commission president Jean-Claude Juncker announced that he is recommending leaders of the remaining 27 EU states give a green light to the start of trade talks next Thursday.

The breakthrough was hailed by Prime Minister Theresa May as ‘a hard-won agreement in all our interests’, while European Commission president Jean-Claude Juncker said it represented ‘sufficient progress’ for negotiations to move on to their second phase.

In dramatic pre-dawn scenes, Mrs May and Brexit Secretary David Davis flew to Brussels to confirm with Mr Juncker the text of a joint document setting out proposals on the key divorce issues of citizens’ rights, the Irish border and Britain’s exit bill.

The estimated Brexit bill is significantly lower than suggested by previous leaks, which put it at £50 billion or more.

It covers Britain’s share of the EU’s budget up to the end of 2020, as well as outstanding debts and liabilities for items such as the pensions of staff at European institutions.

It will be paid over several years and the exact figure is unlikely to be known for some time.

The Commission’s announcement that trade talks can begin was welcomed by business leaders, who had warned that companies would begin activating plans to move staff and activities abroad if no progress was made by Christmas. The pound rose on the announcement.

Senior Cabinet Brexiteers Boris Johnson and Michael Gove gave their public blessing to the deal.

The Foreign Secretary - who previously said the EU could ‘go whistle’ for any excessive financial demands - congratulated the PM for her ‘determination’ in reaching the agreement, while Mr Gove described it as a ‘significant personal political achievement for the Prime Minister’, which would make more money available for the NHS.

The final details were thrashed out in the early hours of Friday by Mrs May and Democratic Unionist Party leader Arlene Foster, who blocked a previous version of the agreement on Monday with her last-minute objection to provisions she feared would create a customs border between Northern Ireland and the mainland.

Mrs Foster said ‘substantial changes’ to the text would mean there was ‘no red line down the Irish Sea’ and no ‘special status’ for Northern Ireland.

The joint report published by Mrs May and Mr Juncker says that in the absence of an overall trade deal, the UK will maintain ‘full alignment’ with elements of the EU single market and customs union which support the economy of the island of Ireland and the Good Friday Agreement.

In a crucial passage, which appears to have been added to satisfy DUP concerns, it says ‘no new regulatory barriers’ will be allowed between Northern Ireland and the rest of the UK, and that the province’s businesses will continue to have ‘unfettered access’ to the UK internal market.

In a provision likely to spark concerns among some backers of Brexit, the document says the European Court of Justice will continue to have a role overseeing the rights of EU citizens in the UK for eight years after Brexit.

It says the UK will be required to continue contributions to the EU budget up to the end of 2020 ‘as if it had remained in the Union’, and will be liable for its share of outstanding financial commitments and liabilities up to that date.

The financial settlement ‘will be drawn up and paid in euro’.

In a Brussels press conference Mrs May said the process of arriving at a withdrawal deal ‘hasn’t been easy for either side’, but the agreement represented a ‘significant improvement’ on the text she was preparing to sign off on Monday.

Provisions on citizens’ rights would allow EU nationals in the UK ‘to go on living their lives as before’, while the financial settlement would be ‘fair to the British taxpayer’ and the agreement on Ireland would guarantee there would be ‘no hard border’ between Northern Ireland and the Republic.

‘I very much welcome the prospect of moving ahead to the next phase, to talk about trade and security and to discuss the positive and ambitious future relationship that is in all of our interests,’ said Mrs May.

Mr Juncker said Brexit was a ‘sad’ development, but added: ‘Now we must start looking to the future, a future in which the UK will remain a close friend and ally.’

He and Mrs May shared ‘a joint vision of a deep and close partnership’, he said.

European Council president Donald Tusk confirmed he has sent the EU27 proposed guidelines for a new mandate for chief negotiator Michel Barnier to begin discussions on the transition period, as well as ‘exploratory talks’ on the trade relationship.

He called for ‘more clarity’ from the UK over its hopes for trade relations.

Under his proposals, during the transition period of around two years after March 2019, the UK would be required to respect EU law - including any new laws passed by the EU27 without British involvement - and to observe its budgetary commitments and the judicial oversight of the ECJ.

‘While being satisfied with today’s agreement, which is obviously a personal success for Prime Minister Theresa May, let us remember that the most difficult challenge is still ahead,’ Mr Tusk said.

‘We all know that breaking up is hard, but breaking up and building a new relation is much harder.

‘Since the Brexit referendum, a year and a half has passed. So much time has been devoted to the easier part of the task, and now to negotiate the transition agreement and the framework for our future relationship we have de facto less than a year.’

Irish premier Leo Varadkar, who held telephone talks with Mrs May on Thursday as the details of the deal were hammered out, said it was a ‘significant day’ for Ireland, which had ‘achieved all that we set out to achieve in phase one of these negotiations’.

Shadow Brexit secretary Sir Keir Starmer said the development was ‘encouraging’, but added: ‘Theresa May must seriously reflect on her approach to the negotiations so far.’

Ex-Ukip leader Nigel Farage said on Twitter: ‘A deal in Brussels is good news for Mrs May as we can now move on to the next stage of humiliation.’

Arron Banks, the millionaire founder of the Leave.EU campaign, said the agreement amounted to a ‘betrayal’ of the country by a ‘traitorous, lily-livered embarrassment of a prime minister’.

Downing Street said only around two or three cases are expected to be referred each year to the ECJ, under provisions which will allow UK courts and tribunals to seek the Luxembourg court’s ‘interpretation’ of questions relating to the rights of EU nationals in Britain.

Mrs May’s official spokesman stressed that the decision to refer would be ‘entirely voluntary’ for UK courts and the ECJ would not have the power to call in cases.

Mr Tusk said the UK had asked for ‘a transition of about two years, whilst remaining part of the single market and customs union’, and it is understood this is the proposal set out in his draft guidelines to EU27 leaders.

But Mrs May’s spokesman insisted: ‘We are leaving the customs union and the single market in March 2019. The Prime Minister has also said that during that implementation period you can expect things to be broadly similar to how they are today.

‘Precisely what that looks like is obviously a matter for negotiation. We are now moving towards the position where we will be having that negotiation.’

Although Mr Tusk’s guidelines allow ‘exploratory talks’ on trade to begin, Mr Barnier said the ‘real negotiation’ on the trade relationship would not begin until the treaty on Britain’s withdrawal is finalised in October 2018.

Mr Barnier said red lines laid down by the UK Government meant it could secure only a free trade agreement on the Canadian model.

‘It’s not us, it’s the British Government that has indicated those red lines, that is closing certain doors, so that will be the model we’ll have to work on,’ said the EU chief negotiator.

Mrs May’s spokesman said: ‘We believe we can get a very ambitious trade deal, that we are in a unique position in terms of our starting point and we are still confident of achieving that.’

Tory former Brexit minister David Jones warned the ‘full alignment’ plan to maintain a soft Irish border could stop Britain signing free trade deals with other countries.

He told BBC Radio 4’s World At One: ‘The worry about that, of course, is that that could well relate to very important areas such as for example agriculture, which we would want to throw into the mix in negotiating a free trade agreement with a third country.

‘And if this were to persist then it could severely handicap our ability to enter into those free trade agreements.’

He called for the issue to be refined in future negotiations, alongside the introduction of a cap for the divorce bill, claiming the ‘back of an envelope’ figure mentioned so far could rise ‘considerably’.

In a separate document, the Commission detailed remaining issues of dispute with the UK, including disagreement over EU nationals’ rights to bring spouses or partners to Britain following Brexit.

The Commission wants the right to cover new partners or spouses whose relationship with an EU national begins after Brexit, as well as those who are already together at the time the UK leaves.

‘This important matter should be dealt with in the second phase of the negotiations and will inevitably be linked to the level of ambition of the future partnership between the EU and the United Kingdom,’ the Commission said.

The document also reports ‘persisting disagreement’ over whether the ECJ should be able to rule on disputes involving events which took place before Brexit but were not brought to court until after UK withdrawal, as well as the enforceability of ECJ decisions in the UK following Brexit.

And it pointedly notes that the UK’s aim of avoiding a hard border with Ireland ‘seems hard to reconcile with the United Kingdom’s communicated decision to leave the internal market and the customs union’.