- The EU is demanding that the UK contributes to pension liabilities as part of the Brexit financial settlement.
- The liabilities would add around €7 billion to the bill and is the main disagreement preventing progress in Brexit negotiations.
- Former Conservative ministers sign a letter to Theresa May calling for the government to prepare for a no-deal scenario.
LONDON — The European Union is demanding that the UK pay billions of pounds in pension liabilities for retired EU officials as part of the financial settlement for Brexit.
The liabilities would add around €7 billion (£6.25 billion) onto the amount the UK owes the EU and is the biggest split between the two negotiating sides preventing “sufficient progress” in Brexit talks, the Times reported.
The way the EU is calculating the amount the UK owe in pension liabilities would mean €11 billion being added to the financial settlement, but one source said this was done at a “rip-off rate.”
When historical investment rates and future staff contributions are used for the calculations, the proportion Britain would pay falls to as low as €3.5 billion.
It comes ahead of Prime Minister Theresa May attending the European Council in Brussels on Thursday, where leaders of the EU27 countries will decide if “sufficient progress” has been made on the financial settlement, citizens’ rights and Ireland in order to allow talks to advance to discussions about a future relationship.
A source close to Brexit negotiations told the Times: “Paying pensions for well-heeled Eurocrats is one thing but doing it at a rip-off rate is toxic and could be too nasty a medicine for the British public to swallow.
“Is it really worth jeopardising everything for this?”
Deal or no deal
The prime minister has been urged to walk away from the Brexit negotiations by former Conservative ministers, who says the UK should “formally declare” it is leaving the EU on World Trade Organisation terms.
Four ex-cabinet ministers, Lord Nigel Lawson, Owen Paterson, John Redwood and Peter Lilley, wrote in a letter to May that: “No deal on trade is better than a deal which locks the UK into the European regulatory system and takes opportunities off the table.”
Declaring that the UK would operate on WTO rules and leave the EU with no-deal would help Britain “crystallise the economic opportunities” of Brexit and give businesses “absolute certainty” about the future.
A report by the Resolution Foundation published earlier this week showed that a no-deal Brexit would cost the average British household £260 a year.
Paterson told BBC Radio 4’s Today Programme that he thought it unlikely that the UK would reach a trade agreement with the EU “because they are flatly refusing to talk about it.”
The former minister said a trade agreement with the EU would be “the best destination, but what we should not be terrified of is the WTO.”
He added: “We have to face the fact that this summit [the European Council] is not going to discuss any future trade deal. We are ineluctably moving down the road to a WTO arrangement so we had better start preparing for it.”
NOW WATCH: Briefing videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.