The new estimate comes as the European Central Bank raised interest rates for the first time in 11 years by 0.5 percentage points, above the 0.25 percentage points economists had expected. Simon Clarke, the chief secretary to the Treasury, made it clear in a written statement that the rise in interest rates affecting EU pension liabilities was the driving force behind the new estimates for the divorce bill. The Brexit divorce bill includes the processing of long-term guarantees for certain borrowing and spending by EU institutions while the UK was still a member of the bloc. The government originally estimated the bill covering the spending commitments would be between £35bn and £39bn. This included loans guaranteed by the European Investment Bank for infrastructure and other projects signed during the UK’s membership. No definitive settlement was agreed as the bill takes loan performance into account. The latest Treasury estimate put the figure at £42.5bn from £37.3bn a year earlier. In a written ministerial statement, Clarke said the increase was mainly due to the UK’s EU pension obligations. “The primary factors are the latest discount rates and inflation assumptions, which are set centrally by the government to value long-term liabilities,” he added. “However, since this is a multi-decade liability, the variables used in this forecast will continue to fluctuate up and down.” By the end of last year, the UK says it has paid £5.8bn to the EU as part of the deal. A Treasury spokesman added: “The unprecedented recent rise in inflation and changes in discount rates have increased our pension liabilities, which is the biggest reason for the increased valuation. “The actual cost of the settlement is confirmed when the payments are made, based on the value at that time. Treasury continues to monitor and verify these payments in accordance with the negotiated agreement.” The European Commission had estimated the divorce bill higher than the UK, at £41bn, at the time of the tripartite withdrawal agreement which also included deals on Northern Ireland and EU citizens’ rights. Subscribe to First Edition, our free daily newsletter – every morning at 7am. BST The shadow of the withdrawal agreement continues to be cast over EU-UK relations with upbeat Prime Minister Liz Truss threatening to dismantle Brexit trade arrangements for Northern Ireland. In turn, the EU has delayed ratifying the UK’s associate membership of the flagship £80bn Horizon Europe scientific research programme, causing a loss of funding for some academic projects already greenlit by the European Research Council. On Thursday 24 groups including the Royal Society, the Russell Group of Universities and Cancer Research UK called on the two candidates vying to become UK Prime Minister, Truss and Rishi Sunak, to pledge to maintain the UK’s leadership in research, development and innovation. (RDI). In a letter to the candidates, they urged them to prioritize membership of Horizon Europe and commit to spending 3% of GDP on R&D.
