The UK owes the European Union £3bn less than it has asked for as part of the Brexit divorce bill, the Treasury has claimed, putting the two sides on a fresh collision course.

Steve Barclay, the Chief Secretary to the Treasury, confirmed on Thursday that the Exchequer’s current estimate of the UK’s contribution was set at £37.3bn. 

This is significantly below the figure produced by the bloc last week, which stood at approximately £40.8bn. 

The bill covers spending commitments made during the 47 years of the UK’s membership of the bloc.

While a methodology for calculating the divorce bill was agreed during negotiations for the Withdrawal Agreement that paved the way for the UK’s departure, an exact figure was not agreed at the time. 

It means that two sides are now at loggerheads over the total the UK will ultimately pay, with Downing Street insisting it does not recognise the EU’s figures, which it claims fail to take account of payment owed in return. 

It was thought the total Brexit bill would be smaller than £39billion because the numerous Brexit extensions meant that the total was decreased thanks to the UK’s contributions to the EU Budget.  

Time to stand firm

Senior Tory MPs are now urging the Government to stand firm, while others have suggested it should withhold the payments due to ongoing disagreements over the Northern Ireland Protocol. 

However, appearing in the House of Lords on Thursday, Lord Frost, the Brexit minister, said the UK would stand by its commitments, although he suggested the final sum could be debated. 

"I don’t think any of us on this side of the House feel particularly comfortable in paying large sums to the European Union but it is an agreed outcome in the Withdrawal Agreement and we stand by it,” he said. 

"What matters is our own calculations and that we are comfortable with the bills when they arrive, which we are."

Unbalanced situation

It came as Penny Mordaunt, the paymaster general and Cabinet Office minister, told MPs on Thursday that the Government was ready to develop a new approach in implementing the protocol, which she said was creating a "seriously unbalanced" situation in Northern Ireland.

MPs went on to approve a Commons motion that stated "flexibility" in the application of the protocol is "in the mutual interests" of the EU and UK and that it allowed for "superior arrangements" to be put in place.

The protocol, which was designed to prevent a hard Irish border by requiring the province to continue to apply EU rules and checks on British goods crossing the Irish Sea, has caused widespread trade disruption since its implementation in January. 

Calls to scrap the protocol

With a number of grace periods for chilled meats, supermarkets, parcels and medicines due to expire in the coming months, further exacerbating these problems, Lord Frost is expected to set out the UK’s longer-term vision for dealing with the protocol next week.

Ratcheting up pressure on ministers to act urgently, senior MPs yesterday lined up during a Commons debate to urge the Government to scrap the protocol, including Sir Iain Duncan Smith, the former Tory leader, and Mark Francois, the chairman of the European Research Group. 

Sir Bernard Jenkin, the chairman of the powerful liaison committee, added that the boom in exports between Northern Ireland and the Republic of Ireland in the first four months of the year was clear evidence of a "distortion of trade" resulting from the protocol. 

Measure of last resort

He added that this clearly satisfied the terms of Article 16, the measure of last resort which could allow the UK to unilaterally suspend parts of the protocol if it believes trade diversion or economic, societal, or environmental harm is occurring.

Earlier in the debate, Sir Jeffrey Donaldson, the new leader of the DUP, called for the protocol to be replaced with new trading arrangements, which he said must meet "seven tests" to command the support of people in Northern Ireland. 

This includes guaranteeing unfettered access to the UK internal market, an end to the diversion of trade away from Britain to Ireland and the rest of the EU. 

The people of Northern Ireland must also be given a say in the making of the laws governing them, he added, while there should be no checks on goods moving between Northern Ireland and Great Britain or vice-versa.