2.1 EU budget

Question 1

What is the EU budget? How is it split and how much is it?

Answer 1

EU has a budget for:
- Policies at European level (94% of budget) e.g. CAP, regional aid, trans European networks, research
- Administration (6%) e.g. parliament, salaries

Was 160bn euros in 2018 - about £141.5bn
- It is about 1% of wealth generated by EU economies every year.

Question 2

How is income/capita distributed in the richest countries in Europe?

Answer 2

EU average is around 28,000

Luxembourg highest - 88,000

Ireland 55,000

UK 40,000

Question 3

What is the difference between the EU budget and national budgets?

Answer 3

Functions of national budgets:
- Redistributing income
- Allocative efficiency
- Stabilise the economy - countercyclical deficits/surplus

EU budget:
Limited redistributive role:
- Small size of 1% EU GNI (National expenditure >50%)
- Redistribution about 0.3% GNI

No stabilising role:
- In theory, expenditure and contributions must be balanced

EU budget longer period than national budget - around 5-7 years:
- Multi-annual financial framework (MFF)
- Financial framework sets the maxmum amount of allocation for broad policy areas, fixed annual ceiling on payments

Question 4

What is the Multi-annual framework split into/spent on?

Answer 4

1. Smart and inclusive growth:
   - Competitiveness
   - Economic, social and territorial cohesion
2. Sustainable growth;
   - Natural resources - expenditure and direct payments
3. Security and citizenship
4. Global Europe
5. Administration - administrative expenditure of the institutions
6. Compensations
   - Total commitment appropriations
   - Total payment appropriations

Question 5

How is the EU budget financed?

Answer 5

At first, began with GNP based contributions - own resources - 1969 summit
- Today, 99% of it is own resources: custom duties on imports, sugar levies - member states retain 20% to cover collection costs
- VAT accounts for about 14bn euros
- Payment from member states about 92.7bn euros

EU revenue makeup 2018:
- 66% GNI own resources
- 11.1% VAT
- 12.8% TOR
- 9.9% other

Payments from member states depend on the size of the country. Usually about 1% GNI however varies across countries.

Question 6

What are indivudal member state contributions?

Answer 6

5 countries - Germany, France, Italy, UK, Spain pay half the budget

Germany - 20.7%
France - 15.6%
UK - 11.9%
Italy - 11.7%
Spain - 8.3%

Netherlands, Poland, Austria Belgium next

Question 7

Why is there variation across countries

Answer 7

UK was reimbursed by 66% between its contribution and what it receives back from the budget
- Lump sum payments to Netherlands and Sweden
- Reduced VAT call rates for Netherlands, Sweden, Germany and Austria

Question 8

What are the goals for how the EU budget is spent?

Answer 8

• Fund common policy, such as CAP
• Assist weak regions (solidarity)
• Complete internal market
• Promote cooperation and large scale projects in fields of research, innovation and justice
• Others may include climate change, demographic change and humanitarian crisis

(Split as before, competitiveness/growth, administration, global europe, security and citizenship, sustainable growth, cohesion)

Question 9

What is the makeup of the 6 spending goals?

Answer 9

39% - sustainable growth: natural resources

34% - economic, social and territorial cohesion

13% - competitiveness for growth and jobs

6% - administration

6% - global europe

2% - security and citizenship

Question 10

Who are the biggest/smallest net contributors towards EU budget?

Answer 10

Germany, UK, France, Italy, Sweden, Spain highest

Lowest:
- Belgium spend a decent amount but benefit more
- Portugal benefit a lot more
- Poland benefit more than spend
- romania, Czechia, Greece, Hungary all similar - benefit more than contribute

Question 11

What is the EU expenditure in the UK?

Answer 11

Fluctuated between 5.4-5.9bn in past decade

2014-20:
Structural and investment funds - 17bn
Regional development fund - 5.8bn
European social fund - 4.9bn
Agricultural fund for rual development - 5.2

Agricultural guarantee fund - 22.5 (doesnt include territorial cooperative funds - allocated across countries)

Question 12

What was the UK rebate?

Answer 12

Partial refund when too much paid

1985 - UK third poorest member but biggest net contributor
- Late in EU
- Guarantee New Zealand food exports to UK
- New firms, small share of firms subsidies (70% budget)
- Budget financed more from VAT related income than today

UK reimbursed by 66% of the net contribution of the previous year
- Corrections up to 3 years after e.g. final 2012 rebate calculation takes place in 2015
- In 2015, agreement for £7bn reduction of rebate over seven years

The rebate is paid by the other 27 members
- Germany, Netherlands, Sweden and Austria pay only a quarter of the share
- Italy and Spain only pay about half

Question 13

What was the effect of Berxit?

Answer 13

• Leave campaigners claimed Brexit would save taxpayer £350m a week

Bill for departure: contributions near currenct contributions for several years after it leaves - 40bn, 60bn euros:

• Gap in payments made in EU annual duvet and 7 year budgetary frameowrk (approved by UK) - around 29bn euros
• Investment commitments executed after Britain elft EU around 17bn euros
• Pensions to EU officials

The EU chief brexit negotiator demanded 57bn euros on 9 February 2017
- Net payment of around £39bn