The budget of the European Union: a guide

On 23 June 2016, voters in the UK will be asked to decide whether they wish to remain in the European Union (EU) or leave. While the EU budget may not be so central to the current debate as it was in the 1970s and 1980s, claims about how the UK fares under the budget, and whether the way the EU raises and spends its money are ‘fair’, ‘efficient’ and ‘sensible’, will likely rear their head in the coming months.

This guide provides background on the EU’s budget and its impacts on the UK, looking at questions that include:

This guide provides background on the EU’s budget and its impacts on the UK, looking at questions that include:

+ How big is the EU budget and how has it changed over time?
+ What are the EU’s main sources of revenue?
+ How is the EU budget allocated across different budget areas ?
+ Why does the UK benefit relatively little from EU spending ?
+ How much does the UK contribute and receive from the EU, and how does this compare to other countries ?

This information is generally in the public domain already but is scattered across different documents on the UK government and EU websites. By bringing the information together and explaining it in a clear and concise way, the authors hope this ‘guide’ helps demystify the EU budget and how it works – although, as shall be seen, the workings of some major parts of the budget are less than transparent.

In a report and accompanying interactive online tool published in April 2016 IFS researchers provided an explanation of how the EU budget works, its size, where revenues come from and what the main areas of spending are. They also provide an estimate of the UK’s net contributions to the EU. The overall net contribution will be a little over £8 billion a year going forward, though it fluctuates from year to year and was £7.5 billion in 2012, £9.1 billion in 2013 and £5.7 billion in 2014.

This is not an estimate of how much stronger the public finances would be if we were to leave the EU. That would depend in part on the deal reached with EU – it is possible that an alternative arrangement of relations with the remaining EU countries would involve the UK continuing to make significant contributions to the EU Budget. More importantly it would depend on the economic effects of leaving.

The overall EU budget is about 1% of the EU’s GNI (Gross National Income) and GDP. That compares with national budgets of between 35% and 58% of GDP. European Commission figures show that the UK’s gross contribution to the EU Budget was £11.3 billion in 2014, compared to total UK public spending of £734 billion. The UK received back £5.6 billion through various programmes leaving a UK net contribution of £5.7 billion.

• Primary Source

UK in a Changing Europe April 2016: Explainer: A guide to the EU budget http://ukandeu.ac.uk/explainers/a-guide-to-the-eu-budget/

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