Mairead McGuinness Fine Gael MEP

Paying for the EU

There is obviously a great need for transparency in all European Union issues but particularly with anything related to finance and budgets. I am frequently asked questions about how the EU is funded and, in particular, about Ireland’s contribution to the EU budget.

Here, the main issues relating to EU funding as well as the EU budget are summarised. For more information, please go to http://ec.europa.eu/budget/index_en.htm.

The EU Budget

It is vital that the EU has an income to address issues that are best tackled at EU rather than national levels – such as environmental protection and climate change, consumer rights, equal opportunities, transport, energy, and the stability of the Euro. As with any successful organisation, to be able to operate effectively EU income and expenditure have to be tightly controlled by means of a budget.

EU budget revenue comes from 3 main sources:

• customs duties,
• a share of the harmonised value added tax (VAT) base of each Member State, and
• a contribution from the Member States based on the size of their gross national income (GNI) – up to a maximum spending limit of 1.24% of GNI. In 2010, the actual figure represented 1.04% of EU GNI.

Fundamentally, EU spending and revenue are defined and limited by the Treaties that refer to, amongst other things, maximum spending limits. The budget covers the costs of administering all the EU institutions and is decided jointly by Council (comprising the heads of state or governments of EU member states, along with its President and the President of the Commission) and Parliament, controlled by the Commission services and European Court of Auditors and is subject to the Parliament’s supervision in the annual discharge procedure (a process whereby the other institutions are held accountable for their expenditure to Parliament).

One very important Treaty provision holds that the EU budget cannot be in deficit and this works to ensure that the costs of the different EU activities are closely monitored to stay within budget.

In terms of actual figures, the EU budget for 2011 amounts to approximately €126.5 billion, an increase of 2.91% on the 2010 figure. This represents around 1% of the Union’s national wealth and in 2010, was equivalent to about €246 per head of the population (or 67 cents a day).

In practice, the budget is facilitated by means of the Multi-annual Financial Framework which lasts for a period of at least 5 years – the current one covers the period 2007-2013. The Framework is a spending plan which sets limits on EU expenditure over a fixed period. This allows for long-term financial planning in terms of EU requirements and gives greater certainty to potential recipients of EU funds.

The focus of the budget has totally changed from the early days of the EU when the common funds were used solely for administration. Now, all EU citizens benefit from the EU budget as all Member States have had a say in which activities are to be funded through the common budget. Typical projects include development of infrastructure, food security, funding research and environmental issues and the emphasis has shifted from the previous Framework’s (2000-2006) focus on enlargement of the Union to the current Framework document’s (2007-2013) prioritisation of sustainable growth and job creation.

In terms of where the money will actually be going in 2011, we can expect to see €41.7 billion assigned to regional policy to cover infrastructure projects and European Social Fund programmes which will cover, amongst other things, projects to support workers and promote job training programmes.

Expenditure for the Common Agricultural Policy (CAP) is already fixed for the whole period 2007-2013 and generally represents about 40% of the total EU budget.

In 2011, actual spending on agriculture will represent 44.6% of the total budget and will come in at approximately €56.4 billion, making it the EU’s largest item of expenditure.

Each EU country is obliged to make a contribution to the budget, regardless of whether they are a net beneficiary of, or net contributor to, EU funding.

In fact, Ireland has been a net recipient of over €40 billion from the EU budget since 1973 and it is expected to remain a net recipient until at least towards the end of the current Multi-annual Financial Framework period 2007-2013. Ireland’s contribution to the EU Budget came to €1,587 million in 2008, €1,486 million in 2009 and €1,352 million in 2010. As of January, 2011, it was estimated that our contribution will amount to €1,365 million for 2011. For 2012, Ireland’s budget contribution is projected (as of January 2011) at being about €1,475 million, though this will be subject to factors such as the spending level agreed through the annual budget negotiation, actual budget implementation and the economic performance of Member States.

The 2010 budget was the last budget that procedurally came under the Nice Treaty rules. The budget for 2011 and all future budgets will come under the Lisbon Treaty which entered into force on 1 December 2010 and which gives increased powers to the Parliament in budgetary matters, giving it the power of co-decision – or joint power – with the Council.