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The EU budget

Economy

Specific Objectives and Competences

  • To understand how the community budget is made up.
  • To know the main items of expenditure in the budget and their evolution over time.
  • To identify the objectives that guide the development of the EU budget.

Contents

  • The EU budget covers a period of 7 years which is known as the Multiannual Financial Framework (MFF). The most recently approved MFF covers the period 2014 – 2020.
  • The EU budget is debated and passed by the European Council and the European Parliament, at the request of the European Commission.
  • The objectives and priorities of the EU are reflected in the distribution of the community budget. Here, it is possible to see how more and more resources have been allocated to innovation and how the main European funds that finance projects of general interest have gained ground with respect to funding destined to agriculture.
  • For the period 2014 – 2020, these priorities form part of the Europe 2020 Strategy.
  • Another of the new developments for this period, which is in line with the current tendency for austerity, is that for the first time the EU has reduced its budget by 3%.
  • In relative terms, the budget represents approximately 1% of the GDP of the EU.
  • The compilation of the EU budget basically depends on three sources of income:
    • Traditional Own Resources: these derive from the customs duties that are levied on importations into the EU and the tax on sugar and isoglucose.
    • Value Added Tax: the member states cede a very small part of the VAT that they collect.
    • Gross National Income: the EU tries to collect a percentage of the GNI of each member state.
  • On the other side there are the main items of expenditure of the community budget:
    • Sustainable growth
      • Competitiveness for growth and employment: costs relating to research and development (framework programmes), education and training, EU networks, social policy, the internal market and its associated policies.
      • Cohesion for growth and employment: this is based on the Cohesion and Structural funds. The objective is to reduce regional disparities and to favour regional development.
    • Conservation and management of natural resources:this part of the budget covers the Common Agricultural Policy, the Common Fisheries Policy, rural development and environmental measures.
      • Costs related to the market
      • Direct payments
    • Citizenship, freedom, security and justice:
      • Freedom, security and justice: the part of the budget dedicated to justice and home affairs, to the protection of borders and to policy relating to immigration and asylum.
      • Citizenship: this includes the costs associated with public health, consumer protection, culture, youth, information and communication with citizens.
    • The EU as a global player: expenditure on the external actions of the EU (development, humanitarian aid, foreign policy and joint security, the European Neighbour Policy) and the costs of pre-adhesion).
    • Administration: the costs associated with the workings of the European institutions.
    • Compensation: parts of the budget used to compensate some member countries relating to specific situations that do not arise every year.

Debates

For the budget period 2014-2020, the EU has proposed reaching the objectives established by the Europe 2020 Strategy; these objectives are:

  • 75 % of the population between 20 and 64 years old should be employed
  • 3 % of the GDP of the EU should be invested in R+D
  • The «20/20/20» objective should be achieved with relation to climate and energy (including an increase to 30 % in the reduction of emissions if conditions allow this)
  • The percentage of early school leavers should be less than 10 % and at least 40 % of the youngest generation should have completed higher level studies
  • 20 million fewer people should face the threat of poverty

What should the EU spend its budget on in order to achieve these objectives?

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