This note considers the EU's spending and how it is financed. It includes the UK's contributions and receipts to and from the EU budget and discusses the UK's rebate.Jump to full report >>
The EU’s spending is organised around a seven year period, known as the multiannual financial framework (MFF). The MFF sets out what the EU will spend its budget on and sets spending limits for the seven years.
The current MFF covers the period 2014-20 and allows the EU to commit to spending of €960 billion (2011 prices). This is a real terms reduction on the previous MFF 2007-13.
During 2014-20, the majority of EU spending will be on ‘smart and inclusive growth’, and ‘sustainable growth: Natural resources’. These categories of spending include EU structural funding and common agricultural policy, respectively.
The MFF isn’t the annual budget itself: rather, it provides a framework through which annual budgets can be negotiated. Annual budgets are negotiated by the European Commission, the Council and European Parliament based on the spending limits set out in the MFF.
The EU’s spending is largely funded (99%) from the EU’s so-called own resources. Member States make contributions through four kinds of own resources:
Roughly 75% of EU revenues come from GNI-based contributions, while VAT-based resources and the sum of custom duties and sugar levies contribute just over 10% each respectively.
The UK makes its contributions to the EU budget through the own resources. The UK receives a rebate on its net contribution. The rebate was introduced the mid-1980s to address the issue of the UK making relatively large net contributions to the EU budget.
The UK’s contribution to the EU budget, after the rebate was applied, was an estimated £12.9 billion in 2015. The UK received total public sector receipts from the EU budget of £4.4 billion, making an estimated net contribution of £8.5 billion in 2015.
Commons Briefing papers SN06455
Author: Matthew Keep
Topic: EU budget