Richard Ashworth

EU Budget Explained

In 1970 EU member states agreed to move from a system of contributions to a system based on own resources. This means that the EU became more financially independent. Member states set the limit of these resources but the resources belong to the EU. So own resources are the funds the EU can rely on to finance its annual budget. These funds are collected from 4 different sources:

1. Common Customs Tariff duties and other duties (fixed import taxes) - Collected from trade with non-EU countries

2. Agricultural levies - collected from trade with non-EU countries within the framework of the Common Agricultural Policy (CAP)

3. Standard EU levy - tacked onto the different rates of VAT in member states

4. 'Top-up' by member states - calculated as a percentage of annual Gross National Product (GNP)

So the EU has its own revenue, which can be balanced with expenditure. In 2004 the total budget amounted to € 109.052 million in commitment appropriations and € 97.476 million in payment appropriations.

Where does this money go?

Expenditure can be classified into two groups; compulsory and non-compulsory. Compulsory are funds spent as a direct result of treaty application.

Virtually all compulsory expenditure is used to finance the CAP.

This classification is necessary because the Parliament can only amend non-compulsory budget proposals and the Council has final say on compulsory expenditure.

We can now lump expenditure into 6 groups to see more clearly where the money goes:

1. Agriculture (roughly 80%)

2. Structural & Cohesion Funds - Help to poorer regions of the EU (44% & 34%)

3. Internal Policies - research & technology, training, transport & environment (7%)

4. External Policies - Assistance to EU neighbours, prospective members and third countries (6.9%)

5. Administration - (6%)

6. Reserves - Used for a variety of purposed including emergency aid

To view the complete budget for 2004 click here