The 2008 EU Budget
How does the EU budget work?
EU Budget
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Each year's budget is part of a long-term spending plan known as the Financial Framework. This is a multiannual framework, currently running from 2007 to 2013. It is designed for the EU to plan expenditure programmes effectively several years in advance and the Member States to know the maximum sum of their contributions in the medium term.
The EU budget has increased in absolute terms in line with economic growth and the successive enlargements. However, as a percentage of the EU's wealth, it has remained largely stable at around 1% of the Member States' gross national income (GNI).
Who decides how much to spend and on what? The European Commission prepares the budget for the following year. It then makes proposals to the European Parliament and the Council of the European Union, which negotiate with each other on what fine-tuning is needed before the budget is finally adopted.
The budget adoption procedure is organised around two types of budget expenditure: compulsory and non-compulsory expenditure. This distinction determines the division of budgetary responsibilities between the Council of the European Union and the European Parliament.
- The Council of the European Union makes the final decision on compulsory expenditure, i.e. agricultural and fisheries spending and expenditure to which the EU is committed under international agreements.
- The European Parliament makes the final decision on non-compulsory expenditure, i.e. spending on less prosperous regions, the environment, investment in human capital, research and education programmes, and the areas of justice, freedom, citizenship and security.
In all cases, the budget is adopted only if a majority of MEPs agree to it and three-fifths of the votes cast are in favour. Regardless of any disagreements which may have arisen in the process, the final outcome will be a balanced budget. Deficits are not allowed under the Treaty.
Where does the money for the EU budget come from? The European Union budget is mainly financed from three 'own resources'.
- A large part (almost three-quarters) of this money comes from contributions paid by the Member States based on their gross domestic product. The national contributions are calculated in keeping with the principles of solidarity and ability to pay.
- A second part comes from customs duties and agricultural levies (a form of import duty on products entering the internal market from the rest of the world).
- The third part is made up of a fixed proportion of the money Member States collect in value-added tax (VAT).
How is the expenditure checked? The European Parliament and the Council of the European Union thoroughly scrutinise the annual expenditure plans when setting the annual budget. The European Commission, which manages the budget, must then account to the European Parliament for how the money has been spent each year.
There are also many checks and balances along the way. The expenditure is subject to internal audits and independent external evaluations. This system constantly assesses the budget allocations to improve the way money is allocated in the future.
Two independent bodies audit the budget expenditure:
- The European Court of Auditors, the EU's own watchdog, conducts audits on an ongoing basis.
- OLAF, the European Anti-Fraud Office, investigates any suspected cases of money spent improperly. It also works with its Member State counterparts to prevent fraud.
What is the EU budget used for?
Although the early budgets only covered administrative running costs, the growth in the volume of EU budget expenditure reflects the development of the common policies. Today, the European Union has an annual budget of close on €115 billion, nearly 80% of which is earmarked for the common agricultural policy (CAP) and regional policy (structural funds). These two policies are long-term actions:
- The share of the CAP has fallen steadily over the years from 75% of the EU budget 25 years ago to 43% today, including rural development.
- The regional policy, which originated with the creation of the European Regional Development Fund (ERDF) in 1975, has risen steadily to nearly 36% of EU expenditure today.
In addition to these two core actions, EU money funds the following priority areas:
Competitiveness and cohesion: The budget allocated to these items for the 2007-2013 period has risen by 23% in relation to the amount spent in the previous seven years. The bulk of the €43.1 billion budget for competitiveness and cohesion is for regional and social development. The European Regional Development Fund concentrates on economic development, with much of the money spent on improving infrastructure in the regions with the most serious economic handicaps. The European Social Fund, on the other hand, invests in people. It provides money for improvements in productivity, working conditions and skills. It also promotes equal opportunities. A separate Cohesion Fund invests only in the poorest regions, particularly in transport, energy and environmental infrastructure projects.
Research
Research
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The European Union sees research and innovation as particularly important to job creation and growth. It has therefore increased the research budget for 2007-2013 by 75% compared with the 2000-2006 period to €54.5 billion.
The environment
Wind turbines
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The EU funds allocated to environmental protection cover a wide range of projects, including the establishment of environmentally-friendly and competitive rural economies, with most of the funds being earmarked for farmers; the adaption of the fisheries sector to cope with falling fish stocks; and environmental programmes that promote the consideration of the environment at all levels of policy making.
Border protection and internal security: The EU's land and sea borders extend along tens of thousands of kilometres. These external borders are closely controlled at all times. This is a shared responsibility. Within its borders, the EU champions a single area of freedom, justice and security, and allocates substantial resources to fighting organised crime and terrorism.
Common external policies: The European Union has a population of nearly 500 million citizens, one-quarter of the world's economic wealth and is the largest trading bloc and development aid donor worldwide. Through its common trade policy, the EU wields considerable economic influence. The European Union also aims to wield political influence, a position that gives it a responsibility in sustainable development, poverty eradication and peacekeeping. It therefore spends some €9 billion annually on development aid, humanitarian assistance, technical support and peacekeeping missions.
The European administration: The total staff of all the institutions together is 40,000 - much the same as the number of public service staff required for a major European city. Administration of the European Union takes less than 6% of the budget. This covers the cost of running all the EU institutions, including the costs of translation into the 23 official EU languages.
© Touteleurope
- Updated: 08.09.2008
