CHAPTER 11
The Union Budget

Budgetary issues are highly relevant to the discussion of policies within the Union. It
administers common laws between the member states and expenditure on common
policies throughout the EU. To pay for this the Union has an agreed budget of €862
billion for the period 2007–13.

In this chapter, it is appropriate to cover EU revenue and expenditure and the
contributions expected of member states before we move on to examine specific policy
areas later in the section.

The EU’s budget is in actual fact rather small. Most of its outlays are determined years in advance and the majority go on just two policies: support for farmers and support for poorer regions. Yet the negotiations over the budget invariably spark off acrimonious debate and a degree of scrutiny out of all proportion to their economic significance. Representatives of member states dig in their heels about who will pay and how much, and who will benefit during the next medium-term budget plan, known as the ‘financial perspective’.

To put the figures into perspective, the EU’s 2005 budget amounted to €106b euro or £73b, the equivalent of only 1 per cent of the member states’ combined gross national income. National budgets in the EU typically amount to 45–50 per cent of national income, allocated between national, regional or local government. Again, the Union has a budget thirty times less than that of the US federal government, despite having a population which is more than 50 per cent larger than that of the United States.

Of the above amount, almost 95 per cent of the budget went directly to the beneficiaries of EU policies i.e. to farmers’ regions, third countries, research and so on. It is often alleged that too much money is spent on an inflated, unnecessarily large bureaucracy. But the running costs of the European Commission amount to little more than those of the London mayor. The total cost of running all EU institutions is less than the budget of the more powerful mayor of Paris.

In the enlarged Union of today, the battles over revenue and spending are perhaps inevitably bloody. But at an average of 1.15 per cent of GNI, it is still well within the established 1.24 per cent ceiling.


Revenue

Originally, the Community was financed by contributions levied on member states, but this was found to be unsatisfactory. In 1970, it was decided that in future EC finances would be based on its own resources, thus providing the

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