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Wednesday 23 August 2017

Q&A: Who funds our €2bn a year and how much could be cut?

German EU Commissioner for budget and human resources Gunther Oettinger (L) and Commissioner for regional policy Corina Cretu address a press conference on the future of the EU Budget at the European commission in Brussels. Photo: AFP/Getty Images
German EU Commissioner for budget and human resources Gunther Oettinger (L) and Commissioner for regional policy Corina Cretu address a press conference on the future of the EU Budget at the European commission in Brussels. Photo: AFP/Getty Images

Sarah Collins

Who funds the EU budget?

The EU's multi-annual budget is negotiated every seven years, and works out at around €150bn a year in the period 2014-20. It is largely funded by direct contributions from EU governments, based on their gross national income (along with customs duties and a percentage of VAT revenue, though the former income source has dried up as tariffs are gradually eliminated through trade deals). The EU budget is not allowed to be in deficit, so it must raise as much in revenue as it wants to spend.

What is the money spent on?

Mainly on agriculture, boosting growth and jobs in the EU's regions (known as cohesion policy) and research - with a small proportion going towards border protection, foreign policy and EU staff. There is a separate development aid fund outside the EU budget.

How much does Ireland get?

Ireland gets close to €2bn a year, the large majority from the common agricultural policy (CAP). But since 2014 Ireland has been paying in more than it gets out, meaning it joins a growing group of countries - Germany, France, the Netherlands and others - known as net payers.

Who is asking for cuts and why?

The European Commission has said cuts will be needed given the Brexit black hole and new pressures such as migration and defence. Aside from cuts, the EU will also need to shift resources away from traditional policies, the EU said in a new reflection paper. But no legal proposals on the budget are due until next year, once the EU has a better idea of the UK's Brexit settlement.

How much could be cut from the EU budget?

It's not clear. The UK contributes €10bn-€12bn a year more than it gets out. Overall it funds around 16pc of the bloc's entire annual budget. But much will depend on what kind of divorce and post-Brexit trade deal the EU and UK manage to negotiate, with the UK still open to the idea of paying to the budget for research, for instance.

Who is in favour of budget cuts?

The UK, Austria, Germany, Finland, France, Italy, The Netherlands and Sweden - the EU's net payers - tend to be in favour of cuts. They formed a "better spending" bloc ahead of talks on the 2014-20 budget, and succeeded in getting overall spending down on the previous period, a first in EU history.

Who will resist cuts?

A group of countries including Spain, Poland and many eastern and southern European countries are against cuts to the EU's regional policy, as they tend to receive the bulk of the payments. France is usually on Ireland's side when it comes to maintaining a large CAP budget.


What happens next?

The Commission's reflection paper will be discussed ahead of a legal proposal due next year. Commission budget chief Günther Oettinger said he needed several months to assess the impact of the UK leaving on the EU's finances. This autumn, agriculture commissioner Phil Hogan will also table his ideas on the future of the CAP, which will feed into the budget talks.

Irish Independent