Multi-annual financial framework
The EU plans its spending in seven-year financial plans in a Multi-annual Financial Framework (MFF). Annually, the European Parliament and the Council approve each year’s budget, within the long-term plan, separately in advance. (See Figure 3.3 below for more details of the budget and accountability cycle.)
At the time of the Brexit referendum, the relevant long-term plan ran from 2014 to 2020. The EU is currently working within an MFF for 2021-2027 and the Commission has proposed an MFF for 2028-36.
The 2014-20 EU funding programmes totalled €1,087 billion and covered six areas:
- Sustainable growth and natural resources – €420 billion (39%)
- Economic, social and territorial cohesion – €371 billion (34%)
- Competitiveness for growth and jobs – €142 billion (13%)
- Administration – €70 billion (6%)
- Global Europe – €66 billion (6%)
- Security and citizenship – €18 billion (2%)
Figure 3.1: EU funding programmes 2014-2020
Sources: European Commission, Priorities for 2014-20
EU budget
Under EU law, the EU annual budget must always balance, so there is no deficit or debt. It consists mostly (>90%) of payments for the current year plus commitments in future years (<10%). Clearly, an EU member state may choose to run its own national budget in deficit and many do.
There was an exception in 2020 with the creation of NextGenerationEU (NGEU), which allowed the EU to borrow in order repair the damage from Covid. NGEU sat above the 2021-2027 MFF and supported the EU’s capacity to support recovery, investment and resilience. The NGEU borrowed €750 billion (in 2018 prices), which supported EU programmes for the benefit of EU member states. It is being repaid over decades out of future EU budgets.
Country contributions to the EU annual budget vary principally according to country Gross Domestic Product. They average about 1% of GDP (the EU uses a similar measure, called Gross National Income – GNI).
The GNI contribution is the major item but country contributions also include a VAT contribution, tariffs and levies.
The 2018 budget was €160bn, consisting of:
- €132bn (83%) spent in EU countries, benefitting citizens directly, on the EU’s main objectives of sustainable growth and smart and inclusive growth:
- €59bn (37%) on sustainable growth;
- €56bn (35%) on economic, social and territorial cohesion
- €22bn (14%) on competitiveness for growth and jobs
- €10bn (6.3%) on Global Europe;
- €10bn (6.3%) on administration; and
- €3bn (1.9%) on security and citizenship.
The EU budget for 2018 of €160bn averaged 85 cents a day per citizen (EU population 513 million) or €312 a year per citizen. (The 2017 budget was €158bn and spent in similar proportions to 2018).
Source: European Commission, EU annual budget lifecycle – figures
Member states’ contributions compared
Figure 3.2 shows member-state contributions to the EU budget for 2019. Of these, the top five contributors were Germany, France, Italy, UK and Spain. On a net basis the UK was the second largest contributor after Germany and contributed slightly more than France.
Generally richer nations are net contributors and poorer states are net recipients.
The House of Commons source also provides net contribution figures on a per capita basis. The UK was sixth on this measure, just ahead of France.
Figure 3.2: Member states’ net contributions to the EU budget
Source: House of Commons Library, A Guide to the EU Budget, May 2021
Budget accountability and control
This diagram below shows EU budget accountability cycle – the steps in granting funds, spending, reporting and auditing. It comes from an excellent NAO briefing on EU-UK finances.
For more detail on the role of the European Court of Auditors and its regular sign-off of the EU’s accounts, please see the section on ‘What is the EU?’.
Figure 3.3: EU budget accountability cycle
