EU budget, commitments, payments and the details

(BRUSSELS) - The EU's 2014-20 budget hangs on calls for sharp spending cuts, with the battle fought over member state commitments and their payments, which cover actual spending and so reflect its true cost.

Commitments cover the money which will be allocated to specific EU projects and programmes. They are the maximum amount of money which can be allocated during the budget period.

Payments are the amount that the EU expects to actually spend and are the maximum amount that can be disbursed. They have to be covered in full, so making them favoured by Britain as they represent the true cost of the budget for member states.

Payments have always been lower than commitments because experience shows that sometimes EU projects and programmes are delayed, dropped or unfinished.

An EU source said that traditionally, the difference between budget commitments and payments is about 5.0 percent.

Up to now, debate on the EU's multi-year budget has turned on the amount of commitments but since the start of the current negotiations, British Premier David Cameron has put the focus on the payments side.

He argues that it is payments that matter most since they are the actual amount spent and funded by member states, and that accordingly they offer a clearer picture of EU finances.

There are other advantages -- the payments figure is less than commitments, making it easier to defend against rising euro-scepticism in Britain. It is also simpler and better understood by taxpayers considering how much money has to be handed over to Brussels.

EU President Herman Van Rompuy in November suggested a compromise figure of 973 billion euros for commitments, about 1.0 percent of EU Gross Domestic Product, and 943 billion euros in payments.

That compromise failed and EU sources said Thursday Van Rompuy would go further now, setting commitments at some 957 billion euros and payments at 900-905 billion in the hope of get a deal.