EU Budget

The biggest slice of the budget goes to making the EU economy more competitive and at the same time making the EU more cohesive, by narrowing the gap between richer and poorer member states. Between 2007 and 2013, these priorities will account for around 38% of the total budget of more than €900 billion for the whole period.

The second largest item of expenditure is agriculture, the EU’s only fully integrated policy. The money is spent on secure supplies of safe, quality food, and ensuring farmers enjoy a fair income while consumers pay reasonable prices. This takes around 35% of the budget.

Agriculture's share of the budget has dropped by half over the last 40 years, as a result of reforms to agricultural spending, a broader view of the rural economy - with 10% of the EU budget now going on rural development and the protection of the rural environment, and above all expansion of the EU’s other responsibilities.

The remainder of the money goes on a wide range of policies, including lifelong learning, security and justice for all citizens, research and innovation, development assistance, food aid and humanitarian assistance.

Boosting economic development and cohesion

Funding to make the EU more competitive and more cohesive, by encouraging job creation and closing gaps in levels of economic, environmental and social development, is used in many ways. The EU funds large infrastructure projects, such as roads, bridges, motorways, airports and improvements in electronic communications, but it also invests in small businesses and decaying city centres, wind farms and schemes to help the disabled to integrate into the community, waste water treatment plant upgrades to meet EU norms and vocational training schemes.

Because competitiveness is so important, spending on research and innovation takes a significant slice of the budget. The money helps promote integrated pan-European research projects which pool the efforts of scientists working in different EU countries in areas such as health, food, biotechnology, information and communication technologies, nanotechnology, energy, environment, transport, security and space. Special attention is paid to helping small businesses innovate, since they are the backbone of the EU economy.

Skills and lifelong learning are also vital to competitiveness. There are programmes to ensure everyone gets a fair chance to acquire the skills needed for a knowledge-based society, and educational and vocational programmes, such as Erasmus and Leonardo da Vinci, for students and teachers to spend time in other countries.

The EU as a global partner

Money to underpin the EU’s role as a global partner in trade and aid is used to fund economic, environmental and social development in many countries around the world. The EU pays particular attention to the needs of its immediate European and Mediterranean neighbours, including the candidates for EU membership, and to the countries of Africa, the Caribbean and the Pacific (ACP) linked to the EU by the Cotonou Agreement on trade, technical assistance and financial aid. Member states provide additional money specifically for the ACP countries, which is paid separately into the European Development Fund (EDF). Eight hundred million euro annually has been earmarked in the current funding cycle for humanitarian and food aid around the world, including emergency assistance to relieve famine or provide help after earthquakes. There is also a small amount for economic cooperation with other industrialised countries. All this will come to over EUR 5 billion each year from 2007 to 2013.

Making the EU a juster and safer place to live

Citizenship, freedom, security and justice are a vital complement to the single market and freedom of movement for EU citizens. Funding allocated each year to creating an area of freedom and justice ensures that internal EU borders are not a barrier to citizens pursuing claims in the civil courts of other member states and improves cooperation between criminal justice systems and the police. Such cooperation helps the fight against terrorism and cross-border crime, and prevents criminals exploiting freedom of movement by fleeing across EU borders.

The cost of running the EU

Overall, the EU budget ofEUR 115.5 billion for 2007 to fund all the EU's activities amounts to some EUR 250 per person, less than EUR 0.70 per day. The share of the budget used to pay the administrative costs of running the EU comes to under 6% of total expenditure and less than EUR 0.04 per EU citizen per day. This includes the cost of running all the institutions (notably the European Commission, the European Parliament and the Council of Ministers), and of translators and interpreters to handle the EU’s 23 languages.

Paying for Europe

Where does the budget money come from? The EU has its “own resources”. They are of three types:

• revenues from levies on agricultural imports and customs duties on other imports;
• a slice of value-added tax income; and
• as much of a direct contribution by member states based on their national income as is needed to meet the needs of the budget.

Levies, duties and value-added tax account for one quarter of the budget. These are all forms of revenue which cannot be said to belong to a particular member state. For example, goods on which customs duty is paid in Valletta may — thanks to the EU’s single market — actually be destined for an importer in Brno.

The direct contribution was introduced in 1988 to deal with two simultaneous developments: an expansion in the responsibilities of the EU and a reduction in revenues from duties and levies as the result of freer international trade. Member states contribute a percentage of gross national income. As this is a measure of national wealth, the formula ensures that each country contributes according to its means. The money is then spent where it is needed most.

EU Budget web links