There are European elections later this week and one of the big challenges that will face newly elected MEPs will be getting to grips with the EU’s finances.
The €148bn EU budget was the subject of a #ICAEWchartoftheweek earlier this year (click here). This highlighted the EU’s plan for spending in 2019, with €57bn budgeted for rural support, €47bn on economic development, £25bn for operating programmes, £10bn on running costs, and €9bn externally.
Our chart this time looks at how the money flows between EU member countries. It illustrates how Germany, the UK, France and the Netherlands each pay in much more than they ‘get back’ in EU spending, while countries such as Poland, Romania and Greece receive more than they pay in.
One of the principal aims of the EU budget is to support economic development, and so it is unsurprising to find that a proportion of the EU budget contributions of better-off northern and western European countries are directed towards the less well developed economies of eastern and Southern Europe.
There are some exceptions. For example, Belgium and Luxembourg (on a per capita basis two of the biggest gross contributors into the EU budget) benefit from hosting the core EU institutions and agencies, with around two-thirds of the EU’s €10bn annual budget for running costs being spent in these two countries. Another is Italy, the EU’s fourth largest economy and hence a large contributor, but also a significant recipient of development support for its poorer regions.
The chart is based on extrapolations of previous spending patterns and so may not take account of more recent developments, such as the move of the European Medicines Agency out of the UK this year. This should result in around half a billion euros of extra spending by the EU in the Netherlands, reducing its net contribution accordingly.
In theory, the scale of the transfers between countries should reduce over the long-term as economic growth leads to higher contributions. Indeed, this has been the experience of Ireland, where its economy has grown to such a point that it is now a (small) net contributor.
The departure of the UK will have a big impact on the EU budget, especially given its position as a net contributor. However, it is important to put this into context: the UK’s net contribution of around €8bn a year is equivalent to approximately 0.1% of total government spending by the other 27 EU countries, while the Withdrawal Agreement envisages the UK continuing to pay into the budget for some time to come.