Articles and Speeches

EU Budget & UK Rebate
13-Aug-05, Information Bulletin.

The EU budget can be an emotive issue, and it has been rather topical recently. 

Many people have asked me, quite rightly, how our contributions to the EU budget are calculated, so I thought I'd offer a brief explanation.

The Facts
- The UK is a net contributor to the EU.  We pay more in than we receive in subsidies.
- The EU budget is set for a 5 year period. The budget for the period 2006 to 2011 is now being discussed.
- The UK rebate was negotiated by Lady Thatcher in 1984.  This meant we got some of our money back.

The Budgetary Basics
Our budgetary contribution is determined by four elements:
1. Customs duties.  We pay duties to the EU budget based on a range of goods imported from non-member countries.
2.  Sugar Levies.  These are charge in line with how much sugar each member produces and subsidize the marketing of excess sugar onto the world market.
3.  VAT based contributions.  We pay 1% of our VAT to the EU.
4.  GNI-based contributions.  We pay a percentage of our Gross National Income (GNI) into the EU and the amount is determined by the net amount the EU requires to balance its budget.

Contributions are paid in 12 monthly instalments and the limit on the EU budget is 1.24% of GNI.

The UK Budget Rebate
The UK receives an abatement of 66% of its contribution with caveats.

In 2004 the rebate was £3.6bn.  In general terms, this reflects the difference between our allocated expenditure (7.23% of EU budget) compared to our VAT contribution (18.11%).