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“Bailouts”,EU budget ceilings and “backlogs” clarified

June 7th, 2016
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Rating: 4.1/5 (44 votes cast)

The UK will not, whatever the circumstances, be called upon by the EU to supply emergency (“bail out”) funding to Eurozone countries. This is clear in the agreement reached between David Cameron and all the other EU leaders in February, which has the status of international law.*

Neither can the EU budget be increased without the UK’s consent beyond the ceilings Member States, including the UK, agreed unanimously for the 2014-2020 period. Any increase in those ceilings requires according to the EU Treaties a unanimous vote – in other words the UK has a veto which could only be altered by a change in the Treaties, something the UK could also veto.

Finally, reports of a £19.4 billion “black hole” in the EU budget are mistaken. There was a backlog in payments – partly the result of technical issues arising in the transition from one seven-year budget period (2007-13) to the next (2014-20) – but much of it was already eliminated in 2015 and it is expected to be down to EUR 2bn by the end of this year, at zero additional cost to Member States beyond their scheduled budget contributions.

This amounts to a return to normal, given that in practice the backlog represents the claims for payment that come in towards the end of one financial year but are paid in the next financial year. As all claims need to be properly checked and this takes time, it is inevitable that some claims will fall into this category.

Background

The EU budget is just under €150 bn per year for the period 2014-2020. This represents about 1 % of the annual wealth produced in the EU and 2% of total public expenditure across Europe, the other 98% of which is spent by national, regional and local governments.

The EU budget is smaller in absolute amounts than the annual budgets of Austria or Belgium  and under a sixth of the size of the UK national budget (£798 billion in 2014).

All Member States pay a similar proportion of their national wealth into the EU budget. This means that all of the richer EU countries, including the UK, are “net contributors” in that they pay in more than the amount of the budget that is subsequently spent in their country.

In terms of net contribution per capita (broadly the amount per head of population the UK pays into the budget minus EU funding spent in the UK) the UK was tenth  in 2014, based on the EU’s official budget figures. The net contribution represents – according to the UK government – about  1.24% of UK public spending overall – though that does not reflect amounts that the UK private and university sectors receive directly from the EU budget, without that money passing through the UK government.

The EU budget is only used in policy areas where Member State governments have unanimously agreed that EU action can have an added value compared to individual countries acting alone.

Relevant areas include making the single market work; promoting trade; tackling climate change; funding investment in cross-border innovation and infrastructure; common development funding and humanitarian assistance; and subsidising food production in a way consistent with the single market.

That unanimous agreement is achieved through a combination of the EU Treaties and the seven-year “Multi-annual financial framework” which also sets the annual spending ceilings referred to above. Annual budgets and spending on individual programmes are set within those ceilings by simple majority in the European Parliament and qualified majority of Member States in the Council of the European Union.

 *The agreement, formally known as the “New Settlement for the UK”, states as follows in Section A, para. 3:

“Emergency and crisis measures designed to safeguard the financial stability of the euro area will not entail budgetary responsibility for Member States whose currency is not the euro.  Appropriate mechanisms to ensure full reimbursement will be established where the general budget of the Union supports costs, other than administrative costs, that derive from the emergency and crisis measures referred to in the first subparagraph…”. 

The New Settlement for the UK will take effect as soon as the UK informs the Council it has decided to remain a member of the EU. Section A of the Settlement in particular will be incorporated into the Treaties at the time of their next revision.  Here is the link: http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.CI.2016.069.01.0001.01.ENG

"Bailouts",EU budget ceilings and "backlogs" clarified, 4.1 out of 5 based on 44 ratings

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Please note that all statements in all entries were correct on the date of publication given. However, older archived posts are not systematically updated in the light of later developments, for example changes to EU law.

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