European Union Budgetary Process

Article 311 of the Treaty provides for a European Union (EU) budget to finance the various activities that underpin its policies.

These include:

• agriculture (CAP)
• fisheries
• structural and cohesion funding
• research
• education
• infrastructure
• competitiveness for SMEs
• EU external actions
• citizenship and security actions

In addition, the EU budget covers the administration costs associated with running the EU institutions.

Under Art 312 of the Treaty, the Multi-annual Financial Framework (MFF) sets out annual maximum amounts (ceilings) for EU expenditure as a whole. It also sets out the maximum amounts for the main categories of expenditure (headings) for a period of at least five years.

The current MFF period runs from 2014 to 2020.

The EU budget is then adopted on an annual basis within ceilings set out by the MFF.

Under the Lisbon Treaty, the European Parliament and the Council make up the Budgetary Authority. The Budgetary Authority has the power to amend and adopt the Union’s annual budget.

The annual Budgetary Council meeting is held each November. The aim is to reach agreement on the following year’s budget for the Union.

Under Art 311 of the Treaty, the EU’s expenditure is financed by own resources contributions from each member state.

These are:

• ‘traditional own resources’ (TOR) – principally customs duties collected on behalf of the EU with 80 per cent of the amount collected paid over to the EU. The balance is retained by the member state to fund the costs of collection and administration
• a VAT-related payment
• a payment based on a percentage of each member state’s Gross National Income (GNI)

Article 325 of the EU treaties assigns responsibility for the combating of fraud affecting the financial interests of the European Union to both the Union and to member states.

However, given that about 80 per cent of EU expenditure is managed by member states (and EU budget revenue is collected by them) the primary responsibility for combating fraud falls to the member states.

The EU budget section of the Department of Finance has been designated the national Anti-Fraud Coordination Service (AFCOS). AFCOS provides administrative assistance to the European Anti-Fraud Office (OLAF), when requested.

As an extra safeguard, the EU Commission has responsibility for monitoring the national administrative practices and procedures in place to fight fraud. This is ensures that they are both effective and comply with EU rules.

The current MFF 2014 – 2020 was formally adopted in November 2013. It totals €960 billion (in 2011 prices).

This represents a 3.5 per cent reduction from the preceding budgetary period, reflecting the current climate of public finance consolidation across member states.

This budget is distributed across seven broad policy areas as set out in the table below.

Ireland has been a net beneficiary from the EU Budget since accession in 1973. Details of our public sector receipts and payment contributions are published, annually, in the Budget and Economic Statistics.

The majority of Irish funding from the EU has come through the Common Agricultural Policy (CAP). It is spent on areas such as direct income and market support to the agricultural sector.

Further monies are received for rural development programmes. In 2015, these areas accounted for about 80 per cent of our total EU public sector receipts.

The next largest area is receipts under the structural and cohesion funds, invested mainly in human capital and physical infrastructure.

These receipts have included considerable investment over the decades in our transportation, educational and water-related infrastructures. It also includes investment in educational training and other supports used in up-skilling our workforce.

For the new 2014-2020 programme, the majority of Irish funding will continue to come through CAP. Ireland can still expect to receive significant receipts under structural fund spending.

Structural fund spending will, for the 2014 – 2020 programme, include a focus on areas such as:

• research
• technology
• innovation supporting SMEs
• ICT
• energy efficiency and education
• training and labour activation measures

Additional funding opportunities will arise under the Horizon 2020, Erasmus, Connecting Europe and Cosme EU level programmes, which cover research, education, infrastructure networks and SME competitiveness and a number of other smaller programmes.

One point to note is that the Budget and Economic Statistics (BES) do not include research receipts as these payments are made directly to the beneficiaries, such as academic organisations.