Budget & Funds

EU Budget

In the 2006 budget, the largest single expenditure item was agriculture with around 47% of the total budget. Next came structural and cohesion funds with approximately 30%. Together with the Common Agricultural Policy, the structural and cohesion funds make up the bulk of EU funding, and the majority of total EU spending.

For 2007-2013, new objectives have been defined, with a total budget amounting to €347.41bn in current prices.

Most EU funding is not paid directly by the European Commission but via the national and regional authorities of the Member States. Ultimately, the European Commission, which manages the budget, is accountable to the European Parliament for how the money has been spent each year. The EU's own independent watchdog is the Court of Auditors, and if anything goes wrong, the EU Anti-Fraud Office, OLAF, will investigate. OLAF also works with its member state counterparts to stop smuggling at the expense of the budget. Smuggling avoids import duty, a key component of EU income.

Funding Objectives

There are 3 main objectives for the funding period 2007 – 2013:

Convergence

Aimed at accelerating economic development in regions with a GDP per capita below 75% of the EU average. The priorities are human and physical capital, innovation, knowledge society, environment and administrative efficiency. The funding allocated is €282.855bn in current prices, financed by the ERDF , the ESF and the Cohesion fund.

Regional Competitiveness and Employment

Aimed at reinforcing competitiveness, employment and attractiveness in all regions, except those already covered by the Convergence Objective. Innovation, the promotion of entrepreneurship, and environment protection are the main themes. The funding allocated is €54.965bn in current prices, financed by the ERDF and the ESF.

Territorial Cooperation

Aimed at promoting cooperation between European regions, as well as the development of common solutions for issues such as urban, rural and coastal development, economic development and environment management. The funding allocated is €7.75bn in current prices, financed by the ERDF.

Agricultural Guidance & Guarantee Fund

For more than 40 years, the Common Agricultural Policy (CAP) has been the European Union's most important common policy. This explains why traditionally it has consumed a large part of the EU's budget, although the percentage has steadily declined over recent years. €52 bn was paid out in 2008.

Support for agriculture ensures food at reasonable prices by sustainable use of resources, while meeting the needs of rural European communities. However small farmers only receive about 8% of CAP subsidies.

Agricultural expenditure is financed by two funds, which form part of the EU's general budget: the European Agricultural Guarantee Fund (EAGF) finances direct payments to farmers and measures to regulate agricultural markets such as intervention and export refunds. The European Agricultural Fund for Rural Development (EAFRD) finances the rural development programs of the Member States.

The member states make the payments to beneficiaries through accredited agencies based on the eligibility of aid applications. These grants are repaid by the Commission monthly or quarterly.

The ‘butter mountains’ and ‘wine lakes’ have disappeared because the price controls and intervention that caused them have been stopped. Agriculture expenditure is moving away from subsidy payments linked to specific produce, toward direct payments based on farm size.

European Social Fund

The European Social Fund (ESF) was set up to improve employment opportunities and so help raise standards of living. It aims to help people fulfil their potential by giving them better skills and better job prospects.

As one of the EU's Structural Funds, ESF seeks to reduce differences in prosperity across the EU and enhance economic and social cohesion. So although ESF funding is spread across the EU, most money goes to those countries and regions where economic development is less advanced.

The new 2007-2013 programme will invest £4.6 billion, of which £2.3 billion will come from the ESF and £2.3 billion will be national funding.

European Regional Development Fund

The ERDF supports regional development, economic change, enhanced competitiveness and territorial co-operation. Funding priorities include research, innovation, environmental protection and risk prevention, while infrastructure investment retains an important role, especially in the least-developed regions.

Cohesion Fund

The Cohesion fund funding is for Member States whose gross national income per capita is below 90% of the EU average. The Cohesion Fund contributes to interventions in the field of the environment and trans-European transport networks. €70 bn has been assigned for 2007 – 2013.

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