Open Europe Blog

Yesterday’s Autumn statement revealed that, under the latest OBR forecast, the UK’s net contribution to the EU budget is set to increase by a cumulative £10 billion between 2013-14 and 2017-18.

However, it is not quite as bad as it seems. According to the OBR, £4.9bn of the increase is “spending neutral” due to a change in how EU aid contributions are accounted for.

Nevertheless, the OBR does expect a real increase of around £5bn. This is due to lower than expected VAT revenues and customs duties (known as Traditional Own Resources) across the EU due to the economic downturn. The effect is that this will increase direct national contributions from the net contributors, including the UK’s.

See the table below from the OBR’s report (click to enlarge):

As we have noted before, it was always possible that the UK’s net contribution to the EU budget could increase, despite the long-term EU budget real terms cut agreed in early 2013, due to a variety of factors (such as more more money flowing to the EU’s poorer countries, which isn’t covered by the UK rebate, fluctuations due to exchange rates, and the fluctuating revenues from VAT and customs duties cited by the OBR.)

Although much of the EU budget remains wasteful and irrational, these figures illustrate why it was so important to secure the cut in overall EU spending levels up to 2020. The deal brokered in February does at least mean that over the long term gross and net contributions will be limited in a way that they were not before. In addition greater pressure on overall spending might (we can hope) finally focus minds on reforming how the money is actually spent.

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