Open Europe Blog

It’s that time of year again. Chancellor George Osborne has delivered his latest budget. The EU geeks that we are, we have one question in mind: what does it say about the UK’s contributions to the EU budget?

Well, as ever, this is complicated because there are lots of ways of measuring these contributions. The table below shows the main figures and how they compare to the OBR’s previous estimates in December 2013 (click to enlarge):

It shows that the UK’s total net and gross contributions to the EU budget are now expected to be around £2.3bn and £1.7bn higher over the next six years than previously forecast. However, the impact of this on the OBR’s figures for the Government’s Total Managed Expenditure (TME) and Public Sector Net Borrowing (PSNB) as shown in the Budget is neutral or even slightly positive over the same period, compared to the December forecast.

One of the reasons for this is that the OBR effectively treats the contributions that the UK makes to the EU via a share of VAT receipts, customs duties and sugar levies as a direct “EU tax” and the money therefore doesn’t show up in the national accounts. UK contributions are also affected by the complex rebate calculations and how much the UK receives from the budget.

As the UK economy is now growing faster than others in the EU, the overall UK contribution increases. But because the rebate is calculated on the basis of the UK’s VAT contributions and the UK gets a refund on some of the customs duties it collects, that will help reduce direct contributions from the UK Government’s budget and balance out this figure over the six years.

Relative to GDP the increase is tiny and the good news is that it’s due to a faster growing economy.  Nevertheless, UK plc still ends up contributing more due to the growth in the ‘EU’s tax base’…

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