June 6, 2005

EU cuts UK funding contribution

by brian_turner

The UK’s contribution to the EU budget is being reduced by Â£630m following revised economic calculations in Brussels.

Britain is trying to persuade the commission to reduce the overall budget whilst safeguarding the UK’s rebate, as it believes the commission’s budget proposals are over-inflated.

In 2005, approximately 20 out of 25 EU member states will benefit from reductions, but the UK’s reduction is the most substantial.

The recalculation is based on a number of factors, including growth, inflation, trade and exchange rates.

The amended budget for 2005 includes savings of approximately Â£1.9bn on a proposed total of Â£700bn.

Germany and Poland will benefit from a Â£225m rebate, Spain will receive a rebate of Â£110m and Ireland, Â£40m.

The UK, Germany, France, Austria, Sweden and the Netherlands, want the annual budget pegged at no more than 1% of member states’ incomes. The Commission, however, wants to have 1.24% of combined gross domestic product to meet the higher costs of an enlarged EU.

A compromise of 1.094% has been suggested, but this is still unacceptable to the UK. According to Chancellor Gordon Brown says, keeping to 1% would still allow a margin for annual increases in the EU budget which exceeded the growth rates of most national budgets. The believes that this would provide enough funding for additional enlargement costs.

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