There are a number of reasons why there is such a large discrepancy:
- Partly this can be accounted for by the €11.2bn that was retroactively added onto the EU budget late last year (one of the European Parliament's conditions for swallowing the cut to the EU's long-term budget for 2014-2020). In addition, the growth of the UK's economy resulted in an adjustment and increase of £781m to the UK's contribution (-£190m via a separate VAT adjustment) - the same mechanism partially responsible for the £1.7bn demand.
- Due to its strong economic growth relative to other EU member states, a situation which looks set to continue in the near future, we also warned that the UK faced an 'EU stealth tax' via higher GNI, VAT and customs contributions.
- We warned last year following the landmark budget cut that the UK might yet end up paying more in net terms due to Tony Blair's rebate cut and a larger share of EU funding going to new member states but the latest developments (the surcharge + stronger relative economic performance) risk pushing this up even higher.