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Friday, December 06, 2013

Economic downturn pushes up UK contribution to the EU budget, according to OBR

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.


Anonymous said...

time to look closely at just what we are paying for not only with the eussr but all the rest of the money leaving the nation whilst our health service remains grossly underfunded, we are subsidising the failing economies of other nations.

Anonymous said...

Yet another "unintended consequence" of the disastrous deal that our politicians have written with the EU.

When do we get our say? It will be a resounding "NO".

Free trade.
No sovereignty.


Jesper said...

The amazing argument for the dangers of deflation is that people are expected to consume less today as they expect prices to be lower tomorrow. Of the things that make up the Consumer Price Index, which things are people likely to postpone consuming?

Food? My guess is that people will eat today even if they expect the price of food will be cheaper tomorrow.
Shelter? My guess is that people will need and therefore pay for shelter today even if they expect the price of shelter will be cheaper tomorrow.
There must be something that people are expected to postpone consuming and part of the CPI, what are those things?

Increased contributions by the UK while BoE continues with QE? I might need to read up on the BoE QE-program but if the net-result is that freshly printed money is used to pay EU then the additional cost might not be much to worry about...

Rollo said...

A good idea, this: penalise anyone successful, reward lame ducks; and prepare to slide down into the third world

Anonymous said...

Your heading should surely read "EUROPEAN (YES EUROPEAN) 8oeconomic downturn pushes up UK contribution to the EU Budget according to OBR"