The UK contribution to the EU budget
The financial relationship between the UK and the European Union (EU) continues to be a major talking point as the terms of Brexit are negotiated.
In 2016, the government spent £814.6 billion on all aspects of public spending, but how much does the UK pay to the EU as a current member?
What about the rebate the UK gets, called the Fontainebleau Abatement, and the net impact of money the UK receives from the EU, for example through the Agricultural Guarantee Fund?
We take a look at the numbers, using latest data from the ONS that account for the UK’s official transactions with EU institution, as well as data from the European Commission.
In 2016, the UK’s gross contribution to the EU amounted to £19 billion. However, this amount of money was never actually transferred to the EU.
Before the UK government transfers any money to the EU a rebate is applied.
In 2016, the UK received a rebate of £5 billion. This means £13.9 billion was transferred from the UK government to the EU in official payments.
But this only accounts for the money that the UK pays to the EU – some of this £13.9 billion is credited back to the UK public sector, of which a proportion is then paid to the private sector.
ONS reports that £4.4 billion came back to the UK public sector and private sector in credits in 2016.
This included £359 million that came back through the European Regional Development Fund and £2.4 billion through the Agricultural Guarantee Fund.
Given these figures, ONS reports that the UK government’s net contribution to the EU – that is the difference between the money it paid to the EU and the money it received – was £9.4 billion in 2016 as compared with the £18.9 billion gross contribution.
But is there anything else we might consider?
Some have argued that there are other payments that should be taken into account. Money from the EU also comes back directly to the UK private sector (for example, to fund research in UK universities). ONS data does not separately identify direct flows from the EU to the UK private sector.
Data from the European Commission (EC) does account for some credits to the private sector. Let’s now take a look at how it calculates the UK’s contribution using its own figures.
Using the latest available figures published by the EC, a wider estimate of flows between the UK and the EU can be calculated that takes into account the rebate and the money the EU sends to the UK public and private sectors combined.
This is arguably a more complete picture of the money that flows between the UK and the EU.
However, in the last few years the EC figures have been volatile and so a five-year average has been taken to better represent a “typical” contribution.
Using EC data that includes credits from the EU to UK public and private sectors, the UK’s average annual net contribution on this wider basis for the years 2012 to 2016 was £8.1 billion.
Making meaning of large amounts
Often, very large numbers can lose meaning – to help you make sense of them we have created a calculator tool that will break the numbers down for you.
The UK contribution over time
The UK’s contribution to the EU budget changes each year as it is dependent on various factors such as: UK gross national income (GNI), the GNI of other EU member states and the value of the UK rebate (which is not a fixed amount, rather it is based on payments and receipts for the previous year).
Here, using ONS figures we take a look at how the UK contribution has changed over the past seven years.
UK contributions to the EU budget, 2010 to 2016
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Notes
Clarification: This article has been updated to clarify that some of the money which is credited to the UK government by the EU is then distributed to the private sector.
In the calendar year 2016, total general government expenditure was £814.6 billion. Here we have used a wide definition, which includes spending on healthcare, education, defence and so on, and also includes spending on social security benefits. Central government spending and local government spending are both included. The amount covers the whole of the UK.
HM Treasury also publishes figures on the payments between the EU and the UK government and estimated the net contribution in 2016 to be £8.6 billion. Its figures differ to those reported by ONS in Pink Book 2016 as they are estimates, versus the final figures used in the ONS publication. Treasury figures are also presented on a cash basis, whereas ONS data are presented on an accruals basis.
European Commission (EC) figures are from the data download in their financial report and have been converted into sterling using an average exchange rate each year for the years 2012 to 2016.
Some commentators also draw attention to the fact that a certain amount of the UK’s contribution to the EU budget goes towards our target for overseas aid spending. They argue that if we were to leave the EU, the UK would still be committed to this spending, so this money would not be saved. In 2014, for example, it was estimated that £426 million of our EU contribution counted towards our overseas aid spending target.
EC figures account for all payments it receives from the UK government and payments it makes to the UK public and private sector bodies. A small proportion of spending – just over 2% – cannot be allocated to a specific country and so are not included in the EC’s figures. There are also some payments to the EC that are not allocated to a particular country and therefore are also not included in their figures. An example of this is fines, which is again a small proportion of total spending, typically between 2 and 3% of total expenditure.
Related
- ONS Pink Book, 2016 Statistical Bulletin