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Executive summary

 

This report contains four sections: an overview, a section on revenue, a section on expenditure and annexes.

Section I presents an overview of the EU’s finances in 2014. It introduces the 2014-2020 multiannual financial framework – the EU’s long-term financial planning – describes its role and structure and presents the specific steps involved in the 2014 annual budgetary procedure. The section ends with a short description of the way the EU budget is managed.

Section II provides information on the budget revenue and describes the own resources that contribute to the budget revenue. It also explains a number of particularities such as the UK correction and other rebates, other revenue, donations and fines.

Section III is the main part of the report. It presents the expenditure side of the EU budget, grouped by area of spending (the budget headings specified by the 2014-2020 multiannual financial framework. It provides information on the main programmes and on the expenditure allocated to each Member State.

Section IV contains six annexes, which provide detailed information on the previous multiannual financial framework, for 2007-2013, and on financing for 2014. The annexes also show expenditure and revenue by budget heading, source type and Member State for the period 2000-2014. Annex 3 presents the methodology for calculating the operating budgetary balances. Annex 4 covers recoveries and financial corrections, and Annex 5 summarises the EU’s borrowing and lending activities. Annex 6 is a glossary of the main terminology used in the report.

Overview

Multiannual Financial Framework

Since 1988, the EU annual budgets have been set within multiannual financial frameworks in order to ensure budgetary discipline, to improve the functioning of the budgetary procedure and to promote interinstitutional cooperation. The current financial framework was agreed for the seven years 2014-2020 by Council Regulation (EU, Euratom) No 1311/2013 of 2 December 20131 (the Multiannual Financial Framework Regulation) and is the first created under the Lisbon Treaty.

Structure

Financial frameworks are composed of a number of headings (some of which are then broken down into subheadings), for each of which an annual limit (ceiling) for commitment appropriations is set.

The total of the ceilings for all headings gives the total ceiling for commitment appropriations. A corresponding estimate is then calculated for the annual ceiling to apply to payment appropriations. Total annual ceilings are expressed in millions of euros and as a percentage of EU gross national income (GNI).

The overall ceiling set by the 2014-2020 multiannual financial framework for commitment appropriations was EUR 1 082 555 million, representing 1.04 % of EU GNI. The ceiling for payment appropriations was EUR 1 023 954 million, or 0.99 % of GNI.

The budgetary procedure

The European Commission prepares an annual draft budget based on the multiannual financial framework in force and the budget guidelines for the coming year. The budgetary authority, comprised of the European Parliament and the Council, makes amendments to the draft budget and, following further negotiations, adopts the annual EU budget prior to the end of the current calendar year.

In the draft EU budget for 2014, presented on 28 June 2013, the Commission proposed commitment appropriations of EUR 142 011 million. The payment appropriations proposed were 5.8 % lower than the previous year, at EUR 135 866 million. In July 2013, the Council set commitment appropriations at EUR 141 771 million and reduced payment appropriations correspondingly to EUR 134 805 million. In October 2013, Parliament proposed commitment appropriations of EUR 142 626 million and payment appropriations of EUR 136 077 million.

The Conciliation Committee, allowed a period of 21 days to achieve consensus, reached an agreement on the 2014 budget in November 2013. The final compromise on the 2014 budget set the level of commitments at EUR 142 640 million (including special instruments), representing 1.06 % of GNI, and the level of payments at EUR 135 505 million, representing 1.00 % of GNI.

Budget management

The way in which the EU budget is managed over its lifecycle, from the approval of the annual budget onwards, means that the figures for the commitment appropriations2 and payment appropriations3 for a given financial year tend to vary over the course of the year. Procedures similar to that used for adopting the budget itself also apply to the adoption of amendments to the budget. The following factors can cause the annual budget to vary over the course of the financial year:

  1. Carryovers. Carryovers are amounts from the previous year’s budget that have not been used and that are therefore carried over to the current financial year. The carryover decision for 2014 was taken by the Commission on 11 February 2014.
  2. Amending budgets. These are used to ensure more precise and more economical financing of the budget by the Member States. In 2014, a total of seven amending budgets were adopted.
  3. Transfers. Appropriations can also be moved from one budget line to another during the year.

The final budget therefore reflects the effect, at the end of the financial year, of active budget management. In particular, it shows all measures affecting the total EU budget — carryovers, amending budgets and transfers — that have been proposed and adopted during the financial year. Of the final budget for 2014, totalling EUR 140 444 million in payment appropriations, EUR 138 440 million — or almost 99 % — has been used.

The Commission holds accounts with Member States’ treasuries, central banks and commercial banks. Own resources are the main source of EU finances, and these are therefore credited twice a month to the accounts held with Member States’ treasuries or central banks. The funds are used to execute payments through commercial bank accounts on the ‘just in time’ principle. In 2014, 0.5 % of a total of 2 166 241 payments made were executed through treasuries and central banks, representing 72 % of the total value of payments. The remaining 99.5 % of payments were made through commercial banks (representing 28 % of the total value).

Revenue

The EU budget is financed by own resources, other revenue and the surplus carried over from the previous year. When the European Parliament and the Council approve the annual budget, total revenue must equal total expenditure. Given, however, that outturns of revenue and expenditure usually differ from the budgeted estimates, there will generally be a positive or negative balance at the end of the year. Normally, the balance is a surplus. This then serves to reduce the own resources contributions that Member States are required to make the following year. In 2014, the EU had own resources of EUR 132 961.2 million and other revenue of EUR 9 973.4 million. The surplus carried over from 2013 was EUR 1 005.4 million.

Council Decision 2014/335/EU, Euratom on the system of own resources of the European Union4 is currently being ratified by the Member States. Once ratified by all Member States, it will enter into force with retroactive effect from 1 January 2014.

The overall amount of own resources is determined as total expenditure less other revenue. Own resources are divided into the following categories: traditional own resources, including sugar levies and customs duties; national contributions, including the VAT own resource; and the GNI own resource, which serves as the balancing resource.

Customs duties are levied on businesses and collected by Member States on behalf of the EU. In 2014, revenue from customs duties accounted for 11.46 % of total revenue. A production charge paid by sugar producers brought revenue of EUR 131.4 million. At the same time, however, the EU is owing Member States estimated reimbursements of sugar levies of EUR 200.4 million, thus more than cancelling out the revenue. As a result, total revenue from traditional own resources (customs duties and sugar levies) represented 11.41 % of total revenue.

The VAT own resource is levied on each Member State’s VAT base. The VAT bases are first harmonised before calculating the VAT own resource to be paid, and the harmonised VAT bases are capped at 50 %. In 2014, five Member States benefited from the use of this cap (Cyprus, Luxembourg, Malta, Slovenia and Croatia). The uniform rate of call for the VAT own resource was set at 0.30 % in 2014. Revenue from the VAT own resource represented 12.27 % of total revenue.

The GNI own resource finances any spending not covered by other sources of revenue, i.e. it balances revenue and expenditure. The same percentage is levied on each Member State’s GNI, as calculated in accordance with EU rules. The amount needing to be raised from the GNI own resource depends on the difference between total expenditure and the sum of all other revenue. In 2014, the GNI resource accounted for 68.83 % of revenue.

The own resources system also includes a specific mechanism for correcting budgetary imbalances in favour of the United Kingdom (the UK correction). It is designed to correct the imbalance between the United Kingdom’s share in payments to and expenditure from the EU budget. The UK correction paid in 2014 was EUR 6 066.3 million.

Revenue other than own resources includes taxes levied on the salaries of EU staff and other diverse items. In 2014, this revenue came to a total of EUR 9 973.4 million.


EU Revenue 2014

Expenditure

EU budget 2014 – Implemented payments (million EUR)

Expenditure by Member State in 2014

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This report presents the annual EU budget expenditure according to a number of headings and subheadings, following the structure used for the multiannual financial framework. Data on the allocation of expenditure by each Member State are also provided. In total, 94 % of the 2014 EU budget was used for funding policies and projects both in Member States and outside the EU. The chart below provides an overview of how each country benefited from the budget and illustrates the relative importance of EU funding to each Member State by expressing this as a proportion of GNI, in order to be able to better interpret the figures.

The 2014-2020 multiannual financial framework having only just started, the payments made in 2014 related mainly to the completion of programmes from the previous period, 2007-2013, and to the pre-financing of the 2014-2020 programmes. There are two important exceptions to this: the common agricultural policy and administration payments for 2014. This section of the report examines the implementation of the payments programme by programme.

Competitiveness for growth and employment

Special focus was given to the area of competitiveness in order to stimulate economic growth and create new jobs. These aims were to be achieved mainly through investment in research, innovation and education. EU expenditure in this area contributed to funding thousands of projects, designed to help a number of specific groups including, in particular, students, small and medium enterprises and researchers.

In 2014, EUR 16 466 million were committed for this budget heading. This included funding for major programmes such as Horizon 2020, Erasmus+, Competitiveness of enterprises and small and medium-sized enterprises (COSME) and the Connecting Europe Facility (CEF).

Horizon 2020 is the EU’s biggest research and innovation programme to date. It is designed to increase the number of breakthroughs, discoveries and world-firsts achieved in the EU by linking research to innovation, in order to better exploit the commercial potential of new ideas.

Erasmus+ brings together seven previous EU programmes in the fields of education, training and young people. For the first time it is also providing support for sport.

The Connecting Europe Facility (CEF) is a funding framework for projects of common interest in the areas of transport, energy and information and communication technology. In the area of transport, the CEF aims to tackle bottlenecks in the transport system and provide the ‘missing links’ in the network, thus creating seamless networks where each Member State has the necessary connections to neighbouring countries. The CEF is also essential for meeting the principal objectives of energy policy: affordable energy for all consumers, security of supply and sustainability. In the area of communication, it provides funding and technical assistance for projects relating to broadband infrastructure and services. As of 2014, funding allocated to this area will be used to promote the mobility of citizens and businesses, by providing seamless cross-border public services such as e-procurement, e-health and open data.

Other actions undertaken in this area related to the single market, satellite navigation programmes, statistics, financial services and their supervision, taxation, the customs union and the fight against fraud.

Economic, social and territorial cohesion

In 2014, EUR 27 944 million were committed for the economic, social and territorial cohesion within the EU.

The Structural Funds, i.e. the European Regional Development Fund, the European Social Fund and the Cohesion Fund, contribute to strengthening economic, social and territorial cohesion between regions and between individual EU Member States. They also promote competitiveness and employment and encourage cross-border, transnational and interregional cooperation. The European Social Fund, for example, aims to help people find better jobs and to ensure fairer job opportunities for all. A new fund was created in 2014: the Fund for European Aid to the Most Deprived. The objective of this fund is to alleviate the most extreme forms of poverty in the EU by providing non-financial assistance to the most deprived. The Youth Employment Initiative, meanwhile, was created to address the unprecedented levels of youth unemployment currently being experienced in certain regions of the EU, often those facing the most serious economic difficulties in general.

Sustainable growth: natural resources

Agriculture is one of the EU’s most significant policy areas from a budgetary point of view. It is the only policy that is fully integrated at EU level. The EU encourages the production of safe, high quality food, promotes European agricultural products, promotes innovation in farming and food processing and provides support to farmers. In 2014, EUR 42 910 million were committed for market-related measures and direct aid given to farmers as income support. An additional EUR 1 724 million collected from recoveries was also made available.

EUR 3 310 million were committed for the European Agricultural Fund for Rural Development (EAFRD) in 2014. The aim of this fund is to increase the economic potential of rural areas, to create new sources of income for those living in rural areas by encouraging the diversification of economic activity, and to protect rural heritage. It promotes resource efficiency and supports the shift towards a low-carbon and climate-resilient economy in the agriculture, food and forestry sectors. The LIFE programme funds projects designed to protect the environment and tackle climate change.

Security and citizenship

EUR 1 466 million were committed for security and citizenship in 2014. Protecting EU citizens, their freedom and their property are core objectives for the EU. The area of security and citizenship includes justice and home affairs, border protection, immigration and asylum policy, public health, consumer protection, culture, young people, information and communications with the public. The EU set up two major funds in 2014, the Asylum, Migration and Integration Fund and the Internal Security Fund, and launched a number of large-scale programmes in areas including justice, health, consumer protection, culture as part of its work in this area.

Global Europe

The EU continued to strengthen its role in international affairs, acting through a number of policy instruments including the Development Cooperation Instrument, the European Neighbourhood Instrument, the European Instrument for Democracy and Human Rights, the Instrument contributing to Stability and Peace and the Partnership Instrument. Action taken by the EU contributed to preventing, managing and resolving conflicts and to building stability, peace and growth in the world. In 2014, EUR 8 286 million were committed for this area.

2014 saw a major surge in humanitarian crises. Four ‘level 3’ emergencies (the highest level of crisis), were declared (in Syria, South Sudan, the Central African Republic and Iraq), an unprecedented number in one year. Armed conflicts and attacks on civilians are continuing in many areas of the world, whilst natural disasters have been occurring with increasing frequency and intensity. The number of people affected by such crises is rising continuously. As the world’s largest humanitarian aid donor, the EU played a major role in tackling the resulting humanitarian consequences. The European Commission alone committed EUR 1 082 million in humanitarian aid in 2014. Aid was directed towards helping the most vulnerable people across more than 80 countries, reaching almost 121 million beneficiaries. More than half of the Commission’s humanitarian budget went to the most vulnerable countries and an additional 15 % was allocated to crises that receive little attention from media and the international community, the so-called ‘forgotten crises’.

Administration

Some EUR 8 314 million were committed (around 6 % of the EU budget) for administration in 2014, ensuring the smooth operation of all EU institutions, the administrative bodies working on behalf of the 508 million EU citizens. Expenditure in this area covered, for example, staff salaries and pensions, buildings and infrastructure, information technology and security.

The change in administrative expenditure seen in 2014, compared to the previous year, reflects the effect of Croatia’s accession, the 1 % reduction in staff, in accordance with the new Interinstitutional Agreement (which specifies a reduction of 5 % over 5 years), the effect of the reform of Staff Regulations and efforts made to limit all non-salary related expenditure.

Examples of results achieved with funding from the EU budget

  • In 2014, two former EU-funded researchers were awarded, respectively, the Nobel Prize in Medicine and the Nobel Prize in Chemistry.
  • The pilot pan-European data portal, which provides access to open, freely reusable datasets from local, regional and national public bodies across Europe, has received a total of around 70 000 visits (an increase of 64 % on 2013 numbers).
  • The rate of higher education attainment has increased, from 22.4 % in 2000 to 36.9 % in 2013. Early school leaving has fallen from 17.6 % in 2000 to 12.0 % in 2013.
  • A total of 769 000 jobs were created between 2007 and 2013, of which 34 800 were in research and 274 100 in small and medium-sized enterprises (SMEs). Across Europe, 25 700 km of road and 4 800 km of rail has been built or reconstructed. The EU has provided support to 32 400 renewable energy projects. Seven million people have benefited from flood protection measures.
  • The European Fisheries Fund supported the sustainable development of fisheries areas through fisheries local action groups. Between 2007 and 2014, more than 9 800 projects were approved, as a result of which around 8 000 jobs were created, 12 500 jobs maintained and 220 new businesses set up.
  • Direct payments to farmers, financed by the European Agricultural Guarantee Fund, accounted on average for almost half of family farm income in 2014 and supported more than 8 million European farmers.
  • The EU provided funding to essential European networks working in the area of violence against women and children, including Missing Children Europe, Women Against Violence Europe, Child Helpline International, the European Network for work with the perpetrators of domestic violence and the European Network of Ombudspersons for Children.
  • The civil protection mechanism was activated 30 times, mainly in relation to natural disasters, but also in response to nine man-made disasters (civil unrests and conflict, oil pollution and accidents).
  • Albania was granted the status of candidate country for accession to the European Union.
  • Over 500 new initiatives were launched under the European Instrument for Democracy and Human Rights, covering over 135 countries. These are in addition to the more than 1 500 projects ongoing in this area.
  • The European Commission alone provided over EUR 1 354 million in humanitarian aid in 2014 to the most vulnerable in more than 80 countries, reaching almost 121 million beneficiaries. 

 

Section III of this report provides details of the different EU programmes and the results they achieved in 2014.

1 Council Regulation (EU, Euratom) No 1311/2013 of 2 December 2013 laying down the multiannual financial framework for the years 2014-2020 (OJ L 347, 20.12.2013, p. 884).
2 commitments: legal pledges to provide finance, provided that certain conditions are fulfilled.
3 payments: cash or bank transfers to the beneficiaries.
4 Council Decision 2014/335/EU, Euratom of 26 May 2014 on the system of own resources of the European Union (OJ L 168, 7.6.2014, p. 105).