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.
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.
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.
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:
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.
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.
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).
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.