UK contribution to EU reaches £9bn a year

By Sean O’Grady, Economics Editor

Wednesday, 30 March 2011
The UK’s payments to the European Union almost doubled in 2010, according to the latest data issued yesterday by the Office for National Statistics – soaring to £230 for every household in the country.

The ONS said yesterday that the net transfer of funds from Britain to EU institutions rose from £5.3bn in 2009 to £9.2bn in 2010, a jump of almost £4bn, or 74 per cent – enough to avoid the recent rise in national insurance or the new 50p rate of tax. The UK’s contributions to the EU are at their highest level ever, and one of the very few areas of public spending set to increase in coming years despite the cutbacks being made across Britain.

The largest single contribution to the rise was the reduction in the UK’s “rebate” from the EU, originally negotiated by Margaret Thatcher in 1984, when she famously asked for “our money back”.

The deal reflected the relative efficiency of British agriculture, which saw relatively little benefit from the EU’s Common Agricultural Policy and had resulted in extremely large net transfers to the EU under the 1972 Treaty of Rome. With the accession in 2004 of new, and poorer EU members from eastern Europe – such as Poland, Romania and Bulgaria – the pressure on EU resources to boost economic development and subsidise farming there led to renewed calls on Britain to give up what is officially termed the “abatement”.

This was partially agreed by the Blair government, and is now leading to rapid worsening in the UK’s financial relationship with the EU.

Thus, the rebate was slashed in 2010 by £2.3bn to just £3bn, and Britain also lost £300m in agricultural subsidies, and paid a further extra £900m to Brussels under complex rules related to the national income and the VAT take. A 2.9 per cent rise in the EU budget has been agreed for 2011.

The ONS also revealed that the UK’s trade deficit with the EU ballooned from £14.3bn to £46.6bn last year.

The UK Exchequer is further exposed to rescuing distressed members of the eurozone via a small European Commission fund and Britain’s contributions to the IMF, which is also helping fund eurozone bailouts. In all, this could amount to around £10bn in rescue loans.

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