Notable trends in the EU budget

The European Union budget has a number of specific characteristics which make it different from the budgets of the Member States : in principle, it must never be in deficit, and there is a special decision-making procedure. The structure and maximum expenditure are specified for a 7-year period in the Financial Perspective. In relation to GDP and national budgets of the Member States, the EU budget is small. It is increasingly funded on the basis of the size of the gross national income of each Member State whereas import levies and VAT-based transfers from the Member States are becoming less important. The United Kingdom receives a special rebate. The importance of the Common Agricultural Policy, historically the largest EU expenditure item, is steadily diminishing in favour of expenditure on cohesion policy. Since the beginning of the 1990s, the Common Agricultural Policy has undergone a radical reform. Opinions differ on the contribution made by the cohesion policy towards income convergence between regions in the EU. The Commission’s proposals regarding the Financial Perspective for 2007-2013 embodied an important increase in expenditure and placed the emphasis on the attainment of the Lisbon objectives. Protracted negotiations at European Council level led to a compromise in December 2005 and following difficult negotiations with the European Parliament, a new Interinstitutional Agreement was signed on 17 May 2006.