# European Union Finances 2012:

statement on the 2012 EU Budget and measures to counter fraud and financial mismanagement

## European Union Finances 2012: Statement On The 2012 Eu Budget And Measures To Counter Fraud And Financial Mismanagement

Presented to Parliament by the Financial Secretary to the Treasury by Command of Her Majesty July 2012
© Crown copyright 2012 You may re-use this information (not including logos) free of charge in any format or medium, under the terms of the Open Government Licence. To view this licence, visit http://www.nationalarchives.gov.uk/doc/opengovernment-licence/ or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or e-mail: psi@nationalarchives.gsi.gov.uk. Any queries regarding this publication should be sent to us at: public.enquiries@hm-treasury.gov.uk. This publication is also available on http://www.official-documents.gov.uk/ ISBN: 9780101840521 PU1344 Printed in the UK by the Stationery Office Limited on behalf of the Controller of Her Majesty's Stationery Office Printed on paper containing 75% recycled fibre content minimum

## Contents

 
Page 
Chapter 1 
Introduction 
3 
Chapter 2 
The 2012 EU Budget 
5 
Chapter 3 
Developments in EU Finances 
13 
Chapter 4 
Financial management and anti-fraud issues 
21 
Annex A 
Glossary 
31 
Annex B 
Technical annex 
35 
Annex C 
Tables 
39 
Annex D 
Report on the use of EU Funds in the UK 
49 

## 1 Introduction

 
1.1 In 1980, following a recommendation by the Public Accounts Committee (PAC), the Government agreed to present an annual statement (Statement) to Parliament giving details of the Budget of the European Union (EU Budget). 

1.2 This Statement is the thirty second in the series and describes the EU Budget for 2012, as adopted by the European Parliament. It also sets out details of the United Kingdom's gross and net contributions to the EU Budget over the financial years 2006-07 to 2011-12 (together with estimates for 2012-13 to 2016-17) and over the calendar years 2006 to 2011 (together with an estimate for 2012). Finally, it includes details of recent developments in EU financial management and the fight against fraud affecting EU funds.

## 2 The 2012 Eu Budget

 
2.1 The EU Budget is negotiated beneath the ceilings set in the Multi-Annual Financial Framework (MFF) (2007-13), which was agreed in 2005. Further details on the current MFF are available in previous Statements1
. Box 2.A provides information about negotiations on the next MFF, which are ongoing. 

## The 2012 Eu Budget

2.2 The 2012 EU Budget was agreed under the Polish Presidency of the EU in the second half of 
2011. Negotiations began in April 2011, when the Commission proposed a draft EU Budget for 
2012. This proposed to increase EU spending (payments appropriations) by 4.9 per cent over 
2011 levels. On the basis of this draft budget, the Council made amendments and agreed its position in July 2011, proposing to reduce growth to only 2.02 per cent over 2011 levels. The European Parliament then considered the Council's position and made amendments in October, which would have raised the level of EU spending in 2012 by 5.23 per cent.  
2.3 A process of conciliation between the Council and European Parliament then took place in November 2011. The adopted 2012 EU Budget provides for commitment appropriations of €147.2 billion (£123.0 billion), which is an increase of 3.60 per cent over 2011 funding, and equivalent to 1.12 per cent of EU Gross National Income (GNI); and payment appropriations of 
€129.1 billion (£107.8 billion), which is an increase of 2.02 per cent over 2011 funding (that is, an increase by no more than inflation), and is equivalent to 0.98 per cent of EU GNI. The payment appropriations for each of the main EU Budget headings are shown in Chart 2.A.  
2.4 The Government worked closely with other Member States to secure a deal on the 2012 EU 
Budget that stopped the Commission and European Parliament's inflation-busting proposals, and thereby delivered on its promise to freeze the EU budget in real terms.  
2.5 Table 2.A shows the positions established at each stage of the negotiation during 2011. 2.6 Figures for previous years' EU Budgets for comparison are provided in Annex C (tables  
C.1 and C.2). 

## Box 2.A: The Next Multiannual Financial Framework (2014-2020)

Negotiations are well underway on the next EU Multiannual Financial Framework (MFF). The MFF will establish the EU's budget ceilings for the years 2014 to 2020. The first step in this process was the Commission's publication of the communication "A Budget for Europe 
2020" in June 2011. This set out the Commission's proposal for the next MFF. The EU Budget is expressed in terms of 'commitments' (earmarked funds) and 'payments' (funds actually spent). In its communication, the Commission proposes: 

- 
Commitment appropriations of €1,025,000 million (£889,376 million) in total from 2014 to 2020. This is 1.05 per cent of EU Gross National Income (GNI); 
- 
Commitment appropriations of €58,316 million (£50,600 million) 'outside the MFF', which would also lead to additional payments (Including these, the total commitment appropriations proposed for 2014 to 2020 are €1,083,316 (£940,000 million), or 1.11 per cent EU GNI); and 
- 
Payment appropriations of  €972,198 million (£843,561 million) or 1.01 per cent EU GNI. 
The Commission also proposes a number of changes to how the EU budget is financed, known as the 'Own Resources' system. The key proposals are: 

- 
replacing the current system of corrections, including the UK's permanent abatement, with a system of temporary corrections for the UK, Germany, the Netherlands and Sweden; and 
- 
introducing two new own resources, a Financial Transactions Tax and a revised VAT-based resource, to partially fund the budget. 
The UK has made its position on the next MFF extremely clear. The UK's top priority is budgetary restraint, thereby ensuring that the EU budget contributes to domestic fiscal consolidation. The Prime Minister has stated, jointly with his EU counterparts, that the maximum acceptable expenditure increase through the next MFF is a real freeze in payments. This must be year on year from the actual level of payments in 2013. At a time of ongoing economic fragility in Europe and tight constraints on domestic public spending, the Commission's proposal for the MFF is unrealistic. It is at least €100 billion too large; 
it is not the restrained budget the Commission claims and it is incompatible with the tough decisions being taken in countries across Europe. The Government consider the Commission's proposals on own resources a distraction from the main issue of controlling the budget size: we will protect the UK abatement and oppose any new taxes to fund the EU Budget. The Commission's proposal was the first stage in an extended negotiations process. Under the Danish Presidency progress was made in setting out the perimeters of Member States' positions, in a 'negotiating box' discussed at June European Council. This will provide a basis for the final stage of negotiation. There is no fixed period for negotiation. The eventual MFF must be agreed unanimously by all Member States at Council. It is then agreed by absolute majority in the European Parliament. 

## Table 2.A: 2012 Eu Budget

|                                    |                     |            |          |              |           |
|------------------------------------|---------------------|------------|----------|--------------|-----------|
|                                    |                     |            |          |              |           |
| €                                  |                     |            |          |              |           |
| million                            |                     |            |          |              |           |
| Financial                          | Commission          | Council    | European | Adopted 2012 | 2011 EU   |
| Appropriations                     | Perspective Ceiling | draft 2012 | position | Parliament   | EU budget |
| 2                                  |                     |            |          |              |           |
|                                    |                     |            |          |              |           |
| EU budget                          |                     |            |          |              |           |
| 1                                  |                     |            |          |              |           |
|                                    | position            |            |          |              |           |
| 1. Sustainable growth:             |                     |            |          |              |           |
| -                                  |                     |            |          |              |           |
| 57,701                             | 55,270              | 57,701     | 55,337   | 53,280       |           |
| 1a. Competitiveness for Growth and |                     |            |          |              |           |
| Employment                         |                     |            |          |              |           |
| -                                  | 12,566              | 11,434     | 12,558   | 11,501       | 11,628    |
| 1b. Cohesion for Growth and        |                     |            |          |              |           |
| Employment                         |                     |            |          |              |           |
| -                                  | 45,135              | 43,835     | 45,143   | 43,836       | 41,652    |
| 2. Preservation and Management of  |                     |            |          |              |           |
| Natural Resources                  |                     |            |          |              |           |
| -                                  | 57,865              | 57,162     | 58,245   | 57,034       | 56,379    |
| 3. Citizenship, Freedom, Security  |                     |            |          |              |           |
| and Justice                        |                     |            |          |              |           |
| -                                  | 1,513               | 1,454      | 1,577    | 1,484        | 1,479     |
| 3a. Freedom, Security and Justice  |                     |            |          |              |           |
| -                                  |                     |            |          |              |           |
| 868                                | 824                 | 916        | 836      | 813          |           |
| 3b. Citizenship                    |                     |            |          |              |           |
| -                                  |                     |            |          |              |           |
| 644                                | 630                 | 661        | 649      | 666          |           |
| 4. The EU as a Global Player       |                     |            |          |              |           |
| -                                  |                     |            |          |              |           |
| 7,294                              | 6,993               | 7,360      | 6,955    | 7,239        |           |
| 5. Administration                  |                     |            |          |              |           |
| -                                  |                     |            |          |              |           |
| 8,296                              | 8,209               | 8,257      | 8,278    | 8,170        |           |
| Total Payment Appropriations       |                     |            |          |              |           |
| 141,360                            |                     |            |          |              |           |
| 132,668                            | 129,088             | 133,139    | 129,088  | 126,547      |           |
| As a percentage of EU GNI          |                     |            |          |              |           |
| 1.07%                              |                     |            |          |              |           |
| 1.01%                              | 0.98%               | 1.01%      | 0.98%    | 0.99%        |           |

 
1 Includes amending budgets 1-3 2 includes amending budget 1 and draft amending budget 2 to 3  
 
Note: Because of rounding the column totals do not necessarily equal the sum of individual items 
 
Sources: Various EU documents 
 
 
, are as follows:  
2.7 Details of the levels of payments in the adopted 2012 EU budget, compared to the 2011 EU 
budget1

- 
Heading 1: Sustainable Growth. Expenditure in this area is aimed at building 
Europe's growth potential and fostering prosperity across EU regions. Payments in this area have been set at €55.34 billion (£46.22 billion), a 3.86 per cent increase 
compared to the 2011 EU budget.  
The 2012 EU budget allocated €11.50 billion (£9.60 billion) under Heading 1a towards transforming the EU economy into a knowledge-based economy, which involves adequate investment in research, learning, and innovation. This is a 1.09 per cent decrease compared to the 2011 EU budget. The 2012 EU Budget allocated under Heading 1a includes: €7.00 billion (£5.85 billion) for research, which is a 3.90 
per cent increase compared to 2011 funding; €1.02 billion (£857 million) for learning and training, a 1.82 per cent decrease; and €370 million (£309 million) for competitiveness and innovation programmes, a 20.92 per cent increase.  
The 2012 EU Budget allocated €43.84 billion (£36.62 billion) under Heading 1b for fostering regional growth and employment, which is a 5.24 per cent increase compared to 2011 funding. This includes €35.06 billion (£29.29 billion) made available through Structural Funds, representing an increase of 3.09 per cent over 
2011 funding, and €8.76 billion (£7.32 billion) through the Cohesion Fund, an increase of 14.84 per cent over 2011 funding.  

- 
Heading 2: Preservation and Management of Natural Resources. Expenditure in this 
area includes spending on the Common Agricultural Policy (CAP), Fisheries, Rural Development, and measures aiming to contribute to food quality and a cleaner environment. 
Payments in this area have been set at €57.03 billion (£47.64 billion) in the 2012 
budget, which is 1.16 per cent higher than 2011 funding. Payments for market related expenditure and direct aids have been set at €43.88 billion (£36.65 billion), which is 2.54 per cent higher than 2011 funding. Payments for Rural Development are set at €12.09 billion (£10.10 billion), which is a 3.73 per cent decrease on 2011 funding. Payments for the European Fisheries Fund are set at €488 million (£408 million), which is a 6.55 per cent increase on 2011 funding. Payments for EU 
environmental protection, through the LIFE+ programme, are set at €254 million 
(£212 million), which is a 3.05 per cent decrease on 2011 funding. 

- 
Heading 3: Citizenship, Freedom, Security and Justice. Expenditure in this area 
includes for immigration, migration, security, and fundamental rights and justice. 
Payments for 2012 in this area have been set at €1.48 billion (£1.24 billion), which 
is a 0.34 per cent increase on 2011 funding. Payments in the field of Freedom, 
Security and Justice (Heading 3a) have been set at €836 million (£698 million), 
which is a 2.83 per cent increase on 2011 funding.  
Payments in 2012 for Citizenship (Heading 3b), which includes spending on culture, youth, and public health, have been set at €649 million (£542 million), which is a 
2.55 per cent decrease on 2011 funding. 

- 
Heading 4: The EU as a Global Player. Expenditure in this area includes EU foreign 
policy and international development expenditure.  
Payments in 2012 for Heading 4 have been set at €6.96 billion (£5.81 billion), which is a 3.92 per cent decrease on 2011 funding. This includes €1.35 billion (£1.13 
billion) for the Instrument for Pre-accession, which is a 6.51 per cent decrease on 
2011 funding; and €1.32 billion (£1.10 billion) for the European Neighbourhood and Partnership Instrument, which is a 3.23 per cent decrease on 2011 funding. 

- 
Heading 5: Administration. Expenditure in this area of the budget includes 
expenditure on the functioning of the EU institutions and includes remuneration and allowances for staff and members, pension costs, and rent and other building costs. Payments in this area for 2012 have been set at €8.28 billion (£6.92 billion), 
which is a 1.32 per cent increase on 2011 funding. 

## Eu Revenue

2.8 The Own Resources Decision (ORD) provides for four sources of EU revenue: customs duties, including those on agricultural products; sugar levies; contributions based on VAT; and GNI-
based contributions. The first two categories are known as 'Traditional Own Resources' (TOR). The VAT and GNI-based contributions are often referred to as the third and fourth resources. A more detailed explanation can be found in the glossary. 

2.9 Chart 2.B shows a breakdown of the estimates of how the 2012 EU Budget will be financed. 

Tables C.3 and C.4 show the gross contributions by Member State, after taking account of the UK abatement, between 2006 and 2012. The key points to note in terms of the UK's contribution are: 

- 
TOR in 2012 are estimated to be around €19.3 billion (£16.1 billion), with the UK's share estimated at 15.6 per cent. In 2011, final estimates of revenue from this source were €16.7 billion (£14.5 billion), of which the UK's share was 16.7 per cent; 
- 
VAT-based contributions in the 2012 EU Budget are shown as €14.5 billion (£12.1 billion), with the UK's share estimated as 17.3 per cent. In 2011, total VAT-based contributions were €14.1 billion (£12.3 billion), of which the UK's share was 17.9 per cent; 
- 
GNI-based contributions in the 2012 EU Budget are shown as €93.7 billion (£78.3 
billion), of which the UK's share is 13.8 per cent. In 2011, GNI-based contributions 
were €87.5 billion (£75.9 billion) with a UK share of 14.2 per cent; and  
- 
the estimated value of the UK's abatement in 2012 is €3.8 billion (£3.1 billion) 
compared with €3.6 billion (£3.1 billion) in the 2011 EU Budget. A detailed 
explanation of how the UK abatement is calculated, and how it operates, can be found in the glossary. 

## Box 2.B: Eu Staff Regulations

The Staff Regulations set out the terms and conditions of employment of the major EU institutions' officials, providing the legal base for all aspects of remuneration, including pay levels, annual salary adjustments, retirement pensions and allowances, such as expatriation and family allowances. They also determine several aspects of the career structure for EU officials, such as the grading structures and promotion rates. Over the next MFF, the Government seeks very substantial reductions in spending on the administration of the EU. The Staff Regulations are currently under reform and the UK is working closely with its allies to advocate a more ambitious and wide-ranging approach, in order to achieve cost-saving objectives for EU administrative spending, as well as improvements in the EU institutions' efficacy and efficiency. 

## Developments In Eu Finances 3 Expenditure

3.1 Chart 3.A shows the development in EU spending commitments between 2008 and 2012. 

The total level of commitments has increased by €20.85 billion, from €126.38 billion to €147.23 billion. Within this, the Sustainable Growth heading has increased by €12.63 billion, which includes €5.37 billion for the Competitiveness for Growth and Employment sub-heading and €7.27 billion for the Cohesion for Growth and Employment sub-heading. The Preservation and Management of Natural Resources heading has increased by €4.13 billion; and the Administration heading has increased by €1.3 billion. 

3.2 Further details on spending in recent years are given in Tables C.1 and C.2. These illustrate commitments and payments for the years 2008-12. They also show the main spending programmes broken down by categories in the MFF.  

## Reform Of The Cap

3.3 The October 2002 European Council set annual ceilings on total market-related expenditure and direct payments for the period 2007-13, as shown in the following table: 

| 2007    | 2008    | 2009    | 2010    | 2011    | 2012    | 2013    |
|---------|---------|---------|---------|---------|---------|---------|

 

| 45,759    | 46,217    | 46,679    | 47,146    | 47,617    | 48,093    | 48,574    |
|-----------|-----------|-----------|-----------|-----------|-----------|-----------|

 1The amounts are before taking account of modulation and other transfers to rural development 
 
Source: Statement of estimates of the EU for the financial year 2011 
3.4 Pillar 1 of the CAP represents poor value for money, and the UK remains a leading advocate of further CAP reform. Over the course of the next MFF, the UK wants to see a very substantial reduction in the CAP budget, focused on Pillar 1. 

## The Uk'S Net Contribution

3.5 Chart 3.B shows the volatility of the UK's net contribution from year to year. This volatility results from variations in payments made due to the nature of the Own Resources system; 
variations in public sector receipts; and consequent fluctuations in the UK's abatement. For further details, refer to technical annex and the glossary.  
3.6 Table 3.B shows the UK's gross contributions, abatement, public sector receipts, and net contributions to the EU Budget for calendar years 2006 to 2012. The figures for 2012 are estimates; those for earlier years are outturn figures. Table C5 gives a more detailed breakdown. 

|                              |         |         |           |
|------------------------------|---------|---------|-----------|
|                              |         |         | £ million |
|                              | 2006    | 2007    | 2008      |
| Outturn                      | Outturn | Outturn | Outturn   |
| Outturn                      |         |         |           |
| 1                            |         |         |           |
|                              |         |         |           |
| Gross Payments               |         |         |           |
| 2                            |         |         |           |
| 12,426                       | 12,456  | 12,653  | 14,129    |
| Less: UK Abatement           | -3,569  | -3,523  | -4,862    |
| Less: Public sector receipts | -4,948  | -4,332  | -4,497    |
| 3,909                        |         |         |           |
| 4,601                        | 3,294   | 4,336   | 7,375     |
| Budget                       |         |         |           |
| 3                            |         |         |           |

 
1The figures for 2012 are forecasts; those for earlier years are outturn. 

2Gross payment figures include TOR payments at 75 per cent. The remaining 25 per cent is retained by the UK to cover the costs of administering collection on behalf of the EU. 

3Due to rounding, totals may not exactly correspond to the sum of individual items Source: HM Treasury 
3.7 UK public sector receipts in 2012, mainly from the FEAGA1, EAFRD2
 and the Social and Regional Development Funds, are expected to be around £5.0 billion. The majority of these receipts will either be paid to, or used in support of, the private sector but are channelled through Government departments. 

3.8 The EU makes some payments directly to the private sector, which do not appear in the public sector's accounts. In 2012, these receipts are expected to be around £890 million. These payments are not included in Tables 3.B or 3.C-F, which provide data on public sector receipts only. 

3.9 The UK's 2012 net contribution is forecast at £6.9 billion; the outturn in 2011 was £8.1 
billion. The large reduction in 2012 compared to 2011 is primarily due to a lower than expected level of receipts in 2011.  
3.10 Chart 3.C shows how the UK's net position compares with those of the other Member States in 2009 and 2010. In 2010, the UK was one of ten net contributors to the EU Budget. 

Germany was the highest net contributor, paying almost 1.5 times as much as the next highest net contributor. The UK was the next highest net contributor, with other significant net contributions being made by France, Italy, the Netherlands and Sweden. 

Source: Based on data published by the European Commission Report: EU Budget 2010 Financial Report, September 2011 

## Financial Year Transactions

3.11 The EU financial year runs from 1 January to 31 December, whereas the UK's runs from 6 
April to 5 April. Table 3.C gives a breakdown of the UK's transactions (estimated outturn) with the EU on a financial year basis between 2006-07 and 2011-12.  

|                                  |         |         |         |         |
|----------------------------------|---------|---------|---------|---------|
| £ million                        |         |         |         |         |
|                                  | 2006-07 | 2007-08 | 2008-09 | 2009-10 |
| Outturn                          | Outturn | Outturn | Outturn | Outturn |
| Outturn                          |         |         |         |         |
| Gross Payments                   |         |         |         |         |
| 1                                |         |         |         |         |
|                                  | 12,245  |         |         |         |
|                                  |         |         |         |         |
| 13,746                           |         |         |         |         |
|                                  |         |         |         |         |
| 13,155                           |         |         |         |         |
|                                  |         |         |         |         |
| 13,733                           |         |         |         |         |
|                                  |         |         |         |         |
| 15,593                           | 15,700  |         |         |         |
| Less: UK Abatement               | -3,560  |         |         |         |
|                                  |         |         |         |         |
| -3,960                           |         |         |         |         |
|                                  |         |         |         |         |
| -5,595                           |         |         |         |         |
|                                  |         |         |         |         |
| -4,218                           |         |         |         |         |
|                                  |         |         |         |         |
| -2,678                           | -3,516  |         |         |         |
| Less: Public sector receipts     | -5,164  |         |         |         |
|                                  |         |         |         |         |
| -5,601                           |         |         |         |         |
|                                  |         |         |         |         |
| -4,558                           |         |         |         |         |
|                                  |         |         |         |         |
| -4,791                           |         |         |         |         |
|                                  |         |         |         |         |
| -3,996                           |         |         |         |         |
|                                  |         |         |         |         |
| -4,755                           |         |         |         |         |
|                                  |         |         |         |         |
| Net contributions to EU Budget   |         |         |         |         |
| 2                                |         |         |         |         |
| 3,521                            |         |         |         |         |
|                                  |         |         |         |         |
| 4,185                            |         |         |         |         |
|                                  |         |         |         |         |
| 3,002                            |         |         |         |         |
|                                  |         |         |         |         |
| 4,724                            |         |         |         |         |
|                                  |         |         |         |         |
| 8,918                            | 7,429   |         |         |         |
| Payments to EU Budget attributed |         |         |         |         |
| to the aid programme             |         |         |         |         |
| 3                                |         |         |         |         |
| -709                             |         |         |         |         |
|                                  |         |         |         |         |
| -715                             |         |         |         |         |
|                                  |         |         |         |         |
| -751                             |         |         |         |         |
|                                  |         |         |         |         |
| -830                             |         |         |         |         |
|                                  |         |         |         |         |
| -856                             | -856    |         |         |         |
| Other attributed costs           | 0       |         |         |         |
|                                  |         |         |         |         |
| 0                                |         |         |         |         |
|                                  |         |         |         |         |
| 0                                |         |         |         |         |
|                                  |         |         |         |         |
| -69                              |         |         |         |         |
|                                  |         |         |         |         |
| -43                              | -163    |         |         |         |
| Net payments to EU institutions  |         |         |         |         |
| (excluding Overseas Aid)         |         |         |         |         |
| 2                                |         |         |         |         |
| 2,812                            |         |         |         |         |
|                                  |         |         |         |         |
| 3,470                            |         |         |         |         |
|                                  |         |         |         |         |
| 2,252                            |         |         |         |         |
|                                  |         |         |         |         |
| 3,825                            |         |         |         |         |
|                                  |         |         |         |         |
| 8,019                            | 6,410   |         |         |         |

 1. Gross payment figures include Traditional Own Resources payments at 75 per cent. The remaining 25 per cent is retained by the UK to cover the costs of administering collection on behalf of the EU. 2. Due to rounding, totals may not exactly correspond to the sum of individual items. 

3. For domestic/public expenditure planning purposes, part of the UK's contribution to the EU Budget is attributed to the overseas aid programme. The aid programme also includes payments to the EDF, not included here. 

 
Source: HM Treasury 
3.12 Table 3.D provides a breakdown of estimated UK transactions with the EU over the period 
2012-13 to 2016-17. Tables 3.E (outturn figures) and 3.F (plans) provide a more detailed breakdown of UK receipts by major expenditure funds from the EU Budget over the periods 
2006-07 to 2011-12 (outturn figures) and 2012-13-2016-17 (estimates). 

|                                                     |        |        |       |         |       |     £ million    |
|-----------------------------------------------------|--------|--------|-------|---------|-------|------------------|
|                                                     |        | 2012-  | 2013- | 2014-15 | 2015- | 2016-17          |
| 13                                                  | 14     | Plans  | 16    | Plans   |       |                  |
| Plans                                               | Plans  | Plans  |       |         |       |                  |
| Gross Payments                                      |        |        |       |         |       |                  |
| 1                                                   |        |        |       |         |       |                  |
|                                                     | 15,358 |        |       |         |       |                  |
|                                                     |        |        |       |         |       |                  |
| 17,122                                              |        |        |       |         |       |                  |
|                                                     |        |        |       |         |       |                  |
| 18,713                                              |        |        |       |         |       |                  |
|                                                     |        |        |       |         |       |                  |
| 18,264                                              |        |        |       |         |       |                  |
|                                                     |        |        |       |         |       |                  |
| 17,560                                              |        |        |       |         |       |                  |
|                                                     |        |        |       |         |       |                  |
| Less: UK Abatement                                  |        | -3,334 |       |         |       |                  |
|                                                     |        |        |       |         |       |                  |
| -3,598                                              |        |        |       |         |       |                  |
|                                                     |        |        |       |         |       |                  |
| -4,002                                              |        |        |       |         |       |                  |
|                                                     |        |        |       |         |       |                  |
| -4,095                                              |        |        |       |         |       |                  |
|                                                     |        |        |       |         |       |                  |
| -3,982                                              |        |        |       |         |       |                  |
|                                                     |        |        |       |         |       |                  |
| Less: Public sector receipts                        |        | -5,065 |       |         |       |                  |
|                                                     |        |        |       |         |       |                  |
| -5,181                                              |        |        |       |         |       |                  |
|                                                     |        |        |       |         |       |                  |
| -5,345                                              |        |        |       |         |       |                  |
|                                                     |        |        |       |         |       |                  |
| -5,317                                              |        |        |       |         |       |                  |
|                                                     |        |        |       |         |       |                  |
| -5,318                                              |        |        |       |         |       |                  |
|                                                     |        |        |       |         |       |                  |
| Net contributions to EU Budget                      |        |        |       |         |       |                  |
| 2                                                   |        |        |       |         |       |                  |
|                                                     | 6,959  |        |       |         |       |                  |
|                                                     |        |        |       |         |       |                  |
| 8,342                                               |        |        |       |         |       |                  |
|                                                     |        |        |       |         |       |                  |
| 9,366                                               |        |        |       |         |       |                  |
|                                                     |        |        |       |         |       |                  |
| 8,851                                               |        |        |       |         |       |                  |
|                                                     |        |        |       |         |       |                  |
| 8,260                                               |        |        |       |         |       |                  |
|                                                     |        |        |       |         |       |                  |
| -856                                                |        |        |       |         |       |                  |
|                                                     |        |        |       |         |       |                  |
| -856                                                |        |        |       |         |       |                  |
|                                                     |        |        |       |         |       |                  |
| -856                                                |        |        |       |         |       |                  |
|                                                     |        |        |       |         |       |                  |
| -856                                                |        |        |       |         |       |                  |
|                                                     |        |        |       |         |       |                  |
| -856                                                |        |        |       |         |       |                  |
|                                                     |        |        |       |         |       |                  |
| Payments to EU Budget attributed to the aid         |        |        |       |         |       |                  |
| programme                                           |        |        |       |         |       |                  |
| 3                                                   |        |        |       |         |       |                  |
| Other attributed costs                              |        | -82    |       |         |       |                  |
|                                                     |        |        |       |         |       |                  |
| -79                                                 | 0      | 0      | 0     |         |       |                  |
|                                                     |        |        |       |         |       |                  |
|                                                     |        |        |       |         |       |                  |
| 6,021                                               |        |        |       |         |       |                  |
|                                                     |        |        |       |         |       |                  |
| 7,406                                               |        |        |       |         |       |                  |
|                                                     |        |        |       |         |       |                  |
| 8,510                                               |        |        |       |         |       |                  |
|                                                     |        |        |       |         |       |                  |
| 7,995                                               |        |        |       |         |       |                  |
|                                                     |        |        |       |         |       |                  |
| 7,403                                               |        |        |       |         |       |                  |
|                                                     |        |        |       |         |       |                  |
| Net payments to EU institutions (excluding Overseas |        |        |       |         |       |                  |
| Aid)                                                |        |        |       |         |       |                  |
| 2                                                   |        |        |       |         |       |                  |

1. Gross payment figures include Traditional Own Resources payments at 75 per cent. The remaining 25 per cent is retained by the UK to cover the costs of administering collection on behalf of the EU. 2. Due to rounding, totals may not exactly correspond to the sum of individual items. 3. For domestic/public expenditure planning purposes, part of the UK's contribution to the EU Budget is attributed to the overseas aid programme. The aid programme also includes payments to the EDF, not included here. 

 
Source: Office of Budget Responsibility 
 

|                      |         |         |         |           |
|----------------------|---------|---------|---------|-----------|
|                      |         |         |         | £ million |
|                      | 2006-07 | 2007-08 | 2008-09 | 2009-10   |
| Outturn              | Outturn | Outturn | Outturn | Outturn   |
| Outturn              |         |         |         |           |
| FEAGA                | 3,312   |         |         |           |
|                      |         |         |         |           |
| 3,455                |         |         |         |           |
|                      |         |         |         |           |
| 3,047                |         |         |         |           |
|                      |         |         |         |           |
| 2,967                |         |         |         |           |
|                      |         |         |         |           |
| 2,541                |         |         |         |           |
|                      |         |         |         |           |
| 2,973                |         |         |         |           |
| EAFRD                | 53      |         |         |           |
|                      |         |         |         |           |
| 265                  |         |         |         |           |
|                      |         |         |         |           |
| 299                  |         |         |         |           |
|                      |         |         |         |           |
| 310                  |         |         |         |           |
|                      |         |         |         |           |
| 362                  |         |         |         |           |
|                      |         |         |         |           |
| 462                  |         |         |         |           |
| Social Fund          | 1,324   |         |         |           |
|                      |         |         |         |           |
| 831                  |         |         |         |           |
|                      |         |         |         |           |
| 519                  |         |         |         |           |
|                      |         |         |         |           |
| 571                  |         |         |         |           |
|                      |         |         |         |           |
| 687                  |         |         |         |           |
|                      |         |         |         |           |
| 552                  |         |         |         |           |
| Regional Development |         |         |         |           |
| Fund                 |         |         |         |           |
| 449                  |         |         |         |           |
|                      |         |         |         |           |
| 1,029                |         |         |         |           |
|                      |         |         |         |           |
| 656                  |         |         |         |           |
|                      |         |         |         |           |
| 919                  |         |         |         |           |
|                      |         |         |         |           |
| 383                  |         |         |         |           |
|                      |         |         |         |           |
| 708                  |         |         |         |           |
| Other Receipts       | 26      |         |         |           |
|                      |         |         |         |           |
| 21                   | 37      |         |         |           |
|                      |         |         |         |           |
| 24                   |         |         |         |           |
|                      |         |         |         |           |
| 25                   |         |         |         |           |
|                      |         |         |         |           |
| 60                   |         |         |         |           |
| Total                |         |         |         |           |
| 5,164                |         |         |         |           |
|                      |         |         |         |           |
| 5,601                |         |         |         |           |
|                      |         |         |         |           |
| 4,558                |         |         |         |           |
|                      |         |         |         |           |
| 4,791                |         |         |         |           |
|                      |         |         |         |           |
| 3,996                |         |         |         |           |
|                      |         |         |         |           |
| 4,755                |         |         |         |           |
|                      |         |         |         |           |
|                      |         |         |         |           |

Source: HM Treasury 
 

|                |         |         |         |         |
|----------------|---------|---------|---------|---------|
| £ million      |         |         |         |         |
|                | 2012-13 | 2013-14 | 2014-15 | 2015-16 |
| Plans          | Plans   | Plans   | Plans   | Plans   |
| FEAGA          | 4,374   |         |         |         |
|                |         |         |         |         |
| 4,469          |         |         |         |         |
|                |         |         |         |         |
| 4,618          |         |         |         |         |
|                |         |         |         |         |
| 4,573          |         |         |         |         |
|                |         |         |         |         |
| 4,591          |         |         |         |         |
|                |         |         |         |         |
| EAFRD          | 323     | 333     | 340     | 347     |
|                |         |         |         |         |
| 340            |         |         |         |         |
|                |         |         |         |         |
| Social Fund    | 312     |         |         |         |
|                |         |         |         |         |
| 322            |         |         |         |         |
|                |         |         |         |         |
| 328            |         |         |         |         |
|                |         |         |         |         |
| 337            | 328     |         |         |         |
|                |         |         |         |         |
| 51             | 52      |         |         |         |
|                |         |         |         |         |
| 54             |         |         |         |         |
|                |         |         |         |         |
| 55             |         |         |         |         |
|                |         |         |         |         |
| 53             |         |         |         |         |
|                |         |         |         |         |
| Regional       |         |         |         |         |
| Development    |         |         |         |         |
| Fund           |         |         |         |         |
| Other Receipts | 6       | 6       | 6       | 6       |
|                |         |         |         |         |
| Total          |         |         |         |         |
| 5,065          |         |         |         |         |
|                |         |         |         |         |
| 5,181          |         |         |         |         |
|                |         |         |         |         |
| 5,345          |         |         |         |         |
|                |         |         |         |         |
| 5,317          |         |         |         |         |
|                |         |         |         |         |
| 5,318          |         |         |         |         |
|                |         |         |         |         |
|                |         |         |         |         |
|                |         |         |         |         |

Source: Office of Budget Responsibility 
3.13 Payments to the EU Budget are scheduled on a monthly basis, but the Commission can ask Member States for earlier payments of VAT-based and GNI-based contributions and the UK abatement, to take account of the high CAP payments, which take place in the first months of the calendar year. At the time of the 2011 Autumn Forecast, a draw-forward of 1.70 twelfths was estimated for the first quarter of the 2012 EU Budget year. A draw-forward of 2 twelfths was subsequently requested, which meant that a total of 5 twelfths was paid in the first quarter of the 2012 calendar year. As a result, payments for the rest of 2012, which will all fall into the 2012-13 financial year, are lower than projected at the time of the Autumn Forecast.  
3.14 The forecast for the UK's contribution to EU institutions is based on a comprehensive and detailed analysis of the many different factors affecting the different types of contribution the UK makes to the EU. 

3.15 This Statement again includes estimates of UK contributions to the EU Budget over the period 
2011-12 to 2016-17. In the medium term, the size of the UK net contribution is forecast to increase from £7.4 billion in 2011-12 to £8.3 billion in 2013-14. Forecasts beyond 2013 are particularly uncertain, as negotiation of the budget envelope for 2014 to 2020 has not yet been agreed. 

3.16 As stated above, the rise in UK contributions is due to increases in the size of the EU 
Budget and the fact that the UK's abatement has been 'disapplied' over time on non-agriculture spending in the twelve new Member States. The Government is working hard, both in discussions of the annual EU Budget and elsewhere, to reduce UK contributions from the increased levels the previous Government signed up to. 

3.17 In accordance with a commitment to the PAC, the Technical Annex explains the main differences in respect of calendar year 2010 between the Government's figures and those which can be derived from the European Commission's EU Budget 2010 Financial Report. 

 

## Financial Management And Anti-Fraud Issues European Court Of Auditors' Annual Report On The 2010 Eu Budget

4.1 The European Court of Auditors (ECA) is the independent audit institution of the EU and is responsible for auditing EU Institutions. It is required to provide the European Parliament and Council with an annual report on the implementation of the EU Budget. The report include a Statement of Assurance (usually referred to as the 'DAS', from the French 'Déclaration d'Assurance') on whether the EU accounts are complete and accurate, and whether income and expenditure have been managed in accordance with all contractual and legal obligations. The report forms an essential element in the European Parliament's oversight of the Commission's management of the EU Budget. 

4.2 The report launches the annual discharge process, the procedure whereby the European Parliament, acting on a recommendation from the Council, decides whether to release the Commission from its responsibility for the management of the budget for the year in question.  
4.3 The 2010 report published on 10 November 2011 provides an assessment of each of the EU 
Budget areas and as usual, the conclusions of the report are mainly based on testing the regularity of transactions, the effectiveness of the principal supervisory and control systems governing the revenue or expenditure involved, and on a review of the reliability of the Commission's management representations. The quality of reporting by the Commission also features in the report. 

4.4 The report differs from previous ones in a number of ways: 

- 
The form and content of the DAS reflect revised international audit standards, 
which gives a clear distinction between revenue, commitments and payments; 
- 
The presentation and composition of the policy groups (and related chapters) have 
been altered to give a more rational and better balanced analysis of EU spending; 
- 
Estimated error rates are given for each policy group and the EU budget as a whole; 
- 
It reports on actions taken by the Commission on previous recommendations for 
improving financial management; and  
- 
It contains an additional chapter on performance issues.  

## Eca'S Statement Of Assurance

4.5 In the ECA's opinion, the 2010 accounts of the EU present fairly the financial position of the EU and the results of its operations and cash flows for the year. 

4.6 The ECA found that EU revenue underlying the 2010 accounts is legal and regular in all material aspects and that commitments in all policy groups were also free from material error. 

4.7 The ECA also found that EU spending continues to be affected by material error. It estimates the error rate for payments at 3.7 per cent, an increase from the 3.3 per cent in 2009. This implies that €4.6 billion (£4.1 billion) was spent against EU rules governing the spending, such as breaches of public procurement rules, ineligible or incorrect calculation of costs claimed to EU 
co-financed projects, or over-declaration of land by farmers. The control systems tested across the EU budget were still only partially effective in ensuring the regularity of payments. 

4.8 The ECA raised concern over the lack of supervision of advance payments, which pre-finances costs to be incurred at a later date; increasing the risk of funds being declared as unjustified. 

4.9 The ECA provides specific assessments for revenue and expenditure policy groups as follows: 

- 
Revenue: The ECA concludes that Member States' payments of TOR, VAT and GNI 
based resources and other revenue free from material error, and that control 
systems were, in general, effective in ensuring the regularity of transactions. 
However, as in previous years, problems were detected in the procedures and 
systems which affect the amounts included in the B accounts1, for VAT-based own 
resources, long standing reservations2
 still exist but notes progress in the clearing of 
backlogs. The ECA found that the Commission had not completed its verification of GNI inventories covering Member States' data for the period from 2002 onwards and that certain weaknesses still persist. The ECA notes that while some progress 
have been made concerning previous recommendations; further work is required in 
respect of implementing a common revision policy for the GNI-based own resources in the EU and in ensuring customs debts incurred on seized goods are accurately 
recorded. For 2010, the ECA recommends that the Commission:  
- 
in respect of TOR, ensure the correct usage and completeness of Member States' account statements, and to further strengthen national customs supervision; and  
- 
present the GNI Committee with assessment reports on Member States' GNI data in order to replace all long standing general reservations. 
- 
Agriculture and Natural Resources: The ECA concludes that payments for this policy 
group were affected by material error as a whole (at 2.3 per cent). However, direct 
payments covered by the Integrated Administration and Control System were free 
from material error. It notes that Rural Development expenditure continues to be 
particularly prone to error with 50 per cent of payments affected, compared with 
27 per cent for EAGF3
 payments. The most frequent type of error was overdeclaration of land by beneficiaries. The ECA recommends the following to resolve 
system weaknesses identified:  
4
 database of agricultural parcels;  
- 
the mandatory use of ortho-photos (uniform-scale aerial photos) and their 
update in the LPIS
- 
improvements to on-the-spot inspections within the control systems run by Member States; and  
- 
adequate checks on the quality of national inspections and for certifying 
bodies to report on them.  
- 
Cohesion, Energy and Transport
: The ECA found this policy group to be the most 
error-prone area of EU expenditure with an error rate of 7.7 per cent, compared to 
5.5 per cent in 2009. For Cohesion funds (which represents nearly a third of the EU 
Budget) in particular, 49 per cent of payments to projects were affected by error. The ECA considers that Member States had sufficient information available to have detected and corrected at least some of the errors for 58 per cent of the transactions affected by errors, prior to their certification to the Commission. The ECA also found that Funds implementing the Financial Engineering Instruments (FEI) in Member States did not adhere to key regulatory requirements and that sufficient monitoring information on the actual implementation of FEI operations were not recorded. 

Common errors centred on the inclusion of ineligible costs and failures to comply with public procurement rules. The ECA concluded that audit authorities (a key element of Member States' control arrangements) were partially effective in ensuring the regularity of Cohesion payments. It recommends that the Commission: 

- 
Continue to monitor compliance with eligibility requirements, including the EU 
and national procurement rules;  
- 
Encourage national authorities to rigorously apply corrective mechanisms prior to approving expenditure and forwarding to the Commission for payment;  
- 
Assesses national eligibility rules for the 2007-13 programming period to 
identify possible areas for simplification and potential sources of error; and  
- 
Provide further guidance on sampling, the scope of verifications to be 
undertaken and the reporting of findings to audit authorities. 
- 
Research and other Internal Policies
: The ECA concludes that overall, this policy 
group was free from material error with estimated error rate at 1.4 per cent. However, interim and final payments for research framework programmes (FP) were subject to material error. The ECA found that systems were partially effective in ensuring the regularity of transactions and notes the Commission's efforts to 
implement its previous recommendations, in particular, to improve control systems. 
To further make progress, the ECA recommends that the Commission should:  
- 
in the area of the research FPs - further enhance ex-ante checks in view of 
identifying high-risk payments, and in order to further improve the reliability of the audit certificates, raise the independent auditors' knowledge of the 
eligibility rules; and 
- 
continue to strengthen the implementation of primary controls in Lifelong Learning Programme. 
- 
Administrative and other expenditure of the Institutions and Bodies
: The ECA 
concludes that payments as a whole for the institutions' administrative expenditure were free from material error (0.4 per cent was the most likely error rate) and that 
the compliance of systems designed to ensure the regularity of transactions displayed no material weaknesses. However, a number of errors and weaknesses were found in the implementation of procurement procedures by the EU 
institutions and bodies. The ECA recommends: a) the establishment of appropriate 
documentation to justify recruitment decisions and the respect of eligibility criterion 
as set out in vacancy notices; and b) for authorising officers to have appropriate 
checks and better guidance in order to improve the design, coordination and performance of procurement procedures. 
- 
Getting results from the EU Budget: For the first time, in Chapter 8 of the report, 
the ECA presents the results of its review of the relevance, comparability and reliability of performance information (activity reports) provided by the Directorates 
General (DG) for Agriculture and Rural Development, Regional Policy and Research 
and Innovation and the main performance audit results for the last financial year as presented in the ECA's Special Reports5
. Based on these reviews, the ECA 
recommends that the Commission: 

- 
Increase focus on performance in Annual Activity Reports - including on the 
economy and efficiency of EU funding; 
- 
Define interim targets related to multi-annual objectives so that progress can 
be assessed adequately; 
- 
Place greater emphasis to defining SMART objectives during the planning of EU expenditure programmes, as well as in identifying and mitigating the risks that may occur during implementation; 
- 
Agree on consistent performance indicators and ensure the reliability of information on planned targets and achieved results; and 
- 
Design and operate monitoring and control systems that will produce 
complete and accurate information on results. 

## Council Recommendation To The European Parliament On Discharge

4.10 On 16 February 2012, the Council welcomed the ECA's Statement of Assurance for the financial year 2010, expressing satisfaction that the accounts, in the ECA's opinion, gave a fair presentation of the financial position of the Union. It regretted, however, that payments from the EU Budget continued to be materially affected by error, that supervisory and control systems for payments remained only partially effective, and that the principal objective of obtaining a positive declaration of assurance on the underlying transactions was still not achieved. Despite a slight increase in the overall rate of error, the Council welcomed what it described as a 'stable quality in the implementation of the budget compared to the financial year 2009'. 

4.11 The Council's recommendations include:   

- 
A call on the Commission to fully assume its responsibilities for the implementation of the Budget, making greater use of its sanctions powers to ensure legality and regularity of transactions, and that control systems are adequate. 
- 
Calls for further simplicity of rules, including through the new Financial Regulation, 
and for the Commission to consider carefully the balance between administrative and control burdens, and added value. Policy objectives should also be simplified, to reduce the burden on beneficiaries. 
- 
Inviting the ECA to perform an audit on the EU's systems for procurement, which suffered from high levels of error, to ascertain what modernisation initiatives might be required. 
- 
Reiterating the importance of the Commission's DG annual activity reports for the 
purposes of accountability, and calls for greater comparability between reports. 
- 
Calling for the Commission to manage the large number of outstanding budgetary commitments under multiannual programmes, through settlement or decommitment. 
- 
Noting the ECA's analysis of errors in the Cohesion area of the budget in the years 
2006-2009, and suggests that this should be a starting point for reinforced efforts 
to reduce the errors in the budget. 
4.12 The Netherlands, Sweden, and the UK, for the first time, voted against the Council's recommendations on discharge. This important action helped to stress that, in these challenging times, Member States should uphold the same high standards for the EU budget as they would for national budgets. The increase in the rate of error, which halted a downward trend in the error rate over recent years, meant that a strong message was proper. As such, the Netherlands, Sweden, and the UK also submitted a joint declaration calling for:  

- 
The Commission to use negotiations on the next MFF to follow the ECA's 
recommendations to thoroughly embed SMART objectives in the management of programmes, and to pursue further simplicity of rules; 
- 
The improvement of the quality of EU spending as a higher priority; 
- 
Greater Member State responsibility for improving the management of EU funds at a national level, and for the Commission to drive improvements with greater use of sanctions; and 
- 
For greater transparency of data at Member State level in respect of EU spend. 

## European Parliament Decision On Discharge

4.13 The European Parliament takes a final decision on whether to discharge the EU budget. It does so having considered the ECA's report, the Commission's response, and the recommendation of the Council. The European Parliament made a final decision to discharge the 
2010 EU accounts in May this year. 

## Uk Government'S Response To The Eca

4.14 The ECA report includes several specific criticisms of certain Member States including the UK. A copy of the UK's response was sent to both Houses of Parliament on 1 February 2012. The response contains some general comments, and specific answers to each critical reference to the UK in the report itself. The UK response was either that we accept the fault and have taken remedial action as necessary, or that we differ on the ECA's or Commission's interpretation, and are in discussion with them on it. Some examples are as follows: 

## Agriculture 4.15 *Eca Audit Finding*: Incorrect Entitlement Calculation And Differences In Area.

4.16 *UK Response:* The correction made to the English Regional boundaries in July 2010 and data input error resulted in an overall underpayment for this claim.  The appropriate corrective action has been taken and a top up payment was made to the beneficiary. 

## Revenue

4.17 *Audit finding*: As in previous years, the ECA detected problems in the procedures and systems which affect the amounts included in the B accounts' statements. This is particularly so for the UK, where unjustified entries (guaranteed and unchallenged cases) and write-offs occurred. 

4.18 *UK Response*: The UK complies with EU legislation by including all guaranteed and unchallenged post clearance debts in the 'A' Account. However, this particular issue involved two specific debts that the ECA maintained should have been entered in the 'B' Account and not the 'A'. The UK authorities replied by letter dated 12 July 2011 in which they contested the ECA findings and outlined their reasoning. 

## Fight Against Fraud Report 2010

4.19 The protection of the EU's financial interests and the fight against fraud are areas of shared responsibility between the Commission and Member States. Each year, the Commission, in cooperation with Member States, issues a report on details of irregularities and latest statistics on fraud, and recent measures taken to reduce irregularities and fraud. This report is required under Article 325 (5) of the Treaty on the Functioning of the European Union (TFEU), and is sent to the Parliament and Council.  
4.20 As in previous years, the report includes both the latest information on irregularities detected by control systems and suspected fraud, and on measures taken to deal with them, and a one-off analysis of a special topic. The 2010 report is in four sections:  

- 
Results of irregularities relating to areas where Member States implement the 
budget (agricultural policy, cohesion policy and pre-accession funds) and in the collection of the EU's Traditional Own Resources (TOR); and expenditure directly 
managed by the Commission; 
- 
Recovery of irregular amounts in 2010;  
- 
Special focus on the  risk of double financing of projects in cohesion policy ; and 
- 
Overview of anti-fraud policies implemented in 2010 and of the new initiatives 
taken to ensure effective protection of the financial interests of the EU.  
4.21 Three Commission working papers accompany the report: (i) Implementation of Article 325 
TFEU (5) in 2010 by the Member States; (ii) Statistical Evaluation of Irregularities in 2010; and 
(iii) Follow-up recommendations to the Commission's report on the protection of the EU's financial interests - fight against fraud, 2009. 

4.22 Member States are required to report irregularities and suspicions of fraud affecting the EU's financial interests in the areas where they implement the budget. In 2010, there was an overall increase in the figure of reported irregularities for all sectors with the exception of preaccession funds and TOR.  
4.23 The overall financial impact of irregularities detected by control systems for expenditure increased to €1.8 billion (£1.5 billion) (1.27 per cent of total allocations) from €1.4 billion (£1.2 
billion) (1.13 per cent of total allocations) in 2009. For Revenue, the financial impact also increased to €393 million (£389 million) (1.88 per cent of total collected TOR) compared to 
€357 million (£355 million) (1.84 per cent of total collected TOR) in 2009. 

4.24 Also, the estimated financial impact of cases of suspected fraud increased from €180 million 
(£175 million) in 2009 to €478 million (£389 million) (0.34 per cent of allocations) in 2010. 

4.25 The report attributes these increases to the cyclical nature of programmes under the Cohesion Funds, particularly the 2000-06 implementing period; an indication that anti-fraud systems are performing effectively; and that reporting obligations are being complied with by Member States. 

|                     | 2009         |
|---------------------|--------------|
| 1                   |              |
|                     | Amounts      |
| No. of cases        |              |
| (€ million          |              |
| )                   | No. of cases |
| (€ million          |              |
| )                   |              |
| Agriculture         | 1,621        |
| Cohesion Policy     | 4,737        |
| Direct Expenditure  | 705          |
| Pre-Accession Funds | 706          |
| Total expenditure   | 7,769        |
| TOR                 | 5,204        |
|                     |              |

1 Figures for 2009 have since been updated as OLAF constantly update its databases. Source: The Commission's 2010 Fight Against Fraud Report 
4.26 These statistics must, however, be interpreted with caution, as a reported irregularity is in most cases not a fraud (a deliberate act). In addition, reported suspicion of fraud is not classified as a fraud until confirmed as such by a court judgment. Also, a sharp rise may simply reflect the inclusion of figures for one or more longer-running cases, which may have only just been resolved. 

4.27 The report breaks the statistics down by revenue and by individual areas of expenditure  
as follows:  

## Revenue

- 
The number of cases of irregularities reported decreased to 4,744 in 2010 
compared with 5,204 in 2009. The established amount to be recovered following 
irregularities detected is €393 million (£337 million) of which €180 million (£154 
million) has already been recovered by the Member States. The recovery rate is 
lower at 46 per cent, compared with 50 per cent in 2009. 

## Expenditure

The total number of cases of irregularities reported increased to 10,332 in 2010 compared with 
7,769 in 2009.  Reported irregularities per sector are as follows: 

- 
Agriculture:
 The number of cases of irregularities reported for this sector increased 
to 1,825 in 2010, compared with 1,621 in 2009. Their estimated financial impact 
fell slightly to 0.23 per cent of total allocations in 2010 compared with 0.24 per cent in 2009. In 2010, a total of €175 million (£150 million) was recovered and the 
recovery rate rose to 42 per cent from 39 per cent in 2009. 
- 
Cohesion Policy
: Reported cases of irregularities increased to 7,062 for this sector in 
2010, compared with 4,737 in 2009. Their estimated financial impact also rose to 
3.15 per cent of total allocations compared with 2.44 per cent in 2009. In 2010, a 
total of €611 million (£524 million) was recovered - a recovery rate of 67 per cent 
compared with 53 per cent in 2009. 
- 
Pre-accession funds: Reported cases of irregularities decreased for this sector to 424 
in 2010, compared with 706 in 2009. However, their estimated financial impact 
rose to 5.26 per cent of total allocations in 2010, compared with 3.80 per cent in 
2009. The sum of €14 million (£12 million) was recovered and the recovery rate 
was higher at 3 per cent compared to 2009. 
- 
Direct Expenditure:
 Reported irregularities increased to 1,021 in 2010, compared 
with 705 in 2009. Their estimated financial impact also rose to 0.27 per cent of 
total allocations in 2010, compared with 0.17 per cent in 2009. In 2010, €25 million (£21 million) was recovered (an increase of 3 per cent on 2009).  
4.28 In 2010, the Commission circulated a questionnaire to Member States on the risks of double financing of projects in the area of cohesion policy. Member States' responses indicate that measures are in place to prevent double funding. These measures include legal provisions, risk analysis, administrative procedures, and cooperation between national authorities, information exchange and the use of electronic tools. Nevertheless, the Commission concludes that more progress is needed in readily identifying risks.  
4.29 The report states that progress has been made in the reporting of irregularities since the last report in 2009, but concludes that more needs to be done to improve the recovery of funds unduly paid out. 

## Eleventh Report Of The European Anti-Fraud Office (1 January To 31 December 2010)

4.30 The European Anti-fraud Office (OLAF) is an administrative investigative service of the EU, with the mission of combating fraud, corruption and other illegal activities affecting the EU, including serious misconduct within the EU Institutions that have financial consequences. It aims to ensure that EU taxpayers' money is spent appropriately and that the EU is not being deprived of its due revenue. 

4.31 OLAF's operational activities are independent from the Commission, and its internal (within the EU) and external (outside the EU) investigations are conducted in full independence. It investigates cases of fraud, provides assistance to the Commission and EU bodies and national authorities in their fight against fraud. It works closely with national authorities' investigation services, police, legal and administrative authorities to counter fraud. It also supports the Commission in developing anti-fraud measures. 

4.32 Every year, its Director publishes a report on the activities of the Office over the previous year. The latest report issued on 19 October 2011, gives a summary of OLAF's achievements in 
2010, supported by statistics and case studies.  
4.33 The report features a special focus on judicial follow-up actions to OLAF's investigation; 
providing an overview of progress, at national level, of judicial actions taken in the Member States. 

4.34 A number of ongoing developments, including a new proposal to improve the legislative framework of OLAF and an internal review within it, will have an impact on the work of the Office in the years to come. 

4.35 The following statistical trends were reported in 2010: 

- 
OLAF completed 691 assessments in 2010 and opened 225 new investigations: 150 
(internal and external investigations) and 75 (coordination and assistance cases). A 
total of 189 investigative and operational cases were closed during the year.  
- 
At the end of 2010, OLAF was handling a total of 493 live investigative and operational cases, of which 139 concerned the EU institutions and bodies and 117 related to expenditure and revenue.  
- 
The average duration of investigations and operations, excluding the assessment phase, was slightly lower than in recent years; below 23 months in 2010 compared 
with 25 months in 2009.  
- 
An individual case can lead to many follow-up actions: Of the 98 cases closed with 
follow-up in 2010, 172 triggered follow-up proceedings: financial (62), judicial 
(67), administrative (33) and disciplinary (10).  
- 
Judicial follow - up on OLAF's findings resulted in national courts sentencing 
fraudsters to a cumulative 125 years of imprisonment during 2010 and imposed 
financial penalties of nearly €1.5 billion (£1.3 billion). 
- 
The amount of €68 million (£58 million) was recovered in respect of OLAF's 
investigative and operational cases as follows: structural funds - €33 million (£28 
million), agriculture - €12 million (£10 million) and direct expenditure - €11 million 
(£9 million). A further €351 million (£349 million) has also been recovered to date 
in respect of financial follow-up cases that are still ongoing. 
.
4.36 OLAF had a total budget of €78 million (£67 million) in 2010. Of this, €58 million (£50 
million) was allocated to administration with the rest (€24 million (£21 million)) dedicated to operations, which fund anti-fraud activities such as the Hercule programme1

## A Glossary Commitment And Payment Appropriations

A.1 The Budget distinguishes between appropriations for commitments and appropriations for payments. Commitment appropriations are the total cost of legal obligations that can be entered into during the current year, for activities that, in turn, will lead to payments in the current and future years. Payment appropriations are the amounts of money that are available to be spent during the year, arising from commitments in the Budgets for the current or preceding years. Unused payment appropriations may, in exceptional circumstances, be carried forward into the following year. 

## Discharge Procedure

A.2 The ECA's annual report is subject to consideration by the budgetary authority (Council and European Parliament) under the "discharge procedure" set out in Article 319 (3) of the Treaty on the functioning of the EU. In particular, it considers how the Budget for the year in question was implemented. The European Parliament, acting on a recommendation from the Council, considers whether to grant the Commission a discharge in respect of the Budget in question, thus bringing the budgetary process for that year to a formal close. The Commission is obliged under Article 319 (3) of the Treaty on the functioning of the EU to take "all appropriate steps" to act on comments made by the European Parliament and by the Council during the discharge process. If so asked, it must also report back on its actions, with such reports going to the ECA. 

## Flexibility Instrument

A.3 The Flexibility Instrument was established under paragraph 24 of the 1999 IIA, which allows for expenditure in any given Budget year of up to €200 million above the FP ceilings established for one or more Budget headings. Any portion of the Flexibility Instrument unused at the end of one year may be carried over for up to two subsequent years, but the Flexibility Instrument should not, as a rule, be used to cover the same needs two years running. The Flexibility Instrument is intended for extraordinary expenditure and may only be used after all possibilities for reallocating existing appropriations have been exhausted. Both arms of the budgetary authority must agree to a mobilisation of the Flexibility Instrument following a proposal from the Commission. 

## Fraud And Irregularity

A.4 Fraud (as defined by the Penal Convention) covers intentional acts or omissions, in respect of both expenditure and revenue, which involve the use or presentation of false, incorrect or incomplete statements or documents, or specific non-disclosure of information, or misapplication of funds or benefits. 

A.5 Irregularity (as defined by Council Regulation 2988/95) covers both simple omissions due to errors or negligence, which undermine the EU and are intentional and deliberate acts. For example, a genuine payment made after the closing date for claims represents an irregularity; but import of goods under false papers is fraud. Member States are required by regulations to report irregularities in the three main Budget sectors (Own Resources, agriculture and structural funds) on a quarterly basis. 

## Inter Institutional Agreement (Iia)

A.6 The IIA is a politically and legally binding agreement that clarifies the EU's budgetary procedure. Under the Treaty, the Council and the European Parliament have joint responsibility for deciding the EU Budget on the basis of proposals from the Commission. The IIA sets out the way in which the three institutions will exercise their responsibilities in accordance with the Treaty, and their respect for the revenue ceilings that are laid down in the ORD. In particular, it provides for the annual EU Budget to be set in the context of a multi-annual financial framework. 

## Own Resources A.7 The Ord Lays Down Four Sources Of Eu Revenue, Or 'Own Resources:'

- 
Customs duties, including those on agricultural products. These are paid on a range of commodities imported from non-Member countries. Following the agreement on agriculture during the Uruguay GATT round, most duties are now fixed. However, for some key commodities, they continue to vary in line with changes in world prices. 
- 
Sugar levies: These are charged on the production of sugar to recover part of the cost of subsidising the export of surplus EU sugar onto the world market. 
- 
Contributions based on VAT: Essentially, the VAT resource is the amount yielded by applying a notional rate of 1 per cent to a VAT base, assuming an identical range of goods and services in each Member State. The VAT base is calculated on the basis of a notional harmonised rate and reflects finally taxed expenditure across the EU. The method for calculating the VAT-based resource is set out in the ORD. 
(1) the starting point is the total amount of net VAT collected in each 
Member State; 
(2) a weighted average of the rates at which VAT is charged in the Member 
State is then applied to the net total to produce the Member State's intermediate national base; 
(3) the intermediate base is then adjusted for derogations operated under 
the Principal VAT Directive to produce the harmonised base; 
(4) a notional rate of 1 per cent is then applied to this base. The base is, 
where necessary, then capped at 50 per cent of 1 per cent of the Member State's GNI; and 
(5) a call-up rate (currently a maximum of 0.3 per cent) is applied to produce 
a Member States' VAT-based contribution. 
- 
GNI-based contributions: The amount due is calculated by taking the same 
proportion of each Member State's GNI. Because the EU is not allowed to borrow, revenue must equal expenditure. The GNI-based resource is the budget-balancing 
item; it covers the difference between total expenditure in the Budget and the revenue from the other three resources, subject to the overall Own Resources ceiling. 
A.7.1 The first two Own Resources are known collectively as "Traditional Own Resources" (TOR). 

The VAT and GNI-based contributions are often referred to as the 'third' and 'fourth' resources respectively. 

## Sterling Figures

A.8 The Sterling figures for 2006 to 2012 in this white paper are based on actual Sterling cash receipts, or payments where these took place and are known. Elsewhere, the appropriate average annual Sterling/Euro exchange rate has been used to convert Euro figures into Sterling1
. 

Generally, the 2012 Euro figures have been converted into Sterling using the Sterling/Euro exchange rate on 30 December 2011, namely £1=€1.197175 (regulations state that VAT-based and GNI-based payments will be made using the exchange rate on the last working day of the preceding year). However, there may be some exceptions, for example where figures have previously been published at a different exchange rate, but these are noted where necessary. 

## Structural Funds

A.9 At present, there are four structural funds through which the EU grants financial assistance to resolve structural economic and social problems: 

- 
the European Regional Development Fund (ERDF), which promotes economic and social cohesion within the Union through the reduction of imbalances between regions or social groups; 
- 
the European Social Fund (ESF), which promotes the EU's employment objectives by 
providing financial assistance for vocational training, retraining and job creation schemes; 
- 
the European Agricultural Guidance and Guarantee Fund (EAGGF - Guidance 
Section), which contributes to the structural reform of the agriculture sector and to the development of rural areas; and 
- 
the Financial Instrument for Fisheries Guidance (FIFG), the specific fund for the structural reform of the fisheries sector. In addition, the EU supports Member States whose GDP is less than 90 per cent of the European average through the Cohesion Fund, which finances projects linked to the environment and trans-European 
transport systems. 

## Uk Abatement

A.10 The UK's VAT-based contributions are abated (reduced) according to a formula set out in the ORD. Broadly, this is equal to 66 per cent of the difference between what the UK contributes to the EU Budget and the receipts, which the UK gets back, subject to the following points: 

- 
the abatement applies only in respect of spending within the EU; 
- 
the UK's contribution is calculated as if the Budget were entirely financed  
by VAT; and 
- 
the abatement is deducted from the UK's VAT contribution a year in arrears, e.g. the abatement in 2011 relates to UK payments and receipts in 2010. 
A.10.1 The formula for the calculation of the abatement is set out in the ORD and in a Working Methods Paper first published in 1988 and revised in 1994, 2000 and again in 2007. 

A.10.2 The Commission is directly and solely responsible for determining the UK's abatement. It calculates the abatement on the basis of a forecast of contributions to the EU Budget and of receipts from it. This is subsequently corrected in the light of outturn figures. 

A.10.3 Corrections may be made for up to three years after the year in respect of which the abatement relates, with a final calculation then being made in the fourth year, e.g. a final calculation of the abatement in respect of 2011 will take place in 2015. 

A.10.4 The effect of the abatement is to reduce the amount of the UK's VAT-based and GNI-
based payments to the EU Budget. It does not involve any transfer of money from the Commission or other Member States to the Exchequer. 

## Determining The Value Of The Own Resources Elements

B.1 The budgetary process relating to revenue has to respect the rules governing the size and structure of Own Resources. It involves a chain of inter-related calculations. These can be summarised as follows: 

- 
at the beginning of the budgetary process, which occurs in the year prior to the Budget in question, the amounts due from each Member State are assessed in that 
Member State's national currency, i.e. Sterling for the UK; 
- 
the initial process involves estimating the amounts due to be received in respect of TOR, the amount relating to VAT if it were applied at 1 per cent across the EU, and the amount of 1 per cent of each Member State's GNI. These estimates rely on the Member States' estimates of their economic activity during the Budget year; 
- 
the Member States' national currency estimates are, where necessary, then converted into Euro using an exchange rate at the time the estimates are being 
drawn up - nowadays this is usually an early May exchange rate; 
- 
the amount of VAT and GNI each Member State has to pay to the EU Budget is then determined by the limits described above for these Own Resources, so that; when added to the amounts for the TOR, the total does not exceed the value of the Own Resources required to fund the proposed Budget for the coming year, subject to ensuring that the value of these Own Resources does not also exceed the Own Resources ceiling for the year in question (e.g. 1.23 per cent in 2012); 
- 
the sum produced (in Euro) is entered into the Draft Budget (DB), in the year preceding the budgetary year; 
- 
the sum entered in the DB is adjusted as necessary during the remainder of the Budget process, essentially to reflect changes on the expenditure side of the Budget, but still on the basis of the Budget exchange rate and still respecting the Own Resources ceiling; 
- 
the Sterling/Euro exchange rate on the last working day prior to the start of the Budget year is established as the rate by which UK VAT-based and GNI-based contributions will be converted for the whole Budget year. The Sterling amount which the UK has to pay in respect of these two resources will be different from its original estimates, if the rate on the last working day is different from the Budget exchange rate; 
- 
during the course of the Budget year, the UK pays its VAT and GNI contributions to meet its obligations as denominated in Euro in the adopted Budget, or subsequent Amending Budgets. These payments are made at the Sterling/Euro rate on the last working day prior to the Budget year. As Member States pay only what they collect, their TOR payments are not determined by the Euro amounts in the Budget; 
- 
Member States pay their contributions for a given Budget year in monthly instalments 
(VAT and GNI-based contributions on the first working day of each month, TOR on 
the first working day following the 19th of each month). The VAT and GNI-based 
contributions are subsequently adjusted in the light of a number of factors, such as outturn figures for VAT. If outturn expenditure is below the amount raised from Member States, excess contributions are refunded in an Amending Budget; 
- 
since there are generally differences between the Sterling/Euro exchange rates (a) 
used to set the Budget and (b) to make VAT-based and GNI-based contributions, 
the UK would generally have paid more or less in Sterling compared with the amount established for them for the budgetary year in question. These exchange variations are accounted for in-year under arrangements in place since 1998. Member States re-estimate their 1 per cent VAT and GNI bases during the course of the budgetary year and the conversion of their national currency estimates is carried out using the exchange rate on the last working day prior to the start of the Budget year. The revised figures are then included in an Amending Budget to the budgetary 
year to which they relate. In practice, converting the revised figures using the exchange rate on the last working day means that in-year contributions are no 
longer affected by exchange rate differences. Furthermore, re-estimating the value 
of the 1 per cent base using much later information means that any differences between these estimates and the actual outturn for the year are very much reduced. The Member States thus contribute in-year virtually what they should on the basis 
of their national currency obligations. In the year following the budgetary year, any adjustments to correct for any under or overpayment should be relatively small, 
compared to the adjustments made in years prior to 1998; and  
- 
Numerous small further adjustments are however, required to be made over several years following the Budget year, for example, to reflect later adjustments in the amount of GNI statistics. 

## Explanation Of The Difference Between The Government'S Cash Flow Outturn For The Uk'S Net Contribution For 2010 And The Figures In The European Commission'S Eu Budget 2010 Financial Report

B.2 When converted at the average exchange rate for 2010 of £1= €1.166206, the figures in the European Commission's report break down as follows: 

 
(€ million) 
(£ million) 
UK gross contribution before abatement 
18,222.1 
15,625.1 
UK abatement 
-3,562.7 
-3,054.9 
UK receipts 
-6,745.6 
-5,784.2 
UK net contribution 
7,913.8 
6,785.9 

Source: HM Treasury B.3 The Government's figure for the UK's net contribution in 2010 is £7,375 million. B.4 A number of factors contribute to the difference between the two net contribution figures. 

The probable main causes for the difference are as follows: 

- 
the UK figure includes only transactions between the EU Budget and the UK public sector, whereas the European Commission's figures include receipts paid direct to the UK private sector. It is estimated that this accounted for around £1,015 million of the difference in 2010; 
- 
the late adoption of Amending Budget No. 10/2009 meant that associated changes 
were not implemented until 2010. The result of which leads to the Government's 
figures for 2010 being some £421 million lower than if the Amending Budget changes had been implemented in 2009; 
There may be other factors, which cause the two sets of figures to differ.  
The following table reconciles the two figures. 

|                                                             | (£ million)                                              |
|-------------------------------------------------------------|----------------------------------------------------------|
| UK Government cash-flow outturn for 2010                    | 7,375                                                    |
| Private sector receipts                                     | -1,015                                                   |
| 421                                                         |                                                          |
|                                                             |                                                          |
|                                                             |                                                          |
|                                                             |                                                          |
| Late implementation, in February 2010, of Amending Budget   |                                                          |
| No. 10/2009                                                 |                                                          |
|                                                             |                                                          |
|                                                             |                                                          |
| 6,781                                                       | UK Cash-flow figure adjusted to reflect main differences |
| compared to European Commission's figure                    |                                                          |
| European Commission figure for 2010 outturn                 | 6,786                                                    |
| Net difference due to other factors (such as exchange rate) | -5                                                       |
|                                                             |                                                          |

Source: HM Treasury 
 

## C Tables

 
C.1 This annex includes tables that supplement data presented in the main text. 

 

| Appropriations                                     |         |         |        Commitments    |         |        Payments    |         |         |
|----------------------------------------------------|---------|---------|-----------------------|---------|--------------------|---------|---------|
|                                                    |         |         |                       |         |                    |         |         |
| 2008                                               | 2009    | 2010    | 2011                  | 2012    | 2008               | 2009    | 2010    |
| Sustainable Growth                                 | 58,338  | 62,202  | 64,250                | 64,501  | 67,486             | 45,731  | 45,332  |
| 1a Competitiveness for Growth and Employment       |         |         |                       |         |                    |         |         |
| 11,082                                             | 13,775  | 14,863  | 13,521                | 14,734  | 9,715              | 10,368  | 11,343  |
| 1b Cohesion for Growth and Management              | 47,256  | 48,427  | 49,387                | 50,981  | 52,753             | 36,016  | 34,963  |
| 2 Preservation and Management of Natural Resources | 55,560  | 56,332  | 59,499                | 58,659  | 59,976             | 53,217  | 49,906  |
| 3 Citizenship, Freedom, Security and Justice       | 1,635   | 2,132   | 1,687                 | 2,020   | 2,065              | 1,489   | 1,911   |
| 3a Freedom Security and Justice                    | 732     | 886     | 1,006                 | 1,139   | 1,368              | 534     | 617     |
| 3b Citizenship                                     | 903     | 1,266   | 681                   | 881     | 697                | 955     | 1,294   |
| 4 The EU as a Global Partner                       | 7,551   | 8,104   | 8,141                 | 8,759   | 9,406              | 7,847   | 8,080   |
| 5 Administration                                   | 7,279   | 7,597   | 7,907                 | 8,171   | 8,280              | 7,280   | 7,597   |
| 6 Compensations                                    | 207     | 209     | 0                     | 0       | 0                  | 207     | 209     |
| TOTAL                                              | 130,570 | 136,576 | 141,484               | 142,111 | 147,232            | 115,771 | 113,035 |

 
Notes: 1.2007-09 includes all Amending Budgets; 2010 includes Amending Budgets 1-7; 2011 includes Amending Budget 1 and Draft Amending Budgets 2-3. 2012 as adopted in 2011 Budget as adopted on 15 December 2010. 2 Because of rounding the columns totals do not necessarily equal the sum of the individual items. Source: European Commission: 'General Budget of the European Union for the financial year' 2008 - 10. Statement of estimates of the European Commission for the financial year 2012. Other EU documentation. 

 

|                                                    |         |         |         | Appropriations    |         |       Commitments    |         |      Payments    |         |         |
|----------------------------------------------------|---------|---------|---------|-------------------|---------|----------------------|---------|------------------|---------|---------|
|                                                    | 2008    | 2009    | 2010    | 2011              | 2012    | 2008                 | 2009    | 2010             | 2011    | 2012    |
| Sustainable Growth                                 | 46,392  | 55,375  | 55,093  | 55,967            | 56,371  | 36,366               | 40,356  | 40,914           | 46,230  | 46,223  |
| 1a Competitiveness for Growth and Employment       |         |         |         |                   |         |                      |         |                  |         |         |
| 8,813                                              | 12,263  | 12,745  | 11,732  | 12,307            | 7,726   | 9,230                | 9,726   | 10,089           | 9,607   |         |
| 1b Cohesion for Growth and Management              | 37,579  | 43,112  | 42,348  | 44,235            | 44,065  | 28,641               | 31,126  | 31,187           | 36,141  | 36,616  |
| 2 Preservation and Management of Natural Resources | 44,182  | 50,149  | 51,019  | 50,897            | 50,098  | 42,319               | 44,428  | 49,851           | 48,919  | 47,640  |
| 3 Citizenship, Freedom, Security and Justice       | 1,300   | 1,898   | 1,447   | 1,753             | 1,725   | 1,184                | 1,702   | 1,210            | 1,283   | 1,240   |
| 3a Freedom Security and Justice                    | 582     | 789     | 863     | 988               | 1,143   | 425                  | 550     | 634              | 705     | 698     |
| 3b Citizenship                                     | 718     | 1,127   | 584     | 764               | 582     | 759                  | 1,152   | 576              | 578     | 542     |
| 4 The EU as a Global Partner                       | 6,005   | 7,214   | 6,981   | 7,600             | 7,857   | 6,240                | 7,193   | 6,678            | 6,281   | 5,810   |
| 5 Administration                                   | 5,789   | 6,764   | 6,780   | 7,090             | 6,916   | 5,789                | 6,764   | 6,780            | 7,089   | 6,915   |
| 6 Compensations                                    | 164     | 186     | 0       | 0                 | 0       | 165                  | 186     | 0                | 0       | 0       |
| TOTAL                                              | 103,832 | 121,586 | 121,320 | 123,307           | 122,983 | 92,064               | 100,629 | 105,432          | 109,803 | 107,827 |

 
Notes: 1 2007-09 includes all Amending Budgets and 2010 includes Amending Budgets 1-7. 2011 includes Amending Budget 1 and Draft Amending Budgets 2-3. 2012 as adopted in 2011. 2 Because of rounding, the columns totals do not necessarily equal the sum of the individual items. 3 Sterling figures are derived from corresponding euro amounts in Table 1B converted at the appropriate exchange rate (see glossary). Source: European Commission: General Budget of the European Union for the financial year' 2008 - 10. Statement of estimates of the European Commission for the financial year 2012. Other EU documentation. 


## Table C.3: Eu Budget Own Resources (€ Million)

 
Agricultural and Sugar Levies 
Custom Duties 
VAT Contributions 
 
2006 
2007 
2008 
2009 
2010 2011 2012 
2006 
2007 
2008 
2009 
2010 
2011 
2012 
2006 
2007 
2008 
2009 
2010 
2011 
2012 
               
               
               
                 
                     
                
                
          
           
          
           
           
      
       
         
             
         
         
        
         
              
Belgium 
24  
12  
61  
6  
6  
7  
7  
1,497  
1,673  
1,759  
1,417  
1,483  
1,508  
1,754  
703  
701  
769  
601  
608  
666  
693  
                
               
               
                 
                     
                
                
               
               
               
               
               
          
           
              
          
          
          
           
               
Bulgaria 
-    
14  
23  
0  
0  
0  
0  
-    
47  
63  
53  
42  
45  
55  
           -    
67  
81  
76  
61  
69  
73  
                 
               
               
                 
                     
                
                
             
              
             
              
              
        
          
         
             
         
         
        
         
              
Czech Republic 
8  
11  
12  
3  
3  
3  
3  
141  
167  
195  
164  
186  
191  
224  
254  
284  
345  
265  
248  
269  
284  
               
               
               
                 
                     
                
                
             
              
             
              
              
        
          
         
             
         
         
        
         
              
Denmark 
37  
32  
50  
3  
4  
3  
3  
287  
298  
294  
280  
303  
300  
342  
470  
496  
537  
448  
352  
401  
419  
              
              
              
               
                   
              
              
          
           
          
           
           
      
       
      
          
      
      
     
       
           
Germany 
210  
151  
323  
27  
27  
26  
26  
2,718  
2,976  
3,014  
2,919  
3,037  
3,329  
4,013  
3,677  
3,929  
3,738  
2,017  
1,837  
1,872  
1,931  
                 
               
               
                
                    
              
              
              
               
               
               
               
          
           
          
              
          
          
          
           
               
Estonia 
1  
18  
10  
-    
-    
-    
-    
19  
25  
24  
24  
17  
20  
22  
31  
38  
38  
31  
25  
28  
30  
               
                 
                 
                 
                     
                
                
             
              
             
              
              
        
          
         
             
         
         
        
         
              
Greece 
11  
8  
7  
1  
1  
1  
1  
194  
222  
224  
190  
214  
193  
208  
467  
844  
615  
512  
462  
399  
408  
               
               
               
                 
                     
                
                
          
           
          
              
           
      
       
      
          
      
      
     
       
           
Spain 
52  
37  
28  
6  
7  
5  
5  
1,146  
1,253  
1,161  
996  
1,151  
1,182  
1,358  
2,474  
2,475  
2,587  
2,290  
1,257  
2,065  
2,134  
              
               
              
               
                   
              
              
          
           
          
           
           
      
       
      
          
      
      
     
       
           
France 
134  
94  
365  
36  
40  
31  
31  
1,148  
1,238  
1,204  
1,227  
1,367  
1,450  
1,711  
4,327  
4,441  
4,714  
3,967  
3,278  
3,763  
3,907  
                 
                 
                 
                
                    
              
              
             
              
             
              
              
        
          
         
             
         
         
        
         
              
Ireland 
2  
0  
1  
-    
-    
-    
-    
200  
218  
200  
177  
186  
176  
198  
366  
396  
401  
308  
250  
243  
255  
              
              
              
                     
                
                
          
           
          
           
           
      
       
      
          
      
      
     
       
           
Italy 
150  
145  
119 5  
6  
5  
5  
1,423  
1,543  
1,530  
1,500  
1,662  
1,893  
2,193  
2,686  
3,193  
4,310  
2,461  
2,175  
2,446  
2,545  
                 
               
                 
                 
                     
              
              
              
               
               
               
               
          
           
          
              
          
          
          
           
               
Cyprus 
3  
12  
9  
3  
2  
-    
-    
29  
35  
36  
31  
24  
26  
30  
34  
36  
40  
37  
33  
35  
37  
                 
                 
                 
                 
                     
              
              
              
               
               
               
               
          
           
          
              
          
          
          
           
               
Latvia 
1  
3  
2  
1  
1  
-    
-    
21  
28  
27  
18  
16  
18  
21  
37  
50  
55  
37  
23  
27  
29  
                 
                 
                 
                 
                     
                
                
              
               
               
               
               
          
           
          
              
          
          
          
           
               
Lithuania 
2  
3  
9  
2  
2  
1  
1  
36  
42  
51  
38  
37  
39  
45  
51  
67  
79  
61  
42  
49  
53  
                 
                 
                 
                 
                     
              
              
              
               
               
               
               
          
           
          
              
          
          
          
           
               
Luxembourg 
1  
1  
1  
0  
0  
-    
-    
18  
19  
14  
11  
13  
14  
17  
56  
74  
73  
63  
50  
62  
66  
                 
                 
                 
                 
                     
                
                
              
              
             
               
               
          
          
         
             
         
         
        
         
              
Hungary 
6  
5  
9  
1  
1  
2  
2  
98  
106  
104  
92  
92  
98  
119  
177  
213  
242  
170  
154  
174  
191  
                 
                 
                 
                 
                     
              
              
              
               
            
                 
               
          
           
          
              
          
          
          
           
               
Malta 
1  
2  
2  
0  
0  
-    
-    
10  
10  
11.0  
9  
10  
11  
12  
11  
13  
14  
12  
11  
12  
13  
              
              
              
                 
                     
                
                
          
           
          
           
           
      
       
         
          
         
         
        
         
              
Netherlands 
244  
252  
271  
7  
7  
7  
7  
1,401  
1,621  
1,762  
1,714  
1,742  
1,779  
2,108  
990  
1,029  
993  
357  
257  
327  
338  
                 
                 
               
                 
                     
                
                
             
              
             
              
              
        
          
         
             
         
         
        
         
              
Austria 
7  
0  
16  
3  
3  
3  
3  
188  
201  
185  
154  
164  
160  
181  
457  
452  
425  
298  
310  
320  
332  
               
               
              
                 
                     
              
              
             
              
             
              
              
        
          
         
             
         
         
        
         
              
Poland 
47  
39  
123  
3  
3  
13  
13  
225  
300  
328  
297  
315  
333  
407  
611  
725  
864  
636  
685  
734  
770  

              
               
               
                 
                     
                
                
              
              
             
              
              
        
          
         
             
         
         
        
         
Portugal 
23  
21  
15  
0  
0  
0  
0  
95  
116  
119  
117  
134  
129  
149  
351  
383  
392  
341  
354  
328  
323  
                
               
               
                 
                     
                
                
               
              
             
              
              
        
          
             
         
         
        
         
              
Romania 
-    
29  
42  
1  
1  
1  
1  
-    
130  
158  
123  
100  
103  
121  
           -    
249  
277  
246  
175  
205  
223  
                 
                 
                 
                
                    
              
              
              
               
               
          
           
          
              
          
          
          
           
               
Slovenia 
1  
0  
1  
-    
-    
-    
-    
35  
82  
89  
69 
67 
67  
77  
69  
79  
92  
81  
67  
72  
74  
                 
                 
                 
                 
                     
                
                
              
               
             
               
              
        
          
          
             
         
         
          
         
              
Slovakia 
3  
4  
6  
2  
2  
1  
1  
52  
87  
105  
82  
105  
106  
122  
92  
126  
123  
123  
86  
101  
103  
                 
                 
                 
                 
                     
                
                
             
              
             
              
              
        
          
         
             
         
         
        
         
              
Finland 
7  
8  
5  
1  
1  
1  
1  
123  
141  
161  
114  
126  
142  
166  
359  
393  
417  
372  
307  
339  
360  
               
               
               
                 
                     
                
                
             
              
             
              
              
        
          
         
             
         
         
        
         
              
Sweden 
18  
22  
31  
2  
3  
3  
3  
382  
417  
424  
368  
432  
456  
527  
485  
528  
500  
198  
186  
201  
208  
              
              
              
               
                   
              
              
          
           
          
           
           
      
       
United Kingdom 
451  
450  
444  
10  
12  
10  
10  
2,100  
2,207  
2,056  
2,222  
2,502  
2,777  
2,992  -2,043  -1,779  -3,312  -3,533  
-934  -1,085  -1,299  
Total 
1,444 
1,373 
1,985 
124 
133 
123 
123 13,585 15,200 15,297 14,404 15,527 16,544 19,171 17,191 19,500 19,408 12,475 12,356 14,126 14,499 
 
EU Budget Own Resources (€ million) - continued 
 
 
Fourth Resource Contributions 
TOTALS 
 
2006 
2007 
2008 
2009 
2010 
2011 
2012 
2006 
2007 
2008 
2009 
2010 
2011 
2012 
           
           
           
               
         
         
          
           
          
           
           
      
       
1,986  
2,041  
2,433  
2,686  
2,575  
2,779  
4,156  
4,372  
4,631  
4,457  
4,783  
4,755  
5,233  
Belgium 
           1,933  
 
         
              
              
                 
            
            
               
              
             
              
              
          
163.00  
196  
243  
249  
258  
284  
-    
291  
364  
372  
353          372  
412  
Bulgaria 
                -    
              
              
              
               
            
         
          
           
          
           
           
      
       
704  
844  
870  
1,061  
969  
1,088  
1,035  
1,167  
1,396  
1,302  
1,498  
1,433  
1,599  
Czech Republic 
              633  
           
           
           
               
         
         
          
           
          
           
           
      
       
1,394  
1,421  
1,617  
1,722  
1,711  
1,832  
2,193  
2,219  
2,301  
2,347  
2,381  
2,416  
2,596  
Denmark 
           1,399  
         
         
         
             
        
        
        
         
         
         
         
    
     
14,654  
15,140  
17,284  
18,872  
18,186  
19,468  
20,501  
21,710  
22,215  
22,246  
23,773  
23,413  
25,439  
Germany 
         13,896  
               
               
               
                 
            
            
             
              
             
              
              
          
96  
89  
95  
100  
102  
112  
130  
177  
161  
150  
142          150  
164  
Estonia 
               80  
           
           
           
               
         
         
          
           
          
           
           
      
       
1,947  
1,482  
1,595  
1,633  
1,515  
1,588  
1,834  
3,020  
2,328  
2,299  
2,310  
2,108  
2,206  
Greece 
           1,163  
           
           
           
               
         
         
          
           
          
         
         
    
     
6,073  
6,190  
7,285  
7,681  
7,341  
7,820  
9,800  
9,838  
9,966  
10,577  
10,095  
10,593  
11,316  
Spain 
           6,128  
         
         
         
             
        
        
        
         
         
         
         
    
     
11,216  
11,742  
13,767  
14,895  
14,156  
15,232  
16,636  
16,989  
18,025  
18,997  
19,581  
19,401  
20,881  
France 
         11,026  
              
              
              
                 
            
            
          
           
          
           
           
      
       
972  
974  
958  
959  
882  
928  
1,482  
1,586  
1,577  
1,442  
1,394  
1,301  
1,381  
Ireland 
              914  
           
           
         
             
        
        
        
         
         
         
         
    
     
9,144  
9,186  
10,502  
11,490  
10,969  
11,700  
13,507  
14,024  
15,144  
14,469  
15,332  
15,313  
16,443  
Italy 
           9,247  
               
               
              
                 
            
            
             
              
             
              
              
          
88  
95  
119  
125  
125  
134  
153  
170  
180  
191  
184          186  
201  
 
              
              
              
                 
            
            
             
              
             
              
              
          
 
 
118  
132  
149  
135  
130  
141  
155  
199  
216  
204  
175          176  
191  
Latvia 
               96  
              
              
              
                 
            
            
             
              
             
              
              
          
158  
190  
205  
188  
202  
225  
234  
271  
329  
306  
269          291  
324  
Lithuania 
              145  
              
              
              
                 
            
            
             
              
             
              
              
          
202  
172  
197  
199  
220  
241  
217  
296  
259  
270  
261          297  
324  
Luxembourg 
              143  
              
              
              
                 
            
            
             
              
             
              
              
       
Hungary 
              501  
547  
592  
595  
708  
681  
790  
783  
870  
947  
858  
955          955  
1,101  
               
               
               
                   
              
              
              
               
               
               
               
           
Malta 
               28  
33  
34  
39  
41  
42  
46  
50  
57  
60  
61  
61            65  
71  
           
           
           
               
         
         
          
           
          
           
           
      
       
Netherlands 
           3,497  
3,401  
3,643  
3,368  
3,607  
3,597  
3,906  
6,131  
6,303  
6,669  
5,446  
5,614  
5,711  
6,359  
           
           
           
               
         
         
          
           
          
           
           
      
       
Austria 
           1,557  
1,565  
1,568  
1,892  
2,151  
2,038  
2,191  
2,209  
2,218  
2,195  
2,347  
2,627  
2,522  
2,706  
           
           
           
               
         
         
          
           
          
           
           
      
       
1,746  
2,158  
2,052  
2,654  
2,569  
2,872  
2,447  
2,809  
3,473  
2,988  
3,657  
3,649  
4,061  
Poland 
           1,563  
              
              
           
               
         
         
          
           
          
           
           
      
       
940  
940  
1,089  
1,360  
1,145  
1,176  
1,378  
1,460  
1,466  
1,548  
1,848  
1,603  
1,648  
Portugal 
              909  
              
              
              
                 
            
         
               
           
          
           
           
      
       
682  
741  
911  
868  
869  
1,015  
-    
1,089  
1,218  
1,282  
1,143  
1,178  
1,360  
Romania 
                -    
              
              
              
                 
            
            
             
              
             
              
              
          
198  
227  
259  
253  
252  
271  
279  
359  
408  
409  
387          391  
422  
Slovenia 
              175  
              
              
              
                 
            
            
             
              
             
              
              
          
 
303  
361  
468  
454  
478  
529  
402  
519  
595  
675  
647          687  
756  
Slovakia 
              255  
           
           
           
               
         
         
          
           
          
           
           
      
       
1,088  
1,127  
1,217  
1,267  
1,344  
1,460  
1,560  
1,629  
1,710  
1,704  
1,702  
1,825  
1,986  
Finland 
           1,071  
           
           
           
               
         
         
          
           
          
           
           
      
       
1,949  
2,269  
1,897  
2,623  
2,573  
2,796  
2,698  
2,915  
3,223  
2,465  
3,243  
3,233  
3,534  
Sweden 
           1,813  
         
         
         
             
        
        
        
         
         
           
         
    
     
12,551  
10,925  
10,889  
13,080  
12,564  
13,095  
12,381  
13,429  
10,114  
9,588  
14,659  
14,266  
14,798  
United Kingdom 
         11,873  
      
       
       
       
       
  
   
Total 
102,351  
109,987  
111,169  
108,996  
119,074  
118,289  
127,512  
70,132 
73,915 
74,479 
81,993 
91,060 
87,497 
93,719 

## Notes:

1. Miscellaneous items of revenue and carry forwards of surpluses and deficits from previous years account for the differences between total budget expenditure given in Table 1 and the own resources figures in Table 2. 

2. With effect from 2009 the agricultural and sugar levies column contains just sugar levies.  From 2009 onwards agricultural levies are incorporated in custom duties figures. 3. The figures for agricultural and sugar levies and customs duties are after the deduction of 25% collection costs. 4. The figures for VAT contributions are after taking account of the UK abatement. 5. Because of rounding the column totals do not necessarily equal the sum of the individual items. 

Source: Figures for 2010 are taken from the European Commission's report: EU Budget 2010 Financial Report, those for 2006 to 2009 have been taken from earlier editions of this report. Figures for 2011 are taken from Amending Budget 6/2011. Figures for 2012 taken from 2012 Adopted Budget. 


 
Agricultural and Sugar Levies 
Custom Duties 
VAT Contributions 
 
2006 2007 2008 2009 2010 2011 2012 2006 
2007 
2008 
2009 
2010 
2011 
2012 
2006 
2007 
2008 
2009 
2010 
2011 
2012 
               
                 
               
                 
                     
                
                
          
           
          
           
           
      
       
         
             
         
         
        
         
              
Belgium 
16  
8  
49  
5  
5  
6  
6  
1,021  
1,145  
1,399  
1,262  
1,272  
1,308  
1,465  
479  
480  
612  
535  
521  
578  
579  
                
               
               
                 
                     
                
                
               
               
               
               
               
          
           
           
              
          
          
          
           
               
Bulgaria 
-    
10  
19  
0  
0  
0  
0  
-    
32  
50  
47  
36  
39  
46  
-    
46  
64  
68  
52  
60  
61  
                 
                 
               
                 
                     
                
                
              
              
             
              
              
        
          
         
             
         
         
        
         
              
Czech Republic 
5  
8  
10  
3  
3  
3  
3  
96  
114  
155  
146  
160  
166  
187  
173  
195  
274  
236  
212  
234  
237  
               
               
               
                 
                     
                
                
             
              
             
              
              
        
          
         
             
         
         
        
         
              
Denmark 
25  
22  
39  
3  
3  
3  
3  
196  
204  
234  
249  
260  
260  
285  
321  
339  
427  
399  
302  
348  
350  
              
              
              
               
                   
              
              
          
           
          
           
           
      
       
      
          
      
      
     
       
           
Germany 
143  
103  
257  
24  
23  
23  
22  
1,853  
2,036  
2,397  
2,598  
2,604  
2,888  
3,352  
2,507  
2,689  
2,973  
1,795  
1,575  
1,624  
1,613  
                 
               
                 
                
                    
              
              
              
               
               
               
               
          
           
          
              
          
          
          
           
               
Estonia 
0  
12  
8  
-    
-    
-    
-    
13  
17  
19  
21  
15  
17  
19  
21  
26  
31  
27  
22  
24  
25  
                 
                 
                 
                 
                     
                
                
             
              
             
              
              
        
          
         
             
         
         
        
         
              
Greece 
7  
5  
5  
1  
1  
1  
1  
132  
152  
178  
169  
183  
167  
174  
318  
577  
489  
456  
396  
346  
341  
               
               
               
                 
                     
                
                
             
              
             
              
              
      
       
      
          
      
      
     
       
           
Spain 
36  
25  
23  
5  
6  
4  
4  
781  
858  
923  
887  
987  
1,026  
1,134  
1,687  
1,693  
2,057  
2,039  
1,078  
1,792  
1,782  
               
               
              
               
                   
              
              
             
              
             
           
           
      
       
      
          
      
      
     
       
           
France 
92  
64  
290  
32  
35  
27  
26  
783  
847  
957  
1,092  
1,172  
1,258  
1,429  
2,950  
3,038  
3,749  
3,531  
2,811  
3,265  
3,264  
                 
                 
                 
                
                    
              
              
             
              
             
              
              
        
          
         
             
         
         
        
         
              
Ireland 
1  
0  
1  
-    
-    
-    
-    
137  
149  
159  
157  
159  
153  
166  
249  
271  
319  
274  
214  
211  
213  
              
               
               
                 
                     
                
                
             
           
          
           
           
      
       
      
          
      
      
     
       
           
Italy 
102  
99  
95  
5  
5  
4  
4  
970  
1,055  
1,216  
1,335  
1,425  
1,643  
1,832  
1,831  
2,185  
3,427  
2,191  
1,865  
2,122  
2,126  
                 
                 
                 
                 
                     
              
              
              
               
               
               
               
          
           
          
              
          
          
          
           
               
Cyprus 
2  
8  
7  
3  
2  
-    
-    
20  
24  
29  
28  
21  
23  
25  
23  
24  
32  
33  
28  
31  
31  
                 
                 
                 
                 
                     
              
              
              
               
               
               
               
          
           
          
              
          
          
          
           
               
Latvia 
1  
2  
2  
1  
1  
-    
-    
14  
19  
21  
16  
14  
16  
18  
25  
34  
43  
32  
20  
24  
24  
                 
                 
                 
                 
                     
                
                
              
               
               
               
               
          
           
          
              
          
          
          
           
               
Lithuania 
2  
2  
7  
2  
2  
1  
1  
24  
29  
41  
34  
32  
34  
38  
35  
46  
63  
54  
36  
43  
44  
                 
                 
                 
                 
                     
              
              
              
               
               
               
               
          
           
          
              
          
          
          
           
               
Luxembourg 
0  
0  
1  
0  
0  
-    
-    
13  
13  
11  
10  
11  
12  
14  
38  
51  
58  
56  
43  
54  
55  
                 
                 
                 
                 
                     
                
                
              
               
               
               
               
          
           
         
             
         
         
        
         
              
Hungary 
4  
3  
8  
1  
1  
2  
2  
67  
73  
83  
82  
79  
85  
99  
121  
146  
193  
151  
132  
151  
159  
                 
                 
                 
                 
                     
              
              
                
                 
                 
                 
                 
            
           
            
                
          
          
            
           
               
Malta 
1  
1  
1  
0  
0  
-    
-    
7  
7  
9  
8  
8  
9  
10  
8  
9  
11  
11  
9  
10  
11  

 

              
              
              
                 
                     
                
                
             
           
          
           
           
      
       
         
             
         
         
Netherlands 
166  
173  
215  
6  
6  
6  
6  
955  
1,109  
1,401  
1,526  
1,494  
1,544  
1,761  
675  
704  
789  
318  
221  
284  
283  
                 
                 

               
                 
                     
                
                
             
              
             
              
              

        
          
         
             
         
         
        
         
              
Austria 
5  
0  
13  
2  
3  
3  
3  
128  
137  
147  
137  
140  
139  
151  
311  
309  
338  
266  
266  
278  
277  
               
               
               
                 
                     
              
              
             
              
             
              
              
        
          
         
             
         
         
        
         
              
Poland 
32  
26  
98  
2  
2  
11  
11  
153  
205  
261  
264  
270  
289  
340  
417  
496  
687  
566  
588  
637  
643  
               
               
               
                 
                     
                
                
              
               
               
              
              
        
          
         
             
         
         
        
         
              
Portugal 
15  
14  
12  
0  
0  
0  
0  
65  
79  
95  
105  
115  
112  
125  
239  
262  
311  
303  
303  
285  
270  
                
               
               
                 
                     
                
                
               
               
             
              
               
          
          
           
             
         
         
        
         
              
Romania 
-    
20  
33  
1  
1  
1  
1  
-    
89  
126  
110  
86  
89  
101  
-    
170  
220  
219  
150  
178  
186  
                 
                 
                 
                
                    
              
              
              
               
               
               
               
          
           
          
              
          
          
          
           
               
Slovenia 
0  
0  
1  
-    
-    
-    
-    
24  
56  
71  
61  
57  
58  
64  
47  
54  
73  
72  
57  
63  
62  
                 
                 
                 
                 
                     
                
                
              
               
               
               
               
          
          
          
              
          

         
          
           
               

Slovakia 
2  
3  
5  
1  
2  
1  
1  
36  
59  
84  
73  
90  
92  
102  
63  
86  
97  
110  
73  
88  
86  
                 

                 
                 
                 

|                         |                    |                    |                  |                   |
|-------------------------|--------------------|--------------------|------------------|-------------------|

             
              
              

        

          

|             |                 |             |             |            |
|-------------|-----------------|-------------|-------------|------------|

         
              

Finland 
5  
6  
4  
1  
1  
1  
1  
84  
96  
128  
102  
108  
123  
138  
244  
269  
331  
331  
264  
294  
301  
               
               
               
                 
                     
                
                
             
              
             
              
              
        
          
         
             
         
         
        
         
              
Sweden 
12  
15  
24  
2  
2  
2  
2  
260  
285  
337  
327  
370  
396  
440  
331  
361  
397  
176  
159  
174  
174  
              
              
              
                 
                   
                
                
          
           
          
           
           
      
       
United Kingdom 
307  
308  
353  
9  
10  
8  
8  
1,431  
1,510  
1,635  
1,978  
2,145  
2,409  
2,500  -1,392  -1,217  -2,633  -3,145  
-801  
-941  
-1,085  
| Total                                                                                                |
|------------------------------------------------------------------------------------------------------|
| 103 9,261 10,400 12,165 12,823 13,314 14,355 16,014 11,719 13,342 15,433 11,106 10,595 12,257 12,111 |

## Eu Budget Own Resources (£ Million) - Continued

 
Fourth Resource Contributions 
TOTALS 
 
2006 
2007 
2008 
2009 
2010 
2011 
2012 
2006 
2007 
2008 
2009 
2010 
2011 
2012 
Belgium 
1,317 
1,359 
1,623 
2,166 
2,303 
2,235 
2,321 
2,833 
2,991 
3,683 
3,968 
4,102 
4,126 
4,371 
Bulgaria 
0 
112 
156 
217 
214 
224 
237 
0 
199 
289 
331 
302 
323 
344 
Czech Republic 
431 
482 
671 
774 
909 
841 
909 
706 
798 
1,110 
1,159 
1,284 
1,243 
1,336 
Denmark 
954 
954 
1,130 
1,439 
1,476 
1,485 
1,530 
1,495 
1,518 
1,830 
2,089 
2,041 
2,096 
2,168 
Germany 
9,473 
10,027 
12,040 
15,387 
16,182 
15,780 
16,262 
13,976 
14,855 
17,666 
19,805 
20,385 
20,315 
21,249 
Estonia 
55 
66 
71 
84 
86 
89 
93 
89 
121 
128 
133 
122 
130 
137 
Greece 
793 
1,332 
1,178 
1,420 
1,400 
1,315 
1,327 
1,250 
2,066 
1,851 
2,046 
1,981 
1,829 
1,843 
Spain 
4,177 
4,156 
4,922 
6,486 
6,586 
6,369 
6,532 
6,681 
6,731 
7,925 
9,416 
8,657 
9,191 
9,452 
France 
7,517 
7,674 
9,338 
12,256 
12,773 
12,283 
12,723 
11,341 
11,624 
14,334 
16,912 
16,790 
16,834 
17,442 
Ireland 
623 
665 
775 
852 
822 
765 
775 
1,010 
1,085 
1,254 
1,284 
1,196 
1,129 
1,154 
Italy 
6,304 
6,256 
7,305 
9,349 
9,852 
9,518 
9,773 
9,208 
9,596 
12,043 
12,881 
13,147 
13,287 
13,735 
Cyprus 
59 
60 
76 
106 
108 
108 
112 
105 
116 
143 
170 
158 
162 
168 
Latvia 
65 
81 
105 
133 
116 
113 
118 
106 
136 
171 
182 
150 
152 
160 
Lithuania 
99 
108 
151 
182 
161 
175 
188 
159 
185 
262 
272 
231 
253 
271 
Luxembourg 
97 
138 
137 
175 
170 
191 
202 
148 
202 
206 
240 
224 
257 
271 
Hungary 
342 
374 
471 
530 
607 
591 
660 
533 
595 
753 
764 
819 
828 
920 
Malta 
19 
22 
27 
35 
35 
37 
38 
34 
39 
48 
54 
53 
56 
59 
Netherlands 
2,384 
2,327 
2,897 
2,998 
3,093 
3,121 
3,262 
4,180 
4,313 
5,303 
4,848 
4,813 
4,956 
5,312 
Austria 
1,062 
1,071 
1,247 
1,684 
1,844 
1,768 
1,830 
1,506 
1,518 
1,745 
2,089 
2,253 
2,188 
2,260 
Poland 
1,066 
1,194 
1,716 
1,827 
2,276 
2,229 
2,399 
1,668 
1,922 
2,761 
2,660 
3,136 
3,167 
3,392 
Portugal 
620 
643 
748 
970 
1,166 
994 
982 
940 
999 
1,166 
1,378 
1,585 
1,391 
1,377 
Romania 
0 
466 
589 
811 
744 
754 
848 
0 
745 
968 
1,141 
980 
1,023 
1,136 
Slovenia 
119 
136 
180 
230 
217 
219 
227 
190 
246 
325 
364 
331 
339 
353 
Slovakia 
174 
207 
287 
416 
390 
415 
442 
274 
355 
473 
601 
555 
596 
631 
Finland 
730 
744 
896 
1,083 
1,087 
1,166 
1,219 
1,063 
1,115 
1,360 
1,517 
1,459 
1,584 
1,659 
Sweden 
1,236 
1,334 
1,804 
1,689 
2,249 
2,233 
2,336 
1,839 
1,995 
2,563 
2,194 
2,781 
2,805 
2,952 
United Kingdom 
8,094 
8,588 
8,688 
9,694 
11,215 
10,902 
10,938 
8,440 
9,188 
8,043 
8,535 
12,570 
12,378 
12,361 
Total 
47,810 
50,575 
59,227 
72,993 
78,082 
75,919 
78,283 
69,774 
75,256 
88,404 
97,033 
102,104 
102,638 
106,511 
  

Source: Sterling figures are derived from the corresponding euro amounts in Table C.3 converted at the appropriate exchange rate (see glossary). 

 
2006 
2007 
2008 
2009 
2010 
2011 
2012 
2006 
2007 
2008 
2009 
2010 
2011 
2012 
GROSS CONTRIBUTIONS 


Sugar levies 
451 
448 
439 
225 
10 
9 
11 
308 
307 
349 
200 
8 
8 
9 
Customs Duties 
2,102 
2,204 
2,031 
2,024 
3,148 
2,554 
2,737 
1,433 
1,508 
1,615 
1,802 
2,146 
2,216 
2,286 
VAT Own Resources  
3,174 
3,352 
2,835 
1,947 
3,187 
2,505 
2,502 
2,164 
2,293 
2,254 
1,733 
2,172 
2,174 
2,090 
Fourth Resource payments 
12,258 
11,684 
10,845 
11,986 
15,679 
12,615 
12,734 
8,357 
7,994 
8,624 
10,670 
10,689 
10,922 
10,637 
VAT & Fourth Resource adjustments 
242 
517 
-238 
-311 
266 
14 
- 
165 
354 
-189 
-277 
181 
36 
- 
United Kingdom Abatement 
-5,236 
-5,149 
-6,114 
-6,057 
-4,470 
-3,623 
3,797 
-3,569 
-3,523 
-4,862 
-5,392 
-3,047 
-3,143 
-3,172 
Total Contributions 
12,993 
13,056    9,798 
9,814 
14,169 
14,076 
14186 
8,857 
8,933 
7,791 
8,737 
12,150 
12,214 
11,849 


PUBLIC SECTOR RECEIPTS  


FEAGA 
4,323 
4,079 
3,099 
3,269 
3,393 
3,073 
5,112 
2,947 
2,791 
2,465 
2,910 
2,910 
2,667 
4,270 
EAFRD 
75 
33 
523 
242 
512 
483 
382 
51 
23 
416 
215 
439 
419 
319 
European Regional Development Fund 
867 
1,033 
1,221 
717 
884 
696 
60 
591 
707 
971 
639 
758 
604 
50 
European Social Fund 
1,953 
1,163 
765 
684 
750 
448 
370 
1,331 
795 
608 
609 
643 
389 
309 
Other Receipts 
40 
24 
47 
31 
30 
39 
7 
27 
16 
37 
28 
26 
34 
6 
Total Receipts 
7,258 
6,331 
5,655 
4,943 
5,569 
4,739 
5,931 
4,948 
4,332 
4,497 
4,401 
4,775 
4,112 
4,954 
Net Contributions 
5,735 
6,725 
4,143 
4,871 
8,601 
9,337 
10,115 
3,909 
4,601 
3,294 
4,336 
7,375 
8,102 
6,895 


Notes: 

1. For all years, the amounts for the UK's gross contribution in this table reflect payments made during the calendar year, not payments to particular EU Budgets. They differ from the figures for gross contributions in Table 2 
in that these figures, drawn from European Commission documents, relate to payments to particular EU Budgets. 2. Prior to 2010, Sugar Levies row also includes figures for duties on agricultural products. 3. Euro figures in this table have been converted from sterling using the appropriate exchange rate (see glossary). 4. The figures for 2012 are forecasts, those for earlier years are outturn. 

5. Because of rounding, the column totals do not necessarily equal the sum of the individual items. 

Source: HM Treasury 

## Report On The Use Of Eu Funds In The Uk D Background

D.1 As part of ongoing work to improve the accountability for, and transparency of, EU funds, this annex is produced as an interim report that consolidates data on the use of EU funds in the UK. 

D.2 HM Treasury has previously produced a Consolidated Statement for each of the financial years 2006-07, 2007-08, and 2008-09, which the Comptroller and Auditor General was invited to audit. The preparation, audit and publication of the Statement was designed to strengthen Parliamentary scrutiny of the UK's management of those funds and assist in the detection of any weaknesses in control systems, which can then be tackled more quickly and effectively. 

D.3 Following review, HM Treasury is seeking to further strengthen Parliamentary scrutiny of the financial relationship between the EU and the UK Government by developing a new and improved framework for accounting for the use of EU Funds, which will be launched for the financial year 
2013-14. The new framework will draw on well-established data collection and assurance systems and processes to raise the quality of the financial information. It will also utilise established Whole of Government Accounts processes to develop ways of improving the consistency and reliability for reporting on the relationship between the UK Government and the EU. 

D.4 During the development phase, the Government is committed to maintaining the greatest possible transparency on the use of EU funds at a consolidated level by publishing interim reports such as this. 

## Respective Responsibilities Of The Uk Parliament And Devolved Administrations In Managing Eu Funds

D.5 In accordance with the devolution settlement, relations with the EU are the responsibility of the Parliament and Government of the United Kingdom, as a Member State. Responsibility for implementing EU obligations relating to devolved matters lies with the Devolved Administrations. The proper administration of EU Funds in Northern Ireland, Scotland and Wales is a matter for the relevant Devolved Administration. This report is prepared without prejudice to the devolution of responsibilities. 

## Preparation Of The Report

D.6 HM Treasury has assumed responsibility for developing the format of this report and for collating the financial data provided by Managing Authorities that it includes. 

D.7 Managing Authorities, however, remain accountable for the propriety of the reported spending, which is publicly disclosed in their annual financial statements and is subject to external audit. This report therefore brings together financial information relating to the use of EU funds by the UK but does not replace individual accountabilities. The Comptroller and Auditor General has not been invited to audit this interim report. 

D.8 By bringing together this financial information, the report supports greater scrutiny of the UK's management of EU funds and of the financial relationship between the UK and the EU. 

## Boundary Of The Report

D.9 The report shows expenditure on co-managed EU schemes in the UK and the corresponding income from the EU. The main schemes for which the EU and UK share management responsibility include the disbursement of Common Agricultural Policy Funds and the Structural Funds, where the UK pays beneficiaries on behalf of the EU. 

:  
D.10 The report excludes

- 
amounts received from the EU where UK central government is the beneficiary; 
- 
amounts in respect of commercial contracts awarded to UK central government bodies by the EU; 
- 
financial support for twinning projects1
 where EU funding is transferred to other 
Member States or to mandated bodies for their part in the project. The transactions are not reported as income and expenditure of the relevant Managing Authority; and 
2
- 
the purchase of Intervention stocks
 with UK funds which are accounted for in  
the financial statements of the Department for Environment, Food and Rural Affairs (DEFRA). 
D.11 EU funding of research and innovation, through Framework Programmes for example, is provided directly to civil investees and as such, the UK Government is not a Managing Authority and the funding is not included in the managed scheme information in this Statement. 

## Management Of Eu Funded Schemes

D.12 The Treaty establishing the Union provides the basic framework for the budget of the EU. 

The budget includes a number of separate funds, including the European Agricultural Guarantee Fund (EAGF), the European Agricultural Fund for Rural Development (EAFRD), the European Regional Development Fund (ERDF) and the European Social Fund (ESF). 

D.13 These schemes are overseen by the Commission, according to eligibility criteria that beneficiaries must meet and the financial reporting responsibility to the Commission that falls to national authorities as part of their co-management.  

## (A) Agricultural Policy Funds

D.14 The Single Payment Scheme (SPS) is the principal agricultural subsidy scheme in the EU, funded by the EAGF and EAFRD. The European Fisheries Fund operates separately from the CAP. 

D.15 Under EU Regulation 885/06, each paying agency must have an internal audit service independent of the other arms of the entity that reports directly to the agency's director. The Internal Audit Services are required to verify that the procedures adopted by the agency are adequate to ensure compliance with Union rules and that accounts are accurate, complete and timely. 

D.16 The Certifying Body for the Agricultural Funds reports on whether the annual accounts of the Paying Agencies are in all material respects true, complete and accurate and that internal control procedures have operated satisfactorily. The Certifying Body reports have confirmed that internal audit in all the UK paying agencies is operating to a high standard, although further improvement is required in respect of the administration of the SPS and compliance with European Regulations where Internal Audit have highlighted issues that risk disallowance penalties. 

## (B) Structural Funds

D.17 The Structural Funds are the financial tools set up to implement Cohesion policy in the EU, and are made up of the ERDF and the ESF.  
D.18 The Managing Authorities responsible for the control of Structural Fund expenditure ensure that all systems are subject to regular examination by internal audit. The Internal Audit results strengthen procedures during the implementation of programmes and provide assurance as to the accuracy, completeness and regularity of expenditure at closure, certified to the Commission. 

D.19 Recent internal audit work within Managing Authorities has generally reported a positive picture with most having a satisfactory level of assurance that systems operate adequately. 

Where this was not the case, action plans were agreed to address weaknesses. 

D.20 Recent internal audit work within Managing Authorities has generally reported a positive picture with most having a satisfactory level of assurance that systems operate adequately. Where this was not the case, action plans were agreed to address weaknesses. 

## Timing Of Expenditure And The Related Eu Funding

D.21 Managing Authorities are required to account for expenditure on EU-funded schemes and the related funding from the EU on an accruals basis under International Financial Reporting Standards (IFRS) as applied to the public sector context by the Government Financial reporting Manual (FReM). By contrast, the public sector receipts in table 3.E of the Statement on the 2012 EU Budget are reported on a cash basis.   
D.22 There is normally a time lag between payment to beneficiaries and settlement of claims by the EU. The UK Exchequer therefore has to bear the cost of the programme until EU funding is received. Expenditure is recognised as it is incurred, with a matching debtor from the EU. The debtor is extinguished when the EU approves the subsequent claim and the release of funds to the UK. 

D.23 The final settlement of claims by the EU may give rise to adjustments following the closure process or disallowances (see paragraphs D.35 to D.37 below). The Commission may make such adjustments several years after funds have been paid out by Managing Authorities to recipients. 

The Statement includes provision for possible future adjustments. 

## Management Of Eu Funded Schemes Expenditure On Eu Funded Schemes In 2009-10, 2010-11 And 2011-12

D.24 The Expenditure Statement shows the EU funded element of amounts paid out by UK 
Central Government bodies on projects supported wholly or partially by the EU on which the UK anticipates EU funding at the point the payment is made. 

D.25 Gross expenditure on EU supported projects is recognised in the period in which it becomes payable by UK Central Government to the recipient under the rules of the relevant scheme. The amount shown in the Expenditure Statement represents the amount paid and payable in Sterling during the period to beneficiaries. 

D.26 Net expenditure represents the amount receivable from the EU in respect of amounts paid or payable by the UK on EU supported projects, after taking account of provisions for disallowances, foreign exchange gains or losses and withdrawals from claims. 

D.27 The Statement of Assets and Liabilities shows those assets and liabilities that stem from cash flows, where e.g. the UK has paid a claim from a beneficiary and is awaiting reimbursement from the EU. The disallowances provision relates to amounts paid out by the UK for which it believes it probable that the EU will apply financial corrections and not fully reimburse the UK. 

D.28 The Statement shows gross expenditure on EU-supported schemes between 2009-10 and 
2011-12. The decrease in gross expenditure between 2009-10 and 2011-12 was mainly due to lower expenditure on schemes supported by the ERDF. After allowing for foreign exchange variations and adjustments to claims, the amount reimbursable by the EU in 2009-10 is £4.8 billion, in 2010- 11 is £4.3 billion, and in 2011-12 is £4.7 billion, the balance being met by the UK Exchequer. 

## D.29 A Breakdown Of Expenditure By Scheme Is Provided On Pages 54-55.

D.30 In recognition of likely future funding adjustments, Managing Authorities made net new provisions totalling £273 million, £84 million and £97 million in 2009-10, 2010-11 and 2011-
12 respectively, against claims for reimbursement from the EU, including substantial provisions against disallowances of payments under the CAP and ERDF. After allowing for the use of provisions following the crystallisation of adjustments, total provisions at 31 March 2012 amounted to £219 million, some £211 million lower than the corresponding figure at the end of the 2009-10 financial year. A breakdown of the movement in provisions by scheme is provided on pages 56-57. 

## Expenditure Statement

For the years ended 31 March 2010, 2011 and 2012 

|                              | 2009-10    | 2010-11    | 2011-12*                |
|------------------------------|------------|------------|-------------------------|
|                              | £000       | £000       | £000                    |
|                              |            |            |                         |
| 5,051,379                    | 4,397,505  | 4,773,977  | Gross expenditure on EU |
| supported projects           |            |            |                         |
| Provisions created in year   |            |            |                         |
| -273,302                     | -84,347    | -96,989    |                         |
| Provisions released in year  |            |            |                         |
| 46,551                       | 75,754     | 30,921     |                         |
| Realised forex gain/(loss)   |            |            |                         |
| 73,441                       | -35,739    | -23,617    |                         |
| Unrealised forex gain/(loss) |            |            |                         |
| -62,535                      | 2,779      | 51,182     |                         |
| Withdrawn from EU claim      |            |            |                         |
| -13,684                      | -49,743    | -18,063    |                         |
| 4,821,850                    | 4,306,209  | 4,717,411  |                         |
| Net expenditure reimbursable |            |            |                         |
| by the EU                    |            |            |                         |

 
*2011-12 balances include the latest available information. Some Managing Authority returns are based on un-audited annual accounts. 

 

## Statement Of Assets And Liabilities As At 31 March 2010, 2011 And 2012

|                           | 2009-10    | 2010-11    | 2011-12   |
|---------------------------|------------|------------|-----------|
| *                         |            |            |           |
|                           |            |            |           |
|                           | £000       | £000       | £000      |
|                           |            |            |           |
| Assets                    |            |            |           |
|                           |            |            |           |
|                           |            |            |           |
| Advances to beneficiaries | 272,812    | 219,642    | 25,594    |
| EU funds receivable       |            |            |           |
| 1,925,110                 | 1,931,886  | 1,763,336  |           |
| Other assets              | 3,189      | 1,798      | 254,299   |
|                           |            |            |           |
| 2,201,111                 | 2,153,326  | 2,043,229  |           |
|                           |            |            |           |
| Liabilities               |            |            |           |
|                           |            |            |           |
| EU funds paid on          |            |            |           |
| account                   |            |            |           |
| -1,520,165                | -1,938,419 | -1,860,340 |           |
| Amounts payable to        |            |            |           |
| beneficiaries             |            |            |           |
| -466,361                  | -140,863   | -183,401   |           |
| Repayable to EU           |            |            |           |
| -10,132                   | -3,525     | -2,697     |           |
| Provision for             |            |            |           |
| disallowances             |            |            |           |
| -430,393                  | -193,286   | -219,080   |           |
| Other liabilities         |            |            |           |
| -53,392                   | -24,607    | -66,734    |           |
|                           |            |            |           |
| -2,480,149                | -2,300,700 | -2,332,252 |           |
| Net liabilities           |            |            |           |
| -279,038                  | -147,374   | -289,023   |           |
|                           |            |            |           |

*2011-12 balances include the latest available information. Some Managing Authority returns are based on un-audited annual accounts. 

## Accounting Policies Basis Of Preparation

D.31 The report has been prepared by consolidating the relevant transactions and balances as recorded by the Managing Authorities in their financial statements prepared in accordance with the FReM. The report is prepared under the historical cost convention. 

## Expenditure Recognition

D.32 Gross expenditure on EU supported projects is recognised in the period in which it becomes payable by UK Central Government to the recipient under the rules of the relevant scheme. The amount shown in these accounts represents the amount paid and payable in sterling during the period to bodies outside the Central Government boundary. Net EU Expenditure represents the amount receivable from the EU (converted into sterling after disallowances and foreign exchange gains or losses) in respect of amounts paid or payable by the UK on EU supported projects. 

## Foreign Currency Translation

D.33 The Commission makes payments in Euros, with the Managing Authority recognising the receivable in Sterling in line with the requirements of International Accounting Standard (IAS) 21, The Effects of Changes in Foreign Exchange Rates. Foreign exchange gains and losses are realised where there are variations in exchange rates between the date EU income is recognised by the Managing Authority and the date payment is received from the EU. Such gains and losses are recognised in the Expenditure Statement. Unrealised gains and losses arising from the revaluation of assets and liabilities at the exchange rate current at the balance sheet date, also reported in the Expenditure Statement, are reported in the Statement of Changes in Taxpayers' 
Equity in Managing Authority accounts. Any hedging mechanisms used to mitigate the impact of foreign exchange losses are not included in this report as they do not impact on the amounts paid out on EU projects or the funding provided by the EU. 

## Disallowances Provision And Contingent Liabilities

D.34 Probable disallowances arising from financial corrections are recognised in accordance with the requirements of IAS 37, Provisions, Contingent Liabilities and Contingent Assets. A provision is recognised where there is a past event - for example an ineligible payment or a failure to comply with the regulations governing a scheme - which will probably lead to the EU 
disallowing expenditure and not reimbursing the UK. Managing Authorities are responsible for estimating the value of any provisions required. 

## Analysis Of Net Expenditure By Eu Scheme 2009-10

|                    | Agricultural    | European    | Other    | Total     |
|--------------------|-----------------|-------------|----------|-----------|
| Policy             | Social          |             |          |           |
| European Regional  |                 |             |          |           |
| Development Fund   |                 |             |          |           |
| Funding            | Fund            |             |          |           |
|                    |                 |             |          |           |
|                    | £000            | £000        | £000     | £000      |
|                    |                 |             |          |           |
|                    |                 |             |          |           |
| 3,575,764          | 475,367         | 939,016     | 61,232   | 5,051,379 |
| United Kingdom     |                 |             |          |           |
| -149,567           | -20,461         | -101,745    | -1,529   | -273,302  |
| provided for       |                 |             |          |           |
| 0                  | 11,324          | 35,227      | 0        | 46,551    |
| released           |                 |             |          |           |
| 32,023             | 9,935           | -30,798     | -254     | 10,906    |
| gains/(losses)     |                 |             |          |           |
| -2,623             | -8,773          | -2,288      | 0        | -13,684   |
| claim              |                 |             |          |           |
| 3,455,597          | 467,392         | 839,412     | 59,449   | 4,821,850 |
| reimbursable by EU |                 |             |          |           |
|                    |                 |             |          |           |
|                    | Agricultural    | European    | Other    | Total     |
|--------------------|-----------------|-------------|----------|-----------|
| Policy Funding     | Social          |             |          |           |
| European Regional  |                 |             |          |           |
| Development Fund   |                 |             |          |           |
| Fund               |                 |             |          |           |
|                    |                 |             |          |           |
|                    | £000            | £000        | £000     | £000      |
|                    |                 |             |          |           |
|                    |                 |             |          |           |
| 3,312,286          | 561,330         | 484,584     | 39,305   | 4,397,505 |
| the United Kingdom |                 |             |          |           |
| -67,419            | 0               | -16,928     | 0        | -84,347   |
| provided for       |                 |             |          |           |
| 11,585             | 0               | 64,169      | 0        | 75,754    |
| released           |                 |             |          |           |
| -22,734            | -9,559          | -2,476      | -970     | -35,739   |
| gains/(losses)     |                 |             |          |           |
| 4,857              | 2,366           | -4,430      | -14      | 2,779     |
| EU claim           |                 |             |          |           |
| 3,238,575          | 554,137         | 524,919     | 38,321   | 4,355,952 |
| reimbursable by EU |                 |             |          |           |
|                    |                 |             |          |           |
| 2011-12*           |                 |             |          |           |
|                    | Agricultural    | European    | Other    | Total     |
| Policy             | Social          |             |          |           |
| European Regional  |                 |             |          |           |
| Development Fund   |                 |             |          |           |
| Funding            | Fund            |             |          |           |
|                    |                 |             |          |           |
|                    | £000            | £000        | £000     | £000      |
|                    |                 |             |          |           |
|                    |                 |             |          |           |
| 3,695,178          | 470,955         | 574,501     | 33,343   | 4,773,977 |
| the United Kingdom |                 |             |          |           |
| -90,049            | -2,496          | -3,994      | -450     | -96,989   |
| provided for       |                 |             |          |           |
| 1,300              | 0               | 29,621      | 0        | 30,921    |
| released           |                 |             |          |           |
| -4,408             | -11,113         | -7,921      | -175     | -23,617   |
| gains/(losses)     |                 |             |          |           |
| 8,206              | 15,840          | 27,136      | 0        | 51,182    |
| EU claim           |                 |             |          |           |
| 3,610,227          | 473,186         | 619,343     | 32,718   | 4,735,474 |
| reimbursable by EU |                 |             |          |           |

 
*2011-12 balances include the latest available information. Some Managing Authority returns are based on un-audited annual accounts 

## Provisions For Future Financial Corrections (Disallowances)

D.35 Disallowances are financial corrections imposed by the Commission on Managing Authorities for failing to correctly apply EU Regulations in managing and administering EU 
schemes. In such circumstances the EU reduces the amount paid to the UK. 

D.36 The European Commission may identify erroneous payments or deficiencies in the operation of Managing Authority systems, and consequently, they can disallow expenditure. In the case of deficiencies in systems, the EU normally impose flat-rate disallowances at the rate of 2 per cent, 5 
per cent, or 10 per cent of annual expenditure, depending on the severity of the failings. The EU 
will not reimburse the UK for the expenditure incurred. The costs then fall on the Exchequer, unless the amount can be recovered from the beneficiary. The ultimate financial impact on the UK taxpayer will, however, be less than this, due to the operation of the rebate system. 

D.37 By 31 March 2012, provisions have reduced, mainly due to utilisation of the CAP 
Disallowance provision as amounts in regard to SPS Scheme years 2007, 2008 and 2009 crystallised. Further provisions on agricultural schemes relate to the England and Rural Development Programme and the Fruit and Vegetable scheme. 

2009-10 
 
Agricultural 
European 
Other 
Total 
Policy Funding 
Social 
European Regional 
Development Fund 
Fund 


£000 
£000 
£000 
£000 
£000 


As at 1 April 2009 
-246,624 
-31,115 
-86,471 
-1,989 
-366,199 
Created during the year 
-149,567 
-20,461 
-101,745 
-1,529 
-273,302 
Released in year 
0 
11,324 
35,227 
0 
46,551 
Utilised 
137,041 
6,457 
19,059 
0 
162,557 
As at 31 March 2010 
-259,150 
-33,795 
-133,930 
-3,518 
-430,393 
 
2010-11 
 
Agricultural 
European 
Other 
Total 
Policy Funding 
Social 
European Regional 
Development Fund 
Fund 


£000 
£000 
£000 
£000 
£000 


As at 1 April 2010 
-259,150 
-33,795 
-133,930 
-3,518 
-430,393 
Created during the year 
-67,419 
0 
-16,928 
0 
-84,347 
Released in year 
11,585 
0 
64,169 
0 
75,754 
Utilised 
180,009 
33,795 
31,896 
0 
245,700 
As at 31 March 2011 
-134,975 
0 
-54,793 
-3,518 
-193,286 
 
|                         | Agricultural    | European    | Other    | Total    |
|-------------------------|-----------------|-------------|----------|----------|
| Policy Funding          | Social          |             |          |          |
| European Regional       |                 |             |          |          |
| Development Fund        |                 |             |          |          |
| Fund                    |                 |             |          |          |
|                         |                 |             |          |          |
|                         | £000            | £000        | £000     | £000     |
|                         |                 |             |          |          |
|                         |                 |             |          |          |
| As at 1 April 2011      | -134,975        | 0           | -54,793  | -3,518   |
| Created during the year | -90,049         | -2,496      | -3,994   | -450     |
| Released in year        | 1,300           | 0           | 29,621   | 0        |
| Utilised                | 29,170          | 1,696       | 9,408    | 0        |
| As at 31 March 2012     | -194,554        | -800        | -19,758  | -3,968   |
|                         |                 |             |          |          |

*2011-12 balances include the latest available information. Some Managing Authority returns are based on un-audited annual accounts. 

## Research Programme Grant Receipts

D.38 The Framework Programme (currently FP7) is the EU's primary mechanism for supporting transnational collaborative research and technological development. The current programme runs from 2007-2013 with an overall budget of €50.5 billion (£43.8 billion) (excluding the Euratom programme). 

D.39 The UK Government does not manage any of the FP7 EU funding, which is awarded directly to programme participants, although as a representative of EU Comitology Committee, the Government does manage the various parts of FP7.  
D.40 FP7 activities are split into four main specific programmes: 

- 
The Cooperation Programme has the largest share of the overall budget (€32 billion 
(£28 billion));  
- 
The Ideas Programme operates through the European Research Council and is the main instrument promoting excellence, providing grants to individual researchers.  
- 
The People Programme, through the Marie Curie actions, provides grants in support of researcher mobility and training; and 
- 
The Capacities Programme, through a variety of actions, provides support to develop Europe's research capacity.  
D.41 The Commission's March 2012 update on signed grant agreement data shows that UK 
organisations overall have been awarded a maximum of €3.73 billion (£3.23 billion), which accounts for 14.7 per cent of the EU funding so far awarded. These receipts are not included in the above tables, which provide data on public sector receipts only. 

## Future Developments

D.42 The previous Consolidated Statement and this report have focused on expenditure and related income on co-managed EU Schemes. As HM Treasury develops improvements to the Statement, the objective will be to report the UK Government's net funding contribution to (or receipts from) the EU. 

D.43 There will be several challenges to overcome to ensure high quality information is consolidated into a financial statement that will meet the reporting objectives of improving the financial management of the use of EU Funds in the UK and improving the transparency of the financial relationship between the EU and UK Government.  
D.44 HM Treasury will work with the NAO and the Managing Authorities to improve the quality of data collection, the consistency of accounting policies applied by Managing Authorities and the scope of reporting on the UK contributions to the EU and other EU transactions. 

 
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