4.1 The EU Budget: Short history

Under the Treaty of Rome (1957), the budget, the means of financing the Community, comprised contributions from member states only.

This system was replaced by a system of "own resources", legitimised under the 1970 Decision. The term "own resources" was adopted to underline the fact that, under the terms of this Decision, certain revenues accrued to the Community as of right. These revenues gave the Community financial independence from the member states. The 1970 Decision, implemented in 1980, established three "own resources" of revenue:

• Agricultural levies.
• Customs duties.
• A share of national revenue from VAT.

There was a resolution of the "British Budget Problem", arising from the UK claim that it was making a disproportionate contribution to the EEC budget, at Fontainebleau in 1984. It resulted in an annual "abatement" or "rebate" or refund.

The 1980s was a time of budgetary crises. As a consequence a new budget model of agreeing budgets ("financial perspectives") for 5-years and then 7-years, rather than annually, was developed. These budget periods, medium-term frameworks, have subsequently been as follows:

• 1988-92 (inclusive): following the "Delors I" programme entitled "Making a success of the Single Market".
• 1993-99 (inclusive): following the "Delors II" programme entitled "From the Single Act to Maastricht and beyond".
• 2000-06 (inclusive): following the Agenda 2000 study which was concerned with "strengthening and widening (enlarging) the union in the early years of the 21^st century".
• 2007-2013 (inclusive).

The 1988 Decision on own resources amended the system of "own resources", setting out 4 types of revenue:

• Agricultural levies on trade with non-member countries, together with duties on sugar and isoglucose produced in member states.
• Common External Tariff (CET) duties and duties on products covered by the ECSC.
• A portion (initially 1.4%) of each member state's VAT as applied to an assessment base "determined in a uniform manner according to Community rules".
• A, new, contribution from each member state related to its GNP at a rate determined annually in the light of the overall budgetary situation.

The Decision of 1988 also provided, for the first time, for a limit on own resources expressed as a % of the EU's total GNP (1.2% by end 1988-92). The ceiling was raised to 1.27% of GNP for the period 1993-99. This ceiling was re-expressed as 1.24% of GNI (following accounting changes) in 2001.

RL, February 2007