HC Deb 24 November 1994 vol 250 cc352-4W
Sir Teddy Taylor

To ask the Chancellor of the Exchequer, pursuant to his answer of 21 November,Official Report, column 15, what account he took of the additional resources coming from new EC members.

Mr. Heathcoat-Amory

The figures for the effect of the Edinburgh financing settlement on the United Kingdom net contribution—£75 million in 1995–96, rising to £250 million in the 1999—are based on a Community of Twelve.

The financial consequences of enlargement are a separate matter. It will not be possible to determine them finally until all the prospective member states have completed their referendums and parliamentary processes, and we know exactly which ones will be joining, and until the consequential revision of the financial perspective is agreed.

However, on the assumption that all four prospective new members join the Community, we expect that enlargement will result in a small reduction in the United Kingdom's net contribution compared with what it would otherwise have been in the absence of enlargement.

The own resources ceiling after enlargement will remain at the levels now proposed: that is, 1.21 per cent. of Community GNP in 1995, 1.22 per cent. in 1996, 1.24 per cent. in 1997, 1.26 per cent. in 1998 and 1.27 per cent. in 1999.

Mrs. Ewing

To ask the Chancellor of the Exchequer what is the net cost to each member state of the European Union of the increase in the size of the Community budget for each of the years 1995–96 to 1999–2000.

Mr. Heathcoat-Amory

I regret that the information is not available in the detail requested. The following analysis gives some broad indications of likely developments.


All member states will contribute more to the higher budget. The extra contributions will be broadly in line with their relative GNP, apart from the effect of the United Kingdom abatement. Thus Germany will contribute about 30 per cent. of the extra cost, France over 20 per cent., and Italy between 15 and 20 per cent. The United Kingdom will contribute about 16 per cent. before abatement. Other, smaller member states will pay a smaller share.

As now, the United Kingdom abatement will reduce our net contribution by 66 per cent. of the difference between our contribution to, and receipts from, the allocated budget—that is, excluding external expenditure, on which we get no rebate.

Change in the own resources structure

By 1999, member states' gross contributions to the Community will more closely reflect their actual GNP shares rather than their shares of a notional harmonised VAT base. GNP is widely acknowledged to be a fairer measure of a member state's ability to contribute than VAT.

The impact of this change in the structure of the revenue side of the budget, taken in isolation, is expected to benefit mainly Spain, Germany and France, with Portugal, Greece, Ireland and Luxembourg being small gainers. Italy will pay heavily—reflecting the benefit it has received in the past from having a VAT base which is a smaller proportion of its GNP base than any other member state; Denmark, Belgium and the Netherlands will also pay more. There will be no change in the United Kingdom's net contribution, taking one year with another, because any changes to our gross contributions which arise will be wholly offset by the abatement in the following year.


It is not possible to estimate with any certainty how each member state would benefit from the additional resources available. The following gives some pointers:

  1. (a) Agriculture. The Edinburgh European Council decisions make no difference to the distribution of CAP receipts between member states, although the recent reform of the CAP will change the balance to some extent; and the Community now has a new GATT commitment to reduce the value of export subsidies and the volume of subsidised exports.
  2. (b) Cohesion Fund. The Cohesion Fund (worth 2.6 billion ecu in 1999–1992 prices) will benefit Spain, Greece, Portugal and the Irish Republic. The allocations decided by the European Council are: Spain 52–58 per cent., Greece 16–20 per cent., Portugal 16–20 per cent., Ireland 7–10 per cent. This is likely to lead to receipts of about 1.4 billion ecu for Spain, 0.5 billion ecu for Portugal, 0.5 billion ecu for Greece and 0.2 billion ecu for Ireland.
  3. (c) Structural Funds. The largest relative beneficiaries will be those member states composed entirely or mainly of "Objective 1" regions (regions where development is lagging behind): Spain, Greece, Portugal and the Irish Republic. Increased grants are also available to the United Kingdom: Northern Ireland has long been, and Merseyside and the Highlands and Islands have 354 now become objective 1 regions, though all were, strictly speaking, too rich in terms of per capita GNP to qualify.
  4. (d) Other internal policies. These include research and development, trans-European networks and a range of other policies. Member states' receipts will depend upon specific decisions taken in specialist Councils and in the annual Budget Councils.
  5. (e) External actions. These will, by definition, not result in receipts for member states, though much of the business which results from this expenditure will benefit firms in the Community, including those from the United Kingdom.
  6. (f) Administration. The principal beneficiaries are likely to be Belgium and Luxembourg where most of the Community's administrative activities are concentrated. France will also benefit from the decision that the European Parliament should remain in Strasbourg. (The United Kingdom acts as host to the JET research programme at Culham in Oxfordshire and has been chosen to provide the site (Canary Wharf, London) of the new Medicines Evaluation Agency.)

Overall assessment

In recent years, the United Kingdom has usually been the second largest net contributor to the EC Budget, both in total per capita, after Germany.

By 1999, we expect that France will have passed us on both counts. The Netherlands is also expected to be a larger per capita net contributor. Italy's net contributions to the Community will increase significantly, though she will still pay less than us. Germany will remain by far the largest net contributor, and will pay much more than us towards the Edinburgh deal.

Of the new member states, Austria and Sweden are expected to be larger net contributors than us per head of population, as is Norway, if it joins. Finland will be broadly in budgetary balance.

Mrs. Ewing

To ask the Chancellor of the Exchequer what was the net cost incurred by each of the EC member states as a result of the 1988 financing review in each of the subsequent financial years.

Mr. Heatcoat-Amory

This information is not readily available and estimates could be obtained only at disproportionate cost.