The EU budget as a basis|foundation| of common policies

A wide range of activities are funded in the Member States, for example in agriculture, fisheries, infrastructure (construction of roads, bridges and railways), education and training, culture, employment and social policy, environmental policy, health and consumer protection, research, to mention a few. Initiatives are also underway to offer EU citizens an area of freedom, security and justice without internal borders. Part of the EU budget is also spent on funding economic development around the world and on humanitarian aid to help non-EU countries afflicted by natural disasters and other crisis situations.

The exercise of budgetary powers consists firstly in determining the nature of the expenditure, then establishing the annual amount of such expenditure and the revenue necessary to cover it, and finally exercising control over the implementation of the budget. The budgetary procedure itself involves the preparation and adoption of the budget.

Before 1970, budgetary powers were vested in the Council alone; Parliament had only a consultative role. After having adopted the draft budget, the Council forwarded it to Parliament for its opinion. If Parliament's opinion contained proposed modifications, the Council gave the budget a second reading and adopted the final version.

b. The Treaties of 22 April 1970 and 22 July 1975 increased Parliament’s budgetary powers:

§ the 1970 Treaty, which followed on from the introduction of the Community’s own resources, gave Parliament the last word on what is known as ‘non-compulsory expenditure’;

§ the 1975 Treaty gave it the right to reject the budget as a whole.

The budgetary procedure contains 5 stages:

1. The Commission draws up the preliminary draft budget, taking into account the guidelines laid down by Parliament and the Council in the course of a trialogue on the priorities for the budget and an ad hoc conciliation procedure on compulsory expenditure. It then forwards the preliminary draft to the Council by 1 September at the latest.

2. At first reading, and after conciliation with a Parliament delegation, the Council, acting by a qualified majority, adopts the draft budget and forwards it to Parliament by 5 October at the latest.

3. Parliament has 45 days in which to state its position. Within that period, it may adopt the draft or decline to state a position, in both of which cases the budget is deemed finally adopted. It may, on the other hand, call for changes.

4. The Council has 15 days in which to conduct its second reading.
Within that period, it may accept all of Parliament's amendments and proposed modifications, in which case the budget will be deemed adopted. It may, on the other hand, not accept them.

5. Parliament has 15 days in which to conduct the second and last reading.

EU budget revenue and expenditure

EU spending is limited by the Treaties. The Union budget is not allowed to be in deficit, which means that revenue has to cover the whole cost of all the different activities. This revenue, or income, comes from three main sources:

· customs duties,

· a share of the harmonised value added tax (VAT) base of each Member State,

· and a further contribution from the Member States based on the size of their gross national income (GNI).

The amount of money which can be made available to the Union is limited by Treaty of the Member States and parliaments. This ceiling is currently set at 1.23% of the Union's gross national income for payments made from the EU budget. As a comparison, about 45% of the Union's gross national income goes to national, regional and local public expenditure in the Member States.

EU spending is further limited by a multi-annual Treaty between Members of the European Parliament, the Council of Ministers, and the European Commission. This Treaty contains a "multi-annual financial framework". The recent ones cover spending plans for the seven-year periods from 2000 to 2006 and 2007 to 2013.