The figures emerge as the referendum debate on British membership of the EU starts to gather pace. Changes to the terms of UK membership being negotiated by prime minister David Cameron could include the restriction of in-work benefits to EU migrants. It is widely expected that the vote will be held in June.
In a briefing on the EU budget, drawn up for the Public Accounts Committee, the National Audit Office also observed that the European Court of Auditors have given a true and fair opinion on the EU accounts every year since 2007.
However, the accounts remain affected by material errors. The EU’s auditors estimated an error rate of 4.4% in EU spending, above its 2% materiality threshold. 2014 was the 21st consecutive year this threshold has been breached.
The error level prompted the ECA to reach an adverse opinion on the regularity and legality of EU payments, however, revenue in 2014 was ruled to be legal and regular.
Payments errors include ineligible items included in cost claims, serious procurement errors in public procurement, and incorrect declarations of area by farmers. The auditors do not make an assessment of fraud.
The EU’s budget is determined annually within a seven-year funding envelope called the Multiannual Financial Framework (MFF). The current MFF, which covers the period 2014-2020, makes provision for spending totally €904bn, down from the €942.8bn in the last MFF period. Annual expenditure is constrained by limits known as ‘ceilings’.
The EU derives its revenue from contributions from its 28 member states, based on their gross national income, customs duties and sugar levies, and VAT receipts.
The UK receives a rebate on its contribution through a mechanism designed to compensate those members deemed to contribute excessively. The cost of this rebate is borne by other member states.
According to European Commission data, in 2014 the UK was one of 10 member states to make a net contribution to the EU budget. The others were:
Germany; France; Italy; the Netherlands; Sweden; Austria; Denmark; Finland; and Ireland.
The UK’s contribution was the third largest among these net contributors.
