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This paper has been updated following second reading of the European Union (Finance) Bill 2015-16. Second reading took place on 11 June 2015 where the Bill was unopposed. The remaining stages in the Commons will take place on 23 June 2015.

The Bill would, if enacted, allow the United Kingdom to approve the European Union’s (EU) latest arrangements for financing the EU budget. These arrangements are laid out in the Own Resources Decision (ORD) of the EU.

The Bill would allow the UK to make necessary payments to the EU and would ensure that the ORD is approved in an Act of Parliament, as required by the European Union Act 2011.

The new ORD, which the Bill seeks to approve, was agreed by Member States’ Heads of Government at a European Council meeting of 7/8 February 2013. The new ORD makes minor changes to its predecessor and leaves the rebate the UK receives on its contributions to the EU unchanged.

The revenues raised from Member States by the ORD finance the EU’s expenditure. When the European Council agreed the new ORD in February 2013 it also agreed EU expenditure limits for seven years from 2014 to 2020. For the first time these expenditure limits were lower, in real terms, than over the previous seven year period 2007 – 2013.

The agreement on EU expenditure is laid out in the so-called Multiannual Financial Framework Regulation (MFF). The MFF is used as the basis for producing annual budgets which determine the EU’s final expenditure.

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