Since the 1960s, European Union member countries have pooled resources together to finance projects that make a difference to the lives of European citizens. Today, this includes creating growth and jobs, environmental protection, reducing economic gaps between EU regions and combatting terrorism and organised crime.
The EU budget also permits a significant level of investment in research and innovation so that Europe can compete with other global players; more so than if each member country went it alone.
For Ireland, the EU budget has been instrumental in transforming our economy from an antiquated, agriculture dependent economy to one largely driven by hi-tech industry and global exports.
It has also funded a number of important infrastructure projects such as major inter-urban roads, including the M4 between Dublin and Galway and the M9 between Kilcullen and Waterford as well as the Dublin Port Tunnel, the completion of the M50 and the DART.
How the EU budget works in Ireland
The EU budget is complementary to Ireland’s national budget and comes into play when it is more effective to spend money at the EU level than at the local, regional or national level. In 2019, Ireland contributed €2.3 billion of the total EU revenue of €165 billion or about 0.7% of the Irish economy.
In the same year, EU investment back into Ireland included:
- €1.5 billion on sustainable growth: natural resources
- €430 million on smart and inclusive growth, and
- €24 million on security and citizenship
In addition to the investment in Ireland, the EU budget provides support in other areas, including:
- Economic development of less wealthy EU countries
- Assistance in situations of natural disasters
- Development aid and assistance to EU neighbours and third countries
What are the main EU investment areas for Ireland?
The EU budget provides financial support to farmers, students, scientists, NGOs, SMEs, towns, regions and many other beneficiaries in Ireland.
Most of Ireland’s EU funding is for agriculture, rural development and nature conservation.
The EU funded a €50 million project to redevelop the Fishery Harbour Centre in Killybegs, cementing Killybegs’ position as the premier port of Ireland’s six designated Fishery Harbour Centres.
The second largest share of Ireland’s EU funding goes to growth and jobs, including research and innovation. For example, an EU funded project hosted at the Waterford Institute of Technology (WIT) has discovered new ways to improve vision using key nutrients found in fruit and vegetables, which is good news for patients in the early stages of age-related macular degeneration.
Regional and social policy is the third largest category of EU funding for Ireland.
Other recent projects supported by EU funding include:
- the transformation of the historic Apple Market in Waterford City into a contemporary urban quarter which received €3,612,394 from the EU’s European Regional Development Fund;
- the Mary Elmes bridge across the River Lee, in Cork, which received €1,500,000 in European Regional Development Fund funding;
- CÚRAM, the Science Foundation Ireland Centre for Research in Medical Devices based at the National University of Ireland in Galway, was established with help from EU funding to the tune of €14,411,619;
- the WISER Life project in Ballymun (Dublin) which received €1,802,407.00 in EU LIFE funding;
- for more, see our EU stories page.
EU budget 2021-2027
Due to the COVID-19 pandemic, the European Union has strengthened its current long-term 2021-2027 budget. Together with a temporary NextGenerationEU recovery instrument, €1.8 trillion was made available to mitigate the damage caused by the pandemic and help Europe emerge from the crisis stronger and more resilient.
Ireland is expected to receive an estimated €1 billion in Recovery and Resilience Facility grants. There will also be €89 million available in 2021 under REACT-EU and €77 million from the Just Transition Fund.
Ireland will also receive almost €1.2 billion in Cohesion Policy allocations from the latest long-term EU budget (2021-2027), as well as just over €8.3 billion in direct payments from the European Agricultural Guarantee Fund (EAGF). There will also be €2.25 billion available through the European Agricultural Fund for Rural Development.
How does the EU-wide budget work?
The EU budget is mainly dedicated to investment, so a long-term spending plan, known as the Multiannual Financial Framework (MFF) is adopted for a period of five to seven years. The MFF sets the maximum annual amounts (ceilings) that the EU will spend on each different category (headings).
Everybody benefits from the EU budget: from the added value of being part of the single market, and also addressing challenges together, such as fighting climate change, strengthening digital sovereignty and responding to the COVID-19 crisis.
The annual EU budget is decided democratically, with the participation of the European Commission, the EU countries (represented in the Council) and the European Parliament:
- The European Commission proposes a draft annual budget
- National governments (Council of the EU) and the European Parliament (representing EU citizens) can amend it
- National governments (Council of the EU) and the European Parliament (representing EU citizens) must approve it.
Where does the money come from?
The EU budget is financed from the following sources:
- A proportion of each country’s gross national income (GNI) in line with how wealthy they are
- Customs duties on imports from outside the EU
- An amount based on the value added tax collected by each EU country
- From 2021, a contribution based on the amount of non-recycled plastic packaging waste in each country
- Other revenue, including contributions from non-EU countries to certain programmes, interest on late payments and fines, as well as surplus from the previous year
- To finance NextGenerationEU, the European Commission will raise funds on the capital markets which will be repaid over a long-time horizon until 2058
Who decides how the money is spent?
Over the 2021-2027 period:
- National authorities manage around three quarters of the budget expenditure jointly with the European Commission (shared management)
- The European Commission and its agencies and delegations manage around 18% of the EU budget (direct management)
- Other international organisations, national agencies or third countries manage 8% of the EU budget (indirect management)
- For NextGenerationEU, 90% of the funds will be channelled via the Recovery and Resilience Facility (RRF). The RRF is an instrument to offer grants and loans to support reforms and investments in the EU countries at a total value of €723.8 billion.
The Commission has the ultimate responsibility for the execution of the totality of the budget to ensure that every euro spent is recorded and accounted for.
- The accounts are then audited by the Commission, national governments and other organisations, and actions are taken to address any weaknesses or errors.
- Finally, the European Parliament (in the name of EU citizens) votes to approve (or ‘discharge’) how the Commission has implemented the budget.
How the annual EU budget lifecycle works
The EU also has a number of bodies and tools to transparently communicate, and to detect, investigate and punish improper use of EU funds, corruption, the evasion of related taxes and levees, or serious misconduct within the EU institutions.