Курсовая работа: The UK as a member of the EU

· The members' contribution based on value added tax (VAT). At that time, a significant proportion of UK imports were coming from outside the EU, while as an indirect tax the VAT is regressive and does not reflect ability to pay. As a result, the UK was a major contributor to 'own resources' because of its dependence on non-EU imports and its VAT payment, both of which overcharged it relative to its prosperity.

Budgetary expenditure on Community policies was dominated by a few items which caused different distributional effects among the partners:

· Expenditure on the CAP which until the mid-1980s accounted for more than two-thirds of the total and went mostly to member states with relatively large surplus-producing agricultural sectors, such as Denmark. Germany and the UK, with relatively small agricultural sectors, were net importers of agricultural products and therefore low recipients of CAP spending.

· The 'structural funds' for regional development and social policy which accounted for less than 20 per cent of the total. The UK benefited from the regional fund but, set alongside the CAP spending, the sums received were insignificant. [8, p.12]

2.1.3 Reforms

The commitment to complete the Single Market programme by 1992 and to move towards EMU finally compelled the Community to implement the long overdue radical overhaul of Community finances. In addition to the 'traditional own resources' of agricultural levies (now replaced by tariffs), sugar levies, and customs duties and the 'third' resource based on VAT, a new topping-up 'fourth' resource was added based on members' GNP and thus reflecting each country's relative prosperity. The Community decided also to restructure the expenditure side of the budget by:

· increasing real expenditure by about 22 per cent to help promote economic and social cohesion between the EU member states and regions for accelerated progress towards EMU;

· Increasing the structural funds' allocation in real terms by 40 per cent and to agriculture by 9 per cent.

These developments changed the structure and the size of the general budget.

Although these innovations were generally on target, the remodeled budget continued to create unfair inequalities in 'net positions' between countries. Therefore, the Commission had to admit that 'the budgetary imbalance of the UK is no longer unique' but extended to Germany, the Netherlands, Sweden, and Austria, which went through budget deficits with the EU larger than the UK (as a percentage of GNP), and naturally wanted similar rebates.

In 1999 the European Council decided instead to:

• reduce the shares of these four countries in the financing of the UK correction to 25 per cent of its normal value;

• neutralize any windfall gains to the UK, caused by enlargement or other future events;

• cut the maximum call-in rate for the VAT resource so that the more equitable

Fourth resource, a proportion of GNP, makes the largest contribution to the budget. [11, p.53-55]

2.2 Common Agricultural Policy

The Common Agricultural Policy (CAP) is a system of European Union agricultural subsidies and programmes. It was proposed in 1960 by the European Commission. It followed the signing of the Treaty of Rome in 1957, which established the Common Market. [7, p.5]

2.2.1 CAP objectives

The initial objectives were set out in Article 39 of the Treaty of Rome:

· to increase productivity, by promoting technical progress and ensuring the optimum use of the factors of production, in particular labour;

· to ensure a fair standard of living for the agricultural Community;

· to stabilize markets;

· to secure availability of supplies;

· to provide consumers with food at reasonable prices.

From the beginning of European integration, farmer’s income was the issue that dominated the debate on agricultural policy. Nevertheless, all CAP objectives have largely been achieved, but at a high cost. [11, p.46]

The latter function was assigned to a specially established fund financed from the EU budget, the European Agricultural Guidance and Guarantee Fund (EAGGF).

2.2.2 CAP policies

The CAP has used an assortment of instruments to achieve its objectives, the most important of which was price-fixing (in a common currency, such as the ecu and nowadays the euro, €) at levels well above the world market prices. Producer’ increased incomes fall short of the coat of the policy incurred by the consumers of the commodity, who paid high prices, and the taxpayers, who finance the EU budget. A direct income subsidy to producers would have achieved the same increase in their incomes at a lower cost.

2.2.3 UK policies