Week 2: Lectures 3 and 4 - Regional Budgets Flashcards
(36 cards)
What is the EU budget?
The EU has a budget for:
- policies at European level (94% allocation) such as regional aid, trans-European networks and research etc. and administration (6% allocation) such as EU parliament salaries
Give the spending and revenue figures for the EU budget in 2022
Spending in 2022 was: 243,320 million euros
Revenue in 2022 was: 245264 million euros
Give the figures for the UK budget during 2022-2023
Total revenue: £715.9bn
- Total expenditures: £807.3bn
So there was a budget deficit of £91.4bn
What are the economic functions of national budgets? (why do they exist)
- Redistribute income
- Promote allocative efficiency
- Stabilise the economy by countercyclical deficits and surpluses
Does the EU budget have a stabilising role?
The EU budget does not have a stabilising role: In theory, expenditure and contributions must be balanced
Compare the period of the EU budget with other national budgets
The EU budget has a longer period than other national budgets (at least 5 years but usually 7) as per its Multiannual financial framework (MFF)
What does the Multiannual financial framework (MFF) do for the EU national budget?
The financial framework sets the maximum amount of allocation for broad policy areas and fixes an overall annual ceiling on payments
How is the EU budget financed?
- Customs duties on imports from outside the EU and sugar levies: Member states retain 20% to cover collection costs
- Value added tax (VAT)
- Payments from Member states
What does the size of the payments made my member states depend on?
- The size of the payment made depends on the size of the country
- Each country makes a payment equal to about 1% of its GNI
How is the EU budget spent?
- Fund common policies such as the CAP
- Assist the weakest regions
- Complete the internal market
- Promote cooperation and large-scale projects in the fields of research, innovation and justice
- Combat climate change and humanitarian disasters
What was the UK rebate?
- The UK rebate was a financial mechanism that reduced the United Kingdom’s contribution to the EU budget in effect since 1985
- It equated to a reduction of approximately 66% of the UK’s net contribution
Why was the UK rebate introduced?
At the time of introduction, the UK was the third poorest member of the EU
but the biggest net contributor to the EU budget
How was the reduction in contribution to the EU budget as a result of the UK rebate accounted for?
- The rebate is paid by the other 26 Member States as
a proportion of their economy - Germany, the Netherlands, Sweden and Austria pay only a quarter of their share
- France and Italy pay about half of the total rebate
What did leave campaigners for Brexit promise and how have they delivered on it?
- Before the referendum, leave campaigners promised that Brexit would save the taxpayer £350m a week
- Britain’s contributions have remained relatively unchanged for several years after it has left the EU (40-60 billion euros)
What contributions does the UK still make despite leaving the EU?
The UK continues to make contributions to take
part in three EU programmes for 2021-27:
1- Horizon Europe research scheme
2- Euratom nuclear research programme
3- Copernicus, the earth monitoring project
Explain net migration in the UK since the 1960s
- During the 60s and 70s more people were emigrating from the UK than arriving to the UK
- During the 80s and early 90s net migration was at a low level
- Since 1994 UK migration has been positive every year
- Net migration currently at 490000 migrants per year
Explain the rights around migration within the EU
- The free movement of persons is a fundamental right guaranteed to EU citizens
For EU members:
1- They have the right to move and residence for up to 3 months
2- They have the right of residence for more than 3 months if they are employed, self employed, a student or a family member of a EU citizen
Explain what positive and negative selection means in terms of reasons for why people migrate
- Positive selection is when migrants bring positive effects to the new country such as skilled labour
- Negative selection is when migrants bring negative effects to the new country such as minimal contributions to the economy or low skilled labour
On average what does positive selection depend on?
On average positive selection depends on educational attainment from the sending country in which people migrate from
What are the short run effects of immigrant substitutes to a native labour force (UK example)
- In the short run capital is fixed and labour is mobile
- When wages in the UK are higher than in the sender country people migrate to the UK
- Immigrants and natives are perfect substitutes and hence they compete in the same labour market
Draw and explain a diagram to show the short run effects of immigrant substitutes to a native labour force
See slide 22 in Lecture 4
- N denotes native labour and L denotes total labour (native + immigrants)
What are the long run effects of immigrant substitutes to a native labour force (UK example)
- In the long run both capital and labour are mobile
- In the short run immigration raise the returns to capital so in the long run firms can now hire workers at a lower wage
- This increases capital stock and so demand for labour shifts right
Draw and explain a diagram to show the long run effects of immigrant substitutes to a native labour force
See slide 24 in Lecture 4
Explain what it would mean if we were to assume that immigrants and natives are complements
- If immigrants and natives were complements then immigrants would make natives more productive
- High skilled immigrants would allow other researchers and academics to further specialize in their fields
- Low skilled immigrants would free up natives to shift into more complex professions
- So immigrants and natives would not be competing in the same labour market
- Therefore an increase in the number of immigrants would shift the demand curve for native workers right
