Poll / Research Item

The New Cost of EU Membership

Title

Financing Mechanisms, the proposed 2028-2034 Multi-annual Financial Framework (MFF), and a Hypothetical Analysis of United Kingdom Contributions as a Full Member State

Abstract

This paper examines the current and proposed financial mechanisms of the European Union (EU) budget, with an emphasis on the European Commission’s (EC) proposals for the 2028-2034 Multi-annual Financial Framework (MFF) and the associated reforms to the system known as “Own Resources”. It explains the structure of EU budget financing, reviews the principal spending priorities contained with the EC’s proposals, and discusses the implications of servicing and repaying the borrowing undertaken through the NextGenerationEU (NGEU) recovery instrument.

Building on this foundation, the paper goes on to develop a hypothetical scenario in which the United Kingdom rejoins the European Union as a full member state by 2028 and participates fully in the proposed budgetary framework without a rebate or special opt-outs (as this is the default position required within EU treaties and the stated position of numerous EU officials). Using publicly available economic data, EC estimates, and historical budgetary relationships, the paper constructs an illustrative estimate of the United Kingdom’s potential gross contribution under the proposed framework.

Executive Summary

Key findings include:

The EU budget is currently primarily financed through a Gross National Income (GNI)-based member state contribution, along with what the EU refers to as “Own Resources” – a Value-Added Tax (VAT)-based resource, a majority share of customs duties collected at EU borders, and a levy based on an estimate of plastics produced but not recycled in a given member state
The EC’s proposed 2028-2034 MFF would increase the scale of the EU budget to approximately €2 trillion over the seven-year period, equivalent to around 1.26% of EU Gross National Income (GNI)
The 2028-2034 MFF proposal also introduces five new Own Resources, that are linked to the revenue from the EU Emissions Trading System (ETS); the revenue from the Carbon Border Adjustment Mechanism (CBAM); a levy on eWaste calculated to have been generated in a given member state; a levy on revenue generated from the sale of tobacco products (TEDOR); and a mandatory contribution from all EU corporations with a net annual turnover exceeding €100 million
The start of repayments against the NextGenerationEU borrowing from 2028 onwards, together with a need to modernise revenue collection in the digital eCommerce era, are major factors behind efforts to expand and diversify EU revenue sources
Under a simplified hypothetical scenario in which the United Kingdom rejoined the EU as a full member state in 2028, without rebates or opt-outs (the default scenario based on EU treaty law), a gross annual contribution in the broad range of €35-50 billion appears to be reasonable and defensible, with a central illustrative estimate in the region of €41-43 billion (£35-37 billion)
The net contribution from the UK would be lower than this amount, as EU spending both publicly and privately would take place on an annual basis
Gross contributions alone do not of course indicate the overall fiscal impact of membership. Any full assessment would also need to consider contributions and receipts from EU programmes such as Horizon and Erasmus+

Introduction

The European Union operates a distinctive supranational budgetary system financed largely through so-called "Own Resources." Unlike many international organisations, the EU possesses legally defined revenue sources that are collected or calculated according to common rules and transferred to the Union budget.

Every seven years, the EU establishes a Multi-annual Financial Framework (MFF), which sets expenditure ceilings and broad spending priorities. The current framework covers the period 2021–2027. During that period, the Union also created the NextGenerationEU recovery instrument, funded through large-scale borrowing on capital markets to address the economic consequences of the COVID-19 pandemic.

In July 2025, the European Commission proposed a new MFF covering 2028–2034. The proposal includes increased spending on competitiveness, defence, innovation, migration management, external action, and crisis preparedness, together with a package of new Own Resources intended to support the budget and help finance repayment of NextGenerationEU liabilities. Additionally, effective 1 July 2026, the EU introduced a temporary €3 flat-rate customs duty on low-value consignments, representing a significant modernisation of Traditional Own Resources in response to the surge in e-commerce imports.

Important status note: As of early July 2026, neither the proposed 2028–2034 MFF nor the accompanying Own Resources Decision has been adopted. Both remain subject to negotiation among member states and the European Parliament. The €3 low-value duty is, however, now in force as a temporary measure. Consequently, all discussion of the 2028–2034 framework in this paper refers to proposals rather than agreed policy, and all quantitative estimates should be interpreted accordingly.

How the EU Budget is Financed

The Own Resources System

The EU budget is financed through a combination of revenue sources collectively known as Own Resources. The system has evolved significantly, most recently with the addition of the €3 low-value customs duty effective 1 July 2026.

Traditional Own Resources (TOR)

Traditional Own Resources consist primarily of customs duties collected on imports entering the EU customs territory from non-EU countries, together with certain residual agricultural levies. Member states retain a proportion of the amounts collected to compensate for administrative collection costs and transfer the remainder to the EU budget.

Historically, traditional Own Resources represented a much larger share of EU financing than they do today. Their relative importance has gradually declined as tariff levels have fallen and the Union's financing needs have expanded. However, a major development occurred on 1 July 2026 with the introduction of a temporary flat-rate customs duty of €3 per item (classified according to tariff headings) on low-value consignments with an intrinsic value of up to €150 imported from third countries.

VAT-Based Own Resource

A harmonised VAT base is calculated for each member state according to EU rules. A uniform call rate is then applied to that harmonised base, subject to limits designed to prevent disproportionate burdens on lower-income member states. Although politically important, the VAT resource now contributes a smaller share of total financing than the GNI-based resource.

GNI-Based Own Resource

The GNI resource functions as the balancing mechanism of the EU budget. Once expenditure requirements and all other revenues have been determined, a uniform call rate is applied to member-state Gross National Income (GNI) to generate the remaining revenue required for a balanced budget. As a result, the GNI resource has become the dominant source of EU financing and typically accounts for most budget revenue.

Plastics-Based Own Resource

Introduced in 2021, the plastics resource is based on the quantity of non-recycled plastic packaging waste generated by each member state. Although relatively modest in revenue terms, it serves both budgetary and environmental policy objectives.

Other Sources of Revenue

Additional revenues arise from: competition-law fines; interest receipts; contributions from non-member participants in EU programmes; taxes on EU staff salaries; budget surpluses carried forward from previous years; and other miscellaneous receipts. Borrowing undertaken through NextGenerationEU is legally distinct from ordinary Own Resources and does not alter the EU's requirement to maintain a balanced annual budget.

The Commission’s Proposed 2028-2034 MFF

Scale and Structure

On 16 July 2025, the European Commission proposed a Multiannual Financial Framework amounting to almost €2 trillion in commitments over seven years. The proposal corresponds to approximately 1.26% of EU GNI annually and would represent a significant increase compared with previous frameworks. It is important to emphasise that these figures represent the Commission's opening negotiating position. The final MFF will require unanimous agreement among member states and the consent of the European Parliament, and may therefore differ substantially from the current proposal.

Major Spending Priorities

The proposed framework seeks to increase flexibility while consolidating and simplifying numerous existing programmes. Key priorities include:

Competitiveness, Research and Innovation: The proposal expands support for research, industrial policy, strategic technologies, and economic competitiveness through a new European Competitiveness Fund and an enlarged research framework
Defence and Security: The Commission proposes substantially increased expenditure on defence-related initiatives, military mobility, industrial resilience, cybersecurity, and security cooperation
External Action: The proposed framework expands funding for foreign policy objectives, development assistance, neighbourhood policy, and support for Ukraine
Migration and Border Management: Additional resources are proposed for migration management, asylum systems, and external border protection
Crisis Preparedness: The framework includes provisions intended to improve the Union's ability to respond to future economic, geopolitical, health, and environmental crises

Proposed New Own Resources

To help finance the enlarged budget and support repayment of NextGenerationEU borrowing, the Commission proposed five additional Own Resources. These proposals are intended to diversify EU revenue sources and reduce reliance on the GNI-based balancing resource. (Note: The €3 low-value duty described above is a separate enhancement to Traditional Own Resources and is not part of this five-item package.)

EU Emissions Trading System (ETS) Resource: A share of revenues generated under the EU Emissions Trading System (ETS) would be transferred to the EU budget
Carbon Border Adjustment Mechanism Resource: A proportion of revenues arising from the Carbon Border Adjustment Mechanism (CBAM) would become an EU Own Resource
Electronic Waste Resource: A new resource would be linked to quantities of non-collected electronic waste
Tobacco Excise Duty Own Resource: A portion of tobacco-related excise revenues would contribute to EU financing
Corporate Resource for Europe (CORE): Large corporations meeting specified turnover thresholds would contribute through a new EU-level resource

According to Commission estimates, the proposed package could generate approximately €44 billion annually, with additional adjustments to existing resources (including the new €3 duty) potentially increasing the total impact further. These figures remain subject to considerable uncertainty and depend on economic conditions, emissions trajectories, consumption patterns, trade flows, regulatory implementation, and final legislative design.

Hypothetical Scenario: The UK as a Full Member State in 2028

Purpose of the Scenario

The following analysis is not intended as a prediction of future UK-EU relations. Instead, it serves as a stylised fiscal exercise illustrating how the Commission's proposed financing framework might apply to a large, advanced economy with characteristics broadly comparable to those of the contemporary United Kingdom. Many political, legal, and institutional factors that would influence any real accession process are deliberately simplified or excluded.

Core Assumptions

The scenario assumes:

UK accession before the start of the 2028 budget year
Full participation in the proposed Own Resources system
No UK rebate or equivalent correction mechanism
No policy opt-outs
Immediate participation in all relevant programmes and budgetary arrangements
No transitional provisions
No major treaty changes beyond UK accession

Important realism note on transitional arrangements: In practice, any UK accession under Article 49 of the Treaty on European Union would involve multi-year negotiations and almost certainly include transitional budgetary arrangements (such as phased contribution ramps over several years) and potentially temporary correction mechanisms. The present scenario deliberately isolates the 'full steady-state membership' baseline to illustrate mechanical orders of magnitude and the impact of the current Own Resources framework.

Economic Assumptions

Illustrative assumptions include:

EU-27 GNI in 2028: approximately €20.5–21 trillion
UK GNI in 2028: approximately €3.7–3.8 trillion
Combined EU-28 GNI: approximately €24–25 trillion
UK share of EU-28 GNI: approximately 15%
Average annual EU budget requirement under the proposed framework: approximately €270–290 billion

Methodology note on GNI projections: These GNI assumptions are derived from publicly available 2024–2025 baseline data from Eurostat, the European Commission's DG ECFIN, FRED, and IMF sources (with 2024 EU-27 GNI in the region of €15–18 trillion depending on exact series and exchange-rate conventions). Figures are extrapolated to 2028 using illustrative nominal growth rates of approximately 3–3.5% per annum, consistent with recent trends and medium-term forecasts (combining real GDP growth of around 1–1.5% with inflation). The 15% UK share of combined EU-28 GNI is a central illustrative assumption, broadly aligned with historical pre-Brexit averages (typically ranging 12–16% depending on exchange rates and relative growth performance). These are orders-of-magnitude assumptions rather than precise forecasts.

Illustrative Gross Contribution

Given the uncertainties surrounding the final MFF settlement and future economic conditions, any estimate of UK contributions should be treated with caution. Under the assumptions described above, a gross annual contribution in the broad range of €35–50 billion appears plausible. A central illustrative estimate would be approximately €41–43 billion per year. This figure should not be interpreted as a forecast. It represents only a scenario-based estimate derived from currently available information.

Component	Low Estimate (€bn)	Central Estimate (€bn)	High Estimate (€bn)	Rationale / Notes
GNI-Based Resource	24	25.5	27	UK contribution in line with ~15% share of EU GNI after netting other revenues. Dominant component
VAT-Based Resource	5	6	7	Based on UK's likely share of the harmonised VAT base in an enlarged EU
Traditional Own Resources (Customs Duties)	4	5	6	Depends on future trade flows, import volumes (esp. e-commerce), and collection efficiency. UK e-commerce import share is significant.
Plastics Resource	0.8	1.0	1.2	Reflects broad assumptions on UK waste generation and recycling patterns relative to the wider Union
Proposed New Own Resources (ETS, CBAM, e-waste, tobacco, CORE)	3	4.5	6	Particularly uncertain. Rough allocation adjusted for UK-specific factors (emissions profile, import composition, corporate sector, consumption patterns). Depends on final legislative design.
TOTAL GROSS CONTRIBUTION	36.8	42	47.2	Broad plausible range €35–50bn; central ~€41–43bn after rounding

Indicative Net Position

Gross contributions provide only a partial picture of a member state's fiscal relationship with the EU budget. Historically, the United Kingdom was a significant net contributor but received substantial funding through agriculture, regional development, research programmes, educational initiatives, and other expenditure channels. Pre-Brexit, gross contributions in the late 2010s averaged around £18–20 billion annually before the rebate and receipts (ONS data).

Under the proposed 2028–2034 framework, spending priorities differ in important respects from earlier budget periods. The increased emphasis on research, innovation, strategic technologies, industrial competitiveness, and defence cooperation could potentially benefit sectors in which the United Kingdom has traditionally been competitive. At the same time, future receipts would depend on programme design, allocation methodologies, regional eligibility criteria, agricultural support arrangements, defence-industrial participation, competitive grant success rates, and any terms negotiated during accession. Because these variables remain unknown, no robust estimate of a future UK net contribution can currently be provided. Accordingly, the gross contribution estimates presented in this paper should not be interpreted as measures of the overall fiscal cost of membership.

Sources of Uncertainty and Analytical Limitations

Several factors limit the precision of the estimates presented here. First, the proposed MFF and Own Resources Decision remain under negotiation and may change substantially before adoption. Second, future economic growth, inflation, exchange rates, emissions trajectories, waste generation patterns, corporate behaviour, and – crucially – the actual yield and compliance profile of the new €3 low-value customs duty remain uncertain. Third, any future UK accession process would almost certainly involve political negotiations capable of affecting budgetary outcomes, including transitional arrangements and possible correction mechanisms. Fourth, future EU enlargement could significantly alter both expenditure requirements and contribution shares. Finally, the analysis focuses on direct budgetary relationships and does not attempt to quantify wider macroeconomic effects associated with Single Market participation, trade integration, investment flows, regulatory alignment, labour mobility, or policymaking influence.

Conclusion

The European Commission's proposed 2028–2034 Multiannual Financial Framework would represent a significant evolution of the EU budget if adopted in broadly its current form. The proposal combines a larger overall budget with expanded spending on competitiveness, defence, external action, migration management, crisis preparedness, and strategic investment. It also introduces a substantially revised Own Resources framework intended to diversify revenue streams and support repayment of NextGenerationEU borrowing.

Within the illustrative scenario examined in this paper, a United Kingdom participating as a full member state without rebates or opt-outs could plausibly face gross annual contributions in the broad range of €35–50 billion, with a central illustrative estimate of approximately €41–43 billion. However, these figures should not be interpreted as forecasts. They depend on assumptions regarding the final MFF settlement, future economic conditions, accession arrangements, and the eventual structure of EU Own Resources.

Their principal value lies in illustrating the mechanics and approximate scale of potential obligations under the Commission's proposals and the current trajectory of Own Resources reform, rather than predicting future contribution levels. Any comprehensive assessment of the implications of EU membership would also need to consider programme receipts, economic effects, institutional influence, and broader strategic considerations alongside direct budgetary contributions.

References

The following sources were consulted in the preparation of this analysis. All URLs were accessible as of early July 2026.

European Commission (2025). EU budget 2028-2034. Available at: https://commission.europa.eu/strategy-and-policy/eu-budget/long-term-eu-budget/eu-budget-2028-2034_en
Council of the European Union (2025, updated 2026). Council agrees to levy customs duty on small parcels as of 1 July 2026. Available at: https://www.consilium.europa.eu/en/press/press-releases/2025/12/12/customs-council-agrees-to-levy-customs-duty-on-small-parcels-as-of-1-july-2026/
European Commission – Taxation and Customs Union (2026). Guidance and legal text on temporary flat fee on low-value imports which will apply until 1 July 2028. Available at: https://taxation-customs.ec.europa.eu/news/guidance-and-legal-text-temporary-flat-fee-low-value-imports-which-will-apply-until-1-july-2028-2026-06-08_en
Council of the European Union (n.d.). Financing the EU budget. Available at: https://www.consilium.europa.eu/en/policies/financing-the-eu-budget/
Bruegel (2025). Financing the EU budget: an assessment of five proposals for new Own Resources. Available at: https://www.bruegel.org/analysis/financing-eu-budget-assessment-five-proposals-new-resources
European Parliament Think Tank (2025/2026). EU budget 2028-2034: Overview of the Commission's proposal. Available at: https://epthinktank.eu/2025/07/29/eu-budget-2028-2034-overview-of-the-commissions-proposal/
Office for National Statistics (2019, updated). The UK contribution to the EU budget. Available at: https://www.ons.gov.uk/economy/governmentpublicsectorandtaxes/publicsectorfinance/articles/theukcontributiontotheeubudget/2017-10-31
Robert Schuman Foundation (n.d.). The budgetary impact of Brexit on the European Union. Available at: https://www.robert-schuman.eu/en/european-issues/454-the-budgetary-impact-of-the-brexit-on-the-european-union
Federal Reserve Economic Data (FRED) / World Bank / Eurostat / IMF (2025–2026 data). Gross National Income and GDP statistics for the European Union and United Kingdom. Used for share calculations and projections.
European Commission (2025). Proposal for a Council Decision on the system of Own Resources (COM(2025) package accompanying the MFF proposal). Details on ETS, CBAM, e-waste, tobacco, and CORE resources.

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Britain Unbound Team

Jul 14, 2026