Q&A: What is the EU budget and why is the UK being asked for another £1.7bn? Agricultural spending still accounts for a large share of the EU budget (Source: European Commission) What is the point of the budget? A: Countries are encouraged to spend money on projects that connect the EU and make the bloc more competitive as a whole, rather than acting as individual countries. The budget also helps poorer governments to fund projects they couldn't pay for on their own. This means weaker economies such as Poland get more money out of the budget than countries such as the UK or Germany. The lion's share of the budget goes on creating growth and jobs and reducing economic gaps between the EU's various regions. However, farming subsidies and policies that support rural development also account for a big share. In 1985, around 70pc of the EU budget went on agriculture. Countries including Britain have argued that less money should be used to subsidise farmers and wanted a shift towards EU spending on growth and jobs. However, farm subsidies are expected to account for around 38pc of the EU budget between 2014 and 2020, or around €363bn of the €960bn total. What type of projects does it fund? A: The budget is prepared by the European Commission. Once Brussels has drawn up its wish list, EU leaders gather for a jaw-jaw with other council members to approve the package. Most of the budget is managed by national or regional governments. Around a fifth is paid directly to organisations and businesses. Beneficiaries of grants are recorded on the EU's financial transparency system. More than 4,000 UK institutions received EU funding last year, including engineering powerhouse Rolls-Royce, which received a number of grants. This included a €2.5m payment for research related to cleaner and quieter aviation technology. The Confederation of British Industry, a business lobby group, received €184,000 in EU funding last year. Engineering giant Rolls-Royce has received a number of grants from the EU UK infrastructure projects have also benefited from EU funding, including the West Coast mainline. The EU contributed £66m to the modernisation of the West Coast mainline, which connects London and Edinburgh. How much does each country put in? A: Everything you need to know about EU budget contributions is in this spreadsheet. The EU budget added up to almost €150bn in 2013. A total of €8.7bn was spent last year in administration costs alone, although the European Commission highlights in its Myths and Facts FAQ that this amounts to less than 6pc of the total budget. At €29bn, Germany, Europe's largest and most powerful economy, put the most money into the EU pot last year. Poland was the biggest recipient. It received €16.2bn in EU funds in 2013. Overall, Britain's contribution to the EU pot amounted to €17bn in 2013, behind Germany, France, and Italy. However, on a net basis, Britain was the second largest contributor to the EU budget last year. It put €10.8bn more into the EU pot last year than it took out. Only Germany paid more on a net basis. Poland also received the highest amount of EU funds on a net basis. The bulk of this money was directed towards "cohesion for growth and employment," which helps poorer regions and countries catch up with their richer counterparts and connect to the Single Market. Greece was the second-largest net recipient. How do they work out who pays what? A: Contributions are based on three factors: How well each economy is doing. This is measured by gross national income (GNI) and accounts for the largest proportion of each country's contribution. A percentage of VAT income. Additional revenues raised from customs duties, agricultural levies, VAT and even sugar contributions are collected on behalf of the EU (countries are entitled to a rebate of 25pc of these revenues to help pay for administration costs - last year the UK received €850m back from Brussels for this reason). Didn't Margaret Thatcher help to get some of Britain's contribution back? Yes, the Iron Lady used her handbag-swinging negotiating style in June 1984 at a summit in Fontainebleau, just outside Paris, to declare: We are not asking the Community or anyone else for money. We are simply asking to have our own money back. Margaret Thatcher, the former Conservative Prime Minister At the time, Britain was still suffering from the impact of the 1980s recession, with unemployment close to 12pc. The UK was the third poorest member of the EEC but on course to become the biggest net contributor to the EU budget because of its relatively small agricultural sector. The budget's emphasis on revenues from VAT also penalised the UK because it raised more revenue from VAT than most other member states. Thatcher won. The rebate is now equivalent to 66pc of the UK's net contribution in the previous year. Such rebates are paid for by the other 27 EU members. The rebate for 2013 was €4.3bn. Is Britain the only EU country that enjoys a rebate? Due to corrections and "rebates on the rebate" enjoyed by Germany, Austria, the Netherlands and Sweden, these countries pay less than their normal share. Denmark recently joined this club, and will receive a rebate of around €130m from next year. This means France and Italy have been left to pick up the biggest share of the tab. Last year, France contributed €1.2bn to Britain's rebate, while Italy contributed €900m. Most of the money Britain receives from the EU is used to subsidise farming (€3.1bn). Why does Britain have to stump up an extra £1.7bn towards the EU budget? In October, it emerged that Brussels had demanded an extra £1.7bn from Britain because the country had performed better that other EU economies. As well as the regular assessment of the relative performance of EU countries, changes to the way economies are measured also had an impact. In 2012, Brussels instructed the EU member states to re-assess their growth figures back to 2002. The deadline was this year. The Office for National Statistics published its revised figures in May 2014, which showed the UK economy was larger than previously thought, and had therefore been underpaying towards the EU budget. Fury erupted across Westminster, and after a lot of noise and plenty of negotiation, George Osborne, the Chancellor, claimed victory for Britain: However, Nigel Farge, leader of UKIP, said this: Who was right? Open Europe has an excellent summary here that I will paraphrase. Osborne is correct, but only because of Maggie's efforts. Thanks to the British rebate, which was applied in full across the period of ESA 95 revisions, the UK will pay half of the initial £1.7bn demand. But isn't the EU bad at managing its own finances? It's not just individuals who overspend on their credit cards. The EU was accused earlier this month of "breathtaking hypocrisy" in demanding the extra payment from Westminster despite failing its own audit. The European Court of Auditors found that £109bn out of a total of £117bn spent by the EU in 2013 was "affected by material error." It means that the accounts submitted by Brussels have not been given the all clear for almost two decades.