European Court of Auditors Uncover Illegality and Misspending in £75.2 billion of EU Costs Last Year

The European Foundation welcomes today’s statement accompanying the European Court of Auditors 2006 Annual Report (291 pages) – assessing EU spending in 2006 – which reports that “errors of legality and regularity still persist in the majority of EU expenditure due to weaknesses in internal control systems both at the Commission and in Member States.”

The £75.2 billion (€106.6 billion) of EU payments made in 2006, subject to massive “errors of legality and regularity” however, are likely to be significantly underrepresented since, even by the Court’s own admission, the “internal control systems” and administration at the Commission are improper for use.

The European Foundation also accepts the Court of Auditors’ overall view in the statement, which concludes that “the Court again gives an adverse opinion on the legality and regularity of the majority of EU expenditure: primarily the part of agricultural spending not covered by IACS, structural policies, internal policies and a significant proportion of external actions. In these areas there is still a material level of errors found in the payments to final beneficiaries, albeit to different levels.”

The report gives credible weighting to the notion that the European Union has failed, even through its catastrophic accounting for the most basic areas of expenditure. Three examples of gross fraud and misspending include the areas of agriculture (£35 billion), structural policy (£22.8 billion) and the Commission’s directly managed internal policies (£6.3 billion).

Agricultural Expenditure
The Foundation welcomes the conclusion of gross misspending on agriculture – worth £35 billion (€49.8 billion) in 2006 – on which the Court states that “while the Single Payment Scheme simplifies claim and payment procedures, it has side effects, such as the allocation of entitlements to landowners who never exercised previous agricultural activity, leading to a substantial redistribution of EU aid away from farmers to landlords. Among new beneficiaries for EU agricultural aid are railway companies, horse riding or breeding clubs and golf or leisure clubs and city councils.” It is also clear – as the report points out (p.120) – that the UK Government has itself created and exacerbated this misspending and misallocation of agricultural funds.

Structural Policy
The misspending on structural policies – worth £22.8 billion (€32.4 billion) in 2006 – “remains similar to previous years”, says the report. “The Court identified a material level of error,” it claims and “the most frequent errors were claims for ineligible expenditure and failure to carry out tender procedures as well as a lack of evidence to support the calculation of overheads or the staff costs involved.”

Internal policies
For the Commission’s internal policies, £6.3 billion (€9 billion) in 2006, the Court again “found a material level of error in the legality and regularity of the underlying transactions, mainly due to reimbursements to beneficiaries who had overstated the costs for projects.”

Time to Renegotiate
Contrary to the Courts’ supposedly forward-looking conclusion that “the Commission should lead by example”, it would be important to note that the EU would be no better served by the Commission than in the previous years of uncovering excessive fraud and unaccountable expenditure. This level of illegality and irregularity can only be dealt with by the Member States with respect to their own national laws. A renegotiation exercise for Britain would be the best answer in going forward on this appalling financial failure.

The European Commission, the European Council and the European Parliament are currently agreeing a 2008 budget which demands that the UK make a £10 billion (€14.3 billion) gross contribution to the EU Budget next year. The British Government has grudgingly supplied the European bloc with a substantial contribution every year but, after this damning report by the bloc’s own auditors, now is the time to realise that the European project is not working.

The British Government needs to lead the way by ending this disaster now and advocating an overall policy of “yes to European trade, no to European government.” Greater democracy can only be achieved among the various peoples of Europe by the fundamental renegotiation of the EU Treaties. It is not an excuse for outright withdrawal from the European Union, as some might argue, but rather its thoroughgoing reform into a European free trade area with limited political cooperation.

James McConalogue of the European Foundation said:
“If the European Union were a commercial company, it would have been shut down today and its Chief Executive would be imprisoned and awaiting trial. For a foreign and corrupt continental government, dressed up as a supposed trade bloc, for which the UK still hands over £10 billion per year, this is a gross attack on British national interest. This is the British taxpayers’ money and their contribution needs to be returned to them. Britain needs to take the lead because little federal Europe still turns a blind eye to financial corruption on the books as it has done with political corruption on the Reform Treaty.”