The Madness of EU Finance

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November 26, 2008 18:36 | by Steve McGiffen

I first began work as an assistant to Yorkshire South West MEP Tom Megahy in 1986.

He has since passed on, my children have grown up and I have grown almost as old as Tom was when I went to work for him, though I have to say to the many readers who will remember him that I shall never grow as wise.

Political issues and many other things have come and gone in these 22 years. The climate has warmed. The Soviet Union is no more. People who were babies or not yet born in 1986 are now famous. Theo Walcott. Malia and Sasha Obama. Numerous Olympic gold medallists.

But the European Court of Auditors report has scarcely changed at all.

Every year, the EU financial watchdog's report pronounces on the degree to which the EU financial affairs over the last 12 months have been handled in an efficient and trustworthy fashion.

Its annual conclusion can be summed up as follows - a large proportion of the taxpayers' money disbursed by the EU each year is wasted or embezzled.

When he presented the report to the European Parliament two weeks ago, the court's president Vitor Caldeira tried to scrape what he could from the barrel.

Significant efforts, he said, had been made "to address the weaknesses in supervision and control."

Yet "material levels of errors of legality and regularity persist because there is a high level of inherent risk associated with many areas of EU spending and weaknesses related to supervision and control."

In other words, these "efforts" have failed. The court could not give its approval to the accounts as a whole. Although there were improvements in the reliability of the bookkeeping, the court could not state that the money had been spent in the ways intended by legislators.

Take the cohesion funds, which are supposed to promote the evening out of the enormous disparities of wealth and income which characterise the 27-member EU.

The court's finding was that "at least 11 per cent of costs claimed should not have been reimbursed."

More than one euro in 10 which the European taxpayer has a right to see spent on helping poorer regions and countries disappeared into a black hole of what the court describes as "ineligible costs, overdeclarations of money spent and serious failures to respect procurement rules."

Then again, how bad is an 11 per cent failure rate really? After all, that means that almost nine euros out of 10 were correctly accounted for.

Now imagine what the reaction would be if a supermarket checkout worker used the same argument to explain why they were missing hundreds of pounds at the end of their shift.

When it comes to the EU, we are talking not about a day's till takings, but a sum of over £35 billion. Eleven per cent of this is around £3.85 billion.

And this is for a single budget area, albeit a big one and the worst performer, responsible for perhaps half of the total loss.

A zero rate of loss, waste and fraud is clearly not achievable when you are dealing with such vast sums.

But a loss which runs into billions has to be symptomatic of serious structural problems rather than the occasional carelessness or successful scam. This problem has a number of features, each of which could have been addressed long ago. Better late than never, however.

First, we should be demanding an end to the one rule for them and one for us culture which prevails at the European Commission, the body responsible for the vast bulk of EU expenditure. Your union rep will be hard pushed to defend your job if you constantly "lose" a tenth of the money with which you're entrusted in your workplace. The same rule should apply to eurocrats.

Second, an end must be put to a system which sees money paid by wealthier member states such as Britain going back to those same member states.

If it is reasonable to aid countries with high levels of deprivation, fair enough, but that is what a "cohesion fund" should be for. Currently, for example, major net payer The Netherlands gets money back to build cycle paths. This is absurd.

The system should be reformed to ensure that member states hold on to the money that they need to pay for such projects, rather than shelling out to Brussels with the right hand to get it back with the left.

It should also be simplified, as the court repeats wearily every year.

Nobody, least of all the legitimate beneficiaries of the subsidies involved, can understand the labyrinthine complexities of the rules.

This means that, while it is maddeningly difficult for honest applicants to complete the paperwork, it is equally easy for crooks to commit fraud.

This is partly, again, because the EU takes on many tasks which should be left to national, regional and local authorities.

As with so many problems, the roots of this fraud and waste lie deep in the Brussels culture of empire-building and self-aggrandisement.

As Caldeira himself put it, "schemes that cannot be satisfactorily implemented at an acceptable level of cost and with tolerable risk should be reconsidered."

Much of what the EU funds should not be funded at all and much of the rest could be left to member states to handle themselves.

This is our money, remember. We have a right to demand that those well-paid officials charged with controlling these funds make a reasonable fist of it.

The problem exists principally because this right is routinely ignored. The high level of waste and fraud is another symptom of the lack of democracy.

Write to your MP and MEP and ask them why they are putting up with this, year after year after year.

Steve McGiffen is editor of Spectrezine. This article first appeared in the Morning Star