EU auditor protests at lost pounds 3bn

LAX BRITISH Customs controls are criticised in a damning annual report from the European Union's spending watchdog, which claims that pounds 3bn, or 5 per cent, of the Community's budget could not be properly accounted for last year.

For the fourth year running, Bernhard Friedmann, president of the EU Court of Auditors, will refuse to certify the annual accounts when he presents them to the European Parliament this morning because of the scale of financial irregularity, waste, mismanage- ment and loose controls. Some of the discrepancies are "honest mistakes", the report says, but outright fraud, in some cases, cannot be ruled out.

The report will be used as a stick with which to beat the European Commission. In it Brussels is accused of perpetuating a "spending culture" that measures the success of a project, or a policy, by the amount spent rather than the result achieved.

But local regional and national authorities, who handle 80 per cent of the money, are also accused of dishing out regional and farm funds recklessly, or, of turning a blind eye when farmers claim too many animals in their herds or flocks.

One of the worst examples of waste in the report is pounds 600m spent on trying to improve safety at dangerous nuclear power plants in the former Soviet Union since the Chernobyl disaster. Firms of Western consultants pocketed huge profits by sub-contracting work to Russian experts, while charging the EU 15 times the rate the experts were paid.

Safety studies were commissioned, at a cost of pounds 30m, but only one report had been submitted to the Russian authorities by June 1997, 11 years after Chernobyl. The report blames a constantly changing staff as well as sloppy book-keeping and administration in the relevant Brussels unit.

Britain is criticised for 22 years of ignoring its obligation to organise checks on imports of New Zealand butter, at a loss to EU taxpayers of nearly pounds 300m in levies by Customs. Most of the money cannot be recovered now, the auditors complained.

Grants to fishermen were another source of waste and fraud. In one case, money was allocated to modernise five Portuguese boats but the auditors found they had all sunk years previously.

All EU governments are also accused of failing to collect VAT properly, leading to a shortfall of nearly pounds 50bn a year. This affects both national exchequers and the EU's coffers.

In a separate report, the Court of Auditors looked at agricultural spending, which absorbs more than pounds 30bn each year. They found that six years after reforms designed to cut support to the richest farmers, 4 per cent of them still receive 40 per cent of the subsidies.

Neil Kinnock, the European transport commissioner, yesterday backed calls for new investment projects to create jobs, as Europe's socialist finance ministers prepared an initiative to put employment at the top of the economic agenda.