Europe pays farmers billions for non-existent losses

The European Commission will be blamed today for handing out billions of pounds to farmers to compensate them for losses they never suffered.

Presenting the annual report to the European Parliament from the EU's spending watchdog, Bernhard Friedmann, president of the Court of Auditors, will single out British handling of BSE-related payments for particularly strong criticism.

Under a scheme for slaughtering cattle over 30 months old, British farmers were to receive pounds 270 per animal only after incineration. But the auditors have found that although claims for 1 million animals were made by end of last year, only 27,000 were incinerated. The British authorities also allowed older cattle, potentially carrying a risk of infection, to be put on the market with EU aid.

The EU's chief auditor has refused to certify the bloc's annual accounts for the third year running, because of such lax control over taxpayers' money.

The report says poor book-keeping, erroneous payments, waste and fraud meant pounds 2.8bn - 5.4 per cent of the total pounds 52bn budget - could not be properly accounted for.

Mr Friedmann will tell the European Parliament that the court was unable to find any audit trail for an alarming 4.3 per cent of transactions checked.

He will blame the authorities in EU states for failing to exercise control over the revenue they collect on behalf of the Community, or the cash they pass on to farmers, job trainees, small businesses, local authorities and other beneficiaries.

Big cereal landowners, many in Britain, were over-compensated by pounds 2bn and beef producers by pounds 550m.

Cheque-in-the-post style payments introduced by Brussels in 1992 were intended to offset projected price drops. But market prices, particularly for grain, rose from 1995 and the system places no ceiling on the amounts individuals can claim.

EU grant aid programmes to help poorer regions also come in for censure. Small companies receive special aid, but the auditors reveal there is no definition of a small company, so that big corporations sometimes qualify.

In Spain, a pounds 2m grant for a skilled trades scheme was spent on a computer centre for the company supposed to be implementing the project.

The auditors also blow the whistle on members of the Economic and Social Committee, a Brussels-based consultative body made up of interest groups, employers and trade unionists. Forty were found to be fiddling their travel expenses over a three-month period last year at a cost to the taxpayer of around pounds 2m.