Treasury not doing enough to help departments cut EU fines – PAC

PAC urges stronger cross-government effort to clamp down on fines incurred for errors in the way government spends EU funds

By Matt Foster

27 Apr 2016

The Treasury is not doing enough to hold departments to account for costly errors in handling European Union funds, according to the public accounts committee.

A new report from the committee of MPs finds that, between 2005 and 2015, the UK racked up "at least" £650m in "disallowance" penalties to the European Commission because of problems with the way public bodies administered EU funds.

But PAC's latest report says departments "only seem to have woken up to this problem recently", and calls on the Treasury to appoint a single official who has responsibility "for ensuring the overall system for spending EU money in the UK delivers improved performance for the taxpayer".

Treasury warns Brexit could hit public finances by £36bn a year – but eurosceptics blast "shameful" use of government resources
FCO will need "considerable" spending boost if Britain backs Brexit, say MPs

The report also admonishes departments for adding "additional complexity" to the administration of EU funds, criticising the Department for the Environment, Food and Rural Affairs (Defra) for opting to implement "the most complex system available" to make Common Agricultural Payments to farmers. While the department has since changed its approach, PAC says the decision created a "damaging legacy" which caused the UK "to incur high levels of disallowance in subsequent years"

PAC also highlights the fact that the Department for Communities and Local Government reported an £8.1m loss in its 2014-15 annual accounts because of ineligible payments relating to the European Regional Development Fund.

"As a priority the Treasury and departments must identify the reasons they keep being penalised and take whatever action is necessary to rectify their mistakes" – Meg Hillier MP

"It too is only now changing its approach for managing ERDF programmes for the current spending period, in an attempt to reduce financial corrections," the committee notes.

The MPs say departments responsible for EU funds could do more to "learn lessons and share best practice within Whitehall", as well as from other EU member states, and questions whether Treasury and the Cabinet Office are doing enough to coordinate a cross-government response to the problem.

"The UK’s relatively high level of penalties, over an extended period, suggests that departments have struggled to effectively learn lessons, share best practice, and seek advice and guidance from member states with superior or improving compliance records," PAC adds.

To sharpen departmental accountability, PAC recommends that the Treasury draws up a strategy for using EU funds in the UK, clearly setting out its value for money and accountability requirements. And it says the Treasury should include information on penalties incurred by each department in its annual statement on EU finances.

Launching her committee's report, PAC chair Meg Hillier (pictured) said government "inaction" was "costing taxpayers dear".

She added: "Money intended to support projects and programmes in the UK is instead being lost.

"The apparent lack of practical concern about this fact until recently will anger many people, whatever their views on Britain's EU membership.

"As a priority the Treasury and departments must identify the reasons they keep being penalised and take whatever action is necessary to rectify their mistakes."

A spokesperson for the Treasury said the government was "committed to ensuring this money is spent in the most effective way possible".

They added: "We have made real progress to ensure every penny of EU funding gets to where it's needed, including by reducing agricultural penalties by almost two-thirds since 2005, and leading the way in Europe to slash regulation and other administrative burdens."

Share this page