Watchdog Questions EU Accounts
by David Rennie in Brussels

The European Union's financial watchdog yesterday refused to give a clean bill of health to the EU's annual accounts - for the 11th year in a row.

The European Court of Auditors said it was unable to give a formal statement of assurance on the 2004 budget of almost £70 billion.

The court acknowledged that the European Commission had made "some progress" in reducing errors and "irregularities". In particular, once-notorious farm subsidies had been reined in by a special form of monitoring, known as IACS, the Integrated Administration and Control System.

David Bostock, the UK member of the court, said that for the first time, IACS had "reduced the risk of error for most agricultural expenditure to an acceptable level." But, he went on, it was still not possible to sign off EU spending on aid for poorer regions, aid and diplomacy, consumer protection and other areas, including "more complicated areas of agricultural spending".

The court's report provided some ammunition for Brussels officials who point out that more than 80 per cent of EU spending is handled by national governments. But the report again singled out Spain and Greece for serious failures to monitor farm subsidies, especially in sectors such as olive production. The auditors stressed that talk of errors and unverified payments was not the same thing as fraud.

Pro-European politicians, such as the Liberal Democrat leader in the European Parliament, Chris Davies, pointed out that the UK's Department of Work and Pensions has failed to have its accounts signed off by national auditors for more than a decade.

EU auditors did provide some examples of apparent fraud. They cited a Greek farmer who claimed to have lost 501 sheep to disease and wolves between 2002 and 2004 and had certificates from the local veterinary office confirming his losses. Yet he was also claiming that his herd was unchanged in size - a phenomenon he could not explain, when pressed.

The Conservative MEP James Elles criticised the Government for resisting a commission appeal to make national finance ministers sign off on their individual spending, year by year.

The call was made last week at a meeting of EU finance ministers chaired by Gordon Brown, the Chancellor of the Exchequer, as part of the UK's current EU presidency. Mr Elles said: "Gordon Brown is yet again saying one thing and doing another." He wanted others to act but would not take the lead.
The Daily Telegraph, 16th November 2005

Another Year, Another EU Fraud
by Daniel Hannan

It doesn't even make the newspapers any more: that's the shocking thing. We are so blasé about Brussels fraud that we no longer notice it. Yesterday, for the eleventh year in a row, the European Court of Auditors refused to approve the EU's accounts.

Its 324-page report was couched in the bland language favoured by accountants everywhere, but its import was unmistakable. Chunks of the EU's £70 billion budget are being lost and stolen. The report identifies fraudulent claims, bogus invoices and other accounting failures. While the auditors are happy to vouch for the money raised by the EU, they cannot say where it goes.

If a private company behaved this way, the story would dominate the front pages; indeed, the directors would be lucky to escape prison. But then, private companies use recognised accounting procedures, which allow irregularities to be spotted. Not so the EU which has still not adopted a verifiable, accrual-based method.

Indeed, one of the main complaints of the former chief accountant, Marta Andreasen, was the absence of double-entry book-keeping. Many accounts, she found, were held on spreadsheets, allowing them to be retrospectively doctored. When she went public, she was suspended and then, in a final vindictive act by the outgoing Commission, fired.

What makes the EU behave like this? Its employees are not inherently wickeder than anyone else. All organisations have their share of shysters. The difference is that there is no link in Brussels between taxation, representation and expenditure. The EU expects bouquets when it spends, but not brickbats when it taxes, because its revenue is handed over by national treasuries.

As Milton Friedman once observed, there are only two kinds of money: your money and my money. The trouble is that, in Brussels, it's all your money. This creates an attitude to expenditure that is at best negligent, at worst corrupt.

Yesterday in the European Parliament, Euro-sophists pooh-poohed the report on three grounds: that the system is improving; that critics are all xenophobes; and that the failings identified are the responsibility of the member states, not of the EU directly. These are important objections, and deserve to be considered separately.

We have heard the "things are getting better" line before. Cast your mind back seven years, to the downfall of the Santer Commission. Remember a Dutch whistle-blower called Paul van Buitenen? Remember his revelations of awesome sleaze: kickbacks in return for contracts, friends and family kept on the public payroll? Remember Edith Cresson employing her dentist as a "consultant" on a handsome salary?

Do you not recall being assured that such things would never happen again? That Prodi would hose the stables clean? Well, eight years on, nothing much seems to have changed. The President of the Court of Auditors told MEPs yesterday that "there has been no improvement" in how the EU runs itself.

The truth is that EU fraud is, in the correct sense of the word, structural: a product of how the Brussels institutions are set up. By saying this, I open myself to the second charge, that of being motivated by hostility to the EU. And here I must plead guilty: I am against the EU. I'm not anti-European: I speak French and Spanish and have worked all over the Continent.

It's just that, after seven years in Brussels, I have reached the view that the system is beyond reform. When they disparage their critics this way, the Eurocrats confuse cause and effect. We are not banging on about corruption because we dislike the EU; we dislike the EU because we see it for what it is: a racket, whose chief function is to look after its own.

Finally, let us deal with the assertion that, since much of the EU's spending is disbursed by national and regional authorities, Brussels ought not to be blamed for their failings. It is certainly true that the money trickles down through many levels, like champagne through a pyramid of crystal flutes.

But this is the problem: in such a system, no one has an incentive to behave properly. The applicants, knowing the cash is there to be claimed, arrange their affairs so as to qualify for it. National authorities have no interest in policing the system, since it is all EU money. And Eurocrats are happy to sign the cheques in the belief that they are buying popularity.

Many British people believe that the problem is cultural: Denis Healey once spoke of "an olive belt" that divides prim Northern Europeans from naughty Mediterraneans.

His Lordship would doubtless enjoy the case cited in the current report of a Greek shepherd who, in 2002, registered a herd of 470 sheep. That year, apparently, 70 of his animals were taken by wolves. The next year, 192 of them were carried away. The year after, 239. Yet, last year, he still had 470 sheep and, according to the auditors "no evidence could be produced by the farmer to justify how he restocked his herd".

But here's the thing: the same kind of ruse is identified in North-East England. The EU system is turning Geordies into Greeks - or, more accurately, turning Geordies, Greeks and everyone else into subsidy-hungry Euro-supplicants.

This is the worst aspect of Euro-corruption. In my own constituency, I have seen how the people most directly ruled by EU law - fishermen - have been forced to alter their behaviour to comply with the Brussels way of doing things.

I have seen honest men turned, against their will, into liars and cheats by the Common Fisheries Policy.

The disease is not confined to Brussels: it is contaminating our own body politic, carried by cash handouts through our veins and arteries. After years of looking vainly for a cure, it is time to consider amputation.
The Daily Telegraph, 16th November 2005

Daniel Hannan is a Conservative MEP for South East England

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