UK paid £650m in fines for mis​spent EU funding, MPs find

The government has incurred at least £650m in penalties over the past decade because of errors in how public bodies have spent EU funds, parliament’s spending watchdog has found.

The Treasury is partly to blame for a failure to control the way the EU money has been spent, according to the public accounts select committee. It is the sixth-highest level of “disallowance” in the EU as a proportion of funding received by the European commission.

A report by the committee has found that government departments “only seem to have woken up to this problem recently” and calls on the Treasury to take the lead in addressing urgently the causes and levels of penalties incurred.

Meg Hillier, the chair of the committee, said government inaction to tackle EU penalties was costing the taxpayer.

“Money intended to support projects and programmes in the UK is instead being lost,” she said. “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.”

In 2014, the EU budget received €143.9bn (£116bn) in contributions from 28 member states and other sources, and made €142.5bn in payments, the report said.

The UK gross contribution to the EU budget, after taking into account the UK rebate of £4.9bn, was £11.4bn. It received £5.6bn in public- and private-sector receipts from the EU budget, thus making the UK’s net contribution £5.7bn.

If private-sector receipts are excluded, the net contribution in 2014-15 was equivalent to 1.4% of the UK government’s total departmental expenditure.

Departments singled out in the report for misspending EU money and then incurring fines included Department for Environment, Food and Rural Affairs, regarding payments to farmers, and the Rural Payments Agency.

Whitehall departments had exacerbated problems caused by the already complicated EU rules and regulations by designing complex spending programmes, increasing the risks of error, the committee said.

In an examination of agriculture and rural development funding, the committee said the UK had had £2.70 disallowed for every £100 it had received over the past decade, compared with 90p for Lithuania, 20p for Ireland and just 10p for Estonia, Germany, Latvia and Austria.