EU budget fraud ‘may be costing taxpayers over £4bn’

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The scale of fraud against the EU budget is likely to be in the billions rather than millions and at least 12 times greater than the amount acknowledged by the European Commission, a House of Lords report has claimed.

At the end of an inquiry into anti-fraud efforts it says the 404 million euro (£348m) cited in the most recent EU audit gives “only a glimpse” of the real size of the problem.

And it slams EU governments – who administer 80 per cent of EU budget funds – for making the Commission’s job harder by being reluctant to admit the level of fraud to Brussels.

The real size of EU budget losses annually is likely to be around five billion euro (£4.3bn) “or even more”, according to The Fight Against Fraud on the EU’s Finances published by the Lords’ Justice, Institutions and Consumer Protection EU Sub-Committee.

It says the UK government is not doing enough and should set up a single department to co-ordinate the fight against EU fraud and take responsibility for a problem which, according to Treasury figures, amounted to a loss in the UK last year of up to £1bn a year in VAT fraud and 77 million euro (£66m) and 204 million euro (£176m) against EU agricultural and cohesion policy programmes respectively.

Committee chairman Lord Bowness said: “Money is tight for everyone, right across the European Union.

“It is extremely worrying that so much money is disappearing from the EU’s budget without anyone really having a handle on where and why it is happening and – most importantly – who is responsible. That we have no control over how other member states organise their affairs is a given, but what we can – and are failing – to do, is to monitor what is happening on our own doorstep.”

He said the committee was “alarmed” by the lack of Government engagement or “seemingly” interest in a huge problem of EU budget fraud in the UK.

“By identifying a single Government department to lead the fight against EU fraud, the UK would be demonstrating our commitment to stemming the fiscal flow of fraudulent money,” Lord Bowness added.

The report said the EU Commission and member states were obliged by EU law to combat fraud against the EU budget but the onus fell mainly on member states.

“We found that the EU’s anti-fraud system has a number of weaknesses”, the report goes on.

“We conclude that the figure of £404m cited by the Commission in its annual report offers only a glimpse of the levels of fraud perpetrated against the EU’s budget.

“The lack of enthusiasm displayed by the member states in reporting fraud to the Commission coupled with a lack of uniformity throughout the member states in the definition of fraud clearly undermines the Commission’s efforts to grasp the full extent of this problem.

“Undetected fraud is by definition impossible to quantify.

“Based on our evidence it is suggested that the actual figure is around five billion euro, but it may be even more.

“Evidence suggests that some member states do not take their anti-EU fraud responsibilities seriously.

“No-one was able to tell us with any confidence how much known EU fraud is perpetrated from within these shores.”

Conservative MEP Philip Bradbourn, the party’s spokesman on EU budget control, said: “This hard-hitting report reinforces what Conservative MEPs have been highlighting for a long, long time – that fraud and misuse of money is simply not taken seriously enough within the EU.”