Skip to main content

Government must act now to reduce EU penalties

27 April 2016

The Public Accounts Committee report concludes Government departments have moved too slowly to reduce penalties incurred to the European Commission.

Report findings

Over the last decade, the UK government has incurred at least £650 million in such penalties because of errors in how public bodies have spent European Union funds—the sixth-highest level of 'disallowance' in the EU as a proportion of funding received by the Commission.

The Committee finds 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.

The Committee says: "By the end of 2016 we expect departments to have spelt out what actions they will take to reduce penalties. If necessary, a task force should be established to ensure that the action needed is delivered."

UK departments add complexity to EU programmes

The Committee highlights the problem of UK departments contributing "additional complexity" to the implementation of EU programmes, driving up error rates.

Too little is being done to learn lessons and share best practice in Whitehall, says the Committee. Departments are also doing too little to learn from other member states.

On agriculture and rural development funding, for example, the Report states: "There is clearly scope to learn, with 21 countries having better records than the UK's figure of £2.70 disallowance for every £100 received over the last 10 years.

"For example, the equivalent figures as at June 2015 for other countries include Lithuania at 90 pence, Ireland at 20 pence, and Estonia, Germany, Latvia and Austria at just 10 pence of penalties for every £100 received."

Treasury does not hold departments to account

The Committee concludes the Treasury "does not sufficiently hold departments to account for spending EU funds" and calls on it to publish a strategy for using EU funds in the UK, setting out standards for performance and value for money.

It finds the private sector and UK universities "have a good success rate in securing funding from EU-wide funding competitions" and urges the Treasury to lead new work to learn from this.

The Treasury should also "press the Commission to identify actions that will ensure that a budget focused on results becomes a reality", says the Committee, concluding "the current EU budget process limits the achievement of value for money".

Chair's comments

Meg Hillier MP, Chair of the PAC, said:

"Government inaction on EU penalties is costing taxpayers dear. 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.

Beyond that, on behalf of taxpayers our Committee will expect the announcement of a named official to take responsibility for improving performance in this area.

What makes this doubly frustrating is departments have hindered themselves by introducing still further complexity to already complex EU programmes. As we have seen, these poor decisions can have costly repercussions.

The experiences of EU member states, the UK private sector and UK universities point to some simple overall conclusions: the government has much to learn and the sooner it learns it, the better."

UK third largest net budget contributor

In 2014, the EU budget received €143.9 billion (£116.0 billion) in contributions from 28 member states and other sources, and made €142.5 billion (£114.8 billion) in payments. The UK gross contribution to the EU budget, after taking into account the UK rebate of £4.9 billion, was £11.4 billion.

It received £5.6 billion in public and private-sector receipts from the EU budget, thus making the UK's net contribution £5.7 billion. If private sector receipts are excluded, the net contribution in 2014–15 was equivalent to 1.4% of UK government total departmental expenditure.

Overall, the UK was the third-largest net contributor of all member states in 2014.

Report summary

Over the last decade, the UK government has incurred at least £650 million in penalties to the European Commission because of errors in how UK public bodies have spent European Union (EU) funds.

EU rules and regulations for spending EU funds are complex, and this in itself contributes to errors; however, UK governments have chosen to design programmes which have added to this complexity, driving up the risk of errors and penalties further.

Departments have exhibited "lack of urgency"

UK government departments have exhibited a distinct lack of urgency in tackling complexity and reducing the levels of penalties incurred.

HM Treasury has not done enough to hold departments to account for spending EU funds, nor to encourage learning from best practice, nor to lead by example by improving the quality of information available on how well EU funds are spent in the UK. 

Further information

Image: iStockphoto