A LEAKED internal report has revealed systematic abuses by Euro MPs of parliamentary allowances that enable them to pocket more than £1m in profits from a single five-year term, writes Jonathan Oliver.

The auditor’s confidential report, suppressed by the Brussels parliament, discloses the extraordinary frauds used by MEPs to siphon off staff allowances funded by taxpayers.

It shows that some claimed for paying assistants of whom no record exists, awarded them bonuses of up to 1½ times annual salary and diverted public money into front companies.

An investigation into the abuses of staff allowances worth up to £182,000 a year — many of which are paid by MEPs to members of their family — was delivered in January last year but was not published.

A copy of the 92-page report, prepared by Robert Galvin, the parliament’s head of internal audit, has been seen by The Sunday Times. It reveals:

- Payments were made to assistants who were not accredited with the European parliament and to companies whose accounts showed no activity.

- End-of-year bonuses worth up to 19½ times monthly salary were paid to assistants to allow members to use up their full annual allowance.

- Payments, supposedly for secretarial work, were made to a crèche whose manager happened to be a local politician from the MEP’s political party.

oPayments were made straight into the coffers of national political parties.

- Some assistants doubled their money by banking pay-offs from outgoing MEPs at the same time as receiving salaries from incoming ones.

- One MEP claimed to have paid the full £182,000 staff allowance to one person, suspected of being a relative.

The revelations come as British MEPs look forward to an inflation-busting pay rise this year that could see their take-home pay rising by almost 50%.

In his report, Galvin said that overpayments of allowances were common, adding: “Remuneration paid may not always be justified by the real costs of providing parliamentary assistance.” He warned that abuses exposed the parliament to “financial, legal and reputational risk”.

The report was based on a representative sample of 167 payments — out of a total of 4,686 — made during October 2004. It suggests that Galvin unearthed only a tiny fraction of the many corrupt practices employed by some of the 785 members of the 27-nation parliament. His analysis of the 2004 figures then took years to surface within the secretive Brussels bureaucracy.

New figures compiled by the TaxPayers’ Alliance reveal how MEPs can pocket more than £1m over five years by exploiting different allowances. The calculations were inspired by known abuses of the system, which Brussels insiders claim have been commonplace.

Over a full term, MEPs could easily bank almost £450,000 in staff allowances — even if they employed several genuine full-time assistants.

The campaign group estimates that MEPs claiming the maximum subsistence of £257 a day while staying in cheap accommodation could also pocket about £105,000 from this source over five years.

MEPs could make £217,800 in office expenses by claiming their home was also their constituency office. No receipts are required to receive this money.

The lack of any need to provide receipts to justify travel expenses means that MEPs could receive a £54,000 tax-free profit while still making regular journeys between Brussels and their home country.

MEPs also have a final salary pension scheme which is even more generous than the one provided to members of the Westminster parliament. The TaxPayers’ Alliance calculates that the cash value of this benefit would be about £350,000 over a full parliamentary term.

At current exchange rates the grand total profit over five years comes to £1,176,800.

That figure does not include an MEP’s salary, which is due to increase after the June European elections thanks to a “harmonisation” of MEPs’ pay.

British MEPs receive £63,291 a year, the same as Westminster MPs. After July their pay after tax could rise from about £46,835 to almost £69,000 a year, depending on the exchange rate and whether they can pay the lower European Union tax rate of 15%.

The existence of the Galvin report was first revealed last year when Chris Davies, a Liberal Democrat MEP who read the document, refused to sign a confidentiality agreement and disclosed some of its findings.

Davies’s revelations created EU-wide interest in the corruption of the Brussels parliament. Despite the embarrassment, MEPs voted to keep the report confidential.

In November Den Dover, a British Conservative MEP, was forced to pay back £500,000 in expenses after The Sunday Times revealed that he had been wrongly paying his EU allowances to a family firm.

It was the most outrageous of a series of expenses scandals that emerged last year.

The European parliament has announced a number of reforms to the expenses rules which will come into force this summer. These include ensuring that MEPs’ staff are paid directly by the parliament rather than via the members’ own “service provider”.

However, Davies said the reforms did not go far enough, insisting that many of the Galvin report’s recommendations had yet to be adopted.

“If five steps are needed, the parliament always seems to take only two,” he said.

“We are now better than the Italian system but a long way short of the standards of the House of Commons.”

A spokesman for the European parliament said: “The Galvin report is a study of potential weaknesses in the system of parliamentary assistance allowances. It has had important consequences. The result has been a complete overhaul of this system to enter into force after the June elections.”

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