A secret internal inquiry by the European Parliament has found widespread abuse of expenses by MEPs employing ficticious staff or unqualified family members, it was revealed last night.

Europe’s anti-fraud watchdog has launched an investigation after learning about the audit which was kept under wraps by the parliament and only shown to MEPs on request at a secret location — and even then they were not allowed to make notes, only read the damning report.

The explosive inquiry centres on misuse of the annual parliamentary assistants allowance of £130,000 available to all 785 MEPs to pay staff — a total of more than £100 million.

It found malpractice by many MEPs in a random sample that showed some of them claimed the cash for ficticious staff or unqualified family members in an echo of the Tory MP who lost the Conservative whip last month for employing his undergraduate son.

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The gilded life of the MEP long ago made the terms 'European Parliament' and 'Gravy Train' synonymous

David Charter, Europe Correspondent of The Times

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The EU’s independent investigation team was called in by Chris Davies, the Liberal Democrat MEP, who said: “This report is dynamite — and makes the Derek Conway affair at Westminster look like small-change.” Mr Davies is one of a group of MEPs on the European Parliament’s Budget Control Committee who were allowed to look at the report this week. Committee members were also supposed to sign a confidentiality agreement.

But Mr Davies did not, and last night he revealed that the auditors’ catalogue of alleged abuses of payments for MEPs’ office staff for the audited period between late 2004 and early 2006. “When I looked at this report my first reaction was to laugh at the outrageous extent of the abuses” said Mr Davies.

“Then that feeling turned to anger and the realisation that the police or the anti-fraud people should be looking at this.” Franz Bruner, Director-General of OLAF, the EU’s internal anti-fraud squad, confirmed that he was launching an inquiry and had demanded to see the audit report by the end of this week. Mr Davies said that many MEPs seem to be involved in malpractice, with large sums of money impossible to account for, according to the audit report. But the document names no names and leaves major questions over how MEP staff allowances have been used.

Most MEPs use an established payment system, which involves appointing a “service provider” — a professional accountancy firm or other professional book-keeper — to handle all cash destined for parliamentary staff.

According to Mr Davies this system is revealed as giving MEPs plenty of freedom to conceal the true extent of payment and recipients.

Mr Davies said that the report reveals that, in some cases, the “service providers” are fictitious. In other cases MEPs employ no official staff, and sometimes social security payments required under Belgian law are not paid. In one case staff working for one MEP received a Christmas bonus 19 times of monthly salary.

The report is due to be discussed by the European Parliament’s Budget Control Committee on Tuesday: “Maybe when some MEPs are exposed for defrauding Parliament and are sent to prison a more acceptable approach will be adopted,” Mr Davies said.

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