Six billion euros was paid out wrongly by the European Union last year, the highest cash total yet called into question by the European Court of Auditors’ annual review.

There were numerous cases of overclaiming from the EU’s budget of €114 billion (£93 billion), especially in regional projects designed to raise living standards in poorer areas, as well as “serious failures to respect procurement rules”, the auditors said.

At least 11 per cent of the €42 billion budget for regional and social funds should not have been paid out – the largest area of mismanaged expenditure and one for which the 27 member states and the European Commission are jointly responsible. There were also “irregularities” of between 2 per cent and 5 per cent in the €51 billion agriculture budget.

For the 14th successive year, the Court of Auditors was unable to state that the EU accounts were clean for “most spending areas”, although they gave the European Commission praise for producing a reliable set of figures for the first time.

“The court still finds that payments made to financial beneficiaries, such as farmers and project promoters running EU-funded projects, have a too high level of error,” they said.

Agricultural spending to encourage rural development was singled out for criticism for a “disproportionately large part of the overall error rate”.

While avoiding the label of fraud for most of the irregularities, one area of overpayment came in farmers claiming for nitrate reduction. In random checks on 13 claimants, 9 were found not to have met the criteria. Once again olive farmers, mostly in Italy, were singled out for criticism, for “errors such as unreliable data leading to overpayments.”

The auditors added: “In general, errors are often due to farmers over-claiming and/or entitlements being wrongly calculated. The court found errors related to farmers overclaiming or exaggerating land area or the number of animals.”

While the estimated level of “irregular” regional spending fell slightly from at least 12 per cent to at least 11 per cent, this led to the highest cash total because of the leap in the EU budget from €107 billion in 2006 to €114 billion last year. In all, there were material errors in 92.4 per cent of the EU budget.

Danita Hubner, the EU Commissioner for Regional Policy, said that her department had clawed back €843 million in irregular payments this year, with €1.5 billion more in the pipeline for recovery, including €243 million from Britain.

“Let’s not lose sight of the big picture – EU money helps to transform regional and national economies, invests in people’s skills, infrastructure modernisation, innovation and the environment,” she said. “Forecasts suggest that by 2013, it will increase GDP in Latvia, Lithuania and the Czech Republic by around 8.5 per cent.”

Mark Francois, the Shadow Europe Minster, said: “This depressing annual ritual has got to stop. As taxpayers across the EU feel the effects of the credit crunch they may well ask why the European Union is still failing to put its financial house in order.”

Where the money went

— Overpayments and lack of paperwork mean the European Commission will demand back £190 million from Britain this year

— £42 million of this is for projects in Northern Ireland, £31.5 million from Greater Manchester and Lancashire, £13 million from the Highlands and Islands and £12 million for errors in handling projects in South Wales

— Certified organic olives were found to be growing in a 10m high waste dump in the Puglia region of southern Italy. Four people were reported to the police for fraud after allegedly sending false certificates to the funding body, claiming that the olive oil was “produce from organic farming”

— The owners of a charitable horse-riding school received €400,000 (now £326,000) in EU funds from the Lombardy region of Italy. But the number of pupils on training courses for the disabled were allegedly inflated, with participants’ signatures forged to reach the number required to secure funding

Sources: European Commission; Open Europe

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