Labour Euro-Safeguards Campaign - Bulletin May 2009


QUESTIONS AND ANSWERS ON FRAUD AND CORRUPTION IN THE EU

  1. Is fraud and corruption a more serious problem in the EU than it is generally?

    No organisation is perfect and all countries and organisations suffer in varying degrees from fraud, corruption, misfeasance and waste, the UK - sadly - being no exception. There is, however, increasing evidence that in some significant respects the EU is in a class of its own in suffering from these deficiencies. Because of its peculiar nature, the EU has sucked power away from its constituent Member States to more and more powerful central institutions in Brussels. Because of its distinctive structure, the vast majority of the policy and decision making is in the hands of officials rather than elected politicians. The Commission, the European Central Bank and the European Court of Justice are all very largely self appointed bodies. The result has been that those in positions of power are unaccountable and therefore have had no real constraints on running things the way they think fit and paying themselves accordingly. This is the problem. From the top downwards, those running the EU have progressively enriched themselves to a greater and greater extent at the public expense. This has generated an environment where standards of managerial efficiency have slipped and slipped and where a culture which tolerates fraud and corruption is endemic.

  2. How much do people in the Commission get paid?

    The EU has 27 Commissioners because, at the moment, there has to be one for each country. Some have heavy responsibilities. Others do not. The scale of their remuneration, however, is in all cases huge. For a five year term, they can each expect to be paid a total of rather more than 1.6m euros, excluding pension rights and a very wide range of generous expenses. The Commission staff are paid comparably lavish amounts with an eye watering range of perks, including wide exemptions for paying VAT, tax free allowances for each child, subsidised schooling, and very generous resettlement and travel allowances. Income taxes are paid at a special low rate, often no more than one third of what would normally apply. It is almost unheard of for any Commission employee to be fired for sub-standard performance or even theft but, if this happens, they are automatically awarded a dismissal allowance while their expenses go on being paid for another twelve months. The result is that those working in the Commission are largely insulated from the real world, with little in the way of penalties in place for bad management and incompetent administration.

  3. How much money gets wasted by the CAP and CFP?

    In these circumstances, it is hardly surprising that so much for which the EU is responsible is so badly run. There is plenty to be said in principle against the existence of both the Common Agricultural Policy (CAP) and the Common Fisheries Policy (CFP), but each of these completely unjustifiable policies is made far worse by the incompetence with which they are administered. About 85% of the CAP's annual 58bn euros goes to just 18% of farms, and the richest 2% of farmers and agricultural companies cream off a quarter of the EU farm budget. The average farmer then receives no more than about 8,000 pounds per annum. Although no more than 5% of EU citizens work in farming, and just 1.6% of EU output comes from agriculture, aid to agriculture still absorbs just under half of all the EU budget. Fraud exists on a huge scale. A single olive scam cost the EU 113m euros. Just one dairy in France fleeced the EU of 20m euros. Estimates for the total misappropriation of CAP funds vary between 30% and a staggering 50%. The situation at the CFP is no better. The Commissioner responsible for the policy himself recently admitted that "80% of our stocks are fished so heavily - above maximum sustainable yield - that the yield is reduced. This compares to the global average of 25%." This is partly a result of the incredibly inefficient way in which the total catch is supposed to be controlled, leaving at least a million tonnes of edible fish being thrown back in the sea every year because they are not eligible to be landed.

  4. How about wasteful projects?

    In the EU administrative environment, it is all too easy for unjustifiable policies to develop a life of their own, untrammelled by the most basic standards of cost efficiency. Perhaps the most glaring current example is the Galileo project, designed to replicate the American Global Positioning System which is available free to the rest of the world. Started in 2000, it should have been operational by 2007 but the first test satellite was not launched until 2005. During this period, it became apparent that the Galileo project, having originally been projected as highly profitable and thus easily financeable by the private sector, had no chance of covering its costs. Instead of then being abandoned, it is now set to proceed at a cost of some 14bn euros to the EU tax payer. At one stage, finance to keep this project going was only secured by raiding part of the CAP budget, depriving it of funds which had been raised for an entirely different purpose.

  5. Why are the accounts not signed off?

    A clear indication of the depth of the managerial problems within the EU administration is the catastrophic position on approving the EU accounts. For the last 14 years, the EU Court of Auditors has refused to sign them off, commenting that "Errors of legality and regularity still persist in the majority of EU expenditure due to weaknesses in internal control systems both at the Commission and in member states." Indeed the Auditors are unable to be sure that they know where as much as 80% of EU funds end up. This is largely because expenditure of EU funds is delegated to the constituent Member States, but this is not an excuse accepted by the Auditors themselves, whose view is that "Regardless of the method of implementation applied, the Commission bears the ultimate responsibility for the legality and regularity of the transactions underlying the accounts of the European Communities."

  6. What about whistle blowers?

    One of the results of the culture in the Commission is the treatment received by a succession of brave people who have tried to blow the whistle on the way in which EU funds have been misused and misappropriated. Because of the ingrown nature of the EU bureaucracy, there is very little toleration of scepticism and dissent and almost no willingness ever to accept that mistakes have been made and money wasted or lost. The clearest confirmation that this is the case is to be found in the treatment of all those who have tried to bring to light irregularities and bad management. In any well run organisation, clear evidence of malpractice would be welcomed by senior management and remedial action taken to put things right. This is not the way, however, that things are done in the EU. Instead, all whistle blowers have been treated with almost unbelievable harshness, while their insights into what has gone wrong have been ignored. In an atmosphere where dissent is inclined to be treated as insanity, it is hardly surprising that this should happen. The result, however, is that fewer and fewer people are willing to put their careers on the line and less and less is done to correct faults which ought to be exposed and remedied. The EU's internal system for dealing with fraud and corruption - called OLAF - is correspondingly almost totally ineffective. Despite all the misappropriation of funds for which there is overwhelming evidence, not one single EU official has ever been convicted of fraudulent use of EU money.

  7. Why does the European Parliament not control matters better?

    The only directly elected body within the EU structure is the European Parliament. Calling it a parliament, however, is a misnomer. It cannot form a government. It cannot initiate legislation. It is really little more than a consultative assembly. Partly because of this, it has never been taken that seriously by its electorate, which regularly turns out in much lower numbers for euro-elections than for those in Member States. Perhaps because it lacks democratic legitimacy, it has never shown as much interest as it might in containing fraud and corruption within the EU. Undoubtedly, however, its ability to do this, even if it wanted to do so, would be compromised by the way it conducts its own affairs. The European Parliaments is almost unbelievably expensive, partly because of the huge amount MEPs get paid and partly because of the lavish perquisites and support which all MEPs receive. Controls over whether claimed expenses are actually incurred are almost non-existent. MEPs are awarded over 200,000 euros a year allowances for employing staff without any check on whether they actually do so. They have an allowance of nearly 50,000 euros a year for having an office in their constituency without ever having to show that such an office actually exists. They have a subsistence allowance of about 60,000 euros a year without any receipts being required to show that this money is ever properly spent. As all these payments are tax free, it has been recently calculated that, by pocketing all these expenses but not spending the money, it is easy for an MEP to come away from a five year term in the European Parliament some 1m euros better off at the end of the term than at the beginning.

  8. What about democracy?

    The fundamental reason why fraud and corruption in the EU is such an endemic, persistent and widespread problem is in fact not hard to find. It is because the whole structure of the EU is so far removed from the concepts of democracy which operate in all developed countries which have relatively high standards of public probity. If there is a democratically elected government, and especially if there is a two party system so that those who misbehave can be thrown out by the electorate, a powerful and continuing constraint on abusing power for personal gain is in place. This is what the EU lacks. Power lies almost entirely in the hands not of elected politicians but of unaccountable officials - exactly as the founders of the Common Market many years ago, who deeply distrusted democracy, intended should be the case. Unfortunately, the EU's founding fathers greatly under-estimated the extent to which human nature would subvert the high ideals which they thought that EU officials would always maintain. Instead of good governance, based on noble principles, we have an administration structure riddled with self interest with no way for pressure from below to correct the situation. There is little incentive for officials not to feather their owns nests or to spend money wisely and efficiently. The opinion polls not only in the UK but elsewhere in the EU suggest, however, that this sort of behaviour is less and less acceptable. In the short run, it may be that the way the EU is run will continue much as it is. Whether it will last in anything like its present form indefinitely may well turn out to be another matter altogether.

Go to
Head of Page