Auditors say EU spending delivers limited value for money but the timing of their report poses questions

EU rural development spending for diversifying the rural economy is intended to address identified problems in rural areas such as depopulation, scarcity of economic opportunities and unemployment. It provides funding to people and rural businesses for projects to help support growth, employment and sustainable development (see picture). (ECA Photographic Library).

EU rural development spending for diversifying the rural economy is intended to address identified problems in rural areas such as depopulation, scarcity of economic opportunities and unemployment. It provides funding to people and rural businesses for projects to help support growth, employment and sustainable development (see picture). (ECA Photographic Library).

The European Court of Auditors (ECA) in a report that was published yesterday reveals that the EU spends billions to help the rural economy restructure but with poor results, delivering “only limited value for money”. EU spending on agriculture be it production and producer subsidies or supporting structural investment plans has being traditionally criticised not only for incompetent handling of programmes but also for extensive fraud. There are stories about subsidies to production, producers and rural development plans notoriously mismanaged by member states. However the timing of this ECA report poses questions. Let’s start form the facts.

As it usually happens with almost all EU agricultural programmes, the rural economy diversification projects are not an exception in wasting some part of the money spent. According to a Press release issued by ECA, “Member States were often driven by a need to spend the allocated budget rather than by an assessment of the appropriateness of the diversification projects themselves”. Jan Kinšt, the ECA Member responsible for the report went a bit further and said that “Member States and regions have not specified clearly what they wish to achieve…In practical terms, this led to situations where almost any kind of project could be accommodated under the objectives set”.

Half of EU spending

As noted above though this report appeared in a very inopportune time for the Commission and the European Parliament. The two EU bodies are currently devoting a lot of efforts to convince the Council (the 28 member states) to accept an increase in the ceiling of the 2014 overall EU budget spending. The European Council has presently proposed more cuts on EU budget, below the limits the Commission’s own proposal have set. Not to forget that EU spending on agriculture and similar activities absorbs a bit less than half the entire budget.

To grasp the magnitude of the EU resources agriculture absorbs it suffices to indicate that during the now ending multi-annual financial framework 2007 – 2013, the percentage of funds devoted to this chapter by those seven EU budgets was 42.5%, covering the common agricultural policy, the common fisheries policy and rural development and environmental measures. In absolute numbers the funds devoted during the 2007-2013 period to the sectors above were around €425 billion.

Coming back to this ECA report on EU expenditure directed to agricultural economy diversification, it informs us that the planned EU spending for these measures was €5bn for the seven 2007-2013 period plus €2bn from the Member States’ national funds. Judging from the results that the ECA report covered that is 6 EU countries and regions, the entire EU funds devoted to these goals were misspent and produced “only limited value for money”.

The audit covered the Commission responsibilities and six Member States (the Czech Republic, France − Aquitaine, Italy − Campania, Poland, Sweden (Västra Gotland) and the United Kingdom − England (Yorkshire and Humber). Examining a sample of projects which had being financed in the above countries and regions, the auditors found that, “The overarching priority of job creation was not properly targeted. The methods of monitoring and evaluation in place did not allow the true picture of jobs created and maintained by these measures to be ascertained. The sample of projects audited showed that they were only moderately successful in generating the employment they intended to”.

Bad timing

The European Sting has presented more than one ECA report during the past few months examining specific EU budgetary areas and management topics. On almost all those reports the auditors found that the targets were only partially met and varying parts of resources were wasted. However the timing that this present audit report appears is very crucial, because as noted above there is an ongoing negotiation for the 2014 EU budget spending ceiling. Its publication now is expected to mitigate the power of the arguments that the Parliament and the Commission will present to Council in support of more restrained cuts on the EU budget.

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