Britain to face pounds 300m `fraud' fine

KATHERINE BUTLER

Brussels

Britain is among EU governments facing fines totalling over pounds 800m for fraud against the Union's agriculture budget. The European Commission is set to demand back subsidies illegally paid out to farmers, meat factories and agricultural exporters in 1992 or preceding years.

Italy, Spain, Greece and Ireland together account for more than half of the penalties for cheating in the dairy, cotton and beef sectors respectively. But Britain, a constant critic of EU waste and fraud will not escape: lax controls over farm spending means the Government will have to pay back at least pounds 8m.

Most of the penalty facing the UK relates to cases of alleged fraud in the beef industry. These came to light during a two-year long probe which also spanned Ireland, France and Italy. While Ireland has emerged as by far the biggest offender, a report prepared by outside consultants to the commission confirms there is "incontestable evidence" of serious breaches by the authorities in all four states.

The report, seen by the Independent, lists flaws in the management of the EU funded beef storage system which is designed to keep up the beef price. These included acceptance of sub-standard meat for subsidised storage, systematic falsification of documentation relating to the classification of meat; "total absence" of controls over the weights or value of meat as it entered or left intervention; and yawning gaps in accounting procedures.

Following a conciliation process Britain has succeeded in persuading the Commission to reduce its fine from the original pounds 12m figure recommended by officials. Dublin is still facing a ruinous penalty of over pounds 100m, one of the biggest ever imposed on a member state.

EU inspectors found extensive abuses of the beef intervention system in Ireland over the years 1990 to 1992, corroborating the findings of the Irish government's own 1992 beef industry tribunal which led to a number of prosecutions. Frantic lobbying by the Irish government - even the Prime Minister, John Bruton, has intervened - has failed so far to persuade the Commission that it should agree to a rebate.

A final ruling on the exact scale of all the penalties is expected next week, when the 20 Commissioners gather to carry out the annual "clearance of accounts", an exercise which involves cross-checking permitted expenditure from the pounds 30bn farm budget against actual payments. Member states are responsible for handling 80 per cent of payments under the CAP and it is their failure to maintain adequate checks which the Commission blames for the vast bulk of fraud.

The Union's spending watchdog, the Court of Auditors, refused to certify the EU's accounts for 1994 on the basis that pounds 2bn could not be properly accounted for. But it pointed the finger at EU governments rather than Brussels for sloppy controls and lax financial management.