Europe in turmoil: Bungles, scams and cronyism cost EU billions

BILLIONS OF pounds are being lost each year through European Union waste and fraud, the Government's spending watchdog has warned.

As MEPs prepared to receive a damning internalreport on the mismanagement of EU funds today, the Comptroller and Auditor-General, Sir John Bourn, produced his own document, cataloguing a series of scams and bungles. Many of the new revelations concerned the Common Agricultural Policy, on which Britain has been lobbying for reform.

Conservative MEPs have written to Tony Blair demanding more action against "a culture of cronyism, nepotism, fraud and mismanagement" in the European Commission.

Sir John found that after four consecutive years in which the EU's auditors found major weaknesses in the management of its budget, there had been "little evidence of improvement". His report detailed specific instances of waste and fraud adding up to more than pounds 3bn. Among them were:

t A scheme to cut the number of fishing boats in the EU which removed 290 vessels from the fleet at a cost of pounds 200m - almost pounds 700,000 per boat. It later emerged that some were already out of service and others had been sunk in accidents. The EU auditors concluded the scheme had "practically no effect" on fishing activity.

t A scam in which two ships sailed from France, one full of olive oil and the other full of sunflower oil. Both docked in Italy and the olive oil was unloaded. Officials were told the oil for the Italian market was sunflower oil, which attracted lower duties. A total of pounds 4.6m was lost in import tax and EU aid to which the firms were not entitled.

t Durum wheat farmers were overcompensated for low yields to such an extent that pounds 2bn was lost between 1994 and 1997. As well as receiving a fixed minimum price, which made up for the yield, the farmers also received special aid for every ton harvested.

t Sixty five thousand cattle, slaughtered under a scheme designed to stop BSE could not be traced, even though farmers had apparently been compensated. Some cattle carcassescould remain in storage for five years because of a shortage of incineration facilities.

t New Zealand butter imported into the EU which fell outside strict fat content criteria required to qualify for a low rate of import duty. UK Customs and Excise officials failed to check it properly and as a result taxes worth some pounds 270m went unpaid.

t Cigarettes loaded into speedboats in Yugoslavia bound for Italy which were unloaded on the Adriatic Coast as contraband instead of going through customs. They went on to the EU black market and pounds 410m in tax was lost.

t Evidence of "suspected major fraud and irregularity" in the EU aid budget. One-third of the budget for southern Mediterranean countries and almost one-fifth of that for Central and Eastern Europe was never paid out.

Sir John called for better information from the European Commission on its finances, for new efforts to co-ordinate customs controls across Europe and for stronger procedures to improve the management of Structural Funds programmes. In their letter to Tony Blair, the Conservative MEPs accused the Prime Minister of backing "business as usual" in the EU, despite major financial irregularities.

Roy Perry, the Tory budgetary control spokesman, said that if today's internal report named individual commissioners then action must be taken against them. "Since December, Blair's boys in Brussels have refused to support Conservative moves to clean up Euro-fraud. Throughout this sorry saga, Blair's silence has been stunning," he said.