Government averts threat of huge EU fines

The  Labour Government left a terrible mess behind in terms of £230 Million fines from the EU concerning the incompetence of regional quangos, of the Government Offices for the Regions and the Regional Development Agencies.

In Opposition Eric Pickles said:

 "Having to pay out £230 million in fines will devastate funding for regeneration and business support at a time when businesses are struggling and the public coffers are empty. This is a financial scandal... Labour ministers need to come clean over the nature of these so-called financial irregularities, and state whether this is fraud, maladministration or incompetence at the heart of Government."

Grant Shapps has now reported to Parliament on progress being made to deal with  this problem:

The Government are on target with the current European regional development fund programme. Funds must be spent by 2015 and we have already invested some two-thirds of the moneys at a point when we are two-thirds of the way through the duration of programme. All areas have meet their 2011 spend targets. Recent funding calls have attracted high levels of interest, which reinforces the fact that we are on track to spend the remainder of the programme on target.

I would note that the claims made by the hon. Member in his recent party political press release were wholly inaccurate. Indeed, under the last Administration, the European regional development fund was plagued by a legacy of poor administration, and the coalition Government have overhauled the management of these schemes that we have inherited.

We have ensured that the European Commission lifted an interruption on the programme which it had ordered. These steps will also protect taxpayers from the prospect of large 'financial corrections' being levied due to poor administration, as happened under the 2000-06 European regional development fund programme. The operation of the fund is governed by complex European regulations and comes with stringent penalties if those are not met. Our firm action is helping to reduce the size of the liabilities that we inherited from the 2000-06 programme, as well as ensuring better management of the 2007-13 programme that we have inherited, by bringing it in-house and
tighter audit processes.

To place the shocking mismanagement of the last Administration in context, as outlined in the answer of 12 October 2011, Official Report, column 448W, a total £101.3 million of funding was lost through financial corrections and unrecoverable amounts arising from irregularities from the European regional development fund 2000-06 programme throughout the period 2000-11. Such losses effectively mean less money to invest in regeneration and growth.

As noted in a recent departmental press notice, this Government inherited potential liabilities for European regional development fund projects between 2000 and 2006 estimated to be as high as £236 million, of which the Department has accepted that £38.1 million of this could not be recovered (this is included in the £101.3 million figure in the paragraph above).

At the end of December 2011, my Department has managed to reduce the remaining figure (£198 million) to a total of £67 million (a reduction of around £131 million) and is continuing to seek recovery of the remaining amount.

To ensure that we continue with tighter levels of control for the 2007-13 programme we have taken on independent auditors, Moore Stephens, to identify irregularities in existing claims to the European Commission; and we have overhauled the audit process to minimise errors in future claims.