UK paid out £650m in fines for 'misspent' EU funding

Over the last decade, the UK government has incurred at least £650m ($947m) in penalties, due to errors in how public bodies have spent European Union funds, according to the Public Accounts Committee (PAC).

The parliamentary spending watchdog has found that government departments have moved too slowly to reduce the penalties incurred and for every £100 received, a fine of £2.70 was paid, compared to to 90p for Lithuania, 20p for Ireland and 10p for Estonia, Germany, Austria and Latvia.

The UK incurred the sixth-highest level of 'disallowance', relating to the Common Agricultural Policy in the EU, as a proportion of funding received by the European Commission.

The Public Accounts Committee pointed out that the "departments only seem to have woken up to the problem recently" and recommended that the Treasury take the lead in identifying why they continue to incur such penalties, the Guardian reports.

The committee said that the Treasury need to identify and exploit all opportunities, to simplify the administration of spending the funds in the UK. In comparison, the private sector and universities had a higher success rate in the way they used EU money.

Meg Hillier, MP for Hackney South and Shoreditch and chairwoman of the PAC, said the government's inaction was costing the UK taxpayer: "Money intended to support projects and programmes in the UK is instead being lost. The apparent lack of practical concern about this fact until recently will anger many people, whatever their views on Britain's EU membership.

"As a priority, the Treasury and departments must identify the reasons they keep being penalised and take whatever action is necessary to rectify their mistakes."

PAC added that EU rules and regulations for spending its funds are 'complex', of which contributed to the errors, but the UK government has chosen to design programmes that raise the risk of error and penalties further.

The Department for Environment, Food and Rural Affairs - singled out in the PAC report for mismanaging funds regarding payments to farmers and the Rural Payments Agency - told the committee that its eventual aim is to reduce error rates to at, or below, 2% by 2020.

The committee concluded that the treasury doesn't sufficiently hold government departments to account for spending EU funds and that it should publish a strategy for using EU funds in the UK, setting out the performance and value for money that is expected.