Auditor recommends giving committed EU funds to UK after Brexit

The European Court of Auditors published on Thursday its evaluation on the EU budget 2016. The level of errors declined to 3.1%. [ECA]

The easiest solution to settle the account with the UK would be to continue transferring committed EU funds to London within this budgetary period even beyond the exit date of March 2019, the president of the European Court of Auditors said on Wednesday (27 September).

Speaking to a group of journalists, Klaus-Heiner Lehne explained that there are chiefly two options to clear Britain’s position in regard to the current multiannual financial framework, the EU’s long-term budget.

The first option would be to continue transferring EU funds allocated under this MFF, which ends in 2020. Meanwhile, the UK would have to contribute paying the sums pledged at the beginning of this budgetary period.

“If I should give some advice, for me, this would be the easiest solution”, he said.

The other option is to calculate the net value by deducting the funds allocated to the UK from the amount that the country must pay to the 2014-2020 budget.

UK challenges obligations to every EU programme

British negotiators rejected the EU’s demand that they come up with a specific proposal on the bill London would have to pay as part of its exit from the bloc. The UK is questioning its obligations in regards to every line in the EU’s trillion euro multiannual budget, sources familiar with the talks explained.

The net result would clearly be in favour of Brussels. According to some estimates, it could be between €60 billion to €100 billion given the committed funds under this multiannual financial framework, his contribution to other EU funds and institutions, and other liabilities (including EU civil servants’ pensions).

Lehne said that “it would be difficult to calculate this amount”, given that payments continue to be made up to three years after the long-term budget expires, given that the execution of some projects last beyond the end of the official period and bills keep arriving.

The EU and the UK will conclude today the fourth round of negotiations to agree on the divorce terms. One of the most difficult issues to settle is the bill the UK should pay to cover commitments it had made as a member state.

During the previous round of talks, EU chief negotiator Michel Barnier told the UK that “Brexit means Brexit”, echoing British Prime Minister Theresa May’s wishes for a clean cut from the Union. The country would stop enjoying the benefits of being a member state after March 2019.

May asks for two-year transition deal after Brexit

British Prime Minister Theresa May called for a two-year transition after Brexit on Friday (22 September) in which Britain would largely maintain its current ties with Brussels, in a charm offensive intended to unlock stalled negotiations with the European Union.

But May requested last week in Florence a transition period of two years to conclude a new association agreement with the EU after the exit. During this period, the UK would honour the commitments made under this MFF, she said.

To date, EU officials have been less clear on whether the UK would receive funds allocated to the country under this budgetary period after the Brexit.

Lehne said that he has been in contact with Barnier since the EU-UK negotiations started. But he said that the Court of Auditors was not asked to provide a methodology to estimate how much the UK must pay to the bloc as part of the financial settlement.

Improved use of the EU budget

Lehne spoke to reporters on the occasion of presenting the Court’s annual report on the EU budget.

The auditors concluded there has been a “substantial improvement” in the estimated level of error in payments made from the bloc’s budget in 2016.

The auditors have issued a qualified opinion on 2016 payments, rather than an adverse one. A “qualified” opinion means that the auditors cannot give a clean opinion, but the problems identified are not pervasive.

This is their first qualified opinion since they began providing an annual assessment in 1994.

Last year, the overall level of error for EU spending was estimated at 3.1%, compared with 3.8% in 2015 and 4.4% in 2014.

Court of auditors warns of multi-billion EU budget gap

Member states will be required to contribute a further €326 billion to the 2014-2020 EU budget. This may affect the Commission’s ability to meet all the requests for payments, and of countries to pay their dues, the European Court of Auditors (ECA) warned.

However, Lehne warned about the high level of unpaid bills that roll over from one MFF to the next one. The EU has accumulated €238.8 billion of unpaid bills.

“Clearing this backlog and preventing a new one should be priorities when you consider the planning of EU spending in the period starting in 2020”, the president said.

Despite recent efforts to increase the efficiency and the effectiveness of how the EU money is spent, the auditors also considered that the Commission should improve the performance of the EU budget.

In this regard, they recommended the Commission should adopt international good practices to monitor and report the performance.

Background

The European Court of Auditors is the independent audit institution of the EU. Spending totalled €136.4 billion in 2016, or around €267 for every citizen. This amounts to around 1% of EU gross national income and represents approximately 2% of total public spending in member states.

“Entitlement payments”, made for meeting specific conditions, account for about 49% of EU spending and showed levels of error below 2%. They include direct aid for farmers, grants to students and researchers, and staff costs. ‘Natural Resources: Market and direct support’ had an estimated level of error of 1.7 % and ‘Administration’, 0.2 %.

The level of error was higher in "reimbursement payments". For ‘Economic, social and territorial cohesion’, the estimated level of error was 4.8%; for ‘Natural Resources: Rural development, the environment, climate action and fisheries’, was 4.9%.