Unappealing choice between quick stimulus and error-free spending

The EU needs to rewrite its spending rulebook

In two weeks’ time, the leaders of national governments will meet in Brussels for a summit devoted to discussing the European Union’s budget for 2014-20. Before they do so, they should engage – at least momentarily – with the annual report of the EU’s external auditors, who this week (6 November) gave their verdict on the EU’s accounts for 2011.

The verdict was a qualified one: which might be interpreted either as “Yes, but…” or “No, but…” according to one’s politics and one’s institutional position. The European Court of Auditors said that the accounts were a true and fair representation, but that the underlying transactions were beset with too many errors and irregularities. Although the Court’s estimate of the level of error and irregularity was higher than last year, the European Commission’s response was, broadly, to claim that the direction of travel was one of continuous improvement, to blame the bulk of the errors and irregularities on administration in the member states, where most of the money is spent, and to urge the national administrations to greater efforts.

For the most part, the national administrations kept their heads down, happy that it is the Commission – because it produces the accounts – that must take the flak.

Some members of the European Parliament, as is their wont, waxed indignant, whether out of a burning desire for financial rectitude or out of a burning desire to close down the European Union, or both. Those of a Eurosceptic persuasion betrayed a convenient ignorance of the levels of error and irregularity that underlie their own national accounts, content to be able to condemn the EU for its 18th year without the auditors’ unqualified approval. The mandate of the EU’s auditors, to certify the correctness of the underlying transactions, is a standard to which most national administrations are not held.

The Commission and its auditors are now engaged in some terrifyingly dull trench warfare, arguing over the methodology of calculating error rates. But the big picture is that the pressure to certify the correctness of the transactions has not gone away, that easy improvements have already been made, and from here on, it is a matter of hard graft.

That big picture provides the backdrop to discussions about the EU’s budget for 2014-20. During those budget negotiations, there will be a lot of overblown rhetoric spoken about stimulating economic growth and jobs. In the light of the auditors’ report, that rhetoric should be regarded with a degree of scepticism. The EU does have a certain amount of money available, but it does not have the capacity – either in the member states or the central administration – to spend large quantities of money quickly while respecting the EU’s cumbersome and complicated rules for programmes and projects.

The Commission has proposed simplifications to the rules in many policy areas for the next spending period 2014-20. But there is no guarantee that the member states and MEPs will approve those simplifications and in any case the proposals do not go far enough.

If the EU is serious about stimulating growth, it has to do more than budget the money: it has to change its rule-book to permit effective, efficient and error-free spending.