Government Office North East prepares for fine

Mar 11 2009 by Adrian Pearson, The Journal

THE “incompetence and mismanagement” of North East civil servants has forced Government bosses to divert millions away from national projects, MPs claimed.

Bungling officers at Government Office North East are preparing for a fine of up to £20m after European Commission auditors realised basic accounting practices had not been followed in spending around £500m in Euro regeneration cash.

As Brussels prepares to hand down a fine, British MPs have revealed the mishandling of the funds by the North East and other regions can no longer be paid for without having an impact on other schemes.

Money which Parliament approved to cover what MPs described as having “a crucial role to play in the vital task of increasing housing supply” and regeneration projects across the country will now be raided to help pay off at least £22.3m of the eventual fines.

Cash will be diverted from the Thames Gateway regeneration scheme and the Homes and Communities Agency, among others.

Both of these schemes are flagship Government projects designed to kick-start spending in the recession-hit construction sector.

Conservative MEP Martin Callanan has repeatedly called for an explanation as to how millions of pounds was spent without the proper checks in place, calls which have so far met with silence from Government Office.

Last night Mr Callanan said: “We have a massively expanded public sector, but incompetence and mismanagement are still endemic.

“No one seems to be willing to take responsibility for this shambles.

“Our region is losing out yet again because of the government’s breathtaking ineptitude and indifference. Taxpayers are having to foot the bill once more for the Government’s failures.”

Europe minister Caroline Flint told The Journal last month she would not be asking for any investigation into the mishandling as a result of the expected fine.

The head of the region’s Government Office, Jonathan Blackie, has previously insisted the money can be paid out of central Government funds without any impact on regeneration schemes, and insisted it was not right to describe the financial correction as a fine.

But members of the House of Commons Local Government select committee have poured scorn on Mr Blackie’s defence of his officers in a hard-hitting report into euro spending. MPs on the committee decided “this ‘financial correction’ is in practice a fine imposed by the Commission on the UK because of a failure properly to account for funds allocated to it by the EU”.

Select committee chair Dr Phyllis Starkey it was “simply not good enough” that regeneration budgets should be raided to pay for “incompetence and mismanagement”.

She said: “Basically the fines should, never have happened in the first place. Budgets have been hit and that is money that could have been spent on delivering programmes.”

A Government spokeswoman said: “There is no certainty at this stage we will have to repay anything like these amounts in our accounts.

“As result of our open co-operation with the Commission and our work to help projects present evidence to the Commission on the 97-99 programme, even though some had already closed – we expect the EC’s to dramatically reduce the corrections and already in some programmes repayments have been ruled out.

“We will consider the Select Committee’s report and respond in due course.”