World Crisis Online

Doubts over the way Britain administers European Union structural funds prompted Brussels to suspend all payments to English projects at the end of 2010, European Commission documents show.

Regional payments totalling €184m (£155m) were withheld from mid-October to mid-December while the Commission investigated “significant shortcomings” in the way England spent its share of the EU’s €50bn a year structural funds.

All 10 English regional authorities were affected by the freeze, which came after a Commission audit raised concerns around how local bodies selected which projects should receive EU money, and how to verify payments were made in accordance with rules imposed by Brussels.

“Payments to the UK were interrupted for two months last year because the Commission was concerned that the UK’s management and control systems for regional funds were not sufficient to guarantee that they were being spent legally and properly,” confirmed a spokeswoman for Algirdas Semeta, the EU commissioner in charge of fighting fraud.

The funds have now been disbursed, but with a warning that more ample proof of monitoring and supervision by British authorities is required to prevent more suspensions.

Commission documents also show that both Scottish regional programmes worth €40m were suspended on December 22, and remain cut off.

Britain has been among the most vocal critics of the EU over irregularities and fraud in its €140bn-a-year budget.

George Osborne, chancellor, on Tuesday refused to endorse the EU’s annual accounts for 2009, highlighting that its auditors had failed to give an unqualified sign-off to the bloc’s accounts for 16 consecutive years.

A Treasury source said: “The chancellor has put Europe on notice that we can’t afford not to put Europe’s house in order.”

Britain is one of only four EU countries that provides assurances to the European Commission on how its share of European funds is spent, along with Denmark, Sweden and the Netherlands.

The British government said the interruptions were an administrative measure, short of longer-term suspensions available to the Commission.

EU structural funds guideWhat are the EU structural funds, how are they allocated, and what are the disparities in the amounts received by different countries?

The Scottish government said it expected to receive the funds once the Com­mission had considered additional audit documents.

The Commission increasingly cuts payments for up to six months when it has concerns over how the funds are managed locally, in a drive to reduce irregularities and fraud in its budget.

Other countries that had EU funds cut off include Germany and Spain, which both temporarily lost money in the first few months of 2010.