Brussels, 10/04/2013 (Agence Europe) - On Wednesday 10 April, the Court of Auditors of the European Union said that EU subsidies to the food-processing sector bore a high likelihood of deadweight - which has been ignored by the EU member states. The Court believes that the aid concerned has not been systematically directed to projects that bring added value to agricultural products in an effective and efficient way.
As part of rural development policy, member states can co-finance, with the EU, subsidies that are granted for investment by companies that process and market food products. For the 2007-2013 period, the EU budget allocated to this aid is €5.6 billion. National funding is added to these subsidies, which brings public funding to a total sum of €9 billion. The objective of these subsidies is to increase the added value of agricultural products and consequently to improve the competitiveness of agriculture. The auditing question with regard to this was whether EU aid to the food-processing industry enabled effective growth of the added value of agricultural products. The Court's opinion was that this had not been noted due to weaknesses in the design of the programme and in the selection systems for projects that were applied by the member states.
The member states are required to draw up rural development programmes (RDP) which enable the aid to be tailored to their needs through national or regional objectives, and which set the scope of the measures to ensure that efficient use is made of the funding available. However, the Court of Auditors found that “only general objectives were set, which did not demonstrate how the funding was intended to add value to agricultural products or improve the competitiveness of agriculture. Despite this lack of specificity, the Commission approved the programmes”.
The member states are required to set eligibility criteria to limit the type of investment or beneficiary eligible for funding, and then set selection criteria to identify the most effective and efficient projects to be supported. The audit found that eligibility criteria were set that allowed almost any food-processing company to be eligible. Furthermore, selection systems were poor or non-existent and while there were sufficient resources - which is often the case at the beginning of a programming period - they were not applied at all.
High likelihood of deadweight. The Court of Auditors noted that the member states “do not systematically direct the funding to projects for which there is a demonstrable need for public support. Without this, the measure risks becoming a handout - a general support to enterprises investing in the food-processing sector - with the attendant risk of distortion of competition and waste of scarce public money. As a consequence, the likelihood of deadweight is high and the results achieved by the projects cannot necessarily be attributed to the grant. Displacement reduces the efficiency of the measure as companies use the subsidised investments to gain market share and not necessarily to improve added value.” The Court of Auditors believes that the member states largely ignored the risks of deadweight and displacement, which were not formally considered in any of the rural development programmes or selection systems audited.
Almost 20% of the EU budget set aside for improving the competitiveness of agriculture is paid to food-processing companies, but the monitoring and evaluation arrangements do not collect information on the added value achieved or on the indirect effects on the competitiveness of agriculture. The current arrangements are unlikely to provide the necessary information to demonstrate the success of the funding or to improve its effectiveness and efficiency for the 2014-2020 period, the Court of Auditors criticises.
Despite the €5.6 billion financed by the EU budget, convincing items were missing in the Court's view to prove: - that the companies needed the subsidies (as an industry or individually); - what specific objectives the subsidies were supposed to help reach (and how); - that the growth of the added value of the agricultural products and the strengthening of the competitiveness of the agriculture were real.
The Court of Auditors' report focused on six national and regional rural development programmes that were principally selected for their size - Spain (Castilla y Leon), France, Italy (Lazio), Lithuania, Poland and Romania.
“Member states are not clearly identifying the need for funding or setting meaningful objectives”, stated the member of the Court of Auditors responsible for the report, Jan Kinst. And he added: “The Commission should only approve programmes that do so, otherwise this measure just becomes a handout to the food-processing companies.” (LC/transl.fl)