Oireachtas Joint and Select Committees
Wednesday, 17 October 2018
Joint Oireachtas Committee on European Union Affairs
Annual Report of European Court of Auditors: Discussion
As we have a quorum we will begin. We have received apologies from Senator Neale Richmond. We had the arrangement in place today to engage directly with the Irish MEPs in Brussels but unfortunately modern technology has let us down. We were going to use the video link which is supposed to be state of the art but it is not. I thank the technicians who tried to get us connected but unfortunately it did not work. Many years ago we were able to send somebody to the moon but today we were unable to speak to the MEPs via video link. I remind members to ensure that their mobile phones are switched off. We wanted to engage with the MEPs today as it would have been important to have direct contact with them at this point in time but unfortunately it was not to be.
We have an engagement today with the European Court of Auditors about the annual report on the European Union's use of public funds. I am delighted to welcome Mr. Tony Murphy and his colleagues to the joint committee today. Mr. Murphy is the Irish master of the European Court of Auditors and this is his first time before this committee in his new role. Last year he accompanied the former member, having been nominated and I am pleased to see that his nomination was positively viewed by the European Parliament and I appreciate his commitment to continue this annual engagement. Mr. Murphy comes to this role with a lifetime of dedication to audit work, first in the Office of the Comptroller and Auditor General here in Dublin, then in the European Commission and more recently in the European Court of Auditors. The European Court of Auditors plays a vital role and important function in assessing the spending of public money by the European Union, whether the money is being spent correctly and the effectiveness of the EU's financial contributions to initiatives. The court provides an interesting perspective on how the EU is doing financially. This engagement will be useful for members of the Oireachtas and it also would have been useful for the MEPs. Before I ask Mr. Murphy to make his opening statement I will remind members of the rules on privilege.
Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House or an official either by name or in such a way as to make him or her identifiable. By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by the committee to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable.
I ask Mr. Murphy to go ahead and make his opening statement. We will then come to the members for questions. I welcome everybody in the Public Gallery.
Mr. Tony Murphy:
Good afternoon. I thank the Chairman and members of the committee for this invitation. It is a real pleasure for me to be here today for the first time in my capacity as the Irish member of the European Court of Auditors to present its annual report for 2017. I echo the Chairman's sentiments that it is a shame that we could not engage with our colleagues in the European Parliament which I will do on another occasion. Indeed, I thank the committee members for their best wishes conveyed to me when I was last here in January during the final stages of the nomination process.
Before I start with the presentation of the main findings of the annual report, I would like to introduce my two colleagues who are here with me today. Wolfgang Stolz is the head of my private office and Peter Borsos is my assistant and he is in the Public Gallery. I would also like to inform the committee that I have been assigned to chamber 2 in the court of auditors. Chamber 2 is responsible for investment for cohesion, growth and inclusion. We keep a very close eye on what happens in chamber 1 which is the sustainable use of natural resources and that concerns where most of the EU funding to Ireland comes, mainly in agriculture. My portfolio covers Chapter 6 of this annual report which we are discussing today and it covers the annual statement of assurance on cohesion policy which, along with natural resources, is one of the major EU policy areas. However, in terms of spending it is not the most significant for Ireland, representing only about 3% of Ireland’s total EU expenditure in 2017 which was about €51 million. In addition, I will have responsibility for some special reports in the near future including one on child poverty.
As members may know, the European Court of Auditors is the independent external auditor of the European Union. We produce a broadening range of products including the annual report, which we will discuss in detail today and also special reports, which we will discuss to a lesser degree. We also give opinions on legislative proposals, specific annual reports on agencies and joint undertakings, landscape reviews and rapid case reviews. That is an overview of the type of outputs that we produce on an ongoing basis.
The annual report is the main output for the year and our main product. It uses around half of the court's annual human resources. It reflects the outcome of audit visits to member states and the Commission. I am very happy to be here presenting it just two weeks after its publication on 4 October. The aim of our work is to provide an opinion on two questions: whether the accounts are accurate and reliable and to what extent there is evidence of money being received or paid out in error, known as regularity and legality. We have given a clean opinion on the EU’s accounts since 2007 and in our 2017 annual report, we also conclude that the EU accounts present a true and fair view of the EU’s financial position. Revenue for the EU budget in 2017 totalled €139.7 billion and had an estimated level of error of 0% so it is not a problematic area in any shape or form. This revenue was raised based on gross national income, GNI, of 56%, VAT of 12%, traditional own resources of 15% and 17% from other sources. That is the breakdown of total income contributions to the EU budget.
In terms of spending for 2017, expenditure totalled €137.4 billion euro, which represents roughly €270 for each EU citizen and is equivalent to 2% of total Government spending and 0.9% of EU gross national income.
Members can see that the audited population totalled €100.2 billion. Of that sum, €56.5 billion, or over 50%, concerned natural resources of which Irish farmers and beneficiaries received over €1.5 billion from the EU. Competitiveness accounted for €14.9 billion and cohesion only €8 billion. That was abnormally low due to the low level of accepted expenditure in 2017. Many member states did not submit any expenditure in respect of cohesion.
Until last year, our opinion on the regularity and legality of spending had been adverse, meaning we found widespread problems for every year since 1994. Now, for the second year in a row, we issue a qualified opinion on the regularity of the transactions, meaning a significant part of the 2017 expenditure we audited was not materially affected by error. Moreover, the level of irregularities in EU spending continues to decrease. The estimated level of error in payments during 2017 was 2.4%, down from 3.1% in 2016 and 3.8% in 2015. It could even have been lower because sufficient information was available to prevent – or detect and correct – a significant proportion of errors in, for example, rural development payments. If this information had been used by national authorities to correct errors, the estimated level of error would have been below the so called 2% materiality threshold for an even larger share of the EU budget.
Problems remain, and that is mainly where payments from the EU budget are made to beneficiaries based on their declarations of costs previously incurred, such as in rural development and cohesion. Other activities funded in this way are research, training schemes and development aid projects. In respect to Ireland, no real problems were detected for this period in transactions tested. There are, however, still a number of horizontal issues in the report which have implications for Ireland. Some of these may increase in importance given, among other aspects, the ongoing multiannual financial framework, MFF, negotiations for post-2020 and Brexit. In 2017, Ireland received roughly €1.81 billion worth of EU funds and at the same time contributed around €2 billion to the EU budget. That makes Ireland a net contributor of €244 million, which is 0.07% of Ireland’s gross national income, GNI. We are just about moving into the territory of being a net contributor. I stress this is an accounting balance exercise and obviously does not take into account the numerous benefits associated with EU membership.
Absorption is another important issue. By the end of 2017, the overall average absorption rate for the 2014-2020 MFF was only 16%, which was even lower than in the corresponding year of the previous MFF in 2010 where it was 22%. The good news is that Ireland is performing above average in absorbing European Structural and Investment, ESI, funds with 30% of cumulative payments of the planned ESI fund spent by the end of 2017. Ireland is third highest in absorption in the EU after Finland and Austria. Nonetheless, the absorption rate in Ireland in 2017 is still six percentage points lower than it was at the same time in 2010 in the previous MFF. The EU budget continues to face significant pressure owing to the value of payments committed for future years, the so-calledreste à liquider, RAL.
The overall financial exposure of the EU budget has also grown, with significant long-term liabilities, guarantees and legal obligations. I refer to the almost full use of the amount available for commitments, combined with the low level of payments and increased outstanding budgetary commitments to a new record of €267.3 billion. That is over twice the annual budget of the EU. In respect of Ireland, we are performing relatively well compared to other member states. We had outstanding commitments of €926 million at the end of 2017 and during 2017 we had payments of €297 million. Our outstanding commitments represent 1.2% of Government expenditure. It is not such a significant issue for Ireland when we compare that to some of the other member states where outstanding commitments represent over 20% of Government expenditure.
From our testing of 703 transactions, we found 13 instances of suspected fraud, which the court reported to the EU anti-fraud office, OLAF. These were the main findings of our annual report. Another useful output we provide are special reports. These relate to topics across all policy areas. They do not concern legality and regularity but are related to performance audits and look at aspects of economy, efficiency and effectiveness of policy implementation. In 2017, 28 such reports were published and the estimate for 2018 is about 35. While Ireland is not always included as a sampled member state, because generally five member states are covered in each report, there are often lessons learned and best practices identified which are of a horizontal nature. In 2017 and 2018 there have been three special reports in which Ireland was visited, namely youth unemployment, broadband and public private partnerships. In respect of agriculture, while Ireland is not directly sampled, some interesting reports were published including on rural development programming, greening, the basic payment scheme, a briefing paper on the future of the Common Agricultural Programme, CAP, and the recent opinion on new system of own resources of the EU.
Upcoming reports relevant for Ireland include an opinion of the court on the Commission's CAP proposal. Other upcoming reports with a more general public interest are EU passenger rights and the EU system of measuring vehicle emissions. We have a broad range of policy areas in which we issue reports. I thank the committee and we look forward to answering any questions the members may have.
I thank our guests for their participation and their report. It is an extensive and important report. I have some questions. On cohesion, Mr. Murphy mentioned that we do not feature so much in that any more. We realise the reason is that we have achieved a certain level of economic development. Are there any other countries that stand out and that still avail of cohesion funds, to a greater or lesser extent? What, if anything, have we in common with them?
Would Mr. Murphy like to expand on child poverty, which was studied? A report was done in the middle of the downturn, which was a serious, difficult and challenging time for everybody. To what extent, if it is known, has the situation altered in the meantime? In respect of revenue and the EU budget in 2017, €139 billion etc., and the GNI calculation - which is moving away from gross domestic product, GDP, and gross national product, GNP - will Mr. Murphy give us some idea as to what difference it makes for Ireland to use GNI as opposed to GDP or GNP? I do not necessarily want Mr. Murphy to go into a major detailed explanation but there are some obvious comparisons.
There are obvious improvements. Other people wish to speak and I do not want to cover their territory. One thing has come to my attention in recent times in respect of spending and banking throughout Europe. It has been said by some people that regulation was non-existent when the Irish and European economies crashed. Some say there has now been an extreme reaction in the other direction, to the extent that restrictions are impeding necessary growth. It might be wise to make a comment on that.
My last point is on broadband, which the European Court of Auditors has already studied. That is a moot question now. It has been ongoing in this country for some considerable number of years. I was spokesperson on that area myself several years ago when much attention was drawn to broadband. It is still an issue. It still has not been concluded in the way we would have expected. I do not want Mr. Murphy to make any political comments, but the European Court of Auditors might have a perspective on the extent spending and policy at European level is likely to affect it. Another issue that causes us quite a problem in this country is the issue of housing. I refer to the degree to which housing has been hit by inflation as a result of a lack of competition in the market for new house building. That is the only thing which affects the prices.
The purchase of existing houses does not affect that, as we all know, whereas extra houses in the housing stock do. We are told all the time that European restrictions impede the extent to which the State may get involved in the direct building of local authority houses. This issue has been tossed out to us on a regular basis but I have strong reservations about it. It is in the national interest to access the necessary funds, of which there are considerable amounts available at low-interest rates of almost zero. If ever there was a situation where it was necessary, in the national interest of our economy, to avail of well-priced funds, it is now. There are many reasons, such as making the economy competitive and improving our society in order that we, as an economy, can develop, as opposed to a situation where a large portion of the family income - up to 50% in some cases - goes towards paying for the mortgage or rent, as the case may be.
I thank Mr. Murphy for his presentation. The auditors are dealing with revenue of €139.7 billion, which is a big budget, and he has flown through the detail of it quickly but it is of benefit to us. There is much information in the reports and the subsidiary reports to which he refers. It is good to see the regulatory and legal position is improving compared with last year, which I think the citizens will be happy with.
On the MFF post-2020, the Taoiseach said Ireland would be prepared to increase its contribution to the EU budget, which we must be conscious of in our work in subsequent years. Is there anything in particular that we need to be alerted to if we increase our contribution? Is it just that we should be more vigilant in future or is there anything else that Mr. Murphy would like to advise us on in that respect?
I am sure the Chairman will be interested in bureaucracy and form-filling, and the balance between efficiency and being friendly to the citizen. Are things improving or otherwise in that regard? Citizens complain about the amount of bureaucracy and form-filling and the fact that it is quite daunting. Are there any moves to try to improve the situation or is the trend going the other way, with more form-filling and bureaucracy required?
Mr. Murphy mentioned a report on youth unemployment. Will he give us the headlines of it? During the recession there were many employment activation measures brought forward by the Government, some of which were funded by the EU. Are we getting value for money for EU-funded employment activation measures, particularly for youth unemployment? A general overview of that would be helpful.
I thank Mr. Murphy for his comprehensive report. There is a general consensus about public private partnerships, PPP, not least in education, in which I have a professional background. I have heard principals do nothing but sing the praises of PPP projects and how they deliver for them. If PPPs were to be used, for example, to install toll bridges on the M50, taking the macro-view of PPP rather than the micro-view, there might be limited benefits. I am interested, however, in exploring how those limitations find their way into the system, whether the system has recognised them, and whether they are likely to discourage future PPPs because it has been widely said that PPP is the way to get infrastructure that we need but cannot afford.
Deputy Durkan made a point about the Cohesion Fund. I have just come back from a conference on the expansion of the EU into the western Balkans. Cohesion funding will clearly become a huge issue as we start to try to develop these parts of the extremities of Europe, and I am interested in that as well.
On youth unemployment, which was briefly mentioned, I am not sure we have found a way to solve it, nor am I sure that training is the way out of the problem. I am interested in anything Mr. Murphy has to say about that matter.
The figure for fraud is 1.8%.
Getting it down that low is quite good in the grand scheme of things. Are strategies being looked at to eliminate it totally? If so, how successful are they expected to be, bearing in mind that human beings will always try to find a way around any rules or regulations that are introduced?
Deputy O'Rourke had to leave to chair another meeting, which is unfortunate but he will be able to hear afterwards what went on.
The committee receives a copy of all the reports issued by the European Court of Auditors and they are circulated well, which we find beneficial and appreciate greatly. The obvious thing that I wish to put into the mix of the questions is the whole issue of Brexit. What is the representatives' up-to-date opinion and insight into what has happened over the past 24 and 48 hours, leaving aside what has happened in the past weeks and months? What way do they see that going?
During the briefing I listened with interest to what was said about fraud, a point which has been highlighted by Senator Craughwell. Are there any lessons to be taken from the cases of fraud? It is important to note that there are not many cases and there obviously seem to be many measures, checks and balances, which is to be welcomed. One issue always arises, however, when we talk about auditing, checks and balances, namely, our farming community. When we deal with the Department of Agriculture, Food and the Marine, Europe or regulations, it has bothered me since I first entered politics that if anyone makes a mistake filling in a form or an application or doing anything else, it is classified as a mistake. On the other hand, when a person in our farming community submits an application form with an error - a genuine, honest-to-God mistake - it is looked upon immediately as fraud. It is looked upon as if it is somebody trying to swindle something but in 99.9% of cases it is no such thing. It is a genuine mistake, such as a mapping error or an over-claim, which might be completely innocent and not somebody out to jip the system or trying to do something that is wrong. It has always bothered me that when one family is filling in an application form for anything it is a mistake, but when a form is filled out in a farming household and something goes wrong, they are told that there is something bad or wrong about it, that it is fraud and that they are out to con the system. I hate that and it has always been the case.
I deal with many farming queries from County Kerry and personnel working in agriculture, whether they be at home or abroad. It bothers me so much that they are looked upon in this way. It is the same with the fishermen, where if an Irish fisherman is doing something it is classified as illegal while if somebody else does the same thing, it is a mistake. If a form in regard to tonnage is filled in incorrectly, it is fraud but if someone else does it, it is a mistake. I would like to hear Mr. Murphy's views and opinions on that because it bothers me greatly and upsets our farming and fishing communities.
Mr. Murphy will have an insight into the future of the Common Agricultural Policy, CAP, given his new and enhanced role. How will it filter down to all levels? What exactly will the policy be in the future and how does he think it will work out? How are we going to work with it? What advantages and disadvantages does he see? The matter is of great interest. I would be grateful if he combined the issues.
Other members are attending other meetings they could not get out of, while others are chairing meetings. That is why the attendance is not what it usually would be. We cannot help that, but we very much appreciate the efforts Mr. Murphy and his officials have made to be here. I apologise again for the mistake made about the connection to the MEPs. It was a matter beyond our control.
Erasmus+ was discussed at length, but it is an area of particular interest to me, as it marries with the issue of youth unemployment and is an programme for apprenticeships. There was some talk about expanding it. I believe a trial module is being run somewhere, but it could be expanded to include a much wider audience. Is that something at which Mr. Murphy is looking? What future does he see for the programme? Will it be run across Europe?
Mr. Tony Murphy:
I will try to bring some of the issues together, rather than answer the questions in the order they were asked.
Cohesion is more important in eastern Europe. We have certain living standards that eastern Europe does not yet have, as is quite obvious if one visits any eastern European country. The table shown reflected this in indicating how important funding was when compared to total government expenditure. In eastern Europe the level of funding can reach 20%, whereas here it is 1%. It is a significant issue in some of the member states concerned.
The discussion on the Multi-annual Financial Framework, MFF, is ongoing. We have seen some briefing papers, on which we have made some contributions and suggestions, but we are not a party to the negotiations. We will wait and see how it works out. The final breakdown of the MFF budget and the future of the CAP are interlinked. We are sometimes asked for opinions on specific things which we give, but at the end of the day it is for legislators in the Parliament and the Council to ultimately decide. While we have a certain role to play in the process, our role is more ex-postin seeing how whatever legislative proposal is decided on should be implemented. It is a slightly different approach.
The audit of child poverty will begin next year. We will be starting a new audit. The report referred to was mostly likely the one from the Organisation for Economic Co-operation and Development. We will take it into account when we start the audit.
GNI* and GDP are other issues. Our contribution has increased because of the use of GNI*. It is becoming more important because we have recently become a net contributor. A review is ongoing of how owned resources will be used to fund budgets in the future. It might have a fundamental affect. Whether the proposals ever proceed is another matter. Regardless of whether they will be based on taxes on plastic or there will be a consolidated tax base, it will all impinge on the GNI* element of total contributions. The means by which GNI* will be calculated is also being considered. It is an ongoing process.
Mr. Tony Murphy:
It is linked with the Deputy's question about housing and broadband provision. These are policy areas within the domain of member states. We have a national broadband plan, to which the European Union is contributing something, but it is the Irish national broadband plan. Targets were set for the EU 2020 agenda to cover the broadband speeds that would be available by 2020. It has been updated to cover the years to 2025. There have been some issues recently in broadband provision, but we carried out our audit some time ago. It looked like the programme was going to plan. In our report at the time we said Ireland would probably not make the 2020 targets in full but that it was in a good position to make the 2025 targets. We were not painting a bad picture at that point. We do not know what has happened in the meantime, except for what we have read in the press.
From an EU funding point of view, taking broadband as an example, if a member state decides that it is going to provide broadband through fibre optics cables, while other more advanced member states are using 4G and 5G to provide broadband, will the EU committee take a view on how the funding should be used? Does it tell us that our idea is bad and that we should do something different?
Mr. Tony Murphy:
It encourages projects to be future-proofed and seeks to ensure measures taken will not be redundant after three or four years. Broadband plans are submitted to the Commission which has an input and monitors the type of plan proposed. Germany is vectoring with cable from the phone system; it is not using fibre, which is a little surprising. When we considered the matter, it seemed as if things were quite positive. The process was co-ordinated and fibre was being used. It seemed that, even if we would not meet the 2020 targets, it was more than likely that we would meet the 2025 targets in full.
On public private partnerships, PPPs, the member who raised the matter did not want to go into too much detail, but the Chairman was correct when he said the reports we issued were distributed. We try to circulate them as far as possible. A report on public private partnerships was released in March and it reached conclusions which were not particularly positive. It stated there were limitations with PPPs and that in some cases projects became more costly. The idea that PPPs would solve all problems was not borne out in practice.
Fraud was mentioned a couple of times. We are auditors. If we come across a case where things look a little suspicious, we err on the side of caution and refer it to the European Anti-Fraud Office, OLAF, but that body may not believe there are grounds to launch an investigation. It is not the case that each case is automatically investigated for fraud. However, what said was true - the number of fraud cases is not high. We are never going to totally eliminate fraud; all we can do is try to ensure it is kept to an acceptable minimum. Taxpayer's money should not be subject to fraud; therefore, we have to make sure we have a system in place which protects EU and national funds as much as possible. This feeds into some of the issues raised by the Chairman about whether things can happen in error or by way of an innocent mistake. Some can take those instances as an indication that fraud is occurring when that is not the case. When it comes to legality and the regularity of payments, it is black and white. There is a formalistic approach; something is either right or it is not. When we talk about an error rate of 2.4%, we are not talking about fraud. Some of the projects in which we have found errors are very good ones in that they have delivered exactly what was expected, if not more. It is just an indicative figure; one has to go behind it and into the details to find out what it really means.
Mr. Tony Murphy:
No. Obviously, we cannot audit all transactions and payments throughout the European Union. What we audit is the EU budget and the figure is 703. Sometimes we are asked how particular member states are doing. For example, we are asked, "How is Ireland or Romania doing?" We cannot give a definitive opinion because we are not sampling on the basis of member states but on the basis of the EU budget as a whole and then different policy areas. In fact, one of the issues that may have contributed to the fact that Cohesion Fund spending was so low was that we had introduced a new approach to our audit of the fund, whereby we would rely more on systems. We are looking to try to avoid a bureaucratic burden on beneficiaries in order that they will not face multiple audits by other authorities in the member state, as well as by the Commission. The idea was to try to use the work of the audit authorities and if that work was good enough, we would re-perform what they had done and if that was good enough, we would not have to go near the beneficiary. We had mixed results. As I said, it was a random sample, but in the case of the Cohesion Fund, we audited transactions which had already gone through the system. They had been audited by the other authorities.
We issued a report on Erasmus+ only a couple of months ago. It is a flagship programme for the European Union in that it is a programme that connects with citizens. Nearly all of us know people who have been on an Erasmus exchange programme. That is what we need more and more to have programmes where people will really see the benefits and that the European Union is adding value. We are all for Erasmus+ pilot scheme being expanded. I hope it will continue.
I think I have more or less covered the MFF post-2020. Deputy Seán Haughey asked about the increased contribution. We will have to wait and see as negotiations are ongoing. We will have to wait and see how the hole created by the withdrawal will be filled. Obviously, the headline on the press release from the President in the report is that the European Union should not make promises on which it cannot deliver. There must be a realistic approach. We have to realise the extent of the EU budget and what one can do with it. Member states also need to be realistic. They have to contribute to the Commission. The President of the Commission, Mr. Jean-Claude Juncker, stated in his speech that the Commission could not be blamed for everything and that we needed resources to be able to do certain things. One cannot cut the budget and then say one wants more. Everybody is in favour of greater efficiency; however, the expectation gap is widening between what can be and what is being delivered.
The Chairman asked about Brexit. We are in the same position. While circumstances change every day, we wait and see what will happen. We will be involved when the deal is finalised, whether to validate figures or in some other role. We have a Brexit task force which follows the process and any new audit we start. Basically, we see whether it could be affected by Brexit. We have had a few cases, where we audited the agencies based in London. They are relocating, one to Amsterdam and another to Paris. Brexit is already real for us in certain areas, but in others we must wait and see. For us, at the end of any transition period we will still be able to audit EU funds which are being spent in the United Kingdom. As members know, programme periods run on until 2020 and expenditure can probably be claimed up to 2023. We will still have to check it as long as the United Kingdom is receiving EU funds.
Surely the advice of the European Court of Auditors must be sought, given that the impact of Brexit may be catastrophic when there is no funding coming from the United Kingdom. Budgets will have to shrink at a rapid pace.
Mr. Tony Murphy:
This goes back to the point made by Deputy Seán Haughey when he asked how the budget would be framed. We will obviously have to take all of these factors into account. When that happens, we will know the extent of the budget and have to be serious about what we can deliver with it, whatever it might be.
The Chairman asked about the Common Agricultural Policy. The Commission has made a proposal about greater subsidiarity at member state level, whereby matters would be left to a member state to design its own measures. It would make it more flexible in a way, but, on the other hand, it is also stating a figure 70% would still have to go towards direct payments. There is some degree of flexibility under the new scheme. Again, it is only a proposal from the Commission at this stage, but we will soon give an opinion on it and the final negotiated outcome.
On the issue of form filling and people making mistakes, at all times we try to promote simplification. We have had a couple of audits. We have a briefing paper on simplification in the post-2020 delivery of cohesion policy. The papers offer opinions or advice which may or may not be taken on board. We can only advise; we cannot insist or audit later. We would be compromised and have a conflict of interest. We are, however, in favour of simplification.
Youth unemployed was a case in point and an issue we discussed earlier. Employment policy is the prerogative of national authorities. The European Union makes a contribution, through which it tries to have some say on policy. The youth guarantee was an idea based on a Council decision. The member states agreed that they would all try to ensure everybody under 24 years of age would have a job, be in training or doing something within four months. Our conclusion again was, going back to expectations, that the publicity and hype beforehand gave the impression that it would solve everything, a like like PPPs. We said it was too much and that it would never work overnight. These things take time. It meant that there would have to be structural reforms in the labour market in many member states. In Greece and Italy the youth unemployment rate is over 50%. It takes a great deal of time to find jobs in the first place.
I think the Deputy mentioned that Ireland was good at activation measures.
Mr. Tony Murphy:
We carry out audits based on a sample of member states at a particular point in time. In 2017 Ireland was one of the member states in the sample. The reason was that it had been recommended by the Commission to be an example of best practice. Even though the youth unemployment rate was still relatively high - any youth unemployment rate is a sad figure to report - relative to other member states, it was not so bad. What the Commission thought was very good here was the way the population had been identified. In many member states the administration does not know where the unemployed youth are. There is a significant problem in identifying the NEETs, young people not in education, employment or training. One of the findings in our audit was that a lot of the outcomes involved training and retraining, not employment. Compared to other member states, fewer permanent jobs or apprenticeships were being created.
I come from a background in0 further education. In the early 1990s there was a tendency for people to enter into further education and never leave it; they just moved from course to course. They qualified in everything but still went nowhere. I have always felt the rule should be that once someone completes a programme, he or she should move on. If we only move people from one training course to the next, it is a gross waste of resources that could be put into creating employment, perhaps by way of a subvention for artisan manufacturers.
There was mention of the audits of public private partnerships. One particular public private partnership, Carillion, in the UK, went below the waterline with very serious consequences for us in this country and brought down a number of construction companies in the public area leaving us with an obvious issue. Was the Court of Auditors consulted or involved in any way or fashion? Does the company come under the remit of the Court of Auditors? Could it come under that remit or is it specifically excluded? I note the company straddled more than one country, and not only Northern Ireland but the South here as well.
The other matter is that Mr. Sven Giegold MEP has a case on illegal state aid in relation to taxation running in the European courts at present. Taxation happens to be excluded from the control of the Commission but a way has been found to come in, as it were, under the radar, in this particular case. I do not want Mr. Murphy to comment on the politics of it. The question being raised is whether or not foreign direct investors headquartered in this country should attribute their taxes to this country or to the individual countries in which the profits were made. I have a strong view about that but it is not for today.
Mr. Tony Murphy:
If there were, obviously we could audit them. As I say, we have already done an audit on public private partnership where we have found whatever we found. The UK was not in the sample. We look at systemic matters in a few member states. We have asked, as was stated earlier here, whether public private partnership, PPP, really is the silver bullet and we are saying it is not. That cover's the Deputy's first question.
Deputy Durkan's second question on taxation is another day's work, as he quite correctly stated, which I would rather not give any definitive statement on. These are ongoing negotiations. We must wait and see what happens. Obviously, different member states have different opinions on this.
I thank all the witnesses. In particular, I thank Mr. Murphy and his officials for the big effort he made in being here today. We will suspend the meeting for a few minutes to allow the delegation to leave the room and for the next witness to take his seat.