Under the Common Agricultural Policy, EU rural development policy grants are made available to enterprises that process and market agricultural products through a measure called ‘Adding value to agricultural and forestry products’ that aims to improve the competitiveness of agriculture and forestry. The EU budget has earmarked € 5.6 billion in aid for 2007-2013. This financing is complemented by national spending, which brings the total public funding to € 9.0 billion.

Member States must draw up Rural Development Programmes, tailoring the aid to their needs through national or regional objectives and setting the scope of the measure to ensure that efficient use is made of the funding. However, the 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 targeting, the Commission approved the programmes. The audit covered six national and regional rural development programmes, selected mainly for their size: Spain (Castilla y León), France, Italy (Lazio), Lithuania, Poland and Romania.

EU auditors found that Member States do not direct the funding to projects for which there is a demonstrable need for public support. Without this, the measure becomes a general subsidy to enterprises investing in food-processing – with the attendant risks of distortion of competition and waste of scarce public money.

Almost 20% of the EU money 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 2014-20 period.

“Member States are not clearly identifying the need for funding or setting meaningful objectives”, said Jan Kinšt (CZ), the ECA member responsible for the report, “the Commission should only approve programmes that do so, otherwise this measure just becomes a handout to the food-processing companies”.