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05 Feb 05. BBC Scotland reported that millions of pounds in European grants paid to the Highlands and Islands may have to be paid back. A European Commission audit has found widespread mismanagement of projects within the region. At least £21m may need to be repaid to Brussels but this could rise as a further £29m of funding is still be fully investigated. Auditors recently inspected 14 projects funded by the European aid programme between 1994 and 1999.

The Cairngorm Mountain Railway was one of the projects investigated

All 14 of the projects failed the initial inspection which the investigators carried out. The commission’s provisional report found serious deficiencies in the effective management and monitoring of the projects and it will now carry out a secondary report. Nationalists demanded that Enterprise Minister Jim Wallace make a statement to the Scottish Parliament. SNP MSP Fergus Ewing said: “This is the most devastating example of financial mismanagement since devolution.” But Deputy Enterprise Minister Allan Wilson said the executive had long been aware of the issue and had “rebutted” the points raised. He also denied the money that might require to be repaid could total as much as £21m.

Second audit

European grants have been spent on projects like the Cairngorm Mountain Railway, the docks at Nigg Bay and transport infrastructure within the Highlands.

The Scottish Executive has acknowledged there is a very real chance some grants will have to be re-paid. A spokesman said: “After an initial audit of ERDF funding in the Highlands was unsuccessful, the European Commission will be returning to the area to carry out a full second audit shortly.

“While nothing has yet been finalised, we have informed partners that there is a very real chance that funding will be decommitted and advised them to ensure that all information is available to the commission.

“The full extent of the commission’s second audit will be known later in the year.” Highlands and Islands Enterprise, which is responsible for four of the audited projects, has also admitted it is facing investigation.

This announcement may play into the hands of KBR whose Nigg yard was originally the choice for the building of the CVF project, a CVF role may avoid the repayment of this money and bolster the Highlands struggling economy. But given that the Chancellor has Rosyth in his constituency and worries expressed by BAE, Nigg was taken off the list, for the moment. In this week’s PQs denials have been made that the Chancellor tried to influence the outcome but another PQ highlighted the fact that the final destination has not been decided, nor indeed has the Prime Contractor given Mr Hoon’s announcement that he is talking charge of the project personally! Will he be personally responsible for the overruns!!

PQs: Aircraft Carriers

Mr. Gerald Howarth: To ask the Secretary of State for Defence what conditions have been applied to the physical integrator contract awarded to KBR in respect of the yard where final assembly of the CVFs will take place. [211432]
Mr. Ingram: No such contract has been awarded to any company. We anticipate announcing the outcome of the process to select the preferred Physical Integrator shortly. The MOD, as client, will retain unlimited right of veto over major decisions on the CVF programme including those relating to final assembly.
Mr. Gerald Howarth (Aldershot) (Con): Will the Secretary of State accept that the unseemly wrangling of recent months that has characterised the Government’s management of the project has done nothing to instil confidence in the prospect of the critically important contract’s being completed to the Government’s stated time scale? In the panel of four, who will take charge of contract—Thales, BAE, KBR or the Mi

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