A SHOCKING report into the expenses picked up by Euro MPs claims politicians receive more than £12,000 a year tax free.

A study by the National Audit Office is set to accuse MEPs of being free-loading fat cats who claim lavish expenses.

It will accuse some Euro MPs of taking advantage of free travel, low tax and attendance allowances.

Up to £3.5 billion of the European Union's £60 billion budget is wasted each year because of lax controls on funding, it will claim.

But an MEP in the North-west has denied that many of his colleagues wilfully plunge their hands into a European cash mountain and say they are dedicated to reform.

Former Cambridge graduate Chris Davies, a Liberal Democrat MEP, said he was aware some Euro-MPs abused the system.

He added, however, that his party was dedicated to reform and was currently trying to abolish guaranteed mileage expenses.

MEPs in the North-west and Britain are currently allowed a first-class return air fare to Brussels or Strasbourg from their nearest airport.

But cheap fares from low-cost airlines, mean flights from airports such as Liverpool John Lennon can be as low as £50.

Euro MPs get to pocket the difference, which works out at around £1,000 a month tax-free.

The Bolton Evening News spoke to Mr Davies minutes before he made his way to Manchester Airport for a trip to Brussels.

He said he was not flying first class and opposed the guaranteed travel expenses, which amounted to around £12,000 a year.

He added that his pay was £53,000 a year -- the same as an MP in the House of Commons. On top of that he claims around £17,000 for turning up to work at the European Parliament.

Mr Davies said: "The Liberal Democrats are dedicated to reform and the party wants to see these expenses lowered.

"I am fully aware that the average wage in Britain is £19,000 and I am determined we don't lose touch with the people.

"I don't think you would find any British MEP saying the existing system is right."

He added: "It's true that there are MEPs who abuse the system, who are elected and then do a less than adequate job.

"But there are people who work their socks off."

MEPs have agreed to an expenses crackdown. They will be given a 13 per cent salary increase from 2004, paying just 17 per cent tax. In return they will not claim any expenses.

Mr Davies said he was not asked to vote but would have opposed the salary increase.