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Court of Auditors

7 pm

The Paymaster General (Mr. Peter Brooke) : I beg to move, That this House takes note of European Community Documents Nos. 9908/88 on the Annual report of the Court of Auditors of the European Communities for 1987, 8502/88 on the management and control of public storage of agricultural products and 9945/88 on the accounting and financial management of the European Coal and Steel Community ; and approves the Government's efforts to press for value for money in Community expenditure.

Mr. Speaker : I have selected the amendment in the name of the Leader of the Opposition.

Mr. Brooke : The debate is an important and timely opportunity to consider in some detail a range of questions relating to the control and management of the Community's finances. In its annual and special reports, the Court of Auditors has performed an indispensable service by analysing and publicising such questions. The House would not expect me to agree with everything that the Court of Auditors says, but I am in no doubt about the value of its work. The same goes for the work of the Select Committee on European Legislation : as always, when we debate the work of the court we have the benefit of a clear and thoughtful report by the Committee.

It might be helpful to begin by reminding the House of the role played by the court in the Community's decision-making process. Under the treaty of Rome, the court is required to examine

"whether all revenue has been received and all expenditure incurred in a lawful and regular manner and whether the financial management has been sound."

The Council and the European Parliament are required in turn to consider the court's annual report as part of the discharge procedure for the budget. The Council proposes to the Parliament a recommendation for the discharge and the Parliament decides whether and on what terms to grant the discharge. ECOFIN will discuss the court's report on 13 March. Tonight's debate will influence the Government's position for that Council, at which I shall represent the United Kingdom.

Mr. Tony Marlow (Northampton, North) : I am grateful to the Minister. There are not many hon. Members in the Chamber, and it is helpful if my right hon. Friend gives way from time to time. I wonder whether at this stage my right hon. Friend would let the House know whether he intends to accept what seems to be a fundamentally sensible amendment tabled by the Opposition.

Mr. Brooke : I proposed to deal with the amendment at the end of my speech, but if it would be helpful to my hon. Friend I am happy to comment on the Opposition amendment now.

I have great sympathy with the sentiments that lie behind the amendment, but I believe that in all the circumstances it would not be appropriate for the Government to withhold their approval of the recommendation to the European Parliament on the discharge of the accounts for 1987.

The recommendation is subject to qualified majority voting. A vote against it by the United Kingdom would amount to little more than a gesture. The fight against

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fraud and mismanagement requires rather more than gestures. But in any case, on the substance of the issue, such a gesture would be misplaced, for two main reasons.

First, by formally withholding approval of the discharge, we would be admonishing the Commission, because the Commission alone is responsible for implementing the budget and drawing up the accounts. If our motive for withholding the approval was to make a broader point about fraud and mismanagement, the impression therefore would be that we were holding the Commission to be largely responsible for such problems. In fact, the responsibility goes much wider. The second reason has to do with the nature of the discharge procedure. The discharge relates to a specific set of accounts for a single financial year. Strictly, discharge should be withheld only if these accounts are in some way improper. It has nowhere been alleged that that is the case in respect of the 1987 budget.

The Court of Auditors report draws attention to accounting procedures and devices that the Community was forced to resort to in 1987 and to which I would expect some of my hon. Friends might animadvert. Those procedures, notably the delayed payments for agricultural market support, were agreed by the Council. They were not unilateral actions by the Commission. It would therefore be inappropriate for the United Kingdom to censure the Commission in the way that the amendment suggests.

Mr. William Cash (Stafford) : My right hon. Friend knows that there was a period of two months within which the national authorities subsumed some responsibility for the discharge of certain moneys in the Community. If it was proved that there had been fraud--I believe that there is some evidence that that is capable of proof--would it not be right for, say, the Public Accounts Committee, or indeed the Government, to pursue the matter on their own account, let alone pursuing the Commission? The Commission has received a heavily qualified audit from the Court of Auditors.

Mr. Brooke : The point that I was making before my hon. Friend intervened was that the Council had supported and sustained the procedures that we adopted at the close of 1987.

Mr. Nigel Spearing (Newham, South) : Will the Minister give way on the question of the amendment?

Mr. Brooke : There are few hon. Members present and the hon. Gentleman will have plenty of opportunity to make points hereafter. However, I will give way.

Mr. Spearing : I thank the Paymaster General for graciously giving way. It might be convenient to intervene now because the Minister animadverted, rightly or wrongly, to the amendment.

Surely the Minister is being slightly inaccurate. The amendment does not say that we should vote against any recommendation by the Council ; it says that we should withhold approval, not on principle for ever, but only until we have received the report of the working party, which the Commission itself thought it advisable and necessary to establish. Surely that is rather different from what the Paymaster General said.

Mr. Brooke : I alluded to the amendment only because I was asked a question about it by my hon. Friend the

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Member for Northampton, North (Mr. Marlow). We can return to the substance of the Opposition's case and their amendment.

I propose to concentrate tonight on the key issues and themes arising from the three documents referred to in the motion. The most important of them relates to fraud and mismanagement involving Community resources. The focus here is on export refunds for beef, to which the court devotes a section of its annual report ; and intervention storage, which is the subject of a special report. I am sure that hon. Members would expect me to devote a significant part of my speech to these matters.

But I also want to touch on the implementation of the 1987 budget and the question of getting better value for money from Community resources. I hope that hon. Members will forgive me if, as a result, I pass rather lightly over some other aspects of these very lengthy reports, but I shall do my best to deal with any specific points in my winding-up speech, if the House will allow me one.

Fraud is a crime against Community taxpayers which tarnishes the Community's policies and institutions. There can be no excuse for member states treating it any less seriously than fraud involving national finances. The Government have consistently made clear that we are ready to support any practical and cost-effective measures to combat it. Lest there be any misunderstanding, let me reiterate what has been said by three of my Ministerial colleagues from the Dispatch Box in the past week about a recent allegation made in another place that the United Kingdom vetoed a Commission proposal on fraud. That was simply not the case. All member states voted against the measure in question. The United Kingdom did so because we did not believe that the proposal as drafted would have improved the situation. By its very nature, the scale of fraud is impossible to quantify.

Mr. Marlow : I think that I heard my right hon. Friend aright when he said that he would support any proposals against fraud. If there was a proposal that the Commission itself should have outposts in Community countries to supervise the expenditure of its money, would my right hon. Friend support that? It is manifestly obvious that until that happens there will be a great incentive in many European countries, perhaps in the United Kingdom, to maximise the amount of Community money that is being expended, perhaps without proper supervision.

Mr. Brooke : In preparing for the debate, I read earlier debates and I recall that my hon. Friend the Member for Northampton, North raised the idea of a supranational authority. It was the more striking because those sentiments are not those I would have expected from my hon. Friend's lips. I shall be listening with great care to the debate in case there is a general view in the House that such a supranational authority should be encouraged.

The court's work on export refunds, which related to beef, scrutinised the effectiveness of controls in the four member states--including the United Kingdom--which account for over 80 per cent. of the expenditure in this sector. The court uncovered evidence of serious deficiencies concerning inspection, verification and other procedures. It concluded that the scope and quality of

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national controls did not give reasonable assurance that the expenditure concerned was legally and regularly incurred. As regards intervention storage, the court's special report is hardly less disturbing, although strictly it has to do with mismanagement rather than fraud. The report is highly critical of Commission guidelines and their national implementation, citing in particular the lack of clear central rules, inadequate physical controls by member states and unsatisfactory accounting and audit procedures.

I shall come in a moment to the steps which are being taken in the light of these reports, but, first, it is worth noting--as does the court--that a number of the abuses which have been so tellingly catalogued spring from the very character of the Community's policies and regimes. That is why direct attempts to detect and deter fraud must go hand in hand with firm control of total spending, notably on the CAP. The court rightly points out that the differential between Community and world agricultural prices entails a significant risk of fraud. That problem is being tackled. The agricultural stabilisers agreed last year have already been triggered for a wide range of arable crops. For the key cereals crop, there will be a price cut of 3 per cent. from 1989 onwards.

The position on intervention stocks is also improving. The butter and milk powder mountains all but disappeared last year, and beef stocks fell by over a third.

Mr. Teddy Taylor (Southend, East) : Is it not outrageous for a Minister once again to say in the House that the food mountains have gone down because of reform? Does he not agree with the Agriculture Minister? If he looks up the figures, which have been published time and time again, he will see that they show that the reason for the butter mountain going down was that last year, at a massive cost, we sold 877,000 tonnes of butter, at prices as low as 2 p per pound, instead of the usual 400,000 tonnes. Does not he accept that it is grotesque, when faced with massive fraud and abuse, for any Minister to try to pretend that the food mountains have gone down because of reform? Does he not accept that there is clear and precise evidence that we had a fire clearance sale, no more and no less?

Mr. Brooke : I would be the first to acknowledge some of the basic facts that my hon. Friend has stated. It is also the case that butter was not being taken into storage because the procedure triggered a moment when that process ceased. While I would be the first to acknowledge that some of the stocks were disposed of by the process that my hon. Friend mentioned, he would be uncharacteristically unfair if he did not acknowledge that the procedures of the Community also played some part.

Mr. Taylor : They played no part, and my right hon. Friend knows that.

Mr. Tim Boswell (Daventry) : Does my right hon. Friend agree that, having emptied the bath at some considerable cost, the most important thing is to ensure that the tap is shut and remains firmly shut?

Mr. Brooke : That is the policy that the Council has adopted in its report.

Mr. Teddy Taylor rose --

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Mr. Brooke : If my hon. Friend will allow me, I will make a little more progress. From experience of past occasions, I know that he will not hesitate to intervene again.

None of this diminishes the need to tackle fraud and waste directly. My right hon. Friend the Minister of Agriculture emphasised the importance of firm action on export refunds and intervention storage at the Agriculture Council last month. I shall do all that I can to ensure that such action is taken at the meeting of ECOFIN on 13 March. In particular, I shall be pressing for new proposals from the Commission in two areas : first, the control and monitoring of export refunds, reflecting the recommendations in paragraph 4.56 of the court's report ; secondly, the management of intervention stocks, on which an ad hoc group has already been set up to study the court's recommendations. I believe that deadlines should be set for the presentation of these proposals and for the adoption of the necessary measures.

Agricultural fraud gets the headlines, but the problem goes wider. The greatly expanded structural funds give rise to obvious difficulties of financial control and management. The new regulations governing the operation of the funds are commendably robust and straightforward. They show what can be done if the need to prevent fraud is explicitly considered when new legislation is being drafted. But much existing Community legislation is too complicated and open to fraud : "leaky and sprawling" was how a recent press story described it. Ways must be found of simplifying it wherever possible.

Simplification and fraud-proofing of regulations is one of the areas where I hope the Commission's recently established anti-fraud unit will get involved. I and my officials have had detailed discussions with the head of the unit about his objectives and priorities. I have encouraged him to focus, essentially, on practical measures. I emphasise the word "practical". Amidst the welter of recent publicity about fraud it is all too easy to be misled by righteous indignation into believing that there is some quick-fix solution. There is not. Nor can there be in a Community of 12 member states with a great variety of legal and administrative systems. It would be interesting to hear hon. Members' views on the desirability of harmonised systems, or, as I said in response to my hon. Friend the Member for Northampton, North, of some sort of supranational authority to combat fraud.

The fact of national diversity cannot, however, be allowed to become an excuse for inertia. I am therefore much encouraged that the Spanish presidency has organised a discussion of fraud at this month's ECOFIN, going beyond the specific issues arising from the court's reports. That discussion will be an opportunity to identify the areas in which action is needed, and to define the procedural steps which should be taken to create the necessary momentum for change. We can operate only by persuading the Commission and other member states that fraud must be taken seriously. That will be a protracted campaign ; some member states have a much more relaxed attitude to fraud than we have in the United Kingdom.

The Government are carefully reviewing all aspects of the problem, but the objectives are reasonably clear. First, we need to strike a judicious balance between carrot and stick to ensure that member states take all necessary measures to prevent, detect and punish fraud against the Community budget. Secondly, we need more and better information on the nature and incidence of fraud in

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member states. Existing reporting arrangements are failing to provide the Commission with the facts that it needs in order to analyse the position and to design effective counter- measures.

Mr. Marlow : In view of the Government's quite proper desire to assist in overcoming fraud, and the possibility of loose and inadequate accounting within the United Kingdom itself, will my right hon. Friend make it clear that any agencies in this country will provide full and total assistance to anybody from the Commission or from the Audit Commission seeking advice and or information?

Mr. Brooke : Within the proper proprieties that the House would wish any agency in this country to observe, I give my hon. Friend that assurance.

Mr. Cash : If there was any real reason why the court needed to acquire information, sought it and could not acquire it as a result of an obdurate refusal by the agency to provide the information, does my right hon. Friend agree that that is the moment at which Her Majesty's Government should say, "This will not do ; we must get to the bottom of this, because it is in our interests to do so"?

Mr. Brooke : I am not clear whether my hon. Friend is speaking to a hypothetical case or to a particular case. The tenor and spirit of my answer follow the answer I gave a moment ago.

Thirdly, we need to consider how far an enhanced role for the Commission in the detection or investigation of fraud could be expected to help reduce the scale of the problem. Fourthly, we need to be satisfied that enforcement standards in all member states reflect the seriousness of the problem. Finally, we need to establish procedures which will enable all new Community legislation to be fraud-proofed, and which will help to root out existing regulations and regimes which are, to coin a phrase, fraudster- friendly. Let there be no mistaking the Government's determination to cut through the rhetoric about fraud and to pursue workable and effective measures to tackle it. Our determination has been underlined by my right hon. Friend the Prime Minister who has made clear that she will, if necessary, raise the issue of fraud at the Madrid European Council in June.

Mr. Ian Taylor (Esher) : In that context, will my right hon. Friend pay tribute to the civil service in the Brussels Commission, particularly taking note that its secretary-general is a former senior official of the Cabinet Office of this country? Therefore, its standards should be at the level that we would expect in this country and not of the kind that Sir John Hoskyns tried to imply earlier this week.

Mr. Brooke I am happy to endorse what my hon. Friend correctly said.

I turn now to the court's criticisms concerning the implementation of the 1987 budget. There are three main ones : that almost 20 per cent. of the final budget for 1987 was not charged to the 1987 accounts ; that published figures for the growth of agricultural expenditure in 1987--as in 1986 and 1985--significantly understated the actual rate of increase ; and that the budget was balanced only by successively adjusting the duration of the agricultural year. The court goes on to argue that these factors call into question the value of the political objectives set out at the

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1984 Fontainebleau European Council, and the budget discipline decisions of the 1988 Brussels European Council.

I would not quarrel with the court's criticisms, but I believe that its conclusion is rather wide of the mark. The accountancy practices to which the court draws attention were the products of a collision between the apparently inexorable increase in agricultural expenditure and the Community's own resources ceiling. It was precisely in order to avoid future collisions of this nature that the United Kingdom insisted during the negotiations on the Community's financing, which culminated last year, that we would not accept an increase in the own resources ceiling until agricultural expenditure had been brought under firm control--until, that is, the Community had adopted rules and procedures to ensure that it could live within its means without recourse to the practices that the court identifies. The 1987 budget, to which the report relates, was the last to be drawn up and implemented entirely under the ancien regime for budget discipline. The new regime put in place after the February 1988 European Council is altogether more rigorous and watertight. I must therefore take issue with the court's dismissive reference to the "superficially more binding objectives regarding budgetary discipline"

agreed at that Council. The future financing package does not consist of mere objectives. It consists of a panoply of firm controls which have given the Community a solid basis for financial stability.

In the case of agricultural expenditure--which is, rightly, the court's main preoccupation--there are three elements of the new system which go well beyond earlier arrangements. First, the agriculture guideline is legally binding ; secondly, it constrains the growth of agricultural spending to a maximum of 74 per cent. of the rate of growth of Community GNP ; thirdly, there is no open-ended let-out for exceptional circumstances of the sort that bedevilled the Community's finances in the past. In future, there will be a cash-limited monetary reserve, capable of being drawn upon only in tightly circumscribed situations. These controls are buttressed by the reforms to which I have already referred--systematic depreciation arrangements and automatic stabilisers for all the main agricultural commodities.

I said earlier that the 1987 budget was the final offspring of the old regime. I look forward to the court's report on the 1989 budget, which is the first complete product of the new one. The provision for agricultural spending in that budget is about £1.3 billion below the guideline, and the budget as a whole is over £2.5 billion within the own resources sub-ceiling for 1989.

The third document mentioned in the motion is the court's annual report on the accounting and financial management of the European Coal and Steel Community. The report is intended to give the European Parliament and the Council an insight into the Commission's management of ECSC resources, most of which come from a levy on coal and steel producers, from borrowing on the capital markets and from bank loans.

Mr. Teddy Taylor : Will my right hon. Friend answer a question that I have asked several times and to which I should like an answer? In view of what he has said about

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his co-operation with the court so that the accounts are properly managed, why did the Council of Finance Ministers, at which he was present, refuse to discuss a report, submitted by the court, which said that the Council's decision to transfer the responsibility for butter dumping from the EEC to member states was unlawful? That refusal meant that nothing could happen.

Mr. Brooke : It is wrong to say that the Council refused to discuss it. It was as a result of the United Kingdom's interventions that the report is now discussed at ECOFIN. That was the basis which we are expanding further at the meeting on 13 March. However, I agree with my hon. Friend the Member for Southend, East that there was disagreement between the Council and the court over that particular measure.

I shall confine my remarks to an aspect of the report that touches on an issue currently before the Council. The court notes that the ECSC's reserves increased in 1987, and calculates that the ratio of total reserves to total assets is higher than recommended by independent consultants. This is relevant to decisions on the current and future funding of the ECSC's programme of social measures for redundant steel workers. The Government have consistently argued that those should be financed, at least in part, by drawing on the ECSC's reserves. The court's report confirms that the reserves are adequate for this purpose.

The Commission, however, considers that there are insufficient resources within the ECSC budget to finance a programme of social measures at the proposed level. It has sought to remedy the alleged shortfall by proposing a transfer to the ECSC budget from the general European Community budget. The Government have resisted this, while making it clear that we are not opposed to the social measures in principle. The matter is to be discussed at the Council of Industry Ministers next Monday.

In my speech on this same occasion last year, I mentioned that I had recently visited the Court of Auditors and had emphasised the contribution that it could make on the subject of value for money in the Community budget. The Community's traditional approach to auditing has tended to concentrate on the regularity and propriety of expenditure by reference to legislative instruments and procedures. That is a necessary function, of course, but I am encouraged by the indications in the latest annual report of the court, moving beyond the traditional approach and towards the concept of value-for-money auditing with which we in the United Kingdom are familiar, but which has yet to take a firm hold in the Community. This shift of emphasis is particularly noticeable in the court's remarks on research and development and the structural funds.

As regards R and D, the court offers a cautious welcome for the programme of evaluation adopted by the Commission in 1983 and extended in 1987, but it urges the Commission to pay more attention to improving its assessment of the implementation and current validity of the R and D framework programme for 1987-91. A mid-term review of this programme is due to take place later this year, and will no doubt lead to proposals by the Commission for new projects and activities in areas which the programme does not at present cover.

I would not wish to prejudge the outcome of the review--some difficult negotiations lie ahead--but it would make neither financial nor industrial sense simply to graft new

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activities on to the existing programme. It would be a mistake to assume that newly identified research priorities must necessarily be pursued at Community level. Even where this is appropriate, new activities should take the place of existing ones which have outlived their usefulness, which are not producing the intended results or which have been overtaken by other developments. Rigorous evaluation is needed in order to identify candidates for weeding out, just as detailed industrial and scientific assessment is needed to identify potentially worthwhile new projects. The criteria and procedures suggested by the court will be an especially useful input to the negotiations on the review.

As regards the structural funds, the court has some interesting things to say about measuring the impact on regional development of infrastructure investments subsidised by the Community. The precise methodology adopted by the court would not necessarily commend itself to all experts in this sphere, but the expansion of the structural funds which was agreed last year will involve a significant transfer of resources from the richer areas of the Community to the poorer. The greater convergence of member states' economic performance that that transfer is intended to bring about will not happen unless the resources are carefully targeted and the projects to which they apply are scientifically evaluated.

Sir Russell Johnston (Inverness, Nairn and Lochaber) : Will the Minister take this opportunity to clarify whether he agrees with the remark recently made by the Chancellor of the Exchequer, that all regional policy in the Community was a waste of time?

Mr. Brooke : Since I share departmental responsibility with my right hon. Friend, I should verify precisely what he said. However, I am grateful to the hon. Gentleman for drawing my attention to the remark.

I referred earlier to the new machinery for controlling Community expenditure. With that machinery firmly in place, the Government are now taking the debate one step further by focusing on the quality of Community expenditure, not just the quantity. To that end we have formally tabled a detailed series of amendments to the financial regulation, which governs the implementation of the budget. The amendments are designed to provide a legal framework for improving the value for money of Community expenditure, clarifying its objectives and developing measures to indicate how far those objectives are achieved in practice. Those concepts have become an established part of the landscape in our own public sector, but are not yet embedded in the Community's culture. We aim to try to change that.

I believe that many of the court's anxieties about the implementation of the Community budget have been addressed in the future financing package agreed last year. I hope that that will allow the court to develop its work on value for money and cost-effectiveness. Finally, I encourage the court to continue in its role as the scourge of fraud, waste and mismanagement. In that it has the Government's full support.

I accordingly commend to the House the reports mentioned in the motion, and look forward to hearing the views of hon. Members.

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7.30 pm

Mr. Stuart Holland (Vauxhall) : I beg to move, as an amendment to the Question, at end to add :

"and to this end calls on Her Majesty's Government to withhold their approval of any recommendation by the Council of Ministers of the European Economic Community to the European Parliament to discharge the annual accounts of the Community for the year 1987, in accordance with the procedures specified in Article 206B of the Treaty of Rome, until the Council has received and discussed the report of the working party established by the Commission of the European Communities to consider the recommendations of the Special Report No. 5/88 of the Court of Auditors (8502/88) dated 13 September 1988 on the management and control of public storage of agricultural products."

It seems to Opposition Members--and, I suspect, to Conservative Members-- that the Minister's unconcern about some of the fundamental implications raised by the auditor's report is simply staggering. The position is highlighted by an excellent report in today's edition of The Guardian, which states :

"Massive fraud involving an estimated £17.25 billion over the past eight years is causing the EEC to fear that the entire Common Agricultural Policy is being discredited."

It is all very well for the Minister to say that that was the ancien regime and that things are changing. He does not face the implications of the report, which in our view falls into two categories, one long-term and one short-term. The short-term category may be the more dramatic, but the long- term one is also important. One of the reasons why there is so much scope for fraud in the European Community is the price support system that it operates, rather than the deficiency payments system that it should be operating. The system should both enable the consumer to benefit and allow operations to be more transparent in supporting producers. That was the basis of the deficiency payments system. Commodities came in, by and large, at world prices--therefore low prices--and the subsidies went to the producers, that is, the farmers, in a manner that could be effectively scrutinised by the Ministry of Agriculture. The argument at the time of the debate on the common agricultural policy throughout the early and mid-1960s was that the share of the working population in agriculture in the Community was too high for a deficiency payments system to operate. One out of four workers in the original six countries was employed in agriculture in 1957, but, as I have told the House before and as many hon. Members present tonight are well aware, the working population in agriculture--at least in the Community of 10, for which figures are readily available--is down to less than 7 per cent.

I will not elaborate on the point unduly, but none the less I think that it should be made. What this means in practice is that production quotas can be set within guidelines for specific farms, concerning head of cattle, grain production, or whatever. If world market prices are then prevailing on the import side, the whole range of fraudulent operations for example on the export and re-import of beef products highlighted in the auditors' report simply would not be happening, as there would not be subsidies for the export and re-import of beef.

Those long-term structural factors must be addressed. If the Government are not addressing them, whatever they do at an ECOFIN meeting in a few weeks' time will not begin to resolve the fundamental problems.

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Mr. Cash : The hon. Gentleman is trying to wrap up the argument in terms of deficiency payments. Wearing their other hat in the Ministry of Agriculture, the Government are trying to deal specifically with how to mitigate surpluses. Those policies, which would be combined with such measures as reducing pollution and the quantity of nitrates--I shall not go into them in detail now--would in aggregate reduce the amount of money required. Clearly that would be the best course to take, and if other countries would adopt the policies that we have been pursuing a good deal of progress might be made.

Mr. Holland : That is probably so. Certainly it is important for us to see agricultural policy as related to other kinds of priority policy, such as the environment and regional development. One of the ways in which reduced expenditure on agriculture could well be reallocated is via the social and regional fund. In the environmental context, for example, the argument is well established that keeping some land under cultivation, which may not in itself be economically viable, is environmentally desirable. It also avoids the grotesque depopulation of the countryside and the "Deserted Village" syndrome that has afflicted various parts of Europe.

Let me return to the short-term implications of what the Government are doing, and the extent to which they are responsible for what has happened. The Minister flipped over that rather easily, saying that responsibility for the monitoring of intervention funds was shared between the Commission and member states. The guidelines are there for the Commission, and some of the auditing and supervision must be done by the Commission, but the responsibility is that of the individual member states. In this instance, it would be the responsibility of member states to establish whether suitable controls are in operation, whether they are accurate on a monthly or annual basis, controls on quantities and quality, the nature of declarations, the source data and accounting arrangements generally--the main items in the auditors' report.

In this context, a letter dated 13 September 1988 is important. It was written by Mr. Marcel Mart, the president of the Court of Auditors, to Karolos Papoulias, at the time president of the Council. It poses questions to be raised with Ministers about what the Government have been, and are doing, in this regard. For example, there is the notorious case, widely reported in the press and mentioned on page 21 of Mr. Mart's letter in its English translation, of the overcrowding of space in storage, preventing any reasonable access or checks. Is the Minister satisfied that that is not occurring in the United Kingdom? What proportion of storage facilities are investigated by the Government each year to ensure that it does not happen?

Page 22 of the letter states :

"There is only one country"--

that is, Denmark--

"in which volumetric assessment of the quantities of cereals kept in flat storage is feasible."

Why is it not feasible for the United Kingdom? Page 25 states that there is a great variety of surveillance and technical differences between various states. In monitoring humidity and knowing how to watch for the presence of insects or to prevent the access of other animals, only Denmark appears to have effective mechanisms for

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scrutiny. As that factor relates to health, the Government should be rather sensitive to the health quality of food products.

Mr. Marlow : I am sure that the hon. Gentleman understands that measuring the volume of a commodity such as grain does not define the value. The value of that volume of grain varies according to the amount of moisture and impurities in it, and the type of grain that is stored. It is essential that, if any heap of grain, for example, is being measured, the other qualities pertaining to it are examined, otherwise it is impossible to have any idea of the value. That is one reason why so much fraud is apparent at present. I agree with the hon. Gentleman. My point is that Mr. Mart's letter highlight that the Danish have a range of inspection procedures which are relevant, such as temperature probes, monitoring humidity, and under which conditions to ventilate. Of course, it is not simply quantity but quality. Notoriously in the beef case, it is alleged that there are so many different quality specifications that it is impossible to monitor effectively. It has been alleged that there are up to 1,000 different regulations for beef products in the Community. Is that so?

Mr. Boswell : Following the point made by my hon. Friend the Member for Northampton, North (Mr. Marlow) and speaking as a practical farmer, I must say that one of our problems with volumetric measurement is that, unless one has a good standardised measurement of the actual density of the grain, it is difficult to know the tonnage involved. That may vary within the heap, even if one has a standardised volume.

The other point that has concerned me is that the hon. Gentleman has several times referred to the practice in Denmark. As I read the report, I believe that Denmark was not one of the countries considered in the detailed study. In fact, the "D" stands for Deutschland, namely the Federal Republic of Germany. I wonder whether I am right about that, and, if so, will the hon. Gentleman correct his assertion?

Mr. Holland : The hon. Gentleman may be correct and I am most grateful to him. It is certainly confusing if Denmark is expressed by an initial--(D)--which represents Deutschland.

The letter says on page 27 that there is

"only one case known (France, cereals) where examples are found of storekeepers being financially sanctioned for excessive quality differences."

What kind of sanctions are being employed by the United Kingdom Government? Are all our storekeepers angels? Can we assume that they are? How many prosecutions have the Government undertaken concerning any breach of the storage of food regulations?

On page 29, the letter says :

"since under current arrangements there exists no stable valuation basis for the recording of stock movements and their consequences for the Community budget in the financial accounts".

Why is there not such a stable valuation basis for the recording of stock movements in the United Kingdom? Will the Minister answer that question, because for that the Government and not the Commission are responsible?

Another consequence is reported on page 30 :

"profits and losses cannot be attributed to individual transactions."

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