House of Commons Hansard Debates for 2 Mar 1989

Column 467

In effect, that amounts to transfer payments and prices being charged by firms in their operations. Why do we not have that transparency? What are the Government doing in that respect?

Sir Russell Johnston : I am not sure about the hon. Gentleman's page references. The page which the hon. Gentlman gave as page 30 is page 67 in my copy of the report.

Mr. Holland : I shall be glad to clarify that. I did say that what we are talking about is a letter from the president of the Court of Auditors of the European Communities, Mr.Marcel Mart, of 13 September 1988 to Karolos Papoulias, then President of the Council of Ministers. That document is available in the Vote Office, and perhaps the hon. Gentleman has it.

Page 31 of this letter--which after all was written by the president of the Court of Auditors to the then president of the Council of Ministers-- concerns the timing of submissions on expenditure and expenditure claims. Mr. Mart said :

"the Member States have an interest in the earliest possible declarations of expenditure because the declaration has to have been submitted before funds can be withdrawn from the EAGGF Treasury account. It was established that the great majority of the intervention agencies draw up their second category declarations in the first week of the month following the month in which the physical operations took place It will be clear that as such an early moment in time, it is hardly likely that the centrally recorded data in respect of intervention transactions can be complete."

What does the Minister say about that, because those who are making those claims should be responsible to him, as the Government are responsible for the operation of our intervention agency? The cost figures involved in the misallocation relates partly to what have been called Mafiosi-type swindling, but also partly to the inefficiency with which the intervention process is being managed. Page 43 of Mr. Mart's letter says :

"no audit is performed by any of the internal audit departments, of the monthly declarations nor of the annual accounts of public storage expenditure, submitted to EAGGF."

Why should they not be in the United Kingdom? In fact, what we have heard is that the Government are appalled by what is happening. They say that the problem will be reduced because we will have stabilisers. The fact that cereal prices may fall by 3 per cent. in 1990 is hardly encouraging for rapid progress in that respect. However, no doubt a fall will be more welcome than an increase. What is the Minister doing in the United Kingdom? When will he put his own house in order? When will he report to the House and respond specifically to the allegations that have been made?

Mr. Marlow : I put it to the hon. Gentleman that, as the system is at the moment, my hon. Friend is unlikely to do anything about it at all. The Community funds--especially in the common agricultural policy--are being ripped off right left and centre by every other country in the Community. If my hon. Friend were to do the decent thing--which I am sure he would like to do--it would mean that the United Kingdom would not get its fair share of funds. There is no incentive for my hon. Friend, on his own, to stand up and do the proper thing.

Mr. Holland : I think that the hon. Gentleman, allegedly the hon. Friend of the Minister, has put his finger on it.

Column 468

There is little incentive, as such, for the Government to seek to reduce the transfers which come to the United Kingdom under the guidance and guarantee fund.

However, another argument involves the accountability of Ministers to the House. For example, the Minister gave two main reasons for rejecting the terms of our amendment. First, he said that to accept the amendment would admonish the Commission. Secondly, he said that the discharge relates to specific accounts and whether or not they are improper. In this case, the admonition is not so much of the Commission as of the individual member states and their failure to pursue adequate audit and scrutiny procedures. It is in the sense that this is the appropriate Chamber in which the Minister should be held responsible for the range of issues that I have raised--where either the United Kingdom is not achieving the best practice available in other Community countries or it is failing to ensure that the quality of food or the manner in which claims are made are adequately transparent and supervised.

Moreover, the Minister's argument on the amendment is bizarre in view of a statement made in this House by the Secretary of State for Agriculture, Fisheries and Food. He said :

"As I have said, the Commission draws attention in its proposals to the need to tackle the problem of CAP fraud What we now need is action The Scrutiny Committee draws the House's attention to the importance of the European Court of Auditors report on intervention. I welcome the Commission's initiative in setting up a working party to study the recommendations of this report."--[ Official Report, 27 February 1989 ; Vol. 148, c. 29-30.]

If there is no sanction at any level, there is no guarantee that the auditors' recommendations will be implemented.

Mr. Cash : The hon. Gentleman is trying to pin blame on the Government. No doubt he regards that as his job. However, at the back of the Court of Auditors report in the Official Journal are the Commission's replies. This is an intricate matter but, when presented with the overwhelming evidence of its failures, the Commission's replies are, to say the least, inadequate.

Mr. Holland : I agree with the hon. Gentleman. Whether the Commission's replies start on page 257 or 265, which I read, they are anodyne in relation to the scale of the crisis that has emerged and the solutions that are needed.

One reason why the Opposition have tabled their amendment is to create a sense of urgency among those concerned in addressing the issues. If, at the 11th hour and 59th minute, one were to withdraw one's objections to the approval of the budget without a fuller implementation of the recommendations of the Court of Auditors, it might not be surprising. The Council is well known for stopping the clock on many matters.

What is surprising is not simply that the Minister is not prepared to fight, but that he is not even prepared to appear to fight. All we are likely to get is talk, talk and talk again rather than real progress.

We do not agree with Sir John Hoskyns's assertion that Brussels bureaucrats are not answerable to any Parliament. I have some sympathy with Lord Plumb when he says that he is outraged by Sir John's ignorance and asks :

"Has Sir John been asleep these last 10 years while the directly elected Parliament has been at work?"

Column 469

What I am concerned about is whether the British Government have been asleep for the past 10 years since they have failed to fulfil their responsibility to adequately scrutinise those public funds which are being expended by Britain's intervention agency which is located in Reading. That scrutiny has been inadequate and the Government should show far more urgency in addressing the problems. 7.52 pm

Mr. Michael Knowles (Nottingham, East) : I congratulate my right hon. Friend the Paymaster General on not taking the cop-out route of blaming the Commission, which Ministers have taken on previous occasions. That is the easy way out for any Minister responding to his national Parliament. Everybody enjoys having a go at the Commission, especially as it is not represented in Parliaments. However, there is a real problem about the Council. In the end, the Council is responsible. It has to act and approve in many cases. The Commission can make suggestions to it. It makes many, the majority of which are not approved. If the Council is a cabinet the doctrine of collegiate responsibility applies and my right hon. Friend is its representative here tonight. But if it is a legislative chamber, as it is in many respects, it is unacceptable that it should meet in secret. No one knows what happens.

The problem is that the Council is a hybrid, but I suspect that the balance is changing. We are getting to the stage when something must be done about the Council. Indeed, something must be done about an awful lot of the Community's structure. Everybody knows that it is nonsense to have such a large Commission, yet every nation state wants to be represented. Every language has to be translated and enormous bills result. A great deal of money goes on translating every document. As everyone in the Community knows, the two working languages are English and French and everybody uses them, but, as a matter of national pride, no one will give up their language. Therefore, there is a problem with the Council.

The hon. Member for Vauxhall (Mr. Holland) made a point about deficiency payments. There is an argument for switching to deficiency payments once the agricultural population reaches a fairly low figure. That is not politically realistic ; I cannot see other member states switching. Many good questions arose from the president's letter which he quoted, dealing with storage and technical differences between countries, with which I will deal later.

Mr. Holland : Why should deficiency payments be unfeasible as a longer-term objective? From another document before the House, on the European Coal and Steel Community, we see that

"urgent action should be taken to decide the future of the ECSC after July 2002."

If plans can be made for that far ahead for coal and steel can we not plan that far ahead to change the system for agriculture?

Mr. Knowles : One knows the speed at which change comes about within the Community. However sensible or rational, on matters such as this, which require a unanimous decision, someone somewhere will use the veto ; in some cases just so that they can be brought off. That is not completely unknown within the Council.

Column 470

The great difficulty with the system, as emerged from an earlier exchange, is that every member state has an interest in fraud. It is in their interests to grab as much as they can, for fear that other people will grab more. That is a recipe for financial disaster. To be fair, the Court of Auditors has said that time and again. It was reinforced when the European Parliament discharged its report. The Commission has produced plans which go to the Council and then we come to next year's auditors' report. The problem is that the Court of Auditors is a stand-alone institution and has no power in its own right. Nor has any other institution at a level where it could have an effect.

In places, the report makes nasty reading. Chapter 1 in particular is fairly horrible. The way in which the Commission presented the accounts is its responsibility, but, to put it mildly, the Council shares responsibility for that. Amounts of almost 7 billion ecu were not charged to the account. Two months were paid for by member states resources, not by the Community as they should have been, so that people could say that there was only a small increase--under 4 per cent.--in the budget that year. That is true if one runs a 10-month year it is always easy to make the figures balance in that way but taking the year as a whole, there was an increase of around 25 per cent. in agricultural spending. The figures were massaged and disguised, and we all know that that was for political reasons. On butter, other sums were lost--about 1.5 billion ecu. That is being amortised over the next four years. Members were owed almost 700 million ecu and that was postponed until this financial year. Chapter 1 is a real horror story for anyone who believes in accounting. I suspect that if that happened in this country, Treasury Ministers would have a very hard time from the House and especially from the Public Accounts Committee. Indeed, if any director of a company or any council did that to their figures they would find themselves inside a court very rapidly. Yet nothing happens here. We have here the problem, to which the court has drawn attention time and again, of the Commission over-budgeting. It happens every time because people are padding the figures. It gives them maneouvrability during the year to switch them about--and they do.

Mr. Cash : Does my hon. Friend think, however--this is a thought that has been occurring to me since we were recently together in Luxembourg --that when one considers and compares the situation of countries that build up a national debt and then get into a bit of a jam,one sees a certain similarity of approach? The real problem that arises here is not necessarily that they have got into a bit of a jam and there is a budget deficit but that there is quite clearly severe fraud which is not being pursued as vigorously as we would like, and that it is the accounting procedures which must be put right.

Mr. Knowles : If my hon. Friend will bear with me, I will come to the fraud question. I have some sympathy with the point he makes. We have set up a system in which every member state has a vested interest in fraud. That is a recipe for disaster, and it is the implication of the system of shared management over agricultural funds especially. There are no common Community controls. It is all in the hands of the member states. The Commission pays out the money on the members' declaration and later there will be an

Column 471

examination and a justification. That is a nightmare. Again, as the court has pointed out, the Commission has not put enough resources into this area, and it should.

Agriculture affects the northern states more and co-financing affects the southern states more. There is just not sufficient audit of the regional and social funds. I think I am quoting accurately from the report when I say that they cannot trace the effect of Community expenditure. Admittedly, Commissioner Christophersen is getting more of a grip on the situation, but frankly he needs to get a stranglehold on it the way things are now.

Chapter 4 of the report, in particular, is a horror story. Paragraph 4.68 on page 76 reads :

"Two Member States (IRL, UK) refused to allow the Court access to scrutiny reports notwithstanding that these checks are required to be carried out under Community law."

Then there are paragraphs 4.73 and 4.74. And so it goes on. On page 193, "Reports and opinions adopted by the Court of Auditors during the last five years", we get a constant repetition. Some of us have read those reports over the years and the same things keep coming up, because the system itself is deficient. We have built a nightmare. People are responding to the problems in a human way, so we have to change the system to work with the grain of human nature and not against it.

My right hon. Friend said that the problem was the regime--I think that was the expression he used. I do not believe that it is. I think that it is more a matter of constitutional balance. The Court of Auditors stands alone as an institution. The European Parliament then discharges with recommendations, and so on round the circle again. We have to look at changes across the range of the institutions of the Community, including the size of the Commission and the whole argument over languages. Indeed, a debate to this effect took place in the European Parliament recently, of which, of course, no notice whatsoever was taken.

Mr. Marlow : While my hon. Friend is considering institutional change, I wonder if he would like to address himself to the question put by our right hon. Friend? Does he believe that Community institutions ought to have more powers of intervention in how the system operates for the expenditure of Community funds and how it is audited and controlled within Community countries, because without this I do not think that we shall get anywhere?

Mr. Knowles : I think that my hon. Friend is right, but I am well aware of the implications of the question he is asking and of why my right hon. Friend did not answer it directly. Without that, I am at a loss to suggest another answer. The system does not work when Community funds are, in a sense, accessed through national Governments. That is the problem. Therefore, the only way is to have the Community's own institutions being able to oversee that function. If someone can suggest an alternative--

Mr. Teddy Taylor : Would not the best alternative be for the Community not to have any funds at all and to concentrate on free trade? Would that not be the best answer for everyone and solve all the problems?

Mr. Knowles : The difficulty here--my hon. Friend knows the problem- -is that the Community is much more than a free trade area. It was so designed in its very nature ;

Column 472

it is written into the treaties. We tried a free trade area on precisely that basis and in the end we still had, or we decided--history can be written either way--to join the Community. That had massive political implications ; one cannot gainsay that. The Commission has a curious hybrid function, part political, part civil service. In a sense, nothing like it has been seen before.

Mr. Cash : My hon. Friend is now getting very close, I suspect, to the centre of his argument. As a result of the previous intervention, he is conceding a point which I know he holds quite strongly, which is that some form of supranationality is required. But will he not accept that the treaty of Rome in no way, in 1957, in 1972 or indeed in 1986 with the Single European Act, prescribes, empowers or creates a political union? When we deal with the central question of finance and control over finance and concede that as a central point with reference to the control of public finance, we are effectively saying that we will have a political union.

Mr. Knowles : We have signed many documents saying that we are in favour of union, and it is not true. The preamble to the treaty referred to producing an ever closer union among peoples of Europe. The implications were clear, they were spelt out, and one has to follow through on the argument. We have a system designed to produce fraud on a massive scale. On the argument of sovereignty--here my hon. Friend and I disagree--we say that we will not accept those controls because that infringes sovereignty ; therefore, we have to accept that we go along with the fraud. It is one or the other.

Mr. Marlow : If this is Community money, where is the infringement of sovereignty if Community officials are allowed to supervise it?

Mr. Knowles : I am with my hon. Friend ; that is precisely my view, but it is not one that is shared by my hon. Friend the Member for Stafford (Mr. Cash).

Mr. Cash : Does my hon. Friend accept that one can have common standards by which the accounting procedures are administered through the national authorities, and have the bun and the ha'penny, too?

Mr. Knowles : I should live so long, is the answer to that. We have only to look at the report on common standards of looking after food or common standards across the professions--or even in the Court of Auditors itself, and there we are dealing with a professional body. To amalgamate the traditions of British public finance and the public finance of France, Germany and all the others has proved very difficult indeed, and there we have men working very closely in a similar field. They have found it difficult, so how one is going to do that across the 12 member states right through the professions I am not at all certain.

There was reference earlier to the Select Committee's recent visit to the institutions. It is interesting that in the run-up to 1992, the regulations covering public procurement will be enforced by the Commission. There will not this time be dependence on national good will and the hope that people will do it right, because they have learned the lesson ; they know what has happened before when they have depended on member states to carry out a

Column 473

common policy. The truth is that the states do not do it, so the Commission has to do it for the Community as a whole.

The same argument applies to paying out Commisssion money. The same argument applies also to the Community's own resources ; they are dependent on the member states. For instance, customs duties now all go to the Community, not to the nation states--they merely get a 10 per cent. collection fee. So what has happened? Are the nation states who control the customs officers rigorously collecting customs duties as they used to do when the money went into national treasuries? I suspect not. Customs officers have been diverted to other duties. They are looking more for drugs--we have heard the statements in the House. It applies across the board in the other countries. So the Community as a whole loses both ways. The member states will not collect the money for it properly yet the member states will spend that money like water. And we are surprised when we end up in financial difficulties. One could not have devised a system more likely to produce that result.

The answer is to look at all the institutions, their powers and their relationships to each other. We must think again. We must start talking both to the other member states and to the institutions. There is no point in throwing up our hands and merely saying that we are against fraud as we are against sin, but not following the implications of that argument right the way through. I suspect that the implications are much greater than merely making a saving of some millions or billions of ecu.

8.11 pm

Mr. Nigel Spearing (Newham, South) : I should like to begin on neutral ground by thanking the Paymaster General for his remarks about the reports of the Select Committee on European Legislation. We have three before the House tonight, one on the Court of Auditors' report which is to the fore, that is, HC 15-viii, one on the special storage report, 8502/88, to which my hon. Friend the Member for Vauxhall (Mr. Holland) referred, that of Mr. Mart and his colleagues, HC 15-ii, and the report on steel matters, HC 15-xi

We would all agree, although it was not mentioned by the Paymaster General, that we would like to see proper recruitment, adequate qualifications and good collection of the common Community tariff, also emphasised in the report by the Court of Auditors. One cannot expect a Court of Auditors, with which we all agree and which we praise, to work without proper recruitment of people with proper qualifications. If they are to be a "scourge"--I disagree with that word, for reasons that I shall give in a moment--they must have the tools of their trade, and it is the quality of the human tool that we all agree must be present in this case.

I speak now not as Chairman of the Select Committee on European Legislation, which produced the reports, which are there for the guidance of the House and the public, but in an individual capacity, although I do not do so in a controversial way. It is clear to us all that there are no inbuilt national incentives to detect fraud in the structure of these finances, particularly in respect of food. As the Paymaster General himself has admitted, there is an

Column 474

inbuilt incentive to defraud, both individually and on a national scale. He actually coined the phrase "fraudster-friendly". Are we becoming a community fit for Arthur Daley to operate in, with its "little earners"? They are not little earners ; they are big ones. I understand that some transactions in intervention stores go up to 5 billion a throw. That is not small money. Even a 5 per cent. fraud on such a sum involves a lot of money. So the Paymaster General has more or less given the game away--and he is an accountant. I was very surprised--

Mr. Brooke : I have been called many things in my time, but I have never been called an accountant, and I am not one.

Mr. Spearing : I must apologise to the Paymaster General. Perhaps I was misled by his official title. At least he is an experienced man of business. That would perhaps be a more adequate and accurate title.

The right hon. Gentleman is glad to hear, he says, of the introduction of value for money. Not many of us would disagree with that, but how can we have proper value for money before we have honesty and probity ? Surely the best guarantee of value for money is to ensure that we have probity and honesty to start with. That is the normal auditing procedure for firms and organisations in Britain. If one gets a qualified report from an auditor, things begin to happen--unless, of course, it is the Court of Auditors of the European Economic Community.

This is where I disagree with the Paymaster General when he talks about the court being a scourge. He says that we should let the court remain the scourge of the fraudster. What has happened is that the Court of Auditors has blown the whistle, not just once but every year for the past 14 years, and play goes on. It is not the role of the Court of Auditors to chase fraud ; it is there to show where fraud exists. Is that not the function of an auditor? So the promotion of a fraud squad inside the Commission, while it may, on the face of it, seem praiseworthy, will work only if that fraud squad, and the auditors, have sufficient evidence on which to work.

I suggest that the court reports show not just that things have gone wrong and that there is fraud but that there is no structure for the prevention and detection of fraud. That must be our major criticism of the food intervention and export structure of the common agricultural policy.

On the European investment bank, paragraph 1.46 of the court's report says :

"With regard to operations financed from Community resources in which the EIB is involved to varying extents, the Court is justified in fearing that, due to a lack of watchful action on the part of the Commission, its task as a higher external audit authority will gradually become meaningless, if not impossible."

The Paymaster General said a little while ago that he would not blame the Commission. That is what he said when I intervened at the beginning of the debate. If for nothing else, surely the Commission could be held responsible for that. It is an extraordinary statement. It is obviously true. The Council must do something about it, and so must the Commission.

Turning to the question of food, which is exercising the mind of the public and the media at the moment, nearly everyone agrees that the CAP needs reform in principle, and all pay lip service to the elimination of fraud, but nothing seems to happen. Why? The answer lies in two distinct but overlapping dimensions : the system, or lack of

Column 475

it, of book-keeping, and its management and supervision by both national and Community authorities. If fraud is to be discouraged, let alone eliminated, there must be both an adequate built-in system, matched to the nature of the transactions and the markets, and effective audit, together with an overlap or junction between the national and Community auditing authorities.

The evidence, however, suggests that neither of those conditions exists. No doubt the Commission would say that it is the fault of the Council and the Council that it is the fault of the Commission. The concept of a joint committee and national management lies at the heart of the issue. It has been referred to by Government Members. If, like me, one is keen on the retention of national competence, how far can one go in ceding authority to the Court of Auditors of the EEC in respect of these matters? Quite rightly, the Paymaster General himself has put that question.

Even if one agrees, as I do, that the nature of joint management must gain the assent of national Governments, surely that right cannot go as far as denying the installation of joint effective management procedures that would provide and control audit quality no less than that expected by any nation in respect of its national institutions or companies. Surely that is self-evident, yet I am afraid that such procedures are what we have not got. Surely, provided that satisfactory controls and systems are in place within a nation, its central Government need not know everything about what is going on and all the individual transactions. But where those controls and systems are not in place, can such information be denied to appropriate bodies? I will come back to that point at a later stage.

Why is fraud rampant in food storage and in the export activities of the EEC? It is because, within the complex transactions, there are no inbuilt dials and gauges to tell us what is going on. Unlike our own firms and organisations, the EEC did not have them built in from the start. When one looks at company accounts, or makes checks in any organisation with which one is familiar--even a tennis club--one finds them. But an audit is only as good as the evidence available to the auditor. If the evidence is inadequate, the opinion is also inadequate. Time and again the Court of Auditors tells us that it does not have enough evidence, so it has no opinion. The accounts are not just qualified ; they are found to be unacceptable except, of course, to the Council of Ministers and the Commission, which merrily discharge them year by year.

This would be totally unacceptable in the case of any social club, shop, works or store in this country, where committees and managers know all about the inbuilt principles of auditing and checking. There is the visible reconciliation of evidence of purchase and the cost of storage in appropriate conditions, including temperature and protection against misuse, moisture and insects. Then there are such factors as access, visibility for checking, elimination of the risk of adulteration--for example watering beer ; sale in checkable quantities--for example pints by the glass ; and assured quality, as in the case of proof spirits. This has to be backed by matching book-keeping, complemented by schedules of quantities and locations--all subject to regular and, on occasions, irregular audit. Every working men's club in the country, and, no doubt, Tory clubs and golf clubs, too, will know what I am talking about, as does every restaurant and cafe. It is something that most people understand.

Column 476

Mr. Christopher Gill (Ludlow) : Of course, we are not talking about working men's clubs or Tory clubs, or clubs of any other sort. Will the hon. Gentleman take it from me that, because of the very nature of the commodity, it is probably a practical impossibility, even with hundreds or thousands of inspectors, or auditors, or whatever other form of system of control might be installed, to control it ? Its control has defied very many people over very many years. I submit that, where there is no personal interest in controlling such commodities, the sort of fraud that is being experienced now will always be with us. The fault lies in the system, not in its control.

Mr. Spearing : I think that the hon. Gentleman is partly right, but food is particularly difficult to store and to sell because it varies in quality and in quantity--for all the reasons about which he and I would agree. I go with him to that extent, but I disagree with him in that safeguards were not built into the system at the start. The Mart report refers to this. That is where it has gone wrong. Unless and until such safeguards are inserted, fraud will not be detected and there will be every incentive to commit it. That is the essential fact that this House, and, moreover, the Council of Ministers and the Commission must grasp. At the moment they have shown no sign of doing so. Of course, no system is perfect, and there are difficulties in respect of food. But there is an obligation on public bodies to use public money in a responsible way, as I am sure the hon. Gentleman agrees. That is not being done.

It is clear from the evidence that safeguards such as I describe, visible in tens of thousands of enterprises--I will not say clubs--in this country, do not exist within this system. It is even more complicated than the transactions in a restuarant. Instead of the customer paying for his food or drink and consuming it on or off the premises, he makes a bid for surpluses advertised for tender. The person submitting the lowest tender takes away the food, claims to have exported it, in certain quantities and of certain quality, to particular destinations, and, having done so, goes back to the shop with bits of paper and gets up to five times what he paid for the goods.

That, I believe, is a crude, but not an unfair, description of the principles of export restitution as operated in the EEC. Each nation has its own food shop, checked by its own Government. The net expenditure for purchase, storage and export subsidy comes on repayment from the EEC, but not necessarily in the exact amount. However, the Court of Auditors, in its annual and special reports, tells us that the system is wide open to abuse. More regulations on top of the system that we have will be about as effective as corking a leaking boat with paper, since we are told that sufficient evidence is not available. We have to refashion that craft before we can stop the leaks.

Hon. Members may think that I am exaggerating, so I shall turn to the words of evidence from the reports themselves. Special report 8502/88, which for the purposes of the debate I shall call the Mart report, referring to food storage, says :

"The conclusion that inevitably results from these findings is that it is technically impossible to arrive at any audit opinion whatever, on the view presented by the EAGGF budget accounts, of public storage expenditure."

One cannot get anything more blunt than that. The report, in paragraphs 6.13 and 6.14, goes on to show why the system is basically defective. I will save the time of the House by saying simply that the report points out that the system was introduced in 1960 as a temporary measure

Column 477

and that it was unsatisfactory but that nobody wanted to change it and that it is now ingrained. That is clear from the reports of the Court of Auditors.

Paragraph 7 on page 64 of the report says :

"The charge borne by Member States in respect of technical and financial costs of public storage for the financial year 1986 can be conservatively estimated at about 450 Mio ECU. The result in terms of published financial information is that the official Community accounts do not reflect any more the full costs of the Community's intervention storage policy."

That can only mean that nobody knows how much officially, it is costing. Although we may know how much is charged to EEC institutions, we do not know how much each national Government is having to tip in as well. What a situation we are in.

Let me go on to the court's report itself and out of intervention into export restitution. Some of the problems have already been mentioned. Paragraph 4.21 says that the nomenclature for export refunds contains more than

"1,200 separate classifications for agricultural produce, including almost 400 for milk products and about 80 for beef."

We have to repay, for that little chit that I talked about, no fewer than 80 varieties of beef. It is open to enormous fraud. It is exported to 11 zones throughout the world, so for beef alone there are probably about 800 schedules. The Paymaster General will tell me if I am wrong, but that is what the paragraph says. No wonder, if there are 800 scales of repayment, that there are incentives for fraud. The Paymaster General has the cheek to say that future regulations must be simplified. That is no use, for we must first deal with the existing regulations that provide such a structure. Paragraph 4.33(b) complains about the lack of spot checking, stating :

"even where arbitrary national scales of examination have been set, they are not always adhered to by the customs services. Some customs stations had recorded examination rates as low as 1 without an apparent justification".

The Commission, to its credit, had a go at persuading countries to adopt a minimum 5 per cent. check rate, which is still not very high. We read on page 258, presenting the Commission's replies--and I have some sympathy for it, and do not wish to be unfair

"At the beginning of 1987 it sent the Council a proposal for a regulation on the monitoring of the payment of amounts granted on export of agricultural products (COM(87)9 final)."

I looked up that document, and it says, "Let's have 5 per cent. checks," but the nations will not agree.

Mr. Marlow : On another and related point, can the hon. Gentleman tell the House--I think he knows more about Community affairs than anyone else--what action is taken to mark and identify a consignment that leaves the Community so that it cannot come back into the Community in the dead of night and be re-exported again?

Mr. Spearing : My knowledge does not extend that far, but the hon. Gentleman puts his finger on a flaw in the structure. I read somewhere that several thousand lorries are running all over the place--and we all know what happens to containers.

Mr. Dennis Skinner (Bolsover) : My hon. Friend is well versed in matters concerning the Common Market, which has been an unmitigated disaster for the British working

Column 478

people from start to finish. As to lorries crossing borders, it is true that they go back and forth, and that, each time they do so, the amount of money that can be made through fraud is increased. In Ireland that fraud is perpetrated on a slightly different scale. Not only do lorries cross the border, but cattle are being driven back and forth. Every time that the cattle cross the border, their owners get extra money. They are doing it that often that the cattle are finding the way by themselves.

Mr. Spearing : My hon. Friend is right, and I recall that practice being mentioned in a previous report of the Court of Auditors.

Mr. Skinner : Yes, the court admitted it.

Mr. Spearing : The Paymaster General should consider also the situation in this country. If we are to make any fuss in the Council, as we ought to do, we must first ensure that we are behaving properly. I am not sure that we are. Intervention buying in the United Kingdom is not the biggest in the Community. HC 137 of 1988-89--"Intervention Buying : Accounts"--shows that in 1987 we had £376 million of butter in stock, and £122 million of beef. I do not know whether those quantities were physically checked on 31 December 1987, and later I shall ask the Paymaster General a question about physical checks.

However, intervention board report CM404 for 1987 reports : "The Board's external trade verification and scrutiny team visited 208 traders during the year to check declarations against company records. As a result financial adjustments were recommended in 74 cases, involving recovery for the Board of £434,713."

The report refers to "company records", but not to any check against actual stores. I am not sure that such checks are made. When the Paymaster General replies, I hope that he will say whether continual physical checks are made by the intervention board, or whether it relies on its contractors to do so.

Mr. Cash rose--

Next Section

Home Page