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Mr. Teddy Taylor (Southend, East) : I hope that everyone who has read the report feels physically sick. We see here not only shameful abuse of public funds but grotesque mismanagement and blind inefficiency. Anyone who feels complacent about the report should be shot. It is disgraceful, when we think of the use that could be made of money that is being frauded away.

What worries me are the attitudes that have been conveyed. My right hon. Friend the Minister said that the reason for the overspend of some 20 per cent. was the "ancien regime", the old system of cash. That system was not exactly ancient ; it started in 1984 at Fontainebleau. When my right hon. Friend the Prime Minister returned from Fontainebleau she said, "Do not worry about the extra cash : we have spending controls which are binding on the Council." Does my right hon. Friend the Minister remember that? I sat here--we all sat here--and heard : "Forget about the overspending. It is sorted out now because we have binding controls." Sadly, we can forget about that,

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because the controls have proved utterly hopeless, fraudulent and wrong. The Government simply stood back and watched the Commission using the accountancy device of a 10-month year.

The Minister, too, has a case to answer, and I hope that some day he will do so. He knows that another device used by the Council and the Commission to get over spending controls was to do something illegal. We transferred spending for butter dumping from the Commission to member states, and the Court of Auditors put in a report saying that that was illegal. The Council did not even discuss that, which was shameful.

We are kidding ourselves if we try to pretend that the CAP is being reformed. Every time we debate these reports we hear that reform is current. We hear about a fall in the value and size of the mountains. We have simply had a fire clearance sale. It is ludicrous to say that the Commission can do things. The report is full of specific criticisms of the Commission and of what can be done.

What on earth can we do? When we receive these reports year after year-- when the fraud continues and increases, as does the mismanagement--we must admit that nothing can be done within the existing rules. Euro-police are a joke. We know what is going on : it is identified. I have asked the Government time and again about the specific case of the Mafia obtaining funds for the delivery of non-existent fruit juice to NATO headquarters in Palermo. Everyone knows about it, but what is being done? The answer is nothing, apart--we are told--from inquiries.

There is only one thing that we can do, and that is to decide that our next chance to act is when the Common Market is next bust. It was bust in February 1988, and the Prime Minister gave it another pile of cash. That is when we have a veto--and here again we are told that we have legally binding controls. There were binding controls last time. They did not work then and they will not work now. We must say that the common agricultural policy, by its nature, creates all that nonsense. It is evil spending, because the people who really suffer are the people of the Third world, whom few people care about. If we look at the food aid reports, we can see that they are suffering. It is shameful. Money is allegedly being spent on food to feed the poor, but instead it is going on fraud and mismanagement. We know, too, that we are killing those countries by dumping food at knockdown prices.

The Government should say that the only answer is to repatriate agriculture to member states. The only way we can do that is by saying no when the EEC is next bust and looking for more resources. The same happened when King Charles had no money. He came to Parliament and asked for cash. We said that he could only have it on certain conditions. If we do not receive that message from the report, but instead we have more inquiries, more meetings and more councils, we all know that it will lead to nothing. We will be kidding ourselves. It is a dreadful report. We should admit the simple fact that the position is a disaster, it is shameful and it is horrible. Our only answer is to commit ourselves to asking for repatriation and the end of the CAP the next time the EEC is bankrupt.

9.35 pm

Mr. William Cash (Stafford) : We have heard a catalogue of cases which are quite appalling in their extent and degree. I would like to read out one such example,

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because there has not been a specific example given which I regard as being quite as bad as this one. At page 74 the report says : "the Court notes with concern that one trader, already under investigation for export refund fraud in 1985 in one Member State, was paid some 12 mio ecu in 1986 in another Member State, without any special attention being paid to individual claims, without an investigation of his export refund activities and without a Directive control. The question thus arises of establishing whether the Commission has at present any system providing it with information on cases of this kind and allowing it to monitor the Member States' mutual information-supplying activities and react promptly where necessary."

That is only one example of the kind of thing that is happening. The fact is that there have not been sufficient prosecutions. We have actual knowledge in this report of cases of forgery and the like, and--just as, for example, in the area of financial services and the recent attacks on city frauds--there is no way of dealing with the problem.

I do not believe, however, that we need to do this by a supranational authority. The Paymaster General asked us whether we thought this should be done by supranationality or otherwise. It is my belief--which I believe may also be the view of the Court of Auditors--that what are required are common standards applied throughout the Member States, but with each of the national authorities preserving to themselves the right of prosecution. The question is not whether we have evidence of fraud--I believe that evidence has already been made available--but I am concerned about the prosecutions which need to be made in order to give effect to the requirement which happens to be associated with proper accounting procedures.

In a sense, nothing more than that needs to be said on that subject. However, there have been criticisms of the Community about the manner in which the agricultural system operates. I would like to put one other thought to the House. On a recent visit to Brussels, we heard much about the social dimension. I understand that there must be something in the form of a dimension of that kind. However, when in practice the whole of the agricultural policy, or much of it, in relation to certain member states is effectively run as a vehicle for social engineering and is, in fact, a social policy by any other means, then I ask a question of the hon. Member for Bolsover (Mr. Skinner). Does he agree that it is not right that people- -for example, in his mining constituency or in mine--should have difficulties under the existing social fund arrangements on a domestic level, because of the way in which the Community functions?

Inefficiency, incompetence and an inability to see the wood for the trees lie at the heart of the auditors' report. As my hon. Friend the Member for Southend, East (Mr. Taylor) said, people in the Third world are suffering grievously as a result of the problems that drought and the like have visited on them. We have evidence to enable us to remedy most of those problems. I believe that the Government have every intention of doing everything that they can to sort the matter out, and I look to my right hon. Friend the Paymaster General to work as hard as possible to make sure that the matter is remedied forthwith.

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9.40 pm

Mr. Tony Marlow (Northampton, North) : There are many horror stories in the auditors' report, but today we have been concentrating on £6 billion of public money which is being expended casually, carelessly and without proper control on the storage of agricultural products and on export refunds for agricultural products. That, as a proportion of the EC budget, is a greater slice than the United Kingdom social security budget. It is without control and out of control. It is maladministered.

As hon. Members have said, there is no proper measurement of the quantities or qualities of commodities in store. There is no proper means by which to access the volume or nature of goods being transported out of the Community. Somebody may look over the back of a lorry or open the occasional box, but less than 1 per cent. of cargoes is inspected and probably less than one tenth of cargoes are analysed in any proper way.

It is open season for fraud. No wonder the EC is ripped off by the Mafia and the IRA. No wonder it is ripped off with three different operatives in Italy to register the number of olive trees. Those trees are registered three times over because the co-operatives want to retain their custom. As my right hon. Friend the Paymaster General said, this is a fraudster- friendly rip-off. It is a £6,000 million slush fund which is completely maladministered.

Why should Britain do something about the problem? In a world of car thieves, the man who does not steal one himself must walk. If everyone else is doing it, we must do it, or we shall be left outside. No individual country will take action.

If we are to take this matter to the EC and the Council of Ministers, we must realise that some countries are doing well out of such frauds. The chap who drives round in a Rolls-Royce, like my hon. Friend the Member for Epping Forest (Mr. Norris), will not, if it is stolen--I am not saying that my hon. Friend's is stolen--want to increase the number of CID members looking for those driving round in stolen cars. Human nature being what it is, there is no incentive for any nation state to do anything about the problem.

If we look at the matter properly and open up what has been happening in the past it will turn out to be a Pandora's box. Governments throughout the EC will be falling like ninepins as all the fraud comes to light and all the horror stories see the light of day.

My right hon. Friend the Paymaster General has asked for suggestions and solutions. I am sure that he would suggest that we should tighten up procedures and have new guidelines. There is common procedure throughout the EC but it is still operated by the individual countries. The slacker they operate the procedures the more benefits they obtain for their country and we shall not get anywhere.

We have to render unto Brussels that which belongs to Brussels. I would not want a great deal to belong to Brussels, but it is Community money, these are Community systems and we must allow Community institutions to supervise them. If we leave it to member countries, we shall get nowhere.

I have one other plea to put to my right hon. Friend. The Audit Commission is universally supported in the House. It is the one non-controversial institution within the European Common Market. It does a good job and we all support it. Let us give it more support, give it the

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resources, give it the finance, give it the power, so that it can do its job. The House traditionally is concerned with money and with voting supply. Let us see that that money is properly co- ordinated and controlled and let us give the Audit Commission all the support it needs.

9.46 pm

Mr. Holland : It is clearly appreciated by hon. Members on both sides of the House that seldom in the history of public expenditure can so much have been taken from so many by so few so fraudulently. It is the transparent fraud which scandalises the House. The abuse, however--and many hon. Members seemed to have missed this--has to be dealt with by the intervention agencies of national member states. It is fine for Commission- shooting season to be open--the Commission is to blame for this and for that--but it is the Governments who are responsible for the national intervention agencies. We should not be saying that there is nothing we can do about it. We have a Minister here who is responsible for that national intervention agency. It is there that we need the action ; it is from this Minister that we need the action, to get transparency of accounts.

When will a report on these accounts and what the Government are doing be made to the House? I put several specific questions to the Minister earlier about what the Government are or are not doing to follow up the recommendations in the report. I think that hon. Members on both sides of the House have a right to an answer from the Minister now.

9.47 pm

Mr. Brooke : I elicit a degree of hollow laughter on the occasion of these debates, which I have been attending for some years, when I say that we have had an excellent debate, but I repeat those words again tonight. It has been an excellent debate with a series of admirable and valuable contributions.

The hon. Member for Vauxhall (Mr. Holland) raised a number of matters in his earlier speech and he has come back in his final remarks and quite properly said that it is not simply a matter for the Commission ; it is a matter for member states as well. I hope that I showed that I was in accord with that in my earlier remarks and I certainly say that I am now.

There was an agreeable paradox in the utterances with which the hon. Gentleman opened his speech at about 7.30. He indicated--as the Opposition have done on more than one occasion--the urgency of the need for corrective action against fraud in the Community. He then proposed what was essentially a long-term solution relating to a change in the basis of agricultural policy. He cited the year 2002 in the context of the Coal and Steel Community and said that if we were ready to think about that year in the context of coal and steel we should be thinking about agriculture too. I am perfectly prepared to think into the next century on the subject of agriculture, but it does not seem to me to march entirely with the degree of urgency which the hon. Member expressed.

Mr. Holland : The Minister is surely aware that I am talking about long-term structural change in the common agricultural policy back to a deficiency payments system which allows food to come in at world prices. If that happens, we do not have this cross-border nonsense that

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we have seen under the beef regime. The short-term issue is what action the Government will take to investigate this fraud in this country through its own agencies.

Mr. Brooke : I freely acknowledge that I was to a degree pulling the hon. Member's leg, but there is a difference between the two time frames. However, I take the point that he was making.

The hon. Member asked me a series of questions about the intervention agency. He would be the first to acknowledge that those questions were dense and detailed. If he will excuse me, I will deal with them in correspondence with him after the event. They were reasonable questions to ask. I made the point earlier--there is reference to it in the amendment, and both the hon. Gentleman and the hon. Member for Newham, South, (Mr. Spearing) referred to it--about the working party that is engaged on these matters. It has already met on a number of occasions and, I understand, is due to complete its work in April. We are concerned to put on pressure for a deadline for the conclusion of that work when we come to the ECOFIN meeting on 13 March.

My hon. Friend the Member for Nottingham, East (Mr. Knowles) mentioned resources and, in particular, resources of people. The Government have always made it clear that they would be prepared to see greater resources of people put to work by the Commission and would not stand in its way, although the Commission has a habit of asking for large groups of people without specifying what it wants them for.

As to the court, I should be delighted if proposals were put to us--and I totally share with a number of my hon. Friends and other hon. Members their admiration for the Court of Auditors. If proposals were put before the Government they would be looked at reasonably and rationally. In fact, we recently agreed to the appointment of what is known in the Community as an A1, essentially a second permanent secretary on the administrative side, for the Court of Auditors. I detected in what my hon. Friend the Member for Nottingham, East said a feeling that original sin had something to do with the problems with which we are faced--that is something in which all on the Conservative side would have no difficulty in joining him. He referred to the criticism by the court of the United Kingdom and Ireland for not making scrutiny reports available to the Court of Auditors. In this area we certainly welcome the court's findings. On the specific criticisms of the United Kingdom, I note that we have met the requirements of the directive and that our instructions for carrying out scrutinies are praised in paragraph 4.67 of the report. We maintain records of scrutinies and are disappointed that the court should draw conclusions on our coverage of scrutinies, based on a small sample. We are considering positively the court's suggestions for improving the quality of scrutinies.

The hon. Member for Newham, South also mentioned the quality of personnel. I am delighted to say, at least with regard to customs and excise, that nearly half the people in customs and excise engaged on this work in the United Kingdom have received or are receiving in the current year special training in what to look for in this area. The hon. Gentleman spoke of safeguards--I had earlier spoken of simplification. There is not much between us there. He also asked about the built-in controls over intervention storage. He was perhaps blurring the line

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between fraud and mismanagement, but I would not dispute his point about inadequacy of those controls. It is possibly in recognition of this point, that, as I saidearlier, a working group is now urgently considering the position.

Examination rates for export refunds are as low as 1 per cent. in some cases, and we fully support the Commission's 1987 proposal which would provide for a 5 per cent. physical inspection target. The United Kingdom's current target is 7 per cent., and at ECOFIN I shall press the Commission to adopt the 1987 proposal in the light of the court's recommendations.

The hon. Gentleman also raised the subject of the Intervention Board for Agricultural Produce and physical checks. The IBAP has recently introduced a rolling programme of stocktaking for beef and butter in intervention stocks. Cereal stocks are inspected annually, or more frequently if trouble is suspected, for both quantity and quality. There is also an independent programme of physical checks carried out by the National Audit Office. In addition, the IBAP's contractual arrangements with cold store operators have recently been revised to ensure that the operators shoulder a greater share of the responsibility for loss or deterioration. It is worth noting that the IBAP's arrangements for controlling cereals intervention were complimented by the Commission in its report last year.

If the hon. Member for Newham, South has in mind a particular case of denial of information to the Court of Auditors and would care to write to me about it, I should, of course, investigate and reply as soon as possible.

My hon. Friend the Member for Holland with Boston (Sir R. Body) referred to the Serious Fraud Office and to Interpol. I am delighted to report that the director of the Serious Fraud Office, Mr. John Wood, was very well received when he spoke at the European Parliament's budgetary control committee hearings in Brussels in January. There was also an intervention from Interpol.

As to the intervention in that speech by the hon. Member for Mansfield (Mr. Meale) on the subject of frontiers and the Single European Act, it is the very possibilities of fraud within the clearing-house mechanism that make the Government so determined that that mechanism should not be brought in.

The hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston) vividly remembers the debate in the middle of the night last year, as I do because the second of the two days--the day into which we moved--was my birthday. The hon. Gentleman referred to what he described as so-called additionality. It is an extraordinary claim that the way in which the United Kingdom treats structural fund receipts is a form of fraud. That is what I understood the hon. Gentleman to be saying. I am afraid that it is a terminological inexactitude of the highest order, and it needs correction. There is no question of the United Kingdom structural fund receipts being used for anything other than their intended purpose. The hon. Gentleman referred to the Chancellor. I think I detected some exegesis of what the Chancellor had said. However, we shall have a word about it afterwards because I think that there may have been a


As for why the United Kingdom did not vote for the proposal put forward by my noble Friend Lord Cockfield, the United Kingdom and all other member states took the view that it would not be help, in the pursuit of fraud, to permit Commission officials to conduct investigations, in their own right, in member states. The practical difficulties

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would be considerable, and it would be necessary for the officials involved to understand, and to comply with, national criminal law. In addition, there is the possibility that member states' own investigations could be jeopardised.

My hon. Friend the Member for Daventry (Mr. Boswell) made a balanced speech and brought in, for the first time, the subject of olive oil, which then returned to the debate. I am glad to say that the account on olive oil-- paragraphs 4.107 to 4.114--is a great deal more favourable than those in previous reports were, and I have some sense of the hon. Member for Bolsover (Mr. Skinner) recycling his material. He did, however, do the House a service in injecting some passion into the debate, from which it gained, even if some of his material had been recycled.

The hon. Gentleman raised the subject of the £17 billion that had been mentioned in The Guardian. As the hon. Member for Vauxhall rightly pointed out, that sum was over eight years. It is an interesting question where the figure comes from. My own calculation is that it is probably 20 per cent. of the FEOGA expenditure over the last eight years. Then one asks where the 20 per cent. comes from. I think it comes from an analysis by Professor Tiedemenn, of Freiburg university, for the European Parliament budget committee in 1987, based on Swedish-Finnish frontier fraud and a previous study. It is a demonstration that in this unquantified area the figures are uncertain.

My hon. Friend the Member for Ludlow (Mr. Gill) asked for reform of the system. I refer again to what I said about simplification. What he said about the CAP marches entirely with the Government's views in terms of what they were seeking to do about the future financing proposals.

My hon. Friend the Member for Southend, East (Mr. Taylor) referred to 1984. I did not arrive in my present position until November 1985, but I would be the first to admit that my hon. Friend drew my attention to some of the failings of the Fontainebleau arrangements as soon as I arrived. It is not simply that we had a fire clearance sale. I hope that he will be fair enough to acknowledge that the reduction in intervention stocks is due not just to sales of existing stocks but is the result of policies that have reduced surpluses and, therefore, the quantities that are brought into intervention. My hon. Friend came back to the 10-month issue--one of which we have had exchanges before. The issue of NATO commodities in Palermo, which has not actually been the subject of a Court of Auditors report--it goes back to a press report in February 1987--has been somewhat difficult to pursue, but I hope to write to my hon. Friend very shortly giving the outcome of my researches.

My hon. Friend the Member for Stafford (Mr. Cash) asked that there should be prosecutions. The whole House will join him in wishing to see that happen and that example served. My hon. Friend the Member for Northampton, North (Mr. Marlow) praised the Court of Auditors. I look forward to sending the report of this debate to Mr. Mart, president of the court.

We have debated for three hours before 10 o'clock rather than having three hours of debate after 10 o'clock. A number of people have asked why we should do

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something about these matters. The answer is, because of the corrosive effect that fraud has on all our institutions. The whole House has demonstrated that it is against fraud, and I shall carry that message to ECOFIN.

Question put, That the amendment be made :

The House divided : Ayes 18, Noes 97.

Division No. 115] [10 pm


Bell, Stuart

Buckley, George J.

Cunliffe, Lawrence

Dixon, Don

Foster, Derek

Haynes, Frank

Hinchliffe, David

Holland, Stuart

Lofthouse, Geoffrey

McKay, Allen (Barnsley West)

Mahon, Mrs Alice

Meale, Alan

Mowlam, Marjorie

Nellist, Dave

Pike, Peter L.

Skinner, Dennis

Spearing, Nigel

Wray, Jimmy

Tellers for the Ayes :

Mr. Ray Powell and

Mr. Harry Barnes.


Alexander, Richard

Amess, David

Amos, Alan

Arbuthnot, James

Arnold, Jacques (Gravesham)

Ashby, David

Atkinson, David

Baker, Nicholas (Dorset N)

Boswell, Tim

Bottomley, Peter

Bowis, John

Brazier, Julian

Brooke, Rt Hon Peter

Browne, John (Winchester)

Burt, Alistair

Campbell, Menzies (Fife NE)

Carlile, Alex (Mont'g)

Carlisle, Kenneth (Lincoln)

Cash, William

Chapman, Sydney

Clarke, Rt Hon K. (Rushcliffe)

Coombs, Simon (Swindon)

Currie, Mrs Edwina

Durant, Tony

Fallon, Michael

Fishburn, John Dudley

Fookes, Dame Janet

Forman, Nigel

Forth, Eric

Franks, Cecil

Freeman, Roger

French, Douglas

Garel-Jones, Tristan

Gill, Christopher

Glyn, Dr Alan

Gorst, John

Ground, Patrick

Harris, David

Heathcoat-Amory, David

Heddle, John

Hind, Kenneth

Holt, Richard

Howe, Rt Hon Sir Geoffrey

Hughes, Robert G. (Harrow W)

Hunt, David (Wirral W)

Hunt, John (Ravensbourne)

Irvine, Michael

Jack, Michael

Janman, Tim

Johnston, Sir Russell

Jopling, Rt Hon Michael

Knapman, Roger

Knowles, Michael

Lang, Ian

Latham, Michael

Lawrence, Ivan

Lennox-Boyd, Hon Mark

Lightbown, David

Lyell, Sir Nicholas

MacKay, Andrew (E Berkshire)

Mans, Keith

Mawhinney, Dr Brian

Maxwell-Hyslop, Robin

Mayhew, Rt Hon Sir Patrick

Miller, Sir Hal

Mitchell, Andrew (Gedling)

Mitchell, Sir David

Moynihan, Hon Colin

Neubert, Michael

Nicholson, David (Taunton)

Norris, Steve

Patnick, Irvine

Portillo, Michael

Rhodes James, Robert

Rowe, Andrew

Sackville, Hon Tom

Shaw, David (Dover)

Sims, Roger

Steel, Rt Hon David

Stern, Michael

Stevens, Lewis

Stradling Thomas, Sir John

Summerson, Hugo

Taylor, Ian (Esher)

Taylor, John M (Solihull)

Thatcher, Rt Hon Margaret

Thompson, D. (Calder Valley)

Thompson, Patrick (Norwich N)

Thurnham, Peter

Waddington, Rt Hon David

Wallace, James

Waller, Gary

Wardle, Charles (Bexhill)

Wheeler, John

Widdecombe, Ann

Wilkinson, John

Wilshire, David

Tellers for the Noes :

Mr. Alan Howarth and

Mr. David Maclean.

Question accordingly negatived.

Main Question put and agreed to.


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