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Shaw, David (Dover)

Shaw, Sir Giles (Pudsey)

Shaw, Sir Michael (Scarb')

Shelton, Sir William

Shephard, Mrs G. (Norfolk SW)

Shepherd, Colin (Hereford)

Shepherd, Richard (Aldridge)

Shersby, Michael

Sims, Roger

Skeet, Sir Trevor

Smith, Tim (Beaconsfield)

Speed, Keith

Spicer, Sir Jim (Dorset W)

Spicer, Michael (S Worcs)

Squire, Robin

Stanbrook, Ivor

Stanley, Rt Hon Sir John

Steen, Anthony

Stern, Michael

Stevens, Lewis

Stewart, Allan (Eastwood)

Stewart, Andy (Sherwood)

Stewart, Rt Hon Ian (Herts N)

Stokes, Sir John

Sumberg, David

Tapsell, Sir Peter

Taylor, Ian (Esher)

Taylor, Teddy (S'end E)

Tebbit, Rt Hon Norman

Temple-Morris, Peter

Thompson, D. (Calder Valley)

Thompson, Patrick (Norwich N)

Thorne, Neil

Thornton, Malcolm

Thurnham, Peter

Townend, John (Bridlington)

Townsend, Cyril D. (B'heath)

Tracey, Richard

Twinn, Dr Ian

Viggers, Peter

Wakeham, Rt Hon John

Waldegrave, Rt Hon William

Walden, George

Walker, Bill (T'side North)

Waller, Gary

Walters, Sir Dennis

Ward, John

Wardle, Charles (Bexhill)

Warren, Kenneth

Watts, John

Wheeler, Sir John

Whitney, Ray

Widdecombe, Ann

Wiggin, Jerry

Wilkinson, John

Wilshire, David

Winterton, Mrs Ann

Winterton, Nicholas

Wolfson, Mark

Wood, Timothy

Woodcock, Dr. Mike

Yeo, Tim

Young, Sir George (Acton)

Tellers for the Noes :

Mr. John M. Taylor and

Mr. Tom Sackville.

Question accordingly negatived.

Question, That the proposed words be there added, put forthwith pursuant to Standing Order No. 30 (Questions on amendments), and agreed to.

Mr. Speaker-- forthwith declared the main Question, as amended, to be agreed to.

Resolved,

That this House notes that the policies of the last Labour Government pushed inflation to an all-time peak of 27 per cent., destroying savings and eroding living standards for millions of families and that Her Majesty's Opposition remains committed to policies which would once again sharply raise taxation and inflation ; and commends Her Majesty's Government's record in creating new jobs, in widening opportunities for home ownership, in directing additional help to low-income families, and in bringing about an increase of one-third in the real take-home pay of a family on average earnings ; and reaffirms its support for the Government's priority in fighting inflation.

BUSINESS OF THE HOUSE

Ordered,

That, at this day's sitting, the Motion in the name of Mr. John MacGregor relating to Statutory Instruments, &c. (the draft European Bank for Reconstruction and Development (Immunities and Privileges) Order 1991) may be proceeded with, though opposed, until fifteen minutes to Eleven o'clock or the end of a period of three-quarters of an hour after it has been entered upon, whichever is the later.-- [Mr. Neil Hamilton.]

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Court of Auditors

Mr. Speaker : I have selected the amendment in the name of the hon. Member for Thanet, South (Mr. Aitken).

10.15 pm

The Financial Secretary to the Treasury (Mr. Francis Maude) : I beg to move.

That this House takes note of the Annual Report of the Court of Auditors of the European Communities for 1989.

We frequently talk about the level of Community expenditure, but less often about the manner in which Community funds are spent--the "how" rather than the "how much". Tonight's debate enables us to remedy this.

Under the treaty of Rome, the Court of Auditors draws up an annual report on Community revenue and expenditure after the close of each financial year. This goes to the Council of Ministers and the European Parliament, which must examine it along with the accounts and the financial statement that the Commission submits. It then falls to the Parliament, acting on the recommendation of the Council, to give a discharge to the Commission over its implementation of the budget.

This is the court's 13th annual report. The court was established in 1975, in response to pressure for an independent audit body. It does much useful work, but the annual report is pre-eminent. It is the principal means of scrutinising how the Community spends taxpayer's money ; of extending to the Community the practices that are routine here ; and of ensuring that money is spent in a lawful and regular manner and that financial management has been sound. The court has power to expose incompetence, waste, inefficiency and fraud, and to stimulate change. It deserves our support. I shall say a few words later about our proposals to enhance its authority. I turn to the court's report on the 1989 budget, which is the subject of today's debate. The explanatory memorandum that I submitted to the Scrutiny Committee comprehensively summarises its contents.

There are some consistent and worrying themes. In particular, there is continuing evidence that certain Community programmes lack objectives that are sufficiently precise. In a number of instances the financial controls needed for proper implementation of certain policies are not in place, are not sufficiently rigorous, or are not being observed properly.

Areas singled out for criticism include agricultural programmes and the structural funds. There are also concerns about research. I will deal briefly with these three areas in turn.

Fifty-four per cent. of spending arises on agriculture guarantee support. In its report, the court criticised a number of programmes for failing to achieve important objectives. Set-aside, for instance, is a scheme to reduce grain production by taking land out of cultivation. A significant amount has been spent on this programme, but that has still not stopped the amount of land under cultivation increasing ; and the land that has been taken out of production has frequently been marginal. The Commission will be looking into the court's suggestions to improve the scheme's cost- effectiveness. We welcome the court's emphasis on the need for simplification of the agricultural programmes and for better implementation and control.

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Mr. Andrew Rowe (Mid-Kent) : This may be an ignorant question, but it would help me if my hon. Friend would answer it kindly. To what extent are the programmes and the definitions thereof the responsibility of the Council of Ministers, and to what extent are they the responsibility of the other organs of the Community?

Mr. Maude : That is not in any way a daft question. The Commission makes proposals to the Council of Ministers, and in general they will be detailed and specific. The Council of Ministers makes a decision upon them, having amended them as it thinks appropriate. The detailed drafting of a proposal, at every stage of the negotiation, generally will be in the hands of the Commission but subject to amendment in the Council of Ministers.

Mr. William Cash (Stafford) : Will my hon. Friend note that in the Republic of Germany and in Rheinland Pfalz a clear declaration must be made about the fields to which set-aside should apply? Is he aware that there are no maps showing the location of those fields? In Sicily, the maps that must be produced are obsolete, because the land register dates back to 1940.

Mr. Maude : My hon. Friend vividly makes the point that the system is not working satisfactorily. That is the point to which the Court of Auditors has rightly drawn attention. It is evident that the system of scrutiny has some potency. The Commission will have to introduce proposals to ensure that the scheme operates much more tightly. My hon. Friend is right to draw attention to deficiencies in the way that the scheme works.

Mr. Teddy Taylor (Southend, East) : To be fair to the Commission, which I think should be protected in this instance, may I ask this question : is it not true that the Court of Auditors pointed out that, although 611,000 hectares had been taken out under set-aside, and a fortune spent from public funds to enable that to be done, the number of hectares growing cereals had increased, that cereal production had increased, and that the barley mountain was at an all-time high? The Court of Auditors criticised the scheme as worthless and pointless, not the administration of the scheme by the Commission. Should not my hon. Friend accept that it is the scheme that is wrong, not the administration?

Mr. Maude : My hon. Friend is right to say that the Court of Auditors pointed out starkly that, at the same time as the set-aside scheme, which was designed to take land out of cultivation, was operating, more land came into cultivation. The land that had been taken out generally was poor land at the margins of possible cultivation. There is a problem with the operation of the scheme, and the Court of Auditors has done the Community a service in drawing attention to that. The Community must now resolve those problems.

Rev. Ian Paisley (Antrim, North) : Does the Minister accept that the Council of Ministers has the final responsibility, and that the criticisms by the Court of Auditors are levelled against the Council of Ministers? Why should the Commission get all the stick?

Mr. Maude : It is heartening to find so many champions of the European Commission in this House, and so many who are anxious to spring to its defence. That will be a source of great comfort and support to the Commission. The hon. Gentleman is right to say that the Council of

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Ministers takes responsibility for the decision to set up the scheme, and for the parameters and the guidelines under which it operates.

However, the hon. Gentleman has considerable experience of these matters, and he will appreciate that the Council of Ministers does not administer the scheme ; the Commission administers it. It is for the Commission to respond to the criticisms made by the Court of Auditors. That is its duty under the treaty. The Commission made the original proposal to the Council of Ministers, and I am sure that the hon. Gentleman appreciates the way in which these matters must work. The court's criticisms of the structural funds include failure to define the fund's objectives properly and the absence of adequate guidelines for implementation. Spending on structural funds increased substantially following the reforms of the Community budget in 1988, but the court rightly observed that those reforms did not guarantee that the funds would achieve their objectives.

Therefore, the Commission must ensure that the funds provide value for money, and the Council will need to follow up the recommendations of the court when it reviews the policy on structural funds. The court also comments on the Community's research activities, especially work done by the joint research centre for other Commission directorates-general. Because the joint research centre bears the costs of all the work that it does directly, the other parts of the Commission have no incentive to give any research work to outside contractors. The court says that the centre must establish a proper customer-contractor relationship with its internal clients. The court also criticises the early retirement arrangements at the joint research centre, which were reported widely in the press earlier this year, although some reports did not reflect the situation accurately. The centre does have some significant problems--in particular, a redundancy scheme which is over-generous but which fails, none the less, to match the centre's staffing with its work load. We shall urge the Council to look into that issue. I must stress again the importance that we attach to achieving good value for the money that is spent by the Community. To that end, we have made suggestions for a series of treaty amendments in the intergovernmental conference on political union which would improve financial management in the Community. These include measures to enhance scrutiny by the European Parliament, to underline member states' obligations to counter fraud, and to develop the responsibilities of the Court of Auditors. These ideas, which we have canvassed widely with our colleagues in the Community, will be discussed increasingly in the coming months.

Next Monday the ECOFIN Council will decide its recommendations on the Court of Auditors report. That recommendation will be sent to the European Parliament to enable it to give the Commission a discharge on that report. Tonight's debate is an important part of this process of scrutiny, and it will be extremely useful to me to hear the views of the House on this matter before I attend the ECOFIN Council on Monday.

Mr. Tim Smith (Beaconsfield) : Further to my hon. Friend's comments about the Government's recommendations for an improvement in the scrutiny arrangements within the Community and the need to encourage Parliament to take more interest, does he agree that, unless

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we make progress in that respect, we shall continue to have annual debates like this and that will lead nowhere? The European Parliament should take more interest in the scrutiny of Community spending. A committee should be set up along the lines of the Public Accounts Committee of the House, which has some clout ; people take some notice of its recommendations.

Mr. Maude : I do not regard annual debates such as this as inappropriate, or as anything but useful. They are a valuable part of the scrutiny process, and I would not want to discount them. However, my hon. Friend the Member for Beaconsfield (Mr. Smith) is correct in saying that it would be desirable for the European Parliament to attach greater weight to the work that it can do to subject the work of the Commission in particular to proper scrutiny. There is a committee which is roughly equivalent to the Public Accounts Committee--the budgetary control committee and a number of our proposals would enhance its power, especially the power to call specific officials from the Commission before it to interrogate them about the way in which they discharge their responsibilities.

Mr. Charles Wardle (Bexhill and Battle) : Does my hon. Friend think that if this Parliament were to take a closer interest in the findings of the Court of Auditors, and if the European Parliament were to do the same, the first priority would be that the accounts should be delivered sooner? This evening we are considering the accounts for the year up to 31 December 1989, and we are now halfway through March 1991.

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