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Mr. Spearing: I beg your pardon, Mr. Morris. I revert to the proper usage.

Why should not new clause 4 be accepted? I do not say that the Minister should accept it straight away, but, if it is not accepted, where else will such matters be raised? We can look with some sympathy upon at least the intentions of the hon. Member for Stafford. Even if the Government do not want the new clause, the issues that the hon. Gentleman has raised and the questions that he has asked, particularly in respect of the formulae of new resources, are tremendously significant. Indeed--dare I suggest it?--the sums involved might be as great as or greater than the sum involved in last night's dramatic Division. It is very easy to lose squillions of pounds in such formulae yet worry about the mere £1,000 million which we discussed last night.

I wish, in a relatively brief introduction, to refer to the terms of new clause 12, which you, Mr. Morris, have kindly included in this group. In view of its terms, my right hon. Friend the Member for Bethnal Green and Stepney, and my hon. Friends who might catch your eye to back him up, will request a separate Division if the Government do not accept it. I shall chance my arm and suggest that the Paymaster General accept it. It is a very straightforward request for an annual report to Parliament on the operation of the great big decision. The first thing that we want is

"a general presentation in text and tables of the financing and expenditure of the European Economic Communities in sterling equivalent and any common unit, which shall include comparable tables of income derived from each member state and expenditure therein in respect of each principal category of expenditure".

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I have no doubt that at some stage the Paymaster General will say, "Oh, the information is all in some report." It might be, but I suggest that what is sought by paragraphs (a) to (e) of new clause 12 will not be comprehensively available. It will not be gathered together in one slim White Paper which is presented to the House and which is available in public libraries for people in universities, colleges and schools to read and understand.

I found it necessary to gather that information when I read some figures in respect of our contribution to the European Union. It is particularly important in relation to rebate mechanisms. We should remember that our rebate is paid for by another sub-formula of countries that have to adjust their own contributions by paying more for the British rebate and other offsets.

I tried to get some figures from the Library to show how the European Community's receipts of expenditure had expanded at constant prices from 1973 to the present and how our own resources contribution and rebates worked out. The Library produced a graph, which I suggest is the only way for any citizen to understand what has happened. It looks rather like an atomic explosion because, even at constant prices, the amount of expenditure and income has expanded rapidly. This decision will authorise further expansion.

Some cynics say that the only way in which the European Community secures agreement is by lubricating disagreements with more cash. That is one of the reasons why the Government and the Community require greater own resources contributions at a time when the Community is telling the Chancellor to watch his own expenditure, but that is an aside.

The importance of our rebate formula cannot be overestimated because it zips up and down from year to year, as we were told during debate last week. Another graph that I commissioned from the Library shows the fluctuations only too well. The proportion of our receipts to our payments, without the rebate, is extraordinary. In some years, our receipts amount to only about one third of what we pay and the rebate makes up another third. However, if the rebate were taken away--as is envisaged in the decision that we will endorse in 1999--we would be in real shtook. Monitoring, which is the "in" word, as described in new clause 12 is very important indeed, as are the account of rebate mechanisms, which apply to any member state. New clause 12, proposed by my right hon. Friend the Member for Bethnal Green and Stepney, would require

"the operation of each article of the Decision"--

how it is worked out in practice. One article in the decision--which, incidentally, I believe should be a schedule to the Bill--relates to the British rebate. As I pointed out in an intervention, it is printed in the report to the Committee of the whole House. As you know, Mr. Morris, an amendment was proposed that sought to write the whole of the decision into the Bill as a schedule so that it would be there for all to see.

Article 4 of the decision, which appears in the Official Journal and on the amendment paper, is quite extraordinary. It contains 30 lines of excruciating mathematical formulae, which I was tempted to read into the record. I do not think that I will do so, although it

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may be educational for hon. Members. Almost every one of the 30 lines introduces another mathematical element into the decision-- the magical formula

"multiplying the result by 0.66"

and so on. Paragraph 3 states:

"The basic amount shall be adjusted in such a way as to correspond to the reference compensation amount",

whatever that may be. Article 4 will affect the country most crucially but, unless a schedule is passed on Report or in another place, its yearly operation will hardly be debated at all because it is retrospective.

Much was said in the debate last Monday and in previous debates about how much extra money will be paid to the European Union--I could not understand all that farrago. The press went batty, arguing about whether it was £750 million or less. I suggest that one cannot tell how much it will be because the article is retrospective. I see that the well-informed hon. Member for Harrow, East (Mr. Dykes) is nodding his head. The press farrago about how much the Government will pay is a matter of speculation; it is merely an estimate. Unless the Government are forced to report annually to Parliament, we will not have a retrospective report of how the amount was worked out. The paragraph about reporting is a very important part of new clause 12. If it does not appear in the schedule and we do not receive a report, as proposed under new clause 12, where will we get the information? The Official Journal , which was wielded by the Member for Stafford, contains the extraordinary statement:

"Council decision of 31 October 1994; Acts whose publication is not obligatory".

Fortunately, because the decision is an important one it is contained in the Official Journal . Regulations are regarded as being important and therefore have to be published, but decisions are usually much less important than this one, which amounts to a treaty, and may not be published. I suspect that this decision, according to strict European Community treaty law, did not need to be published, even in the Official Journal . I suspect that that is so, but perhaps the Paymaster General will seek advice and confirm whether I am correct.

I hope that I have persuaded the Committee, particularly the Paymaster General, that new clause 12 is a democratic necessity. Without it, we will not be able to find out what has gone on and the Government will not be able to tell us comprehensively about the operation of this decision, and the 1998 decision which has to be considered with it. The decision of 1988 and the decision of 31 October 1994 have to be read together in order to find out what is going on. The 30 October 1994 decision comprised three different decisions, including one about budget discipline, which is related to this decision but is not the same. Perhaps the other place will include in legislation the reference number of another amendment which was put down but not selected and which is quite important. I challenge the Minister to explain why we should not have some British glasnost on this matter. What is the Treasury afraid of in opposing the proposed new clause? I cannot think of any possible democratic, financial or moral reason to refuse it.

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Mr. John Biffen (Shropshire, North): I am glad that the debate is proceeding without the drama of an impending general election or the mass withdrawal of the Whip. Of course, it has lost a little excitement in the process, but that is more than compensated for by the very pertinent comments made by the Labour Front Bench, my hon. Friend the Member for Stafford (Mr. Cash) and the hon. Member for Newham, South (Mr. Spearing).

The three proposed new clauses--Nos. 1, 4 and 12--are an attempt by the House of Commons to at least have a presence in European Union decisions. Through the actions of this and past Governments, we are bereft of what are traditionally considered to be appropriate powers. However, that surrender has not taken place with total acceptance on the part of the House. Euro- scepticism is alive and vigorous, and--foolish or wise--believes that the future belongs to it. The more we travel with the evolution of the Union in post-Soviet collapse circumstances, the more we realise that the original blue paper judgments of the treaty of Rome are increasingly inappropriate. Therefore, the questions that we consider this afternoon are how the House can be better informed about resource allocation within the European Union and where the net balance of political judgment lies. Above all, that must be underwritten by the Treasury Bench and not secured by reading The Financial Times or The Independent . That is an important and legitimate aspiration. Knowledge will be the precursor of repossessing greater parliamentary authority in the decision-taking processes of the Union.

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I hope that my hon. Friends on the Treasury Bench will feel generous towards the arguments that have been made, and will accept that we are trying to establish a partnership between the House of Commons and the Executive in the conduct of European policies. I say that because I believe that it is a matter of constitutional significance and one that will move in an evolutionary way, although not with high drama. As the hon. Member for Newham, South said, a few years from now people will look back and mark these debates. They will see what arguments were deployed and how they related to the way in which the Union has proceeded under the impact of our sister European nations.

The way in which the Union will proceed is a matter of speculation on our part. I believe that the forces operating against centralisation within the Union are powerful and will mesh with the attitudes that have been expressed this evening.

Mr. Geoffrey Hoon (Ashfield): I have followed the right hon. Gentleman's arguments with some care. Is he saying that, in reviewing the way in which the House of Commons votes money for the European institutions, it is right that we should consider how those institutions spend that money? Is not his argument that the House of Commons should have that opportunity when European institutions also have that opportunity? The European Commission, the European Parliament and the European Council examine both how the money is raised and how

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it is spent. Does he not find it curious that the Bill deals only with how the money is raised and not with how it is spent?

Mr. Biffen: That is an interesting point. I have no wish to widen my area of dialogue with the Front Bench. I think that I am doing reasonably well on the present basis, but I take account of what the hon. Gentleman says.

There are great dangers in supposing that we can be some missionary force in the conduct of European fiscal affairs, and that the way in which we do things will eventually be accepted by our sister European countries. They all have their own traditions. One of the problems will be how those traditions relate to one another in a collective framework. Therefore, I am cautious about saying that we will stand out and have remarkable power in influencing future behaviour on such matters in Europe.

I do not intend to make a long speech. My hon. Friend the Member for Stafford and the hon. Member for Newham, South properly concentrated on the role of the gross domestic product in the calculation of the allocation of resources. As the hon. Member for Newham, South said, GDP is presented in the European Council decision in the most fantastic, sophisticated manner, running to heaven knows how many places after the decimal point.

In reality, the concept of GDP is hit or miss. It is not possessed of immense sophistication. I am led rather pedantically to quote the American economist Morgenstern, who said:

"Qui incipit numerari incipit errari."

That is perfectly true. One has only to look-- [Interruption.] I assume that the Latin tongue is well known on the Opposition Benches, but I will supply a translation for the Treasury Bench if it is thought appropriate. Hansard is well able to cope with these matters. It is when I lapse into Welsh that difficulties arise. The concept of GDP is a matter for serious consideration. When substantial transfers of money from one country to another take place through a doubtful mechanism such as the present mechanism or whatever, do not suppose that there will not be eventually sharp political consequences. I see some Scots Members on the Opposition Benches. They will remember the days of rating revaluation. Something that ought to have been perfectly clear and manageable gave rise to a tremendous political furore.

How do we measure the black economy? How do we measure something which, by its nature, cannot be measured? How do we think it operates in Italy, Greece or other countries possessed of the Latin culture, as opposed to countries such as Denmark or Germany, which are Nordic in their traditions?

I do not see the point in any xenophobic way. It is a sheer practical consideration when we consider how we proceed with governmental co- operation, when the most intimate matters of resource allocation are decided by such dubious mechanisms. I will tell the House what will happen. There will be conflict and recrimination in all layers of government. The press will be expert in explaining how we are being ripped off by our partners. We see it already. We are forcing an arrangement which will compound all those difficulties. I believe that it is perfectly possible for beneficial circumstances to result from resource transfer. Of course I do. The Marshall plan was easily the most successful

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internationally mounted system of resource reallocation. It was done without any of the absurd formulae which will be but an apple of discord for the future.

The conclusion I draw is that what we are being asked to nod reverentially and acquiesce to is the blueprint for the next phases of European co- operation, which will produce exactly the opposite outcome to that intended. It is bad enough that the mechanism has to deal with the present budgetary ambitions of the European Union. If it is to be the fulcrum for the transfer of resources to bring about economic cohesion and the preconditions for a single currency, it will simply lead to disaster.

Of course, I shall give the Treasury Bench all the support that it requires of me. But do not let it ask me to say that I have been intellectually convinced by Maastricht, by Edinburgh or by this Bill. For it simply will not stand the most severe testing--that of time.

Mr. Denzil Davies (Llanelli): The right hon. Member for Shropshire, North (Mr. Biffen) had a short dialogue with those on his Front Bench. Perhaps I may have a short one with mine.

I commend the speech of my hon. Friend the Member for Oxford, East (Mr. Smith). He will be surprised to hear that. Some of us were critical of his approach during the Maastricht debate, but his reply to the intervention of the hon. Member for Harrow, East (Mr. Dykes), who tried to trap him into a complete defence of own resources, gave some of us Euro-sceptics some encouragement.

As my right hon. and hon. Friends see the doors of government opening and getting ever nearer, before long we on the Opposition Benches who have been the Euro-sceptics will gradually move to the main stream of the Labour party's attitude to Europe. All my hon. Friend needs to do is attend a session of what used to be called the Budget Council--I do not know whether there is still a Budget Council. The Budget Council is not about the budget, and its members cannot have any influence over spending decisions. In 1977-78, all the money went on the common agricultural policy, so there was not much point in going to Brussels for the Council. That is part of the problem--spending is set.

I understand that surpluses can be carried forward. The Treasury used to shudder at the very thought of carrying forward surpluses, or money not spent, from one year to the next. That system does not provide any sensible control over public expenditure.

I predict that, once my right hon. and hon. Friends get into government, the Labour party will move back to its original Euro-sceptic state. Whatever Government are in power, at some time they will have to stand up and defend British interests at the Councils of Ministers.

Mr. Iain Duncan Smith (Chingford): Does the right hon. Gentleman agree that the main point that so differentiates this budget from a domestic budget is the simple fact that, if we did nothing today, or on Third Reading, the Community would still get its money year on year? The increase is the only thing that it would not get. If a domestic budget is not voted through, there is no money for the following year, and therefore there can be no control.

Mr. Davies: I understand that very well. The object of this debate is to make a charge on the Consolidated Fund.

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It is that terrible thing, hypothecation. A chunk of money--about £2.5 billion net next year--is hypothecated. The Chancellor is scrabbling around to find £1 billion as a result of what happened last night. He can touch all other areas of public expenditure--I do not think that he can touch judges' salaries, as they also have their backsides on the Consolidated Fund--but he cannot touch the Euro-budget. That is the object of this sort of exercise. To return to the own resources debate, I must inform the Paymaster General that I was intrigued with article 8(2) of the European Council's decision, whereby the Commission is given certain powers to do certain things to apply the decision. I do not understand what that means. I am sure that the Paymaster General is well briefed, and will tell us what it really means from a technical point of view. On the abatement provisions, I was a great admirer of Lady Thatcher and those people who negotiated the Fontainebleau agreement. It was not an easy thing to do, and our contributions decreased for a while. Now, that agreement is written into the document under discussion, as it presumably was in 1988. It is codified, and has been taken away from Fontainebleau and become part of article 4 of the Council's decision.

When the document comes to the end of its life, the Fontainebleau agreement will do so also, and there will have to be more negotiations. On top of that, article 10 of the decision states that the Commission has to do something about it by 1999. It is therefore slightly disingenuous for the Government to say that they have preserved the Fontainebleau agreement, because it is up for grabs again.

I do not know what will happen in 1999, or even before then. I do not know what will happen in 1996--the year of the intergovernmental conference. Perhaps new institutions and new common policies will be created, as well as new work found for the old institutions. Article 2(2) refers to common policies and new charges. Presumably, if a new policy is created, new money will have to be obtained.

6.15 pm

I wonder whether what we are debating is really as sacrosanct as the Government seem to think. If substantial changes were to be made in 1996, it might give the Commission the opportunity to slip in a few figures, raise the ceiling a little and gain more powers for certain institutions.

The history of this European centralised state has been the history of the battle to acquire power between the institutions. It is the Europe of the institutions and not of the people. The struggle is not between nation state and centralised European state, but within that centralised state for more power and more money. Power needs money, and more money produces more power. I would not be as sanguine as the Government that everything is all right until 1999. That is not how such things work. The Commission is adept at finding itself more money--not necessarily to spend for itself, but because of the power that goes with expenditure.

The cost of the CAP is increasing. Perhaps it is a smaller percentage of the budget than it used to be, but the amount spent on it will still have increased by 1999. As I said on Second Reading, some people seem to think that the Poles will save us from the CAP and that they will smash it when they join, but they will need regional

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and structural funds. Enlarging the Community with countries from the east, which are poorer than ours, will not mean a smaller budget or getting rid of the CAP.

The balance of payments is not a fashionable subject these days. The Paymaster General is present: he probably writes the cheques once a week, or whatever it states in the agreement, which probably also states, "If you don't, the Commission will come down on you like a ton of bricks." So he has to write the cheques. I imagine that they are in ecus or deutschmarks. I do not suppose that they are made out in pounds. Presumably the money comes out of the exchange equalisation account. Perhaps things have changed, but that used to be the case.

If our net contribution is to be £2.5 billion next year--I know that one cannot identify a particular year, because money goes in and comes back out--in my book that is £2.5 billion on the balance of payments deficit. In his Budget speech, the Chancellor said how wonderfully the balance of payments was doing. I am not so sure. I found in the Red Book that we would have a deficit of £6.5 billion on manufacturing industry and £7 billion on something called "other", which is in effect food and drink. That is a total of £13.5 billion, but it will be reduced by about £2 billion or £3 billion in invisibles and £5 billion in oil, as it has doubled in the past few years.

Old oil is being called on once again to save the Conservative Government, although it is probably too late on this occasion. Earnings from invisibles and oil bring the total down, but the £2.5 billion has presumably been subtracted, and it amounts to half the surplus on oil exports. That sum of money is not merely public expenditure, as it goes across the exchanges. Perhaps it will do so less and less if we move to a single European currency. The great advantage of such a currency would be that no one would have to worry about such matters any more.

The hon. Member for Harrow, East is nodding. He is very pleased. There would be no problems about a balance of payments deficit with Europe, or a large manufacturing deficit. Unemployment is the problem in my constituency, but I do not expect the hon. Gentleman to worry much about that. The problems will appear in different ways, but they will not appear in the balance of payments.

Mr. Dykes: Unemployment is a separate problem, which needs to be dealt with by a separate mechanism. The programme on jobs, growth and employment was the beginning, and that is why more resources are needed to reduce unemployment. It still remains a modest amount of money in comparison with what other member states do.

Mr. Davies: We have heard that speech so often. People say that more resources are required to counteract unemployment, and it is not very much really. As unemployment increases, more and more resources have to be found to combat it. Who has to pay? Constituents like mine, many of whom are unemployed anyway.

If I may digress a little, I am surprised that the hon. Member for Harrow, East is considering unemployment in terms of little Europe. Perhaps we can debate the matter again. The world is passing us by, and moving away from

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Europe. We have the general agreement on tariffs and trade and a global economy, yet the hon. Gentleman is still stuck in that old groove.

The Chairman: Order. We are certainly not discussing the global economy in the debate on this new clause. The right hon. Gentleman must get back to own resources.

Mr. Davies: I accept that we are talking about the European Union own resources decision, and nothing more global than that. The Library has assessed that we have spent £22 billion since 1974 across the exchanges on being a member of the club, or on having a seat at the top table. I am not quite sure what the justification is supposed to be. By 1999, it is projected that we will probably add to that another £13 billion. Let us round it up. It is just £35 billion--not very much to the hon. Member for Harrow, East, who thinks that that is a small amount in terms of total Government expenditure. That is the money that we have spent, but I do not know why we have spent it. Other countries have not spent similar amounts. As I said on Second Reading, my constituency is at the far end of Wales--Dylan Thomas described it as west Britain--far away from Brussels and further away from Berlin.

I do not have the figures for Ireland here, but the Irish do marvellously. We talk about GNP--part of the GNP of the southern Irish economy comes from us. It comes from some of my constituents. The figures for income per head around Dublin are probably much higher than the income per head in Llanelli, Merthyr Tydfil or the Rhondda valley. Luxembourg does just as well as Ireland, and it has the second-highest per capita income in the European Union. That is the nonsense that we are discussing in the context of this new clause. The more information and control we have in the House the better. I would have thought that somebody would have to say that the ceiling should come down, and that, if we believe in subsidiarity, the ceiling should not go up. The battle between the centralised European state and the nation states will go on.

I agree with the right hon. Member for Shropshire, North. I think that the tide is turning, and that it will not be long before even the Labour leadership recognises that change is necessary.

Mr. Tim Renton (Mid-Sussex): It strikes me as one of the ironies of my political life that, way back in 1979 when Lady Thatcher first formed her Government, I suddenly found myself made a Parliamentary Private Secretary to my right hon. Friend the Member for Shropshire, North (Mr. Biffen). He was already known as a fairly strong Euro-sceptic, while I was clearly on the Europhile wing of my party. That difference between us has not changed in the intervening years. My right hon. Friend tolerated me as a PPS with great good humour, until Lord Howe's Budget of 1981 when I resigned for not supporting the retrospective tax elements in it. My right hon. Friend tolerated my little rebellion. In those days, the resignation of a PPS earned about three lines on page 17 of a major newspaper, and my resignation did not make headline news. But he tolerated my departure with great good wit, just as, I am sure, the Front Bench will tolerate any rebellion by my right hon. Friend today.

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I have always found that, despite our philosophical differences about the EC, my right hon. Friend and I have many other things in common. I agree very much with what he said about the need for greater transparency in the issues which we are discussing this afternoon. Clearly, that is not easy to achieve.

My hon. Friend the Member for Stafford (Mr. Cash)--he is temporarily not in his seat--and the hon. Member for Newham, South (Mr. Spearing) bring to the issue enormous experience from sitting on relevant Committees, such as the Select Committee on European Legislation and the Committee on the Maastricht Bill. Most of the rest of us--myself included--do not have that experience. There are times when they are speaking--however wise the speech may be--when a certain miasma or a fog of lack of perception comes over one, simply because one does not know the details. That is one of the troubles with a debate such as this.

The greater the transparency, the better. The House of Commons and all hon. Members need to be informed, no matter whether they have sat on the relevant Standing or Select Committees or not. I certainly accept that. Putting the issues of fraud or financial mismanagement aside to a later debate--that is what you want us to do, Mr. Morris--this first debate is therefore in search of transparency. The debate is about two prime questions: the first concerns the formula of own resources, and whether it can last until 1999, while the second is about the competence of the institutions that already exist to deal with the checking and control of the funds disbursed by the European Union.

I shall deal with the resources question first. My hon. Friend the Member for Stafford--in a lengthy but well-informed speech--did somewhat exaggerate the problems of using GNP as a measurement of each country's proportionality or its suitability for contributing to own resources. That is borne out by the comments in the Court of Auditors report.

The report carefully looks at whether the current, different definitions of GNP are adequate, but the court's summary on the issue states that employing a statistical concept such as GNP that does not correspond to a fiscal base that can be checked with reasonable certainty may provide a means of ensuring that the financial responsibilities of the European Union are fairly divided up between member states; the report states that the use of GNP may provide a fair division.

To be fair, the report then goes on to say that the use of such a concept requires a considerable effort from the Commission and member states to ensure that national accounts are reliable and harmonised, and thus to ensure that the budget and the policies of the European Union are managed rationally. That is a far cry from the picture that my hon. Friend the Member for Stafford painted--that, as a result of conscious or unconscious distortions in GNP, the UK could find itself paying perhaps 1 billion ecu or 2 billion ecu more a year than was justified. My hon. Friend may have had his tongue in his cheek when he arrived at that over-dramatic conclusion.

Of course GNP can be improved as a formula, and there is a necessity for the formula to be harmonised throughout member states. I do not believe that the formula has in

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it--either at the moment or inherently--the degree of distortion which my hon. Friend painted. I do, however, agree much more readily with those who wonder whether the present own resources formula which is encapsulated in the Bill--clause 1 of which we passed with extreme rapidity--will last until 1999.

The accession of the Visegrad countries--which hon. Members on both sides of the Chamber hope and believe will happen--is likely to increase the common agricultural policy budget by 50 per cent. and the regional budget by perhaps 100 per cent. By the time the British budget comes up for renegotiation in 1999--which is the present aim--the picture will be totally unrecognisable and different from the present situation. That should be put on the record, as we agree to the new higher limits based on an individual country's GNP. The second point is about the efficiency of the existing institutions to check on the disbursement of funds, and how carefully they are spent. It is remarkable that, during this interesting debate, no one has given credit to the European Parliament for having set up the Court of Auditors, which it decided to do in the early 1980s. I think we would all agree that that was very much a step in the right direction.

As the hon. Member for Newham, South said, there is clearly friction between the Court of Auditors and members of the Commission. The Court of Auditors produced a fairly critical report, comprising 450 pages of detailed analysis of what, in many cases, constitutes financial mismanagement rather than fraud. Members of the Commission immediately stated, in print, that they considered some of the criticisms unfair and not properly based.

6.30 pm

On one point, however, the Commission and the Court of Auditors established common ground. Shortly after presenting his annual report in Strasbourg on 15 November, Mr. Middelhoek, president of the Court of Auditors, said:

"eighty per cent. of the European Budget is actually spent in the Member States so eighty per cent. of the problems come within the remit of the Member States".

But what precisely does that word "remit" mean?

The underlying thought, surely, is that if 80 per cent. of the money is passed on to the member states--remitted to them--by the Commission, it is up to those states to check that it is properly spent. Judging by some of the comments that I have heard, I think that there may be a gap in our present mechanism, which we and other member states must fill ourselves.

I have never been a member of the Public Accounts Committee, but I fully appreciate its importance and its seniority in the pecking order of the House. Hon. Members have asked why the PAC is not empowered to look into the disbursement of European funds in this country, along the lines suggested by Mr. Middelhoek. What, in fact, is to stop it from doing so now? What is to stop the Comptroller and Auditor General from examining--at this very moment, if he so wishes--the way in which European funds are spent in this country, and establishing whether those funds are spent efficiently, fairly and honestly?

Mr. Spearing: The quick and rather brutal answer to that question is that new clauses 14 and 15, and another

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tabled by the hon. Member for Stafford (Mr. Cash), have not been selected. I understand that those new clauses would have done what the right hon. Gentleman asks.

As for the 80 per cent. figure to which the right hon. Gentleman referred, it is difficult for a member state to say that the amount has been improperly distributed to some of its areas, regions and towns. The right hon. Gentleman might ask his city council, and I might ask mine, but it would be difficult to say that money sent by Brussels to perform-- supposedly--many good works had been improperly sent by Brussels. It would be hard to question both the distribution of the money and the advisability of sending it.

Mr. Renton: The hon. Gentleman has considerable experience in this context. Perhaps my hon. Friend the Minister will comment when he replies, but surely it would not be difficult for the Comptroller and Auditor General to examine the issue. Nowadays, for instance, bypasses are often built and little signs are put up, saying, "This bypass has been built in part with funds from the European Union." Surely it is easy to check whether the funds have been properly and fairly spent.

This is, I think, very relevant to the common agricultural policy. As the CAP grows, which it is bound to do, with the accession of the Visegrad states, there is likely to be increasing demand for each member state to be responsible for CAP disbursements made within it--responsible in the sense of checking financial irregularity.

Mr. Ted Rowlands (Merthyr Tydfil and Rhymney): I should like the position to be as the right hon. Gentleman has described, but it is not, and I cannot see how it will be. The CAP does not involve British Government money; it is not part of any estimate in any individual Department. The accounting officer in the Ministry of Agriculture, Fisheries and Food is not responsible for CAP money, and is therefore not responsible for that expenditure to the National Audit Commission or the Public Accounts Committee. That is very sad: it represents one of the ways in which the House has lost control over the expenditure of large sums. I am afraid that the PAC is not the answer, however, although I should like it to be.

Mr. Renton: Perhaps this is a genuine lacuna. Later this evening, we shall debate the PAC's role. New clauses which some of us tabled referred to it specifically, but they have not been selected. As a non-member of the PAC, I do not see any statutory bar that would prevent the Comptroller and Auditor General from examining the disbursement of the money. Furthermore, I believe that there will be increasing pressure from the Court of Auditors and the Commission on member states--not just because of the principle of subsidiarity but because of a genuine wish for the work to be done efficiently--to become more involved in checking that there has been no financial mismanagement.

Mr. Duncan Smith: My right hon. Friend has said that a problem exists, and that it should therefore be scrutinised. He should approach the issue from another angle. The real problem lies in the fact that money passed to Brussels is then redistributed back to the nation states, where all accountability is lost. Surely the money should

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not go to Brussels in the first place, but should be disbursed in the nation states originally. Brussels should then adjudicate.

Mr. Renton: That issue lies at the heart of the way in which subsidiarity will develop in the years ahead. I strongly believe in the strength of the European Union and its ability to do some things better than individual nation states, but I think that because financial mismanagement--if not fraud--clearly accompanies international subsidy in particular, there will be a growing demand for better methods than subsidies to be found to redress regional or national imbalances. We do not yet know what that better way will be, but I think that allied with the pressure that I have mentioned will be pressure for fraud or mismanagement within member states to be the subject of redress within those states.

The 450-page Court of Auditors report is an immensely impressive document; its authors have done a fantastic amount of work. The question now is this: how do we and other national Governments--and the Commission and the Council of Ministers--ensure that some of the report's many recommendations are implemented, and that problems are put right?

I have been told, although I have not checked personally, that at present fraud against what are loosely defined as the European Union's financial interests is a criminal offence only in Germany, Italy and Portugal. If that is so, it means that there is a gap in the criminal justice provisions of individual countries, including our own. We should make certain that we have the legal and penalising weapons to ensure that, when we know that funds have been mismanaged, we have the capacity to right the position domestically when that is possible.

I wholly agree with hon. Members who have said that the matter is deeply important to those of us who believe in the European Union. We know that, unless we get it right, the Union's image will be increasingly tarnished.

Mr. Rowlands: I listened with considerable interest to the right hon. Member for Mid-Sussex (Mr. Renton), and all his speech demonstrated to me was the sad and tortuous way in which we are now realising exactly how much power has gone and is going from this place.

I hope that the Minister will take the opportunity now, although the issue of control of public expenditure and its disbursement should arise when we discuss our next set of amendments, to clarify whether I was right in saying, when I intervened on the speech of the right hon. Member for Mid- Sussex, that there is no means by which the accounting officer in the Ministry of Agriculture, Fisheries and Food--the permanent secretary--can be hauled before the House of Commons or the Public Accounts Committee over expenditure on the common agricultural policy, because it is not part of any estimates in any Government Department. I shall illustrate that argument to him later, with the example of a Department for which he had some responsibility, in overseas aid.

The right hon. Gentleman also, I think, left out a major aspect in his speech. He said that there were two issues--first, how money was raised and, secondly, the control of its disbursement and the competence and accountability of disbursement. There is one stage between those two--where the money is spent. The other aspect that requires transparency is the expenditure that will be given, as a result of the Bill, to the European Commission and Commissioners.

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