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5.8 pm

Dr. Vincent Cable (Twickenham): The motion invites us to condemn fraud and calls for stronger action against it. I am happy to support that, so far as it goes, whatever the original motives behind its being brought before the House. The fundamental issue at stake, which concerns many of us who are broadly in support of the European project--I think that that includes many Conservative Members, as well as Members from my party and the Labour party--is the fact that fraud is not merely undesirable in itself, but undermines the legitimacy of Europe.

We therefore demand that action against fraud be taken not only at the level of the lowest common denominator of European Governments and at the average level of enforcement, but that best practice should be followed. The Chief Secretary rightly used the phrase "zero

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tolerance". That is exactly the philosophy that should inspire action against fraud whether in the Commission or in the Parliament, and we support it.

Mr. Christopher Fraser (Mid-Dorset and North Poole): It is ironic that the hon. Gentleman claims that his party thinks highly of Europe, but he is the only representative from his party present for this debate.

Dr. Cable: I expect that my colleagues are happy for me to carry the banner on their behalf. We strongly support a firm policy on fraud, but it should be put in context. Those of us who sit on European Standing Committee B see the work of the auditors, and I am always struck by the use of the phrase "fraud and irregularities" to describe malpractice in Europe. Some 90 per cent. of the cases that the Court of Auditors uncovers are irregularities--incorrect form filling and failure to follow proper procedure--and do not involve criminal fraud. Irregularities are of course unacceptable and financial procedures must be tightened up, but there is a big distinction between that and fraud. The headline figures for fraud and irregularities are frequently used to exaggerate the extent to which fraud exists in the European Union.

Much of the fraud in European budgetary activities takes place in member states. It is useful to compare the behaviour of individual member states with the behaviour of Commission institutions. Before the debate, I looked at the Customs and Excise figures on criminal fraud in the British system. Our estimates are that around 5 per cent.--or £2 billion a year--of the total domestic excise budget is subject to fraud, which is a similar figure to that for European budgets, especially on the revenue side. Therefore, there is nothing specifically European about fraud. The Conservatives are presumably aware of that which is why they have proposed cutting cigarette duty--one of the main sources of fraud.

Mr. Richard Page (South-West Hertfordshire): This country has an effective value-for-money unit within the National Audit Office. It is not only fraud that is pulling the European Union down, but the fact that money is not spent as effectively as possible to achieve its objectives. We should pay great attention to both aspects.

Dr. Cable: That is an excellent point. One of the issues on which my colleagues are campaigning in the election is that the role of the Court of Auditors should be enlarged to cover fraud and irregularities and value for money, in the same way as our Comptroller and Auditor General or district auditors. That is a helpful suggestion and I am glad that the hon. Gentleman has made it.

The level of fraud is important, but so is the trend. Some of the examples mentioned by the right hon. Member for Horsham (Mr. Maude) were rather antique. Mr. Marin's exploits should of course be brought to light, but the example cited took place in 1987 or 1988. The trend in fraud figures is more relevant today. The trend recorded by the Commission through its investigations in the "Fight Against Fraud" report, which is published every year, showed last year a decline of 13 per cent. in fraud and irregularities on the agricultural budget, and a

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50 per cent. decline in fraud in relation to structural funds. Many of the actions being taken are beginning to bear fruit.

Miss McIntosh: The hon. Gentleman mentioned a Commissioner by name. Does his party support the Conservative proposal to name and shame individual Commissioners, such as Commissioner Marin and Commissioner Cresson, and to give the European Parliament the power to sack individual Commissioners? The Government are not minded to support that, but will the Liberal Democrats do so?

Dr. Cable: I thought that those Commissioners had already been named and shamed, and fired. It is not entirely clear what additional value would be gained from that proposal.

I wish to suggest what action should be taken, and I believe that we should build on proposals already made. One relates to the Court of Auditors, which performs an important role and should be enlarged. The key area isthe independent fraud office, and we welcome its strengthening. I believe that it is now called OLAF, rather than UCLAF. The Chief Secretary listed many additional powers that OLAF will have, and that is welcome. It will be a more genuinely investigative agency.

I have one or two questions about OLAF that I hope the Minister will answer later. Will it have the power of criminal arrest? Can people suspected of fraud be arrested by OLAF? That is an important step, because it does not currently have those powers and is shackled by the lack of them.

Mr. Wardle: I can answer that question. OLAF does not have that power. It simply has the power to present a case to the prosecuting authority in the country concerned.

Dr. Cable: I thank the hon. Gentleman for that answer, but its implications are perhaps uncomfortable for some of his hon. Friends. If the independent fraud office is strengthened in the manner proposed--and in the manner many of us would like to see--it would be a considerable extension of supra-national authority to a European institution. The power to arrest in the hands of a European institution, even one with such unexceptional objectives as the avoidance of fraud, would be a considerable constitutional change. We would welcome it, but I doubt whether all Conservative Members have fully assimilated the implications.

Fraud is prevented not only by institutions but by the underlying policies. The point has already been made that because half of European spending originates in the agricultural budget, many of the problems are associated with agricultural reform. The Conservatives in government and this Government have argued for agricultural liberalisations. The Liberal Democrats regret that this year we settled for a weak compromise that achieved little on dairy farming and made small cuts in cereal prices. We are making slow progress in moving European agriculture to world prices and eliminating extensive subsidies, but there is a broad consensus about the need to do so.

I suggest that the Government should campaign in Europe to eliminate agricultural support for tobacco. Fraud is endemic in that area, but there is no justification

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on economic--let alone health--grounds to subsidise that crop. The Government could usefully make policy innovations in that area.

There are specific problems associated with the workings of the Commission, at both Commissioner and official level. My colleagues in the European Parliament acquitted themselves well on that issue, and people from all parties have acted honourably in calling those responsible to account. I am delighted that tough action was taken and that the Commissioners have been asked to leave office. However, how do we ensure in the long term that the Commission works as the servant of the European public instead of being self-serving as it has recently been? The problem lies not so much with the Commissioners as with the European Commission officials, many of whom are appointed on the basis of connection with member state Governments and have a poor standard of public service. There is widespread abuse of expenses, but the officials are protected by Belgian trade unions, which operate restrictive practices that are unacceptable. The implications of reform go further than many people have yet accepted, and I am not sure whether all Conservative Members would be comfortable with the suggestion that the long-term solution is the creation of a professional international civil service that is chosen by competitive selection. That would require a high standard of professional honesty, such as obtains in our own civil service, which specifically precludes national Government interference in appointments and promotions. It would be a radical step forward. Officials would be accountable, through the Commissioners, to the European Parliament.

I hope that the Government are committed to that idea as it would greatly strengthen the credibility of the Commission and the Parliament vis a vis the Council of Ministers. We have long supported in principle evolution towards that position, although I am not sure that all the implications have been fully accepted by those who complain about the lax standards in the Commission.

Mr. Andrew Rowe (Faversham and Mid-Kent): Would it not be equally effective and a great deal better if the disparity of emolument between European and domestic civil servants were greatly minimised and if the career pattern of national civil servants included a period in the European bureaucracy that was seen as a means of securing advancement rather than, as is frequently the case at present, a backwater to which we can dispatch the type of civil servant who so worries the hon. Gentleman?

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