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5.51 pm

Mr. Alan Campbell (Tynemouth): I am grateful for the opportunity to contribute to the debate. The Chamber reminds me of a Public Accounts Committee meeting, but it is the stronger for that.

Tackling fraud in the European Union is an important matter. It is too important to be kicked around by the Opposition during a European election campaign. I associate myself with the comments of my hon. Friend the Member for City of Durham (Mr. Steinberg).

I, too, am a member of the Public Accounts Committee and took part in the visit to Brussels and Luxembourg last month. I do not want to pre-empt the report that will be produced for the House, but I shall make a few observations.

I wonder how many of my colleagues recently received, as I did, a letter appealing to me to support the Conservative party in the forthcoming European election. The letter does not state which Conservative party, but it sets out one of the planks of the Conservatives' campaign, which we heard from the shadow Chancellor this afternoon. It suggests "doing less better" in Europe as one way of tackling fraud. That is an interesting phrase, "doing less better"--presumably there is a comma in it somewhere. It smacks of one of those focus groups which, we understand, are having an increasing influence on Conservative party policy.

For Conservatives to aim to do less, but better, and at the same time to cut the resources paid to Europe, raises some interesting questions. Does "doing less better" mean avoiding or scrapping EU undertakings where fraud is a problem? Given that fraud is a major problem in the common agricultural policy, does it mean scrapping parts of the CAP for British farmers? If so, they should be told about that.

If "doing less better" means that, because there has been fraud in the tourism programme, we should walk away from it, the people of the constituency that I represent should be told. We benefit from £640,000 of European help for tourism in my area. If there is fraud in the ECHO programme, as we have been told, does that mean a block on further humanitarian aid to countries such as Yugoslavia? We need to know.

A much more productive approach would be to make progress on developing a system of proper audit and accountability across Europe. That would require co-operation between member states, as well as leadership, rather than shouting from the sidelines. Listening to some of the Opposition spokesmen this afternoon, one would be led to believe that fraud never occurred during the 18 years

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in which they were in power, or until Van Buitenen blew his whistle. However, the evidence of fraud in the EU was well known.

In the tourism programme since 1989, more than 70 individuals and organisations have been implicated in wrongdoing, yet it took two years to get rid of the head of the unit, and the director general eventually went in October 1996 only on condition that he was allowed to retire

Nepotism, misuse of funds and mismanagement of the programme were taking place, yet at the end of it all, the leader of the Tory MEPs said:

    "I know that what has been going on for years has now been exposed."

The hon. Member for Vale of York (Miss McIntosh) says that he played a part in exposing the fraud, and good on him, but the Tories cannot have it both ways. They cannot take credit when fraud is exposed in Europe, and deny that there was fraud there while they were in government.

Even after that, rather shamefully, Tory and Liberal MEPs failed to back Labour MEPs, as we have heard, in their efforts to set up the committee of independent experts. Progress has been made only because certain Governments, particularly our own, have been willing to take the lead and grasp the nettle.

I am trying to adopt a positive approach. Assuming that we accept that Britain's future lies in the European Union--at least half of the Conservative party accepts that--and if we acknowledge that the present Government will not last for ever, we should seek common ground, not only in the House, but with our partners in Europe. We must seize the opportunity for root-and-branch reform.

There is common ground, despite the impression given by the shadow Chancellor, and there should be common cause. As the hon. Member for Bexhill and Battle (Mr. Wardle) said, members of the Public Accounts Committee were united by their view of the complacency that characterised the Commission and parts of the Parliament. That complacency helps to explain the failure to act to root out fraud earlier.

However, the complacency is not universal. I did not detect complacency among the committee of independent experts or among the growing group who are proponents of what might be called a Danish-Dutch-British model of accountability and right of access in the EU. We need to build on that consensus.

Common ground is emerging on the need to develop a new and modern European accounting and audit culture which improves procedures across the member states where 85 per cent. of the budget it spent. There is also common ground on the view that the 15 per cent. of the budget that is spent by the Commission should also be properly accounted for. The Commission cannot shrug its shoulders and say that there are more important matters, such as enlargement, to worry about. I hope that both sides of the debate can unite behind the approach that I have outlined.

Mr. David Davis: I apologise to the hon. Gentleman for missing the first minute of his speech. As the hon. Member for Croydon, Central (Mr. Davies), our colleague

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on the Public Accounts Committee, has joined us, I want to put a question to him that is important in the context of the debate.

All of us who went to Brussels and Luxembourg were struck by the need for dramatic changes--the hon. Member for Tynemouth (Mr. Campbell) just referred to the Danish-Dutch-British model of accountability. Earlier the hon. Member for Croydon, Central raised as a psychological barrier the need for a treaty change. The Prime Minister has argued that we need root-and-branch reform. Treaty change is not as difficult as it is sometimes portrayed. It is often used as a barrier when it is not one. There have been intergovernmental conferences that have decided on such matters in one day. Does the hon. Gentleman believe, as I do, that we should go for radical reform, or for an interim measure?

Mr. Campbell: I am sure that my hon. Friend the Member for Croydon, Central (Mr. Davies) will want to make his own case. I am not sure whether the right hon. Member for Haltemprice and Howden (Mr. Davis) expects me to answer that question. The issue is where we start from in this debate: whether we can agree as to what can be achieved and whether we can engage in debate constructively and positively. I think that we share common ground as to how radical that reform would need to be.

I want to make one final point about the Commissioners. In future, they cannot hide behind the idea of collective responsibility. We require a clearer understanding of who is responsible for what in the Commission and to whom people should be responsible. If there is shared concern and common ground, that begs the question, which has been asked--at least by Labour Members--as to why the previous Government failed to act sooner. Change will be extremely difficult, but not impossible. There would be much less positive influences for change if a future Government were shouting from the sidelines. Some of the necessary changes will sit uncomfortably with some of the stated aims of cutting back on the roles and resources of European institutions.

I was most interested in the comments of the hon. Member for Twickenham (Dr. Cable), as I, too, want to speak about employment practices in the EU. There seems to be an employment culture that encourages temporary employment and short-termism--even, as the Committee found, among posts in UCLAF itself. Although good and trusted people may be employed under temporary contracts, such contracts can often lead to delays in making appointments. That leads to the setting up of ad hoc arrangements, which in turn lead to accusations of wrongdoing. That employment culture lends itself to nepotism and, expensively, to an over-reliance on consultants and experts.

The European Court of Auditors is aware of that problem, but does not have the power to recommend that institutions should take on more staff, even if, by doing so, European taxpayers would be given greater value for money. In any case, the Court of Auditors is itself constrained by an annual budget that is £10 million less than that of this country's National Audit Office. We were told by the shadow Chancellor that that was one of the legacies of the previous Government.

We require serious debate about resources and how they are used, and about the role of institutions such as the European Court of Auditors. It will not do to try to

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transfer a particular national model--even our excellent British model. We need to develop a new, European model of audit and accountability, even if those words may be alien to some Members of the House. Tackling fraud relies on constructive engagement in Europe; it cannot be achieved from a position of isolation. This is a serious issue; it is worth much more than to be used as a weapon to beat an anti-European drum. It requires direction and leadership in Europe; I have seen no evidence of that from the Leader of the Opposition, in terms either of Europe or of his own party.

6.3 pm

Mr. Richard Page (South-West Hertfordshire): In a rare and delicate fashion, I want to raise the debate above the party political level and move it into a more open and nationalistic mode. If any Member of the House were to go out into the highways and byways of Westminster to ask the average British citizen what he or she thought about the financial control of Europe, or what that person thought about the way in which Europe looked after taxpayers' money, there would be, first, a snort of derision, followed by a reply that could probably notbe repeated in this House. [Hon. Members: "Unparliamentary."] As my colleagues advise me, the answer would be unparliamentary.

Whatever view one takes of Europe--whether one is for or against integration, or for or against the euro--it boils down to the fact that all of us in the Chamber share a unity of desire to see better accountability of taxpayers' money, so that it is more effectively spent in the European Union. I have no doubt that many of the reservations that are expressed as to the size of the EU budget and the size of the British contribution to that budget are influenced by the thought that, at present, that money is not being well spent.

I am grateful to the hon. Member for Tynemouth (Mr. Campbell), who gave us a trailer for the Conservative party's European manifesto. That manifesto argues for a reduction in contributions, something that I can support. The pressure for efficiency will become more important, especially as the EU enlarges following the admission of central and eastern European states. That will mean that even larger sums will be involved and, unless there is change, there will be an even greater opportunity for larger sums to be mis-spent and mishandled. With efficiency gains, we can have the penny and the bun. We can still achieve the same objectives, but with lower contributions.

For that reason, as a Member of the Public Accounts Committee--three quarters of whose Members are in the Chamber--I supported the suggestion in our debate earlier this year that we should have an away day to Brussels and Luxembourg so that we could see exactly howthe financial controls inside the Commission were implemented. Bluntly, I found a worrying lack of direct accountability, a lack of clear lines of responsibility and a lack of the use of the effective accounting and auditing mechanisms that we take for granted in the UK.

There is a divide between what happens in the UK and what happens in Brussels. The European Parliament is flabby. It must take a firm grip of the situation and ensure that the European Commission has more effective direct management of expenditure, with particular reference to its external aid programmes. At present, it is impossible

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to tell how fully the Commission has been able to meet programme objectives and how external aid programmes have been operated to ensure that they do not suffer from fraud. We need the implementation and control of schemes that are not susceptible to fraud; at present, the way in which those schemes are set up leaves them wide open to fraud. That is an example of all the problems that are coming from Europe.

I could spend the next half hour going through all the scams that have been running in EU operations during the past few years. I fully accept that many of thosescams took place under the previous Conservative Administration. However, that does not mean that we should stop considering them now. We must try to make improvements and move on from the arguments advanced by the Conservative Government at the time of the Maastricht treaty.

I stagger with disbelief at how some of those scams could have gone through. One example is the beef export refund scheme. That scheme carried an inherent risk because the rate of refund for different countries outside the EU varied. Our National Audit Office found that we sent 5 million kg of beef to Mauritius, where there are 1 million people. Surprise, surprise--one of the highest amounts of support was paid for that import.

More recently, in relation to fishing vessels, EU funds were used as incentives for people to fish outside European waters--an objective that we all support--but what did we find? In 90 per cent. of cases, the vessels subsidised were either inactive--sunk--or those people were already fishing outside the EU. That 90 per cent. represented a slight shortfall on the programme objectives. Those who accompanied me on the away day will know what a sacrifice I make by not mentioning the cochineal beetle scam--that was a joy and a wonder to behold.

My worry is that the case of the whistleblower is not a one-off. We must remember that the whistleblower was not a civil servant acting on a whim, who took action on the spur of the moment. For month after month, he tried to persuade his superiors to take an interest in the concerns that he had raised and to take action. From what I gather, the reaction that he received was either direct hostility--that he would be fired if he continued--and threats of other consequences if he did not desist; or initial expressions of interest, only to be followed by the individuals whom he had approached saying that he should forget all about it.

That typifies my concerns about the way in which the Commission operates, that it is far too incestuous and lacking in outside direct and clear accountability. The Commissioners do not appear to own their own directorates, by which I mean that they are far too involved in the creation of policy instead of in directing policy--the tail wags the dog. In turn, the Commissioner becomes more and more a creature of the directorate, rather than the driving force of policy creation. Unless Commissioners exhibit clear independence of thought in the near future, the EU will not drive forward progressively, but will remain locked in a stifling bureaucratic circle.

We have witnessed the resignation of the Commissioners. Until that time, the investigative UCLAF unit was controlled by, and reported to, the Commission.

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I shall not repeat the words of my hon. Friend the Member for Bexhill and Battle (Mr. Wardle). Although it might be hotly denied, I gained the impression that the careers of individuals within that unit were closely bound up with that of the Commission, so perhaps it would not have been a career-enhancing move for individuals in UCLAF to create too large a wave inside the Commission.

There does not appear to have been an adequate Commission response to the concerns expressed by the Court of Auditors. The argument that the Commission was responsible for only 15 per cent. of expenditure, with 85 per cent. being spent by member states, is totally unacceptable. I am sure that the House believes that the Commission should accept responsibility when fraud occurs and be prepared to investigate it. The report of the committee of wise men has already been quoted, but their conclusions are worth repeating: they found a

That is a damning indictment of anyone in charge of a directorate of the European Commission.

I know that the Commission has the ability to investigate expenditure, even though, during our visit, we heard that denied, not once, not twice, but three times. That is unacceptable. My hon. Friend the Member for Bexhill and Battle spoke of OLAF, son of UCLAF, and I wonder whether the new unit will be as fully independent as has been promised. I wonder whether it will be able to report fully to the Budgetary Control Committee of the European Parliament. I am not convinced that there will be established a strong enough mechanism to ensure that such concerns are properly and adequately investigated.

I have already said that there needs to be stronger supervision by EU Commissioners of the programmes under their control, but with that has to come a clear-cut policy of prosecutions being pressed when fraud has occurred. Such matters must not be swept under the carpet and the sums lost pushed to one side--that would be unacceptable. The Court of Auditors operates fairly well, but there is no European organisation parallel to our National Audit Office that carries out value-for-money audits. That brings me to the question that I put to the hon. Member for Twickenham (Dr. Cable). There is no body or organisation that reports directly to the European Parliament to ensure that value for money has been obtained, and no equivalent of our Public Accounts Committee to investigate budgetary irregularities or weakness. Such improvements have to be installed as a matter of urgency, if the average member of the British population is to regain confidence in the European movement.

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