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6.39 pm

Mr. John Whittingdale (Maldon and East Chelmsford): This has been an important and, given the large number of members of the Public Accounts Committee who have spoken, a well informed debate. However, it is worth saying that it has been a long time coming. It is six months since Paul Van Buitenen revealed the scale of the fraud within the European Commission. It is two months since the report of the committee of independent experts, which led to the resignation of the entire Commission.

Immediately following the report's publication, my right hon. Friend the Member for North-West Hampshire (Sir G. Young), the shadow Leader of the House, asked for a debate on the report and on the whole question of European fraud. He repeated that request the following week. However, only now--eight weeks later and in Opposition time--are we finally debating the matter. That is perhaps an indication of the importance that the Government attach to tackling European fraud.

There has always been a problem with fraud and mismanagement in the European budget. The previous Government repeatedly grappled with that problem. Our task was not made easier by the fact that most member states did not have to pay anything into the European budget, and so appeared to show little interest in ensuring that it was properly spent, but, despite that, considerable progress was made.

As a result of British pressure, the Court of Auditors was established as a full institution of the Community and its reports had to be followed up. British pressure forced the Commission to agree to produce an annual report on the fight against fraud for the Council of Ministers and led to the strengthening of the Court of Auditors and the financial controls exercised by the European Parliament under the Maastricht treaty.

The most recent Court of Auditors report is unable to account for £3 billion of expenditure. Not all of thatis necessarily due to fraud; maladministration, mismanagement and incompetence are undoubtedly also responsible. However, that figure represents almost half the amount that Britain contributed to the European budget in the year in question. It is money that British taxpayers worked hard to earn and to pay, and they are entitled to demand that action is taken.

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Unfortunately, little has been done in the past two years. Despite Ministers' claims that fighting fraud would be a key priority of the British presidency, virtually nothing was achieved. No mention was made of any concrete action in the relevant section of the presidency conclusions following the Cardiff summit. Since then,the Government have never once put fraud and mismanagement in the European Commission on the Council of Ministers agenda. The Chief Secretary talked about the Government's attitude being zero tolerance of fraud. We have seen zero action on fraud.

Dr. Nick Palmer (Broxtowe): Will the hon. Gentleman give way?

Mr. Whittingdale: I will not, if the hon. Gentleman will forgive me. I have only a short time in which to make my winding-up speech.

In the 1999 preliminary draft budget, overall expenditure on preventing fraud was cut by 16 per cent. To take one sector, the draft budget line showed a reduction from 500,000 euros to 495,000 euros in expenditure on combating fraud in the textile sector. Meanwhile, restaurants and canteens received more than 1 million euros. But the real scandal relates to the fraud and mismanagement that is taking place in the Commission itself.

I pay tribute to Conservative MEPs and, in particular, Edward McMillan-Scott, who has been campaigning on this issue for many years. The hon. Members for North Durham (Mr. Radice) and for Tynemouth (Mr. Campbell) referred to the scandal of what had been going on in the tourism office. Edward McMillan-Scott first drew attention to it in 1990, and in 1995, when he was fed up with the lack of action being taken, he called in the Belgian fraud squad to investigate.

For a long time, Conservative MEPs' warnings were ignored. It was not until Commission official Mr. Paul Van Buitenen blew the whistle that something was finally done. However, when he first reported his findings to the Secretary-General of the Commission, he was told that he would be sacked if he passed his report on to the European Parliament. When he did so, he was immediately suspended.

Although the Commission was prepared to cover up the evidence, the Parliament was not. Given that evidence, it is hardly surprising that the Parliament voted to refuse to approve the 1996 budget. The hon. Member for Croydon, Central (Mr. Davies) seemed to suggest that Pauline Green and Labour MEPs were somehow responsible for that, but the vote was carried in the teeth of opposition from Labour MEPs.

According to The Guardian, Labour MEPs were put under intense pressure by the Prime Minister to

We know that the right hon. Gentleman wrote personally to Pauline Green to give her her orders, although he has refused to publish that letter.

The German socialist spokesman on the budget committee resigned in disgust at the attempts of the British Labour group to protect the Commission.

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According to Pauline Green, the group even went so far as to table a motion of censure of the whole Commission and then say that it would vote against, to

    "demonstrate our confidence in the Commission".

Mr. Geraint Davies: Will the hon. Gentleman give way?

Mr. Whittingdale: No, I have very little time in which to speak.

When a vote was taken, all but two British Conservatives voted in favour of the motion and 53 British Labour MEPs voted against. No wonder Mr. Van Buitenen said that he was disappointed by the attitude of the socialist group and, in particular, Pauline Green. He said:

The report of the committee of independent experts, which was published last March, is a devastating document. It talks of fraud and corruption passing unnoticed at the level of Commissioners themselves and of loss of control by the political authorities over the administration that they are supposedly running. It also states that there is a heavy responsibility for the Commissioners individually and the Commission as a whole. Faced with such a damning indictment, the Commission had no alternative but to resign.

Extraordinarily, eight weeks later, the Commissioners are all still at their desks and behaving as if nothing at all had happened. When they finally go, they will collect substantial pay-offs at public expense. Meanwhile, Mr. Van Buitenen has been moved into a new job in the personnel department. It is outrageous that certain individual Commissioners such as Edith Cresson were not instantly sacked in disgrace, and Conservative MEPs are quite right to refuse to co-operate with her in any way.

Although most Commissioners are not personally guilty, the entire Commission is discredited. The only way to restore credibility is for them to leave their offices immediately and for no Commissioner to be reappointed beyond his term. The Commission should stop trying to extend its power ever wider and should concentrate on doing properly the things it should be doing. Part of the reason why fraud and mismanagement have been allowed to grow unchecked is that the Commission has closed its eyes to everything that does not further its aim of creating a federal state. Its only interest has been to spend more money, not to spend money more efficiently.

Our view is that Europe needs to do less, but to do it better. That is why we have proposed a 10-point plan to root out fraud and maladministration, and why we want a genuinely independent and powerful anti-fraud office. As my hon. Friend the Member for Bexhill and Battle (Mr. Wardle) made absolutely clear, what is on the table at the moment does not involve genuine independence.

Conservative MEPs have been campaigning for such changes for many years. Labour MEPs, on the other hand, have seemed to be more interested in covering up fraud and protecting the Commission. That is perhaps less surprising when we look at their record of waste and abuse of public money. A few weeks ago, we learned how careful the leader of the socialist group is with public money when it was revealed that she had arranged that she could claim travel expenses for attending a wedding in Cyprus.

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Today, we have heard that former Labour leader Glyn Ford used his office expenses allowance to pay for his laundry, his decorating, his gardening and even his log cutting. According to his former assistant, his house became a hotel paid for by the Parliament, but because of the absurd electoral system introduced by the Government, he will probably be re-elected next month and his electors cannot even vote against him if they want to. If the Government are serious about cracking down on that kind of abuse, the Minister should make it clear now that Glyn Ford will not be a candidate at the elections next month.

Fraud and mismanagement are endemic throughout the European budget and extend right to the heart of the Commission itself. Conservative MEPs have campaigned over many years to tackle the problem and we have produced a concrete programme of action to achieve that. The Government have done almost nothing, while their supporters in the European Parliament have done their best to sweep the problem under the carpet. I ask the House to support the motion.

6.50 pm

The Financial Secretary to the Treasury (Mrs. Barbara Roche): As one normally says on these occasions--and it is true in this case--this has been a good debate with some good contributions from Labour Members. The speech by the hon. Member for Maldon and East Chelmsford (Mr. Whittingdale) was astonishing, because it fully demonstrated the collective amnesia of Conservative Members. I am grateful for the excellent contribution of the hon. Member for Tunbridge Wells (Mr. Norman), because he reminded us that fraud has been going on in the European Union for a considerable time. What did the Conservative party do when it was in government? Very little indeed. I am also grateful to the hon. Member for Tunbridge Wells for giving me the opportunity publicly to thank him for his remarks on the Budget. He said that it was not a bad Budget for business. I always like to give thanks where thanks are due.

The Government believe that there should be zero tolerance of fraud, which is why the Prime Minister has called for a root-and-branch reform of the Commission. We have put this matter at the top of our agenda. One of our key priorities is financial management reform to ensure better lines of responsibility and personal accountability at all levels and to improve transparency. That important point was raised by members of the Public Accounts Committee.

Other key priorities are the modernisation of personnel policy to ensure a flexible, high-quality service, and the establishment of a management structure that will deliver an effective and flexible service, including in particulara wide review of the present structure of directorates-general and mechanisms for adjusting to changing priorities. None of those measures were taken by the Conservative party when it was in power. Improving contracting, project monitoring and evaluation procedures are other priorities.

It is important that the initiative set out by the Prime Minister and the Chancellor at January's ECOFIN meeting has met with such approval. Hon. Members have spoken about the fraud prevention office, which my right hon. Friend the Chief Secretary outlined. It will have a strong, independent head with statutory protection from

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dismissal, who will be appointed after consultation with the Council and the European Parliament. The head will be able to open investigations on his own initiative, will have access to buildings and documents, will be able to draw up reports containing recommendations for follow-up action, and will report regularly. That initiative has come from our Government. I expected to receive the congratulations of Conservative Members: I was sadly disappointed and let down when they were not offered.

In the time left, I shall deal with some of the points raised. My hon. Friend the Member for Workington (Mr. Campbell-Savours) asked whether the fraud office's reports will be available for debate in Westminster. That is an important point, and the answer is yes. Reports from the fraud office to the Council and the European Parliament will form part of our parliamentary scrutiny process. All hon. Members know how vigorous that process is, and we are looking forward to that happening.

The hon. Members for Twickenham (Dr. Cable) and for Bexhill and Battle (Mr. Wardle) asked whether the fraud prevention office will be able to arrest fraudsters. Only national and judicial police authorities have such powers, but it is planned to give the fraud prevention office powers to investigate and to pass on the results of its investigations. That is analogous with our National Audit Office.

My hon. Friend the Member for City of Durham (Mr. Steinberg) rightly gave some important examples, about which we share his concern. He also referred to structural funds. The United Kingdom has been concerned about that area, which is why we not only obtained a very good deal for the UK in the negotiations on structural funds but negotiated--especially during our presidency--procedures to deal with the funds. When I had the pleasure to be a Minister at the Department of Trade and Industry I took part in a conference organised in conjunction with the National Audit Office to examine this important area.

My hon. Friend the Member for Tynemouth (Mr. Campbell) made an important point about the need for a new culture of accountability. He is absolutely right, and we are determined to achieve that. I was also delighted to hear the contribution of the Chairman of the Public Accounts Committee, who reminded us of what the Prime Minister said.

The hon. Member for South-West Hertfordshire (Mr. Page) spoke about the European Union, and I was a little disappointed in what he had to say. I should have thought that he would congratulate the Government on the excellent deal that we obtained for the United Kingdom in the Agenda 2000 negotiations. Once again, I feel let down by Conservative Members.

My hon. Friend the Member for Croydon, Central (Mr. Davies) made a measured speech. His analysis of the problem was good, and he made some sensible, practical suggestions for reform. We have been working with the Commission on phase 3 of the "sound and efficient management 2000" initiative, which has resulted in welcome reforms.

The hon. Member for Tunbridge Wells referred to the development budget. My right hon. Friend the Secretary of State shares his concerns and is monitoring the situation closely. The hon. Gentleman made a good joke

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or a bad joke, depending on one's preferences. I thought that it was not bad at all, so I must break ranks with my hon. Friends who said that it was.

It is a bit rich for the Conservative party to initiate this debate. Let me remind Conservatives of what they have done. They initiated this debate, but what did their MEPs do? The Tory MEPs voted against producing receipts for MEPs' expenses. They voted against a wage cut for British MEPs. I know this will shock my hon. Friends, but I must tell them that Tory MEPs opposed the panel of fraud busters that forced the Commission to resign. I am sorry that Conservative Members are not taking this matter seriously, because this strikes me as an indictment of the record of Tory MEPs.

In January last year, Edward McMillan-Scott, the leader of the Conservative party in Europe, refused Labour MEP Alan Donnelly's invitation to take a cross-party approach to investigating fraud allegations in the European Commission.

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