Olive Oil

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The Chairman: Before I call hon. Members to ask questions, may I tell the Minister that the opening statement should not normally last longer than 10 minutes? Having said that, few hon. Members are present, so I have used my discretion. We now have until 11.30 am at the latest for questions to be put to the Minister on the matter and on her statement. I remind hon. Members that questions should be brief and asked one at a time. There is likely to be ample opportunity for all hon. Members to ask several questions.

Mr. James Paice (South-East Cambridgeshire): I preface my question by telling the Minister that I know that she has far more important things to deal with at present, and I have no intention of keeping her here longer than necessary. Her opening statement may prove the longest part of our proceedings. However, I have a couple of questions that I should like to ask, subject to catching your eye, Mr. Winterton.

My first question relates to the general agreement on tariffs and trade and the world trade talks. The Minister referred to the export refund issue, but even the Commission's new proposals are clearly production subsidies, which are against the spirit of GATT and the World Trade Organisation. What is the Government position on how to reform the olive oil regime so that it is compliant with GATT requirements, bearing in mind that most other sectors of CAP have moved away from production support?

Ms Quin: The question is important. The likely timetable for discussions in the GATT framework fits in with the likely timetable for discussions on further reform of the olive oil sector. The Government would like the aid that is eventually given to the olive oil sector to be compatible both with the GATT system and with the thrust of other reforms in agriculture that we have supported. In other words, we would move towards a system of direct aid for producers, in which that aid would be digressive over time—something that both the current Government and the previous Government favoured—and would in future be decoupled from production as far as possible.

I have to tell the hon. Gentleman that getting agreement in the European Union for that will be challenging, to put it mildly, as several member countries benefit from the way that the olive oil regime has worked over the years. They are reluctant to see that support diminish. However, it will be possible—but not easy— to obtain that agreement if we can find a means of helping producers, both in the transitional sense and, while recognising their financial difficulties, in a way that sends them a clear signal about moving towards GATT compatibility and the principles of the reform of CAP, which we all support.

Dr. Ian Gibson (Norwich, North): I shall not delay proceedings either, but I am concerned about the word ``fraud''—whenever I hear it, my hackles rise. My concern is health and oils. I recall many tragedies in Spain caused by oils and their effects on human health. European Union document 5213/01, which has been distributed to us, mentions types of fraud by mixing different oils. What does the Minister intend to say about

    ``the lack of an analysis method for detecting this type of fraud (deodorising virgin oils)''

where different oils are mixed and there is no tracer for the contamination oil? Whose responsibility is it to ensure that any oil mixed is safe for human health?

Ms Quin: A number of authorities are involved in the process. Each member state has its own arrangements for protecting the food chain and for ensuring that products that enter it are safe. That process is organised in a number of ways. However, in order for the regime to function properly, the European Commission has a responsibility to examine the systems in each member state to determine how far they protect European consumers and European taxpayers. The European anti-fraud office and the budgetary services in the European Commission have a role to play in that process.

I envisage that, once it is established, the European food authority will also have a role. It is intended that it will monitor and co-ordinate the activities of the food safety agencies in the different countries as well as overseeing European food safety standards. The answer to my hon. Friend is that there is a variety of agencies involved. He is right to look more closely at the term ``fraud''. It covers a variety of activities. Those he mentioned are serious not only because they involve financial irregularities but because they are a threat to human health. It is true that some of the activities categorised as fraud in the various reports constitute less serious irregularities, including overpayments or underpayments, which result from administrative error, so we must carefully consider what is meant by fraud. However, my hon. Friend highlights some of the most serious issues with which we must deal.

Mr. David Heath (Somerton and Frome): Whose responsibility is the verification of the geographical information system? Is it a matter for member states and their authorities or is there a European body that can intervene if the arrangements made by any member state are found wanting?

Ms Quin: Although responsibility for introducing the system lies with member states—they have undertaken to introduce the system by the deadline that I mentioned in my opening remarks—the information is supplied to the Commission. The Commission and Court of Auditors will then check whether the system is correctly administered and whether the claims for aid that are made for introducing the system are in order. Follow-up action is possible both through the anti-fraud office, OLAF, and through the Court of Auditors. Of course, member states can also be taken to the European Court of Justice.

The Chairman: Does the Minister want to respond further, bearing in mind the note that I know she has not had time to read?

Ms Quin: No thanks.

The Chairman: I was trying to be helpful.

Mr. Paice: I am sure that we can encourage the Minister to say all that she needs to say.

I want to return to the issue of fraud, raised by the hon. Member for Norwich, North (Dr. Gibson) and, in particular, to the horrifying figures in the report, which indicate a low level of recovery of money obtained by fraud. The figure for consumption aid amounts to 756 million euros, which is roughly £500,000, of which only 6 per cent.—a minuscule amount—has been recovered. Although irregularities on export refunds are lower, there is still only a 13 per cent. recovery rate. Those are large sums of money, and the failure of the Commission or national Governments to recover money that has been fraudulently obtained is serious.

Who is responsible for recovering that money—national Governments or the Commission, through the European Court of Justice? What options are available? I see that the principal fault lies with Italy, but can national Governments be held accountable and required to return the money to the Commission's coffers, into which the UK puts a considerable amount of funding? Is it left to Governments to decide whether to reclaim the money from the producers who obtained it fraudulently, or must it be recovered from individual producers, which is a much tougher assignment?

Ms Quin: The hon. Gentleman is absolutely right that there is massive concern about the failure to recover money that has been paid out unjustifiably as a result of fraudulent claims. A reform, dating back to 1995, of the clearance of accounts in the European Union introduced a system whereby the Commission requested member states to record all debts owed to the EAGGF, which represents the main CAP expenditure, in a debtors' ledger. Because of the difficulty in recovering debts, the Commission allowed up to eight years for debt recovery by a member state, after which it would refer most outstanding cases to the recently established OLAF. OLAF would then consider the reasons for the failure to recover the debt, and decide whether the debt should be charged to the Community budget or the member state's budget. That would depend on whether the failure was due to the member state's failure to act speedily and expeditiously or inability to determine what went wrong.

There is an improvement in debt recovery. Greece recovers an increasing sum—more than 70 per cent.—and similar figures are now registered in Spain and Portugal. The Italian figure is low, which is partly a reflection of the slow and cumbersome legal process in Italy. We hope that that figure will improve. If it does not, OLAF will be able to take some recovery mechanisms from the member states under the system that I outlined, based on the reforms introduced in 1995.

Mr. Heath: It is a little difficult for many Members to understand why the rate of recovery is so very low, given that olive trees tend not to move around a great deal, even in Calabria. They are fairly static, and so are identifiable assets. I understand that the accredited paying agencies had initial responsibility for drawing up the debtors' register. Has any agency lost its accreditation as a result of not performing sufficiently well in the recovery of debt?

Ms Quin: On the first point, the hon. Gentleman has misunderstood a key element of the matter. The fraud and difficulties of recovery about which we have talked relate to consumption aid—the aid paid to mills—not to individual producers. Therefore, they are not related to the number of olive trees. The Commission rightly decided that the consumption mechanism was fraud-friendly, and that is what it has removed. There will be on-going production aid but, if GIS is effective, as we believe it will be, controls on production aid will be far more satisfactory than those on consumption aid. The consumption aid system accounted for by far the greatest bulk of financial irregularities. It is important that the hon. Gentleman understands that. We believe that the elimination of consumption aid severely lessens the opportunities for fraud.

I certainly do not know of any example in which accreditation has been removed from a paying agency. If I am wrong, I shall write to the hon. Gentleman. The Commission seeks much greater ability, through the controls that it has implemented, to monitor and inspect the work of paying agencies. That will enable it to ensure that they carry out their functions effectively and honestly.

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