European Standing Committee B |
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Mr. Tyrie: If we are so influential in Europe, why cannot we garner support? Mr. Timms: We have been extremely influential in Europe on the constitution, and I am happy to point to a wide range of examples of that. In this respect, however, we have not yet persuaded other member states to support our proposal, but we will continue to try to do so. Mr. Tyrie: I have a few more general questions. Will the Minister explain why, when push comes to shove, the Government support the Council’s decision to sign off the accounts and to grant discharge under EU law every time, even though they know that the ECA has heavily qualified the accounts and that the European Parliament is extremely chary of doing so? Column Number: 12 Mr. Timms: We do so because we seek improvement. For the reasons that I have set out, I believe that improvement is clearly under way. There is further to go, and we are determined to push things further, but we believe that to oppose discharge would not help to bring about the continuation of the improvements that have started, which is our goal. Mr. Tyrie: What worries me is that although we are told improvements are under way, we are given no indication of how they might manifest themselves in reductions in fraud and irregularities, which is where I began this question-and-answer session. I am surprised by the answer that I have been given. Have discussions taken place between Britain and other member states about withholding discharge to secure necessary reforms and to clamp down on fraud and irregularity? Mr. Timms: I have not been party to such discussions. As I said, we have taken the position that we have because we want to encourage further improvement, but the approach that the hon. Gentleman suggests would not do that. I do not know whether he has seen the letter of 15 February from Siim Kallas, but it talks of the road map towards securing a statement of assurance for the accounts. That certainly encouraged optimism on my part that the Commission will be getting to grips with these matters, and I want to do everything I can to encourage it to do that. Motion made, and Question proposed,
2.37 pmMr. Tyrie: This a complicated issue, which tends to send people to sleep quite quickly; it certainly seems to have sent a number of my colleagues away. Although the Conservative party is not as fully represented as it usually is, the Liberal party is not represented at all this afternoon. As the Minister said, this is the 10th year running that we have found ourselves discussing this issue. He rightly said that there is no room for complacency, but what worries me is that although he has talked repeatedly about his view that improvements are under way, he has been able to give me virtually no substantive evidence of those improvements. I am not at all convinced that improvements are under way, and I see no evidence of that; indeed, I see some evidence of things getting worse. Overall, the report could be taken as evidence that they are getting worse. Column Number: 13 I have before me the summary set out in the statement of assurance. I shall not read it all out, but I shall give the Committee a feel for the scale of what has been uncovered in the statement of assurance. On the structural funds, the summary refers to
On internal policies, it says that
On external actions, it says that
On agriculture, the tone of the Minister’s comments implied that things were getting better, but the summary says:
On pre-accession aid, it says that
And so it goes on, for those who want to read further in the nearly 1,000 pages of documentation before us. Overall, 93.4 per cent. of spending has been deemed unsafe or riddled with errors. Only 6 per cent. has been left unqualified. That does not mean that every part of that 94 per cent. has definitely been misspent. It means that we cannot tell with reasonable confidence that there is “no material error”, to quote the Commission official who responded to the report. That is pretty shocking. Not even the worst performance of Government Departments quite matches up to 93.4 per cent. If a private sector body were in such a situation, I am confident that it would lead to a downrating of its credit and possibly a withdrawal of its credit rating altogether. Bankruptcy could quite easily follow. It would be extremely prejudicial to any private sector institution to receive one, never mind 10 reports such as the one in front of us. I feel that although the Minister has said that there is no room for complacency, he has allowed that. He has made statements about improvements being under way, and he thinks that a lot of good work is going on and that things should get better. I do not see much of that in what we have in front of us. In fact, I rather agree with his boss, who has said in reference to the proposal to increase the budget that in the light of lax control:
That is what the Chancellor of the Exchequer thinks. I do not often agree with him, but I agree on that. Mr. Hopkins: In some member states, including big net beneficiaries, surely Finance Ministers have an incentive to keep quiet about such matters because they benefit from the budget. If errors are made, they may get more rather than less. Column Number: 14 Mr. Tyrie: That is absolutely right. One of the steps forward is that whereas there used to be only two net contributors, there are now four or five significant net contributors. That creates scope for the creation of an alliance. That is the route that we need to go down and that was what I was trying to hint at in the question-and-answer session. The Government have to be much more proactive. Rather than saying that they put forward some proposals for the European Court of Auditors and that because only Sweden was interested they let them drop, they need to be much more forthright in trying to create a coalition of interests to try to clamp down on such stuff. We cannot carry on like this; it is wholly unacceptable. The annual report on the protection of European Community financial interests and the fight against fraud is particularly damning. It is well worth looking at sections of it. There are many points of qualification. Last year, we had some amusing illustrations. We had grants for sugar cane growing in Croatia, which does not have a climate capable of growing sugar cane. Grants went to Kosovo that reappeared under different names in Gibraltarian bank accounts shortly afterwards. Plenty of such stuff can be found in the report and I am not going to rehearse all that again. The fact is that the attempt to put in place a system of public accountability is clearly not working adequately. Few people would argue that it is. Something has to be done. I notice, incidentally, a repetition of the wonderful phrase that in some areas there have been “100 per cent. reductions in value” of particular budget lines. That is another way of saying that there has been a total loss, of course, and that people have no idea where the money is—it has just gone. It might be mislaid; it might be sitting somewhere where nobody knows how to claim it or, more likely, it has found its way into the pocket of somebody who should not have it. The whole thing is replete with such detail, and that is no way to run the EU. What is to be done about it? Last year, I gave a much longer speech than I intend to give today, setting out what I think we should do. Today, I asked somebody who devotes his life to work in this field, what I should say. He suggested that I say the same as I said last year. When I asked why, he said, “Well, nothing much has changed; it is pretty much exactly as it was,” which is why I am concerned about the Minister’s suggestion that improvements are under way. I shall not rehearse the speech that I made last year, but the Minister would do us a service by being pretty rigorous—more than he has so far been in the explanatory memorandums that we have seen—in assessing the four actions that have been taken to improve the situation. The so-called four heads of action are: the general improvement in financial management; the introduction of accrual accounting; the creation of OLAF; and the so-called activity reports. I am not convinced that OLAF is yet effective, and I think that accrual accounting, although I am in favour of it, will have benefits only in the long run. It is a difficult way of
In France, there is a sophisticated form of personal liability in this field backed by insurance. I am not sure whether we need to go down that road in the EU, but perhaps it should be considered. Certainly, the activity reports so far do not seem to have provided the jolt to the culture that will be required if we are to sort some of this out. Why is that? Why—to use one of my favourite quotes—is “sunshine the best disinfectant”? Why is the sunshine of greater publicity area not having an effect? Why is it that the Court of Auditors produces damning reports—there have now been 10 in a row—and the press write their ritual condemnations, and then, somehow, the waters close over and nothing happens? There are several reasons. One is that there are deep structural flaws in the way in which the EU tries to operate. A set of institutions created for one era is trying to operate in the much more open and transparent era of the 21st century. In the middle of the 20th century, when the institutions were created, democracy was considered a dangerous thing. People thought that it had helped to create fascism, so they did not want to go too far down that road in constructing these institutions. Therefore, they tried an institution at one remove that would operate on a functionalist agenda—administrative and, effectively, accountable to no one. In some sense, it is a body of the great and the good. That is how the Commission came to exist; it is part of the package of ideas that lies behind the EU. If that approach was ever relevant—it was certainly never very relevant for Britain—it is no longer so in that form. That is why it needs dramatic reform. However, I fear that it will not get it. The Commission’s very purpose is to operate at one remove from democracy. While it does so, sunshine will not be a very effective disinfectant. If one sits on the Commission and is attacked, one knows that one can brush the attack off and can probably see one’s way through. It takes a huge scandal to bring about the accountability that we take for granted in the UK. That is reflected in the culture of complacency in the Commission. Column Number: 16 I do not want to spend the whole afternoon Commission-bashing, because many people in it work hard to do a good job. The Minister made some good points about parts of the Commission that have done well. There are a lot of dedicated people there, but the structure is wrong, and these problems will carry on until it is put right. I shall illustrate my points by referring to one practical manifestation of the inadequacies of the culture: the treatment of whistleblowers. Let us consider the treatment of people who tried to expose some of that stuff, such as Marta Andreasen, the former chief accountant who was appointed by Lord Kinnock to try to sort this matter out. She highlighted inadequate double-entry bookkeeping and the hopeless condition of the IT systems, and supplied the European Court of Auditors with information to expose that. For that, she was sacked. I do not think that that is a helpful way in which to encourage legitimate whistleblowers. No one suggests that the information that she came forward with was fundamentally wrong; indeed, most people agree that most of what she said was right. Mr. Hopkins: I am interested in what the hon. Gentleman says. Does not that suggest that anyone who looks too closely at the accounts or criticises too much will be regarded as non-communautaire and therefore as a persona non grata? Does not that attitude also affect some Governments in the EU? Mr. Tyrie: I am not one of nature’s EU-bashers, and I do not favour withdrawal from the EU; I have never been in that camp, but I have been concerned for a long time that for some—a small minority in the UK these days, but for some on the continent—for understandable reasons that derive from the war, the EU is an act of faith. Therefore, if one criticises it too strongly, one is attacking a faith—something much deeper than merely a practical set of arrangements to try to improve our mutual welfare and economic well-being. That is an obstacle to practical reform and is deeply concerning. The accusation that one is uncommunautaire should be meaningless rhetoric. One should be able to say, “I am interested in the furtherance of British interests and I want to find ways in which they can work with the interests of other countries—my near neighbours.” That seems to be a practical approach. Mr. Hopkins: Would not it be useful if the British Government were to explain to the EU Commission that if it wants to become more popular in Britain, cleaning up its act would be a good thing? Even those for whom it is a matter of faith should know that if it is to succeed, it must be made clean so that even those who, like me, take a more sceptical view are persuaded. Mr. Tyrie: I absolutely agree. It is heartening to find a measure of cross-party agreement on such issues. The culture of complacency has infected even the London office of the Commission. I shall not tarry too long on this issue, because we are ranging widely and I want to return to whistleblowing. However, until the hon. Gentleman’s point is addressed and the
Let me carry on with the list of whistleblowers. I have mentioned only one so far, but there is a whole team of them. There was Mr. van Buitenen, who blew the whistle on Edith Cresson’s dentist, which eventually led to the resignation and collapse of the whole Commission. What has happened to him? Well, he has gone. He was suspended from duty quite quickly. Then there is Madam Dorte Schmidt-Brown, who blew the whistle on the Eurostat fraud several years before anything was done about it. She faced repeated obstruction, and has claimed persecution. First she was ignored, then she was persecuted. She has had a breakdown, and has suffered badly as a consequence. Lord Kinnock has apologised to her. As I said, I am not going to repeat all the arguments that I rehearsed last year, but I thought that I would say a little about whistleblowing, because surely this is one practical area in which we can improve things a little. I believe that the public sector can learn a little from private sector best practice. Most public sector companies now have in place whistleblowing arrangements that give staff the opportunity to report to independent directors on the board who are wholly independent of the line managers to whom they usually report. I wonder whether some independent panel should be created to which whistleblowers can make representations in total confidence and that has the power to ensure that they are financially provided for if they are under pressure or face persecution. I do not know exactly what the arrangements should be, but the current arrangements are not adequate. If they were adequate, whistleblowing would clean up this stuff up in six months. If the arrangements were reasonable, thousands of cases would be reported. Mr. Hopkins: I do not share the hon. Gentleman’s touching faith in the private sector in these matters, as it can be as ruthless with whistleblowers as the Commission and the public sector. Does he agree that there have also been private sector scandals, malpractices and frauds such as those involving the Mirror Group pension fund, Enron and others? The list is as long as one’s arm. What we want is transparency and democratic control. Mr. Tyrie: I agree with most, but not all, of that. The hon. Gentleman is confusing various cases a little. In the Maxwell case, there were no whistleblowing arrangements. In the Enron case, however, the scandal was exposed by whistleblowers, which is an example of how whistleblowing can be effective in the private sector. On the whole, it is more effective in the private sector than the public sector these days. The improvements in corporate governance that have come with the combined code provide a framework from which the public sector now has something to learn. I would like the Commission to consider that. Column Number: 18 All the same, I keep returning to the point that I have made time and time again. Culture is the problem. If the culture of an institution is wrong, it is extremely difficult to sort out. That is a political problem. The democratic deficit that people talk about will not be solved by making an institution answerable. One point that I have not made but that I should make is that the Commission can say quite rightly that many of its problems are caused by the fact that it has delegated responsibility for the implementation of expenditure to member states, and that it is the member states that misbehave. That is true, but often there is a conspiracy of silence between the Commission and some member states that permits that environment to develop. Any improvement in democratic accountability must come through the national Parliaments. I am sure that the European Parliament does a lot of good work, and that is better than nothing, but it will never be able to provide the disinfectant that I have just described—the level of sunshine required to provide a true disinfectant. Our Chairman has experience of both institutions, but he cannot, of course, offer a view this afternoon on whether anything I have said in that regard is true. I will try him out on that in the Tea Room after the conclusion of our sitting; I have high hopes that he will not disagree with me. For my parting shot, I will repeat an early point I made, by referring to something that the hon. Member for Luton, North (Mr. Hopkins) said a few moments ago. If we are going to sort this out in the long run, the paymasters of the EU must stick up for themselves and work much more closely together; they must be prepared to cause ructions. How did we get the rebate in the beginning? Because Margaret Thatcher was prepared to be tough. How are we going to get sensible reform of the EU budget, and reductions in the level of some of the current absurd and wasteful expenditure in the EU? Only if the paymasters of the Community are prepared to kick up dust and have a proper fight. They have shown no sign of willingness to do so in negotiations on the EU constitution, and that makes me less than optimistic that we will not be sitting here in a year’s time—although I may be sitting on the Benches opposite—discussing an 11th report that has been heavily qualified by the European Court of Auditors. 3.2 pmMr. Hopkins: I have been a member of this Committee for eight years. Perhaps that is an unusually long time, but I have witnessed the referral of eight of these 10 reports, as the Scrutiny Committee refers them to the Standing Committee as a matter of routine. So I have been through this process many times, and I suspect that I have said some of what I am going to say now in previous speeches on previous reports. However, I still think that this is a serious matter. It is not right for the Scrutiny Committee just to nod something through—even a 1,000 page document—as if it is of no account. I therefore feel obligated to say something. I hope that my hon. Friend the Minister
As the hon. Member for Chichester said, with enlargement more member states will become net contributors. One of the reasons why I supported enlargement so strongly was that I thought that it might make the European Union look more seriously at itself and start to deal with these issues. In evidence, I quote from one of the first of the European documents before us—paragraph 3.28 of the Court of Auditors annual report for 2003, in European Union document No. OJ C293, volume 47—which states that Britain was one of only two states where random verifications are undertaken, and that Britain regards all those cases
When there is no reply in other countries, an investigation is launched and nothing is done. In Britain, we assume a degree of suspicion, and if there is no reply we withdraw preferential treatment. We could press other states to adopt such rigorous procedures. I happened to pick out that paragraph from the documents, but it seems that Britain has something to teach other member states about how these things should be managed. They should take a stricter view of happens in their own bailiwicks. My hon. Friend the Minister also suggested that things were getting better. I draw his attention to the table between paragraphs 4.16 and 4.17 in the document to which I have just referred. The table deals with common agricultural policy irregularities and post-payment checks. It does not have details of 2003 and I do not have the figure to hand, so he might be able to correct me, but I can say that between 1998–99 and 2001–02—four consecutive years—the number of post-payment checks reduced, but the irregularities that were identified increased. That suggests that things were not getting better, but getting worse. I hope that the 2003 figure represents an improvement, but it will have to be shown to me and I will have to be persuaded. Table 4.1, a few pages further on in the same document, shows figures about area aid, forage areas and other crops. Again, I am citing this table as it happens to be a useful example. It shows that the percentages of applications with errors in some
The CAP in particular is something that we have argued over and over again should be reformed. I have called many times for it to be abolished and replaced by systems of national agricultural policy, which we could negotiate mutually, perhaps with other nations. Such a policy would not have caused enormous waste, high prices, dumping of cheap products in third world markets, which undermines poor farmers, and all the attendant ills and evils of the CAP. We must be serious about any reform. If we took the CAP out of the picture, much of the problem would disappear. We have talked about what is likely to happen with the structural funds, but the aid budget is another area where fraud, inefficiency and irregularity cause problems that we as a country have focused on time and again. We have contrasted our good performance—that of the Department for International Development—in contributing aid with that of the European Union. It would be beneficial to the recipients of that aid if all the money went through national Governments; it would certainly benefit them if our contribution went through DFID rather than the European Union. That money would be targeted better at the sub-Saharan African states, which are in much greater need, and it would not be nudged towards the Mediterranean francophone states, which get rather more than their share and are nowhere near as poor as the sub-Saharan African states. |
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