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Mr. Redwood : Did my hon. Friend notice that when the Economic Secretary remarked on how things could be improved, he gave us verbiage and very vague bureaucratic processes? Does my hon. Friend agree that if we really want to clean up an organisation, from the top, we must say that people who preside over fraud or commit fraud are fired and action is taken against them and that the people who spot it—whistleblowers—are rewarded and promoted? Until we get to that point, are we not going to face this situation year after year, because those at the top of the Commission and the other European organisations do not send a clear message that fraud is the most important thing to root out?
Mr. Francois:
As usual, my right hon. Friend makes a powerful point. Part of the situation that we are in now follows on from the fact that an entire Commission resigned on the issue of fraud some seven years ago, and the House, the British people and others across the EU were assured that such issues would be tackled head on as a result of that failure. We are now seven years on from then, and the Economic Secretary attempts to argue that, at last, such things are being taken seriously and that the problems will be laid to rest in about three years. I want to test some of the arguments that he put to the House this evening and press him specifically on some of the details of the road map and how it is supposed to work in principle and how it is likely to work in practice.
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The road map is now used by the Government, the Council and the Commission as their answer to the challenge of how the problem will be dealt with. It is designed to facilitate the European Court of Auditors being able to sign off the accounts satisfactorily in the not-too-distant future, and I shall come to the timing shortly. In our debate Upstairs on 1 November, the Economic Secretary laid out the concept of the road map, which was initiated by the European Council and then taken up by the Commission as a result. He explained that the Government has sought to press that initiative as part of their presidency of the EU in the second half of last year. I want to press him tonight on how he sees that operating in detail and on what the European Scrutiny Committee in its 15th report of the 2005–06 Session—at page 12 of our bundle tonight—described as his
Let us get on to the detail. Will the Economic Secretary give us further information on the timings by which he envisages the process working? Given the history of all this, it seems clear that the problem will hardly be put right overnight. Can he provide some realistic idea of the year in which he expects the objective to be ultimately achieved and the accounts satisfactorily signed off, given that the EU firmly committed itself seven years ago to eradicating the problem? The Minister mentioned 2009, but will he be clear on whether the Government's stated position is that the accounts should be 100 per cent. signed off in 2009, or do they hope that the percentage signed off will be higher, if not necessarily 100 per cent.? Getting to 100 per cent. only three years from now seems ambitious, so will he be crystal clear about whether he expects to achieve 100 per cent. DAS by 2009?
Mr. Davidson : Does the hon. Gentleman agree that the Minister should tell us what will happen if, whatever the target is, it is not met? We have had protestations of good intentions from the European Commission for a long time about the accounts, but nothing has happened and nothing has been done. Does he also agree that it is essential that the Minister tells us what will happen if the 2009 date is not met? May I also suggest that the Minister sticks with his adage, "Do less, better"? That way, if the target was not met by 2009, the budget would be cut, and that would concentrate minds.
Mr. Francois: I thank the hon. Gentleman for an important point, and indeed a point so powerful that it has provoked the hon. Member for Leicester, East (Keith Vaz) to leave the Chamber. I would welcome a clear answer to his question when the Minister replies. In sum, do the Government expect 100 per cent. DAS by 2009, and what will happen if they do not get that?
The Minister's explanatory memorandum, which is reproduced by the Scrutiny Committee at page 11 of our bundle, reports progress in the following terms:
"the financial management of around 35 per cent of the total 2004 budget is now assured by the ECA, as opposed to only 6 per cent of the budget (just administration) of the 2003 budget. This is a dramatic improvement, for which the Commission and the Member States should take credit."
I accept that in purely numerical terms 35 per cent. is better than just 6 per cent., but is the Minister saying he is happy with a situation in which some two thirds of the EU's accounts are not satisfactorily signed off?
Mr. Francois: Are not Ministers being complacent in seeming so willingly to crow about only one third of the accounts being cleared, as if that were some wonderful achievement?
Mr. Francois: The Minister says no from his sedentary position. We shall see what he says when he winds up, but when he opened the debate he made a lot of the fact that the figure has reached 35 per cent. If he undergoes a Damascene conversion in the space of two hours, I will welcome it.
On a technical point, we acknowledge the introduction of activity-based budgeting into the budget process, which appears to be helpful as it makes it easier to identify spending by subject headings and by specific line items within them. That makes the whole process clearer and is therefore to be welcomed. May I press the Minister, however, on progress towards full accruals-based accounting, which I understand, from page 6 of the bundle and from his remarks, was due to be introduced in the financial year 2005? That should, in theory, improve the quality of the audit process, but there are several references in the bundle to the fact that it has not yet been brought fully into operation. I know the point is technical, but it is important, and I wonder whether the Minister can update us on progress on the introduction of accruals-based accounting. If nothing else, can he tell us how it has fared so far in financial year 2005?
At page 9 of our bundle, the European Scrutiny Committee states, on the basis of the chapter of the ECA's report that focuses on financial instruments and banking activities:
"the Commission does not have a complete overview of the existing assets held by financial institutions on its behalf and such an overview would ensure that the assets are subject to regular and adequate monitoring."
That is an extraordinary statement. Will the Minister say what initiatives are contained within the much-vaunted road map to ensure that that difficulty is put right, so that the Commission will, in future, have a more accurate picture of what it actually has in the bank? As a British taxpayer, that question does not seem unreasonable and perhaps the Minister will help to answer it.
The Minister said that the European anti-fraud office, which is popularly known as OLAF, is helping to win the battle against fraud in the EU. Last month, however, Accountancy Age revealed that fraudsters have sent out fake letters from OLAF to innocent victims in an organised scam. Those letters accused the victims of making irregular bank transfers and thus violating money laundering regulations, and they demanded a payment to make amends for the alleged transgression.
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That is hardly OLAF's fault, but it does not inspire confidence in the system when the name of the anti-fraud office of the EU is used to try and defraud people. Will the Minister tell the House what specific action has been taken to combat that fraud? By way of comparison, has there ever been a similar scam in the United Kingdom by fraudsters purporting to represent the National Audit Office? Hon. Members would like to know whether anyone has had the temerity to try that in the UK, because a bunch of fraudsters have had the temerity to try it on within the EU in the name of the EU's anti-fraud office.
I want to pick up the Minister on an outstanding matter from our exchange in Committee on 14 December, when we touched on the UK's budget performance against the so-called Maastricht criteria. In particular, we discussed the recommended ratio of debt to GDP, which the Maastricht treaty states should not exceed 60 per cent.—I have the Hansard here, if the Minister's memory has failed him. I asked the Minister what the UK ratio would be if the Government's considerable off-balance-sheet liabilities were included in the calculation. He said that he did not possess that detailed information and that he would write to me, which was fair enough, but it is March and I am still waiting for an answer. Having given the Minister almost three months' notice of my inquiry, will he tell us tonight the ratio of debt to GDP including off-balance-sheet liabilities? [Interruption.] The Minister has quipped from a sedentary position that he should resign, but the matter is not that serious.
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