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Mr. Robert Goodwill (Scarborough and Whitby) (Con): I was fascinated to hear the Economic Secretary say that he believes in the EU. I know that it is in vogue to take direction from an overarching authority, but the EU is something in which I believe, in so far as it exists, but I do not believe that it has a coherent system of financial accountability.

I must declare an interest—as someone who farms modestly in Yorkshire, I am eligible for my share of the €43 billion out of a total of €100 billion. Little has been paid incorrectly to farmers this year, because little has been paid at all. The Department for Environment, Food and Rural Affairs system is so complex that it rules out the possibility of fraud, but DEFRA has so many officials that it probably wastes an equivalent sum on administration—there are now more DEFRA officials than there are dairy farmers in England.

Until 2004, I was a Member of the European Parliament, where, as a member of the Environment Committee, I was budget rapporteur between 2002 and 2004. A particular bugbear of that Committee was the way in which the LIFE—the financial instrument for the environment—third countries programme is administered. The programme is for environmental projects outside the EU and the Committee was especially concerned about financial probity in relation to money deployed in the west bank and Gaza strip. I did not look to see whether it was referred to in the documents because I know that the Commission had difficulty finding an inspector who was prepared to go and look at those projects, but it is a concern.

Last November, once again the European Parliament enacted what has become an annual ritual by refusing to sign off the EU's accounts for the 11th year running. It is almost as predictable as the arrival of Alsatian asparagus or Beaujolais nouveau that the European Court of Auditors will deliver a "negative statement of assurance"—a phrase reminiscent of "deferred success". We have been deferring success in this area for 11 years.

As the Minister rightly said, 80 per cent. of the budget is deployed by member state Governments, and the blame for many of the more blatant frauds—for example, those involving olive trees in Italy or flax in Spain—should be laid fairly and squarely at the door of the Governments involved, but not all of the money unaccounted for has been misappropriated. Attention was drawn to the UK's sheep annual premium scheme, for example. There was no suggestion that farmers misappropriated every single penny in the scheme, but the system in place before sheep were individually tagged meant that sheep could be counted twice by inspectors on different days. Such infringements were few and far between, but the system was not sufficiently robust to rule out the possibility of fraud. My hon. Friend the Member for Esher and Walton (Mr. Taylor) drew a parallel with the housing benefit system in the UK, but I do not think that the comparison is fair. We are talking about money given to 25 member states and
 
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a small number of NGOs, which is not the same as distributing large sums among large numbers of individuals.

Some EU funds are spent in a way that I believe is diametrically opposed to the wishes of the British people—for example, we spend €1 billion a year on subsidising the growing of tobacco, much of which is low quality and has to be sold on to third-world markets—and some of the money is wasted. Hon. Members who have perused the documents will have found on page 245 a reference to the Committee of the Regions. It is noted that the Committee has not been able to fill the auditor's post on a permanent basis. There is a story behind that. The Committee has 317 members from across Europe, each of whom costs £147,000—that figure does not include salaries. I discovered that fact by accident. When I was discussing another report in the European Parliament, it emerged that the Committee of the Regions also discussed reports, but no one listened to what it said. Is that Committee good value for money? Do right hon. and hon. Members receive feedback from their Committee of the Regions representatives? Do they even know who their representatives are?

When the financial auditor of the Committee of the Regions drew the Court of Auditors' attention to problems associated with members' travelling expenses during a meeting of CoCoBu—the Committee on Budgetary Control—the matter was played down by the auditors. Not until Members of the European Parliament—in particular Michiel van Hulten, a Socialist MEP from the Netherlands, and Chris Heaton-Harris, a Conservative—drew attention to it did those events emerge.

Mr. Francois: May I take this opportunity to place on the record the fact that Chris Heaton-Harris has been absolutely tireless in pursuing fraud and waste in the EU on behalf of the British taxpayer? I have worked closely with him and I commend the work that he has done on behalf of the people of this country.

Mr. Goodwill: I endorse my hon. Friend's comments.

Whistleblowers have a sad record in the EU. Paul Van Buitenen, who exposed the fraud that brought down the Santer Commission, was sacked by Commissioner Kinnock, now the noble Lord Kinnock. Incidentally, Mrs. Cresson, who was criticised for giving money to her dentist and whose pension was suspended, is now on half-pension, we are told.

Marta Andreasen, the first qualified accountant to be employed as chief accountant by the Commission, refused to sign off the accounts for the previous year when she was appointed. She was suspended by Commissioner Kinnock. In fact, I think it is scandalous that a Labour commissioner sent officials scurrying around Brussels in taxis issuing suspension notices to their employees—shades of Militant, dare I suggest. Marta Andreasen said that there were no systems in place to make sure that money was spent properly and that a double accounting system should have been in place.

I am proud that Paul Van Buitenen went to Edward McMillan-Scott, a British Conservative MEP, and that Marta Andreasen went to Chris Heaton-Harris, another
 
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Conservative MEP. It is Conservative Members of the European Parliament who have been taking the lead in the fight against fraud. I am sure that when we form our new group with allies from eastern European countries, we will be even more effective in taking that forward.

Most recently, Dorte Schmidt-Brown raised concerns about EUROSTAT, the EU statistical service. It systematically siphoned off £3 million and kept two sets of books at its headquarters in Luxembourg, but no one was fired. All the staff concerned were redeployed and are now either still employed or drawing their pensions. As the new chief accountant of the European Commission, Brian Gray, has said, one can change the system, but it has proved impossible to change the culture. There is an environment of complicity. Why rock the boat when every whistleblower is suspended? If people keep quiet, they will keep their jobs.

I have a practical suggestion for the Minister about benchmarking—a term that I do not really like. It would be very useful when monitoring what is going on with the finances of the EU if each directorate-general of the Commission were individually to measure progress. The present system of issuing a positive or negative statement is too broad a brush. We would get much more value from more detailed information from the directorates-general.

7.36 pm

Mr. Ivan Lewis: With the leave of the House, I shall respond to the debate.

Elements of the debate have been good—I wish I could say that the whole debate had been good. [Interruption.] I will not name the elements that have been good and the ones that have been not so good, but I am looking carefully at the Opposition Benches. The debate is important and it is probably good that it has taken place on the Floor of the House rather than in Committee, which has not happened for a considerable time. It is important that the issues are aired transparently.

I will try to respond directly to the different issues and questions that were raised by hon. Members. The hon. Member for Rayleigh (Mr. Francois) basically claimed, as he did before we concluded the negotiations, that the deal that the British presidency secured on the financial perspective was in some ways bad. That is complete nonsense. For the first time, the United Kingdom is paying roughly the same as France and Italy. The budget is generally on a downward trend. The abatement will be worth more in the next period than in this and a process now exists to lead to the necessary reform of the common agricultural policy. We would settle for all those elements as a fair and reasonable agreement on the financial perspective. Many people believed that the British presidency would not be able to secure a deal on the financial perspective and the Conservative party was desperately disappointed when we achieved that.

Mr. Francois: Will the Minister give way?

Mr. Lewis: No, I will not.
 
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The hon. Gentleman also asked me about the Government's opinion on when the accounts will be 100 per cent. cleared. It is the Commission's stated objective that the qualified assessment will be removed by 2009. We think that it is good that the Barroso Commission has set itself that target and we welcome that, but we cannot be sure that all the necessary measures will be in place to achieve it. There is still a lot of work to be done before we can be sure that it will be achieved.

The hon. Gentleman asked for an update on the progress of accruals accounting. I have become an expert on accruals accounting in recent times and there is good news. The Commission successfully met the deadline to implement the new system in January 2005. The transition to the new system was successful and there is an ongoing process to develop that system. The European Court of Auditors queried whether the production of the 2005 opening balance would be ready in time. The Commission assures us that it is on track.

The hon. Gentleman asked also what would happen to the debt-for-GDP ratio if off-balance-sheet figures are taken into account. I think that he was expecting me to write back on the matter. I apologise for the letter not having arrived. The Office for National Statistics classified public debt based on agreed national accounting rules, SA95. It is nonsensical to add contingent liabilities to GDP calculations as they do not apply to other member states. There is no figure with which the UK could make a comparison, nor is there any implication in relation to stability and growth. The issue is not relevant.

The hon. Gentleman asked whether the abatement concession was included in figures for the United Kingdom's contributions that were published in the pre-Budget report and whether it would be included in the figures for the Budget. As far as we are concerned, the PBR was in line with the code for fiscal stability, which as always contained cautious assumptions, a point which I made to the hon. Gentleman at the time. From memory, the negotiations at that time were ongoing. Therefore, any assumption would be an assumption. We were cautious. The figures will be updated now in the usual way at the time of the Budget.

The hon. Gentleman asked also for some examples of how the road map objectives would be achieved. The major actions that will improve assurance are improving internal controls in the Commission and in member states to the standards that are proposed by the European Court of Auditors, promoting further simplification of complex legislation—the ECA says that this will lead to improvements—reaching a political agreement with the European Parliament on the level of risk that is tolerable, and introducing greater involvement of national audit offices. As many Members have suggested, our NAO is very willing to help in that regard.

I have tried to address all the specific issues raised by the hon. Gentleman. My hon. Friend the Member for Luton, North (Kelvin Hopkins) spoke for the 11th successive year on these issues. He made an informed and intelligent contribution, but I cannot say that I agreed with everything that he said. That may come as a surprise to right hon. and hon. Members. However, my hon. Friend tried to make a constructive contribution.
 
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I hope that the career of the hon. Member for Richmond Park (Susan Kramer) will not suffer as a result of her enthusiastic support for the recent unsuccessful leadership bid of the hon. Member for Eastleigh (Chris Huhne). The hon. Lady asked about some important points, including the Commission having an appropriate system of accountability. The directors-general of the Commission already sign declarations of assurance. From now on the Commission's chief accountant will sign off the accounts. That is a further strengthening.

The hon. Lady asked also about the National Audit Office and what the United Kingdom might do. We were the first member state to provide a response to the annual report of the ECA. That is a process and obligation that is now in the EU's financial regulation. We have already cleared the way to support the idea of management level declarations. We were fully prepared to support this at Council. We are certainly interested in making better use of the NAO to audit our management of EU funds.

We did not make the level of progress that we would have liked on that because many member states did not feel able to support that approach. That is because they have highly federal or regional structures. The UK has a pretty impressive record in recent times in trying to drive the agenda forward during our presidency and also in making contributions in Council whenever possible.

The contribution of my hon. Friend the Member for Stroud (Mr. Drew) was thoughtful and constructive. He is frank about his scepticism. Most of the time it is a balanced scepticism. I think that he conceded that there has been some progress in recent times although he feels that there has been nowhere near enough progress. That is a reasonable point to make.

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