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Across Europe, a plethora of bodies are administering these programmes. That organisational complexity is compounded by fiendishly complex individual schemes, making them difficult and costly for member states to administer, and frustrating for those at the receiving end who are coping with the bureaucracy, such as our farmers. They tell me that they spend more and more time in the office trying to cope with ever more complex
schemes. Such schemes and programmes, especially those implemented under the structural measures, have a propensity to lead to many errors and therefore to a qualification. In its last report, the Court of Auditors reported that at least 12 per cent. of the total amount reimbursed to structural measures projects should not have been. So 12 per cent. of spending on regional policy should not have been spent on those programmes. That is the level of complexity and error.
The situation becomes even more worrying when the different bodies involved cannot even agree on the rules. For example, the Court raised several concerns about the application of the single farm payment in the UK. We always complain about other countries, especially Mediterranean countries, and we laugh about corruption there, but the single farm payment was a disaster because our Government tried to gold-plate an EU directive—even more than our colleagues in Wales and Scotland did. It was the English Minister gold-plating an EU directive that led to a massive qualification of our single farm payment scheme and a fine from the European Commission.
Mr. Davey: I am glad that the hon. Gentleman made that valid point. Perhaps we should ask the promoter of the Bill how the audit will take account of gold-plating and incompetent Ministers, whether English, Italian or Spanish, failing to get the basics right to ensure that money is not wasted.
Mr. Leigh: The hon. Gentleman will have to address that point to my hon. Friend the Member for Christchurch, but I would have thought that it was obvious we need to have that discussion. If we are going to have these directives, we need to simplify them, if possible, and not make them even more fiendishly complicated. The hon. Gentleman makes a valid point, and I agree with him.
We are all aware of the problems with the Rural Payments Agency, but the issues raised by the Court related for the most part to different interpretations of the rules. It noted, for example, that on the basis of maintaining land in a “good agricultural and environmental” condition, England made payments to railway companies, golf and leisure clubs and city councils. That issue was not limited to the UK. Payments to horse riding and breeding clubs were noted in Germany and Sweden. It is supposed to be a scheme to help struggling farmers. The UK authorities took the view that although the fairway of a golf course would not be eligible for a payment under the CAP, other land owned by a golf course could be eligible. But why is the money of the hard-pressed European taxpayer going to golf clubs? I shall resist the obvious temptation to comment on possible discrimination against cricket, football and rugby. We might elicit French and Italian support for the latter two, but I fear that cricket is probably a lost cause—
Mr. Cash: There is French cricket.
Mr. Leigh: Well, I am glad we have a chance of beating someone at cricket.
The issue of complexity has to be grasped. The PAC has drawn parallels with the experience of the Department for Work and Pensions, whose complex schemes had led
to the Department’s accounts being qualified for successive years. We said again and again that the Department should have less means-testing and less churning of money, and should leave more money in people’s pockets and erase tax thresholds—simple points to improve matters. But no, every year the schemes get more and more complex. The Department is ground down by ever more complex schemes that result in its accounts being qualified. Much the same happens in Europe.
We recommended that the European Commission consider the relationship between the desired outcome of a particular scheme, the complexity of the rules governing it and the consequential likelihood of an error occurring. That is obvious stuff. I recognise that there has been some simplification of the regulations as part of this campaign. That is part of the new financial perspective, and simplification is also one of the themes of the Commission’s action plan. That is welcome.
The new single farm payment, for example, replaced 11 previous schemes, but even that programme is far from simple. But even when there is a will—and there is now a will to try to address some of these problems—nothing moves quickly in Europe. The cognoscenti of such matters will be aware that the legacy of old and multi-annual programmes lasts for years. It is like the old cliché of the super tanker taking years to turn round.
Mr. Chope: My hon. Friend says that there is a will in Europe to do something about the problem, but is there any evidence of that given that the European Union continues to subsidise tobacco farming?
Mr. Leigh: Well, there is a will in the sense that the problem has been identified and the debate is being had. The problem is whether the will exists to take tough and difficult decisions that will remove subsidies from particular interest groups, but that is always the problem in politics. The difficulty is compounded many times over in Europe where there is a lack of clear accountability. As I understand it, one of the aims of the Bill is to try to achieve clearer lines of accountability.
Mr. Davey: The hon. Gentleman said that Europe takes a long time to reform or change its mind, and it is like turning round an oil tanker. I agree, but how could we try to speed things up in Europe?
Mr. Leigh: That question is difficult to answer. I suspect that the hon. Gentleman is trying to lead me into saying that there should be a new treaty that would make decision-making faster, but I do not want to get into that. I want to concentrate on the narrow audit points. For what it is worth, I think that if we are going to be in the European Union, there should be more democratic accountability. How we achieve that, I do not know, but we do not have it at the moment. Whether people are enthusiastic about the project or not, there is clearly something wrong that needs to be addressed.
Mr. Cash:
My hon. Friend the Member for Christchurch (Mr. Chope) mentioned tobacco. When the European Scrutiny Committee met the Court of Auditors a few years ago, we asked for the European Commission’s report on tobacco, which was regarded as a very hot potato. As I understand it, that report has never been
released, even to the Court of Auditors. I do not know what the state of play is now, but perhaps my hon. Friend the Member for Gainsborough (Mr. Leigh) will bear that in mind for the future. That shows a lack of accountability and transparency.
Mr. Leigh: There has been a problem with secrecy. It is in the interests of everyone, including those who believe passionately in Europe, to achieve more transparency and accountability, so that such reports are released, whether they are hot potatoes or not—and especially as they relate to tobacco. [ Laughter. ] I must carry on.
Before I was distracted, I was saying how difficult it is to turn the situation around, even when the will exists to do so, and I wish to give an example. In its last annual report, the Commission noted that some £89 billion of outstanding commitments from the 2000-06 financial framework were yet to be paid. The outstanding commitment relating to the structural measures programme was equivalent to more than two and a half years’ expenditure at the 2006 spending rate. That means that while officials in member states are busy launching new programmes for 2007-13, they are also dealing with the running down of programmes from the previous period. It is no wonder that they and we are confused.
It is clear that before we can hope for a clear audit of the EU accounts, member state Governments must take every opportunity to push for simplification and a reduction in the bureaucracy. The EU-wide review of the European budget, on the face of it, provides just such an opportunity, but I fear that it is all too easy for good intentions to be lost once bureaucrats begin to argue over the fine detail. We want to know what the Government are doing to lobby for change and whether they think that the Commission’s review will deliver on simplification. There is a clear opportunity for the British Government to lobby for change as this is where we can lead opinion in Europe.
Let me now look at fraud and irregularity. The lack of a positive audit opinion on the EU accounts does not necessarily indicate that high levels of fraudulent or corrupt transactions have actually taken place. For instance, in 2006 member states notified the Commission of more than 12,000 irregularities with a total value of £788 million, of which some £220 million was estimated to be due to suspected fraud. That is only 0.3 per cent. of the budget. No fraud is acceptable, but different commentators will have different views on what these figures tell us. There is some confusion about that. Of concern to us, however, is the reliance we can place on any of those figures.
The figures quoted are influenced by the timeliness and accuracy of the member states reporting to OLAF, which is the European anti-fraud office. OLAF has reported that recording practices vary and that data communicated by member states are sometimes incomplete. Furthermore, the distinction between suspected fraud and other irregularities is not consistent. We simply do not have that famous level playing field throughout Europe. We do not know exactly what is going on.
Member states do not always have the same definition of criminal risk. A significant proportion of reports do not distinguish between suspected fraud and irregularity. A crime in the UK might not necessarily be a crime in Greece, and vice versa. If we do not properly judge the
EU’s performance on this vital issue, we surely need to apply greater pressure to get these reporting systems up to scratch so that we know what is going on.
Mr. Davey: I may be trying the hon. Gentleman’s patience, but he is making an important point. Some things are crimes in this country but not in others, though they affect the whole Union through trade and the management of accounts. Is he therefore arguing that there should be some sort of EU-wide work on justice and home affairs so that we can ensure that a crime in this country is also a crime in another country?
Mr. Leigh: There is no enthusiasm throughout Europe to try to get some sort of EU-wide common criminal code. There is enthusiasm throughout Europe—people take an interest in this—about getting some sort of understanding about what is going on and having some sort of transparency, so that we can know which countries are particularly open to fraud and irregularity. We simply do not know at present.
Mr. Davey: For the record, neither my party and I nor anybody here would argue for a common EU code of criminal law. That would be absolutely wrong. However, some matters affect all countries—such as fraud to do with EU money or other, cross-border crimes—and I would argue that they require EU action. From the direction of his remarks, I would think that the hon. Gentleman seems to agree that there is a case for some crimes, such as those that affect EU money or cross-border activity, having some sort of decision-making process at a supranational level.
Mr. Leigh: I am a reasonable man and I will listen to any proposals that the hon. Gentleman wishes to make. If a clear case were made for going in that direction, I would not necessarily be opposed to it. However, I would like to start with at least a level of knowledge before I jumped to a conclusion.
Let me now talk about the benefits derived from EU expenditure. Over recent years, the focus of the debate has rightly, in my view, focused on how to strengthen basic financial management and we have arguably paid less attention to what we get from those programmes. Our Committee’s 2005 report noted that the European Court of Auditors had a duty to examine
“whether the financial management has been sound”.
That corresponds broadly to the value-for-money audits carried out by the Comptroller and Auditor General in the UK. It is very important. We have a superb system in this country of post hoc audit. Every Government Department is subjected to very close scrutiny by the National Audit Office, which reports to a Committee of the House— the Public Accounts Committee. We know what is going wrong. The equivalent process is weak in the EU. I should say that we have very weak budget control in this House—that is a long-standing campaign of mine—but we have very good audit control.
So, what are we doing in Europe? Despite the importance of such work, we discover that the European Court of Auditors published only a handful of such reports a year. The concept of producing value-for-money reports, having a lot of publicity and going to a committee of the European Parliament to try to get a grip of what has gone wrong is still weak in the EU. We believe that the
scale of that work is wholly inadequate. Perhaps it is not yet part of the continental tradition, but we can lead opinion on it because we are good at such work in this House.
Since 2005, the Court has, to a certain extent, improved the quality of its special reports as a result of our campaigning. I know that the work is respected. For instance, in 2007, nine such reports were published, but they were limited. For instance, the subjects that they covered ranged from
“the effectiveness of technical assistance in the context of capacity development”
of government in beneficiary states to
“The institutions’ expenditure on buildings”.
That is all well and good, but I remain concerned that the volume and range of that audit work remains limited compared to the reports that we are doing week by week on our Government. We surely need to know much more about whether the money that we are contributing as European taxpayers is achieving good value for money, but we simply do not know yet.
More fundamentally, properly to inform debate on these European programmes we need a much greater focus on measuring the value derived from them. I would be interested to know what the Minister is doing to encourage the EU institutions to address the important issues of having good reports on audit.
Mr. Cash: As I understand it, the Public Accounts Committee and all the laws relating to it originated with Mr. Gladstone when he was Chancellor of the Exchequer. I think that I am right to say that when he introduced it and subsequently, he constantly reiterated the fact that the Committee was important because it directly related to democracy as well as being of benefit to the taxpayer, and my hon. Friend has ably demonstrated that today. That is the key question. The lack of a proper system, which the Bill would seek to remedy, has caused a great deal of concern about the operation of the financial affairs of other countries.
Mr. Leigh: That is a serious point. We have had a bit of fun today—it is a Friday, and the Bill will no doubt be talked out—but there is a serious point behind all this. It is not a joke. Mr. Gladstone, that great Liberal Prime Minister 150 years ago, put his finger with great accuracy on what was wrong with 19th century politics—the corruption and the lack of control and of audit. So much of the progress that we have made in this country in achieving good governance and rooting out corruption so that we are one of the least corrupt countries in the world—what is more important than rooting out corruption?—goes back to what Mr. Gladstone was doing and to what my hon. Friend has been saying. We have a role to play in Europe in trying to get auditing and the equivalent of a Public Accounts Committee in the European Parliament and we have an interest in how the money is spent, both centrally and in the member states.
Mr. Davey:
The hon. Gentleman is absolutely right, but it is not merely about corruption, is it? It is about efficiency and value for money. I hope that he agrees that in this country, in many areas, we do not get value
for money or have efficiency of government, just like they do not in the EU. That is why his Committee is so important.
Mr. Leigh: Of course. We have a tendency to think that we do things much better than the French, Germans, Danes or Dutch. I do not think that we do. We are not corrupt, and I am not making a party-political point as the PAC has been around for 150 years, but we are just as afflicted by waste and incompetence in government programmes as any other country. That is why we need a Public Accounts Committee, and that is why we need to follow the European money all the way through so that we see how it is being spent and where all the waste and efficiency is. That simply does not happen at the moment.
Mr. Cash: On this historical point, John Bright, with others, was responsible for the removal of corruption and inefficiency in the East India Company. It was precisely because he and Gladstone were determined to bring in efficiency and democracy, complementary to one another, that we managed to get things right. The EU is, quite rightly, a target for us today.
Mr. Leigh: You might take me to task, Mr. Deputy Speaker, if I speak at great length about the East India Company, as that all happened a long time ago. Still, the point is important.
As I say, we should take a lot more interest in how EU money, which is taxpayers’ money, is spent in our own jurisdictions; that is the point. It is a sobering thought that more than three quarters of EU expenditure takes place at member-state level. In 2006, the then Comptroller and Auditor General, Sir John Bourn, put a proposal to a Committee of the House of Lords advocating the production of a new consolidated account to improve the transparency of expenditure of EU moneys in the UK—the point made today by the Liberal spokesman, the hon. Member for Kingston and Surbiton (Mr. Davey). In 2006, I wrote to the then Chancellor of the Exchequer, now the Prime Minister, in support of that idea. The aim was to obtain a much clearer statement of the way European moneys were spent in the UK, in particular how much money was spent on what programmes. To my amazement, the right hon. Gentleman accepted the idea almost immediately, which was great. We are now to get that consolidated account.
At present in the UK, those moneys are accounted for only in large Department accounts, such as that of the Department for Work and Pensions, where they are almost wholly obscured by other domestic expenditures. It is difficult to track European money. Then, in 2006, the Treasury announced that it intended to pursue, in close consultation with Parliament and the National Audit Office, a statement of assurance on the national use of EU funds. We were one of the first countries to agree to do this, along the lines that we had suggested in our letter to the Chancellor of the Exchequer. The statement will take the form of an annual consolidated statement on the UK’s use of EU funds. That will be prepared to UK accounting standards and audited by the NAO. Production of the statement for 2006-07 is well under way. I understand that we are likely to see the fruits of that endeavour very soon.
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