That this House takes note of European Union Documents No. 14938/08, Commission Communication: From financial crisis to recovery: A European framework for action and No. 16097/08, Commission Communication: A European economic recovery plan, and endorses the Governments approach to discussions with European partners on these issues.
Mr. Deputy Speaker (Sir Alan Haselhurst): Before I call the Economic Secretary, may I say that as the Front Benchers took 63 minutes out of the 90 on the previous motion, I hope that there will be a little more awareness of the number of Back Benchers wishing to take part in this debate? I shall try to vary the cast to some extent.
That this House takes note of an unnumbered Explanatory Memorandum from HM Treasury dated 4 December 2008, European Court of Auditors 2007 Annual Report, an unnumbered Explanatory Memorandum from the Department for International Development dated 8 January 2009, European Court of Auditors Annual Report on the activities funded by the seventh, eighth and ninth European Development Funds, European Union Documents No. 12156/08 and Addenda 1 and 2: Protection of the financial interests of the Communities: Fight against fraud, No. 12471/08 and Addendum 1: Annual report to the discharge authority on internal audits carried out in 2007, and No. 12472/08: Report on the progress at 31 March 2008 on the modernisation of the accounting system, an unnumbered Explanatory Memorandum from HM Treasury dated 16 October 2008, European Anti-Fraud Office: eighth activity report for the period 1 January to 31 December 2007, and European Union Documents No. 14480/08 and Addendum 1: Commission Report to the Council on the follow-up to 2006 Discharge Decisions (Summary)Council recommendations, and No. 14481/08 and Addendum 1: Commission Report to the European Parliament on the follow-up to 2006 Discharge Decisions (Summary)European Parliament Resolutions; and supports the Governments promotion of measures to improve the level of assurance given on the Community budget.
I am pleased that we are able to have this debate on EU financial management issues on the Floor of this Chamber for the first time in three years. I appreciate that there are other attractions taking place at the moment, most noticeably the inaugural address of the 44th President of the United States, but Parliament rightly attaches great importance to the protection of the financial interests of EU taxpayers. Even though this debate might be relatively sparsely attended, I am sure that there will be other opportunities to address some of the issues that have been talked about today.
Bob Spink (Castle Point) (Ind): The Economic Secretary has started generously, and that is characteristic, but what value can we put on any of these documents, and what confidence can we have in them, when the EU is totally unable to get its accounts audited? The reasons for the lack of audit are not minor errors, but major deficits and major spending errors in each of the main heads. What confidence can we have in any of this? Is it not just nonsense?
Ian Pearson: It is not nonsense; it is an important part of the scrutiny process. The hon. Gentleman got to the nub of the question, and in a few moments I will address directly the issues that he raised
This is a timely debate, because on 10 February, European Finance Ministers will meet at ECOFIN to make their recommendations to the European Parliament on the discharge of the 2007 budget. I look forward to hearing hon. Members views today; I am sure that they will be useful in helping to shape the UKs position in the run-up to those Council discussions.
Regrettably, today we are faced with the inability of the European Court of Auditors to give a positive statement of assurance on the EUs accounts for the 14th consecutive year. I want to be clear from the outset that the Government consider the situation entirely unacceptable. It is simply not good enough that the majority of the EU budget suffers from a material level of error; errors affect more than 2 per cent. of expenditure in most policy areas. On expenditure on the structural and cohesion funds, the court estimated error of 11 per cent., or approximately £4 billion. That is a particular concern, as is the Courts opinion that the member states and the Commissions supervisory systems are only partially effective in ensuring the legality and regularity of transactions in that significant area of EU budget expenditure.
It is disappointing that the Court was unable to give a positive opinion on agricultural expenditure; last year, it anticipated that it would be able to do so. In that area, it estimates that the material level of error still lies between 2 and 5 per cent., which is between €1 billion and €2.7 billion. European Union taxpayers deserve better.
Philip Davies (Shipley) (Con): It really is not good enough for the Minister to say, Its not good enough of the European Union. Surely the problem is that each year the accounts are not signed off, but the following year the UK Government give even more money to the European Union. In what other case would the Treasury agree to give ever more money each year to an organisation that had not had its accounts signed off properly? Surely the answer is for the UK Government to say, We wont give you any more money until you get your accounts signed off properly.
Ian Pearson: I certainly agree that European Union taxpayers deserve better. Before turning to some of the key actions that we believe are needed to deal with the recurrent problem, I want to mention the improvements that have taken place in recent years. In many instances, they are in large part due to the UKs continued pressure on financial management issues.
The European Court of Auditors has again been able to give a positive opinion on 40 per cent. of EU budget expenditure. That compares to 35 per cent. in 2005 and just 6 per cent. in 2003. It is not good enough, but still a significant improvement. This year, the Court for the first time gave a positive opinion on the reliability of the EUs accounts with no reservations. The accruals-based accounting system introduced by the Commission in 2005, with our support, is now fully on stream and is successfully giving the Commission greater control of its day-to-day finances, enabling it to produce more accurate financial information. The estimated level of error for agricultural transactions outside rural development programmes remains immaterial, and the whole European agricultural guarantee fund, which makes up the majority of agriculture expenditure, has received a positive statement of assurance from the Court.
When can we expect pragmatic progress on reform of the common agricultural policy, and when that progress takes place, what financial benefits will there be for the UK? What savings will be passed on to
the UK? What cuts can we make to the amount of money that we are providing to subsidise agriculture in the rest of Europe?
Ian Pearson: As the hon. Gentleman is aware, it is a long-standing policy of the Government to seek fundamental reform of EU finances. Spend on agriculture accounts for 40 per cent. of the EU budget; we do not believe that that faces modern realities, and we will continue, through the review process that is under way, to ensure that we negotiate and make our points clear.
Mr. Peter Bone (Wellingborough) (Con): When we agreed to the massive increase in contributions to the EU, was it not the Governments position that we did so only because, during the French presidency, the CAP was to be reformed and there would be a massive reduction in expenditure? That just did not happen.
Ian Pearson: There has been reform, although in the UKs view there needs to be further reform. The hon. Gentleman will be aware that the EU budget is going to go down in this financial year, compared to the previous financial year. I would have thought that he would welcome that.
Mr. David Heathcoat-Amory (Wells) (Con): Will the Minister comment on page 210 of the pre-Budget report, which shows in a small footnote that our net contributions to the EU budget are increasing from £2 billion this year to £6.5 billion in two years time? In the light of the appalling mismanagement and waste shown by the European Court of Auditors, to which he has just alluded, can he instance any other Government programme that is increasing by that magnitude?
Ian Pearson: I do not have to hand the detailed figures that the right hon. Gentleman has quoted, so I cannot verify or comment on them. However, if I can find an opportunity to look at them during the debate, I will certainly respond to him in closing it.
I must emphasise that the disappointing error rates highlighted in this years report should not be mistaken for widespread fraud in the European Union budget. As the 2007 Fight Against Fraud report makes clear, overall levels of estimated fraud remain relatively low, at approximately 0.2 per cent. across the 2007 budget, affecting 0.1 per cent. of agriculture spending and 0.3 per cent. of structural and cohesion fund spending. No level of fraud or corruption can be tolerated, and I welcome the increased activities of the European Anti-Fraud Office to stamp out the fraud that exists.