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It is an honest and clear appraisal, and it is in the documents contained with the report before us today. It would merit everyone studying it in detail.

I wish to discuss what is said about the UK in the annual report, because we are never completely free of blame. For example, we regularly get reports that more cases have been brought against the UK over the illegal taking of fish in the EU than against most other countries —[Interruption.] Not in the past couple of years, but certainly in the past.

Paragraph 17 of David Bostock’s letter states:

Paragraph 18 states:

Paragraph 19 states:

He was talking about programmes involving the UK, and he continued:

No country, not even this country, is free from questions about the way in which people carry out their transactions. That does not mean that they are fraudulent; it just means that the accounting systems and the way people are reading the spending rules for European Union funds call the transactions into question. It does not mean that when clarified, they will end up being seen as fraudulent or improper reimbursements.

I wish to finish with an anecdote about one of my local farmers who was having problems with his sheep premium returns. When I went to help him out, he pulled out a bundle of things that were the equivalent of backs of fag packets—a number of bits of paper and backs of purchase invoices—where he had written out his various sheep numbers and so on. I could not make head nor tail of them. Of course, our people then turned up from the Ministry of Agriculture, Fisheries and Food and said that they could not make head nor tail of them. He could remember but could not prove what he had done, so he was having difficulty getting his payments. We must have systems, particularly in the A8 countries, that are disciplined, transparent and easy to understand, so that people are not accused of fraud when they are not fraudulent and so that we find fraud where it exists. In the meantime, I hope that the criticisms made in this debate will be passed on to the Government and to the European Union, and I hope that we will see further improvements in the future.

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6.22 pm

Mr. Jeremy Browne (Taunton) (LD): My party takes an enlightened view of the European Union. I had an opportunity during the previous debate to touch on some of these themes, so I shall not rehearse them again at length. Liberal Democrats regard the EU as having a useful role to play in bringing nation states together to co-ordinate our response to the current economic crisis effectively. We emphatically think that the EU has a role to play in trying to mitigate the effects of climate change. Most people would accept that the EU and public opinion across Europe are further ahead in the debate than anywhere else in the world—certainly further ahead than in north America and Asia. The European Union, with Britain at the forefront, has a role to play in taking that agenda even further forward.

The EU also has a key role to play in international diplomacy; we share the values of democracy, free speech and free markets, although free market economics have been challenged in the past few months. Probably the greatest foreign policy development and achievement in my adult lifetime has been the expansion of the European Union and the embracing by eastern European states that previously lived under oppression of freedom and those broad liberal values that we often take for granted in this country.

I regret the paranoia that the Conservative party typically displays towards the European Union—the sense that everything that emerges from Europe must inherently be bad or a cause for suspicion. That paranoia persuaded the Conservative party to vote unnecessarily against the Government in the previous Division. However, I and my party recognise that just as politics in the United Kingdom is broken to some extent, politics and the financial and budgetary process in the European Union need to be dramatically overhauled. My party rightly recognises and welcomes some of the limited progress that has been made, but our bottom line is that that progress is not good enough. I echo the sentiments expressed in this debate by the Conservative Front-Bench spokesman about the terrible, wearying cycle of these debates; year after year we hear that the European Union has, yet again, not met the standards that we are entitled to expect it to meet on behalf of our constituents, who pay their taxes and contribute to the UK’s financial contribution to the EU budget.

Mr. Heathcoat-Amory: The hon. Gentleman is saying that he supports financial reform in the European Union. Why, therefore, did his party’s representative on the Convention on the Future of Europe take no interest whatever in this aspect of reform when he had the opportunity to do so, and why did he fail to support my efforts and those of others who attempted to table amendments that would have cleaned up and reformed the European Union budget in a way that the hon. Gentleman now says he supports?

Mr. Browne: I do not know the particular circumstances of that meeting. I do know that there is a huge range of views in the Conservative party on the European Union—indeed, the Conservative shadow Cabinet seems to be split on the Lisbon treaty, on joining the euro and on all kinds of other important questions relating to the European Union. I also know that my fellow Somerset MP, my hon. Friend the Member for Somerton and Frome (Mr. Heath), takes the view—

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Madam Deputy Speaker (Sylvia Heal): Order. I wonder whether the hon. Gentleman would bring his remarks back to the motion, and not be led astray.

Mr. Browne: I regret being led astray by the right hon. Member for Wells (Mr. Heathcoat-Amory). I fear that nothing would ever be quite Eurosceptic enough for his taste, regardless of what I or his own Front-Bench team said.

This House has a duty to safeguard and champion the interests of taxpayers in the United Kingdom, who contribute to the overall budget of the European Union. Much of the money that we are discussing is spent in the individual EU member states. I take on board the points made in the previous speech about the capacity of some of those member states to have auditing or overall political processes that meet the standards that we would expect in this country, and I agree that not all the money that is misspent necessarily involves fraud. Nevertheless, member states need notify the Commission only of irregularities of more than €10,000. I am told which the estimate of the total financial impact of irregularities has increased from €804 million to €1.048 billion a year. That figure is high enough to be a cause for concern, so I would like the Minister specifically to address that growth in the estimates of fraud and to tell us what representations the British Government are making to try to address the problem.

In a debate that took place upstairs, I raised with the Minister of State, Department for Environment, Food and Rural Affairs, the right hon. Member for Liverpool, Wavertree (Jane Kennedy), who was then a Treasury Minister, the irregularities occurring in individual member states. I suggested that she might wish to identify, and thereby name and shame, the worst offenders so that we could make some progress—after all, that tactic is favoured by the Government in other areas of policy—by putting pressure on some of those member states to raise their game. She replied:

I fear that that is indicative of a less than muscular approach taken by Treasury Ministers. They could certainly express their discontent far more stridently within the EU than they currently appear to. Total UK budget contributions to the EU between 2007 and 2013 are to be £71 billion. Even spread over six years, that is a sizeable sum of public money by anyone’s reckoning, and the onus is on the House and the Government to ensure that it is spent more efficiently and effectively.

We are having an interesting three-way debate on the subject of Europe. The back-to-back nature of the hour and a half that we spent discussing the financial crisis and this debate has allowed the three party positions to emerge in a way that we do not often have the advantage of seeing so clearly. The Conservative party position is to favour an inert European Union. There is a sense of fear and loathing whenever the subject of Europe comes up. To give the Conservatives credit, however, they are alert to the financial irregularities and the need to make improvements. The Labour party position is to be positive and constructive with regard to the EU, but I regret to say that, on the downside, they are insufficiently alert—indeed, somewhat complacent—when it comes to the financial irregularities in the EU.

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Finally, there is the Liberal Democrat position, which is to be positive and constructive towards the EU and see that it has a role to play, as I said earlier, but also to be alert to the need to address financial irregularities. Only one party has both sides of that equation right, and that is my party, the Liberal Democrats.

6.32 pm

Mr. Peter Bone (Wellingborough) (Con): It is a great pleasure to follow the hon. Member for Taunton (Mr. Browne), in whose words I found nothing whatever to agree with. His conclusion that his party is constructive towards Europe and somewhat concerned about the problem that we are discussing seems wholly unrealistic. We need only look at the two Liberal Members who are in their places—they have two very different opinions on Europe. [Interruption.] Well, on the Lisbon treaty.

We are spending billions of pounds a year on the EU. I think that today we have agreed to contribute another three quarters of a billion pounds for this year, although that has not quite been made clear in the debate. What worries me is that if I, the Government or anybody else were investing huge sums of money in any other organisation, we would expect it to have proper, audited accounts. At least, that is what I thought until this week, when I saw the Government spending billions of pounds on banks, obviously without having exercised any due diligence.

It cannot be right that the EU has not had unqualified accounts for 14 years. It would have been incredible to somebody voting in the referendum on whether to take Britain into the Common Market to think that this country would give billions of pounds to that organisation without being sure how it was being spent. We are debating not whether that money is being spent wisely and on good things, but whether it is being spent in line with the rules of this ridiculous European Union club.

The Government’s argument is always that they are at the heart of Europe, and that by co-operating with Europe they get their own way. Indeed, I understand that Superman led the EU in its financial recovery, which we discussed in the previous debate. If they really are at the heart of Europe, and if they really get their message across, that must mean that they support the fact that the auditors do not give clean reports. I think that that is the case, because it is politically useful to other countries if the fine rules of the European Union club are not applied. Whether we say that it is fraud or irregular payment, it is very convenient to overpay people in one’s own country. I am sure that that is how some of our EU friends look at it.

We in this country are much better at and much fairer in interpreting EU rules to the letter. Many of my constituents say that we are mad to do that. They ask why we do not do what our continental colleagues do and use flexibility when deciding how much money should be given out. If the Government were serious about the matter, after 12 years in power they would have sorted it out, but they are not serious about it. They could have solved the problem at a stroke by going to the European Council and saying, “We, as a country, are not going to pay a single penny more in contributions until we get the accounts sorted out.” I think that this debate is far more important to the British people than the inauguration of the US President.

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Mr. Jeremy Browne: The hon. Gentleman is closer to these things than I am: is it the Conservative party’s position that all payments to the EU should be suspended until the accounts are signed off as being fully proper and correct?

Mr. Bone: I am grateful for that helpful intervention, but unfortunately I do not speak for the shadow Cabinet, which has a set and agreed policy on Europe and is united behind it. I am making a simple, practical suggestion to the Minister, who is highly regarded, that if he were serious about it he could solve the problem overnight.

Debates such as this may be put on at this hour so as to avoid publicity but, to the British people, spending billions of pounds on an organisation that cannot even get its accounts right cannot be acceptable.

6.37 pm

Kelvin Hopkins (Luton, North) (Lab): I apologise for not being able to be here for the first part of this debate, Madam Deputy Speaker, although I was here for the whole of the first debate.

I have had the misfortune to debate this nonsense for the past 12 years, often in Standing Committees and sometimes in the Chamber. I sound almost like a broken gramophone record, but I wish to repeat some sensible thoughts in the hope that they will have some impact on my hon. Friend the Minister.

There is a simple way to eliminate the fraud that is taking place, which is to change the whole European Union budget system into a new mode of operation. I add that although both Eurosceptics and Euro-enthusiasts keep talking about “Europe”, the organisation is not Europe; it is the European Union. Europe is a continent which includes a lot of countries that are not in the EU, and the EU is a political construct imposed upon some of those countries. I therefore speak of the EU, not Europe. I love Europe and go there on my holidays every year, and various of its countries are absolutely wonderful.

To overcome the problem, we must completely reform the budget. It currently redistributes revenue and income across the EU in a way that is sometimes rather arbitrary. Some countries pay more than they should and some receive more than they should. A way to overcome that would be to have a budget allocated by a simple fiscal transfer system that gave to those who were poor and took from those who were rich, so that everything was proportionate to the prosperity of the member state. That is if one wants to have such a budget at all—there may be a case for not having one, but that is another debate. If we are to have one, the way to make it fair and acceptable to everybody is to ensure that everybody receives according to their needs and gives according to their ability. There would then also be a transfer of power, from the EU bureaucrats who decide where the money will be allocated to the member states. Devolving more power back to member states would be sensible and agreeable. If fraud then occurred within those member states, that would be their problem. In Britain, we would no doubt spend the money sensibly and avoid the problem of having lots of apparently generous donations from the EU to local projects with the EU logo all over them when we are massive net contributors and only part of our money is being handed back.
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Britain suffers more from that than most countries. As a wealthy country we would be a net contributor under the system that I am proposing, but we would not be a net contributor with France, Denmark and even Ireland being net recipients. Like us, they would be net contributors.

The cumulative figure for net contributions by Britain to the EU since we joined is £125 billion. The sums will rise substantially by 2013 because of the poor deal negotiated by Tony Blair during the British presidency. Of course, with the devaluation and depreciation of the currency, we pay substantially more each year. If contributions were a proportion of our national income rather than effectively geared to the euro, we would pay less.

A system whereby there was a budget for pooled contributions from member states, where poor countries received and rich ones gave an amount proportionate to their living standards, would be a fair system that would eliminate the problem of fraud. We would not have the massive confusion and complexity of these budget reports. Decisions about where money was spent would not be made by bureaucrats in Brussels, but by democratically elected Governments in member states.

6.41 pm

Ian Pearson: With the leave of the House, I should like to respond to the debate. First, I want to refer to the comments made by my hon. Friend the Member for Linlithgow and East Falkirk (Michael Connarty), who acts as Chairman of the European Scrutiny Committee. He said that he believed that the glass was more than half full and rightly pointed out that for the first time the Court has this year given a positive opinion on the reliability of the EU’s accounts, with no reservations. He also suggested a number of other areas where improvements had been made. I agree with him that there have been some positive developments, but I like a full pint. We need to be relentlessly dissatisfied with the level of progress. That is why the Government will continue to press through the European Court of Auditors and other forums, in particular the February ECOFIN discussions in Britain, the need for the Commission and member states to continue to do better in the future.

I was rather surprised to hear one hon. Member suggest that we should refuse, in effect, to make future contributions to the European Union until all this was sorted out. I do not think that that is a realistic attitude. The UK is required to make its contributions under obligations imposed by the treaties, as the European Communities Act 1972, and section 2 in particular, gives effect in the UK to Community law.

We must recognise, too, the clear and demonstrable benefits of the UK’s membership of the EU. EU membership has delivered and continues to deliver significant benefits to the UK and the whole EU. The EU is key to the success of business in the UK. Europe accounts for nearly 60 per cent. of our trade, 700,000 British companies have trading ties to Europe and at least 3.5 million jobs depend on Europe.

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