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Lord Harmar-Nicholls: Hear, hear!

Lord Cockfield: I am glad of the support of my noble friend Lord Harmar-Nicholls. I shall have less support when I tell him what that implies.

Economic union, which is very much in the interests of this country, comprises the single market. It comprises international or external trade; it comprises a single currency and, for example, such things as reforms in corporate taxation to enable the single market to operate effectively. I believe that those policies, which lead to greater rather than less integration in the Community, ought to be carried through to a successful conclusion as our first priority.

I hope that on some occasion we shall have an opportunity to debate the 1996 conference in detail in your Lordships' House. It is difficult to do that without a statement of government policy forming the basis upon which such a debate should take place. I regret to say that at present government policy reminds one of the story of the blindfolded man in a darkened room searching for something that is not there. Let us hope that by the time we come to our debate at least something will be found which will form a firm basis for that debate.

I want to turn briefly to the question of fraud. Many years ago that great Irish humorist, Patrick Campbell, wrote a story entitled The Day the Truth Got Out. I fear that in relation to fraud that day has now come. I regret to say that the Court of Auditors, as well as your Lordships' Select Committee, completely misunderstand the matter. They both talk as though the primary responsibility rests with the Commission; it does not. It is absolutely clear that the primary responsibility rests with the member states. The Commission's role is one of reimbursing expenditure incurred by the member states.

Let me illustrate that point by reference to what happens in the United Kingdom. I choose the United Kingdom because I understand the administrative procedures here better than I understand them in Greece—if anyone understands them in Greece—Italy, Spain or any of the other countries. I want to make it quite clear that I accept that the level of fraud in the United Kingdom is small by comparison to what occurs in not all but most other countries. For example, I believe that the Germans, the Danes and the Dutch are just as honest and reputable as we are. Because I choose the United Kingdom as my illustration, I do not want it to be thought that I am saying that the United Kingdom is a bad case; it is not; it is a good one.

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Let us look at the common agricultural policy. The money is not expended by the Commission. It is expended by the Intervention Board in Reading and by corresponding bodies in Scotland, Wales and Northern Ireland. To whom is the Intervention Board responsible? It is not responsible to the Commission in Brussels. It is responsible to the Ministry of Agriculture, which one can find only five minutes' walk from here.

Lord Harmar-Nicholls: My Lords, is not the Intervention Board's authority confined only to storage?

Lord Cockfield: My Lords, no. The Intervention Board pays out the money which is payable under the guarantee side of the funds. A booklet was published by the Intervention Board which sets that out clearly, and I suggest that my noble friend procures a copy and reads it.

The Ministry of Agriculture is not responsible in any way to the Commission in Brussels; it is responsible to a Minister who sits just down the corridor from here. To whom is the Minister of Agriculture responsible? He is not responsible to the European Parliament, the European Commission, the Court of Justice or the Court of Auditors; he is responsible to the British Government and the British Parliament. What would be the position if in fact it were the Commission and the Community who were responsible? What would be the reaction if officials from Brussels raided the offices of the Intervention Board and started rummaging through its papers? I have no doubt that there would be a great outcry of indignation. What would happen if enforcement officers from Brussels made a dawn raid on the Ministry of Agriculture and seized its papers? The noble Lord, Lord Bruce of Donington, would be speechless with anger—that would be a sight worth seeing.

Lord Bruce of Donington: My Lords, I am grateful to the noble Lord for giving way. Is he aware that I am never speechless with anger? Is he also aware that so far his speech has not informed us of anything that we did not already know? In addition to dealing with the narrow question of fraud—in which I willingly admit (indeed as a Briton I am very proud of the fact) that our own country has a good record—will the noble Lord address himself to the question he has so far avoided? I refer to the question of irregularity and financial mismanagement and waste. If he thinks that he can exempt the Commission from that, then he has another think coming and I will debate it with him at any time.

Lord Cockfield: My Lords, I am sorry that the noble Lord should set himself up so easily as an Aunt Sally. I shall deal with that matter. I have not finished what I wanted to say.

What would happen if there was a police force in Brussels which could come into the United Kingdom, arrest people and put them on trial? There would be the most appalling outcry, and that is the truth of the matter. At long last the truth is beginning to dawn. At the time we were debating the humble Address I happened to be listening to Radio 4 and, in the immortal words of Damon Runyon, "minding my own business", when

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who should come on the air but the President of the Court of Auditors. He said that 80 per cent. of the fraud was the responsibility of the member states.

He is not the only one who is beginning to realise what goes on. I do not know whether any of your Lordships know who Mr. Haensch is. He is the President of the European Parliament—a body much accustomed to denouncing the Commission for tolerating fraud. At a press conference at the time of the summit in Essen Mr. Haensch observed—I realise that I am quoting a press report, but it has not been denied and I should think it is correct—

    "80% of fraud did not take place at Union level, but at national administrations level".

The clincher—if I may be forgiven for using such a word —comes with the conclusions of the summit at Essen. My noble friend Lady Chalker referred to that summit. The presidency conclusions, a copy of which I hold in my hand, are arranged with typical German thoroughness in exactly the same way as the Maastricht Treaty is arranged; that is, it starts with matters of Community competence. That is Pillar I. It then goes on to deal with Pillar II, co-operation in the field of foreign policy and security. There is not a word about fraud under either Pillar I or Pillar II. We then come to Pillar III where, at page 19, it refers to co-operation in the fields of justice and home affairs. It is only when one turns to page 20 that one finds the section dealing with fraud. In other words, here is the clearest possible demonstration that fraud is essentially a matter coming under the third pillar of the Maastricht Treaty.

The point about the third pillar—this also applies to the second pillar but we are talking about the third—is that it concerns co-operation between the governments of the member states. There is no Community competence. The Commission is very largely kept out of the picture altogether. It is reduced to a mere secretarial role. The Court of Justice is excluded from the picture altogether. All of this was deliberate. It was the basis on which our own Government, together with certain other governments, negotiated the Maastricht Treaty. There lies the proof of the thesis that I am putting to your Lordships: that the responsibility rests firmly, so far as concerns at least 80 per cent. of the field—I agree with the noble Lord, Lord Bruce of Donington, that, in so far as the Commission is actually expending money itself, it ought to do so efficiently and there ought to be full accountability—on the shoulders of the member states. Unless and until that responsibility is nailed where it belongs, this problem will never be solved.

I said in your Lordships' House a few weeks ago that there is no point in shooting the wrong man, which in effect is what is happening at present. One wonders why on earth the Court of Auditors got it wrong, why your Lordships' Select Committee failed to understand the position and, above all, why the Commission ever allowed itself to be lumbered with this responsibility, which was largely outside Community competence and for which it had little or no legislative backing, for which it had insufficient staff and for which it had insufficient funds. We can well understand why the

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Council of Ministers—the people responsible—unloaded it on to the Commission, because that put the Council in the position of being able to unload its responsibilities and its guilt on to someone else. Why did the Commission take it on? Part of the answer is that it was responding to what it felt was pressure but also, I regret to say, because it tends to be in the nature of bureaucracies to seek or to accept additional power. Speaking as a bureaucrat of very long standing, because I first entered the public service more than 60 years ago, it is a temptation that takes a very strong man to resist. The Commission very unwisely took it on, and one can see the results.

There is an answer to this and it is a very simple answer. However, it will never be accepted, of course, largely because it would be effective. The answer lies in applying the basic principles of the market economy: one has to put responsibility on the shoulders of those who benefit. What one does is perfectly simple. One says that whenever a country seeks reimbursement of money it has expended from the Commission—it is the Commission's job to reimburse countries—it gets back only 49 per cent. and has to pay the other 51 per cent. itself. Once a country finds—it will not take it very long to find—that it has to pay the greater part of any fraud or mismanagement, or failure to deal with it, once it has to justify such expenditure to its own taxpayers, it will begin to take a somewhat different attitude towards the question of fraud. One will find a revolution in thinking in ECOFIN and in other bodies of this kind. Of course there will be a great outcry, but the greater beneficiaries under the common agricultural policy, which are the northern states—France, Germany, Holland and Denmark—will gain far more from the reduced amount they have to pay into the Community than they will lose by having their reimbursement reduced to 49 per cent.

With regard to the poorer states, effectively what one has at present is an appalling bureaucracy, both at the national and the Community level, handing out money to these people. It would be much better and much more transparent if one simply gave them the money as a cash grant, modulated according to their relative wealth. One could then see very clearly and without any doubt what they were getting. One could see how they expended it and whether it was wisely spent. However, the important point is that one would have removed altogether the present distortion which means that fraud pays member states. That is why one has fraud.

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