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Lord Bruce of Donington: My Lords, I am most grateful to the noble Baroness for so courteously giving way. In the course of her remarks on fraud the noble Baroness has confined herself to fraud pure and simple. The Select Committee of your Lordships' House has been investigating and some of us on this side of the House have spoken about not only fraud but waste, mismanagement and irregularity. Irregularities and mismanagement have been responsible for far greater

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wastage than fraud itself. Will the noble Baroness expand her remarks to include the whole question of mismanagement and irregularity as distinct from fraud?

Baroness Elles: My Lords, I am most grateful to the noble Lord, Lord Bruce of Donington, for making that point because I totally agree. Fraud is the term we have used, but it also covers waste, crime, financial mismanagement and bad auditing. The Secretary General of the Commission, Mr. David Williamson, said in a report of Agence Europe of 18th November 1994 that he wished:

    "to clarify the way the report of the European Court of Auditors should be understood as it has so far caused 'a great deal of confusion' in the press. This report, he explained, covers the efficiency of the Union's financial management, on one hand, and fraud detection, on the other. Fraud strictly speaking appears in one case only, in Denmark. In no way therefore, he stressed, is it a report on fraud, as Mr. Middlehoek, President of the Court of Auditors, had himself recognised that it is impossible to quantify it. There is no indication that fraud is more rampant in the EU than in Member States".

I hope that that covers the point which the noble Lord, Lord Bruce, made.

In the three reports produced by the House of Lords Select Committee that is well amplified and expanded. I should have thought that the other place should take it upon itself to look more seriously at its structures for examining the expenditure of European Community money.

I would support much closer co-operation with the European Parliament, where the Budgetary Control Committee has done a certain amount of good. It has produced a number of reports over the years, but governments have refused to take any notice of those reports and have refused to take any action. I remember one report by Mr. Pieter Dankert, a Dutch socialist, on fraud and mismanagement in the Community. No government took any action on that report. I hope that at least we can start to look at what the European Parliament is doing, although we do not necessarily have to follow it.

We have to decide how we will deal with this question. It is lamentable that the Community should be accused of fraud when the fraud is committed by a great many citizens of the Community. I hope that the institutions of the Community will consider seriously how they will identify the causes of fraud and root it out. Wherever it occurs fraud is unacceptable, whether it is in a member state, a company or a European institution. Although this House has no particular powers over the Bill before us, I hope that the debate will at least have clarified some of the problems which beset us and I hope that we can create a better structure for our budgetary positions.

5.35 p.m.

Baroness Strange: My Lords, as this is the first time I have raised my voice in your Lordships' House this year I should like to wish all your Lordships, and all our long-suffering staff and supporters, a very happy New Year.

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It started well for us, with a party of 10 German and Austrian friends arriving unexpectedly to stay—well, at three hours' notice—and 25 of us dancing reels until my son piped in the New Year, guns were fired, "Auld Lang Syne" sung, and the New Year was toasted in my French noble kinsman's sparkling Burgundy. We taught the Germans and Austrians more reels, and then they taught us how to waltz.

Your Lordships may think that I am already breaking one of my many New Year resolutions by waffling and wasting your Lordships' time. I am just trying to show in a practical and pictorial way that I am at heart very much a Europhile and not a Euro-sceptic.

That is why it is so important that we get it right, for all of us in Europe. First, this Bill is a money Bill, so we should not by rights be discussing it at all. Secondly, as the Government have already committed us to it at the Edinburgh conference, to attempt in any way to overturn it now would only make us appear either inept or perfidious. But we do have the opportunity to speak our minds here in the Lords, for which we are grateful. We are not crying over spilt milk, we are merely stating what is in our minds.

I am glad that the noble Lord, Lord Thomson of Monifieth, said that this is a strange debate. That encourages me to join in. Unlike other noble Lords who have spoken I have no qualifications, although, like the noble Lord the Leader of the Opposition, I would lay claim to being a bear of little brain. But unlike him and other noble Lords, I have never been a Euro-MP, nor a Commissioner, nor sat on the European subcommittee of your Lordships' House. I am merely the lady in the kitchen. As it is my own kitchen I am quite happy to have it full of Tower of Glamis apples, curled up cucumbers, black pudding and British sausages.

There are only two points that I should like to make. First, of the 12 European members in 1993 (which are the latest figures I have been able to find) only Germany, Britain, Italy, Holland and France were net contributors. Everybody else took out, including Denmark, Luxembourg and Belgium, all of whom have a higher GNP than we do. In 1993 we paid out £5,937 million. Of that, £3,504 million came back to us so that our net contribution was £2,433 million. Of the money which came back to us in grants, our Government had no control over their application. It is as if, put in basic lady-in-the-kitchen terms, I paid tax of £6 but the Government said, "You're only paying £2.50 because we are giving you £3.50 back". The snag is that the £3.50 has to be spent on new Christmas tree lights and a Euro-viewing telly aerial whereas I might have spent it on patching up the Aga and more British beer and sausages.

The second point is about taxation without representation. The Commission which obtains all this money is not a democratically elected body. It is as if we were living in 15 houses in an estate together. We all own our own house and the land on which it stands. But because we are part of an estate we are all administered by the council. If we do not like the way it runs our estate and spends our taxes, we can vote it out. But what if it is not elected but still has powers to run our estate? It can still come into our kitchens and

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demand alterations and we have to pay for it to do that. I cannot think that that is the right way to run a community.

My Lords, another new year resolution has just bitten the dust—I have spoken for far too long. Happy new year anyway.

5.41 p.m.

Lord Harris of High Cross: My Lords, it would have been a great loss if we had allowed ourselves to be inhibited from discussing a money Bill. We would have missed a full quota of notable speeches, including an outstanding maiden speech which I am not allowed to spend more time praising.

It is not difficult to think of a number of plausible arguments for voting more money to Brussels. For an economist the most persuasive argument would be that Brussels is doing a good job. As a Euro-sceptic and not, in the terms of the noble Lord, Lord Thomson of Monifieth, a despised anti-European, I take the benchmark of achievement initially as completing the single market. We still await the dawn—or is it the end?—of 1992. If we had a full catalogue of the breaches of the original single European programme of the noble Lord, Lord Cockfield, and others, those breaches would include continued subsidies to nationalised French industries, the protection of German services, the stubborn persistence of the airline cartel and the appalling deficiencies of the common agricultural policy about which we have heard a great deal. Pondering such issues, do we really believe that Brussels would deserve a strong vote of financial confidence?

Therefore, we move on to a second and possibly stronger case which might be put—that Brussels has big responsibilities and needs to enlarge its activities. It has taken in new members and from those new members it will obtain a certain amount of income. But there would be general agreement, I believe, that the Eurocrats are already doing too much for our own good and for their credit. We have constant news of multiplying regulations, of pandering to pressure groups and lobbies, and of the buying of favour and, incidentally, of votes on the Council by shameless subsidies for often quite useless political projects in the member countries.

The strongest case we have heard is that the Bill is necessary to validate the promise Mr. Major made at Edinburgh, although in the submission of the noble Lord, Lord Beloff, as I understood it, Mr. Major may not have had the authority without prior parliamentary sanction. The Prime Minister is not averse to boasting of his various and changing positions on the European issue. However, one on which he has been wholly consistent, and about which he has beaten his chest a good deal, is his determination to crack down on fraud and mismanagement. The Edinburgh meeting was in December 1992. Some two years and billions of wasted pounds later, who doubts that if ordinary British people were asked an opinion they would say we should not give a penny more to Brussels until in some way its public finances have been brought under control?

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I listened with close attention to the magisterial lecture of the noble Lord, Lord Cockfield. At the end I even found something with which I could agree. The noble Lord started by demonstrating the impossibility of any honest implementation of a European agricultural policy so long as it operated through national governments reimbursing their farmers. As I understood it, he suggested a splendid policy, if not of repatriating the whole of the CAP, at least of repatriating reimbursement of part of the price support so that in each country European farmers could cheat their own government and not the remainder of us who seek to be more upright. That policy does not exonerate the Commission. It seemed to pass responsibility to national governments. In the immediate sense that is correct. But over the whole of the situation sits the Commission. I almost used the phrase "broods M. Delors", but I made another new year resolution to mention M. Delors rather less, particularly now that he is obligingly on the verge of retirement. If the Commission's pay and perks depended upon bringing the total agricultural and other budgets under control, I have no doubt that its ingenuity and his would be equal to the task.

The former president of the European Union has not been backward in initiating far reaching proposals for policies and initiatives that suit him or his colleagues. He and his colleagues can hardly be exonerated from responsibility for expenditure of, in the case of the common agricultural policy, we are told, something like 60 per cent. of the Euro-budget. In short, why has not the European Commission engaged the advice and services of the noble Lord, Lord Cockfield, to tell it how to put its financial house in order?

The noble Lord, Lord Cockfield, also pointed out that national governments have no incentive to cut down on agricultural abuse so long as the reimbursement comes from the European budget and not their own. I argue that in precisely the same way the commissioners and their pensioners, apologists and hangers-on have no incentive whatever to reduce waste and extravagance so long as they can simply whistle up a few more billion pounds from craven national governments.

If Mr. Major wishes to keep faith with his European partners at the Edinburgh Summit, why not start with a presidency conclusion incorporated in that great statement which read:

    "The Council confirms its view that all Community expenditure should be subject to the principles of sound public finance and budgetary discipline"?

There is no ground here for any additional money to be sent in that direction.

So we are left with the pragmatic, political, unprincipled plea that the increase demanded at present is rather small —£75 million, almost petty cash—and that that will grow, but not too rapidly, over the coming years. I regard that as a totally reckless and irresponsible attitude towards taxpayers' money. It is mirrored and encouraged by the way in which the Euro-apologists always present the cost of Europe to this country in such misleading terms. We are told that the net cost at the moment is running at around £2 billion a year. Under cross-examination, any well-informed debater would

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have to acknowledge that the real cost to the economy is the gross outlay which we have to endure, less the Thatcher rebate, which comes at present to around £6 million. That £6 million passes from this country's finances to the European area of control. For remarkable and unexpected elucidation, I commend a speech by Mr. Lamont in the House of Commons at cols. 958 to 963 of Hansard of 28th November 1994. If their eyes continue to the following speech by Peter Shore, noble Lords' education will be further advanced.

As a former Chief Secretary to the Treasury, the Prime Minister knows perfectly well that the real cost to Britain of European involvement is currently around £6,000 million and that it will grow, if optimistic projections are not falsified, to no more than about £8 billion by 1999. Nevertheless the Prime Minister agreed to a totally unnecessary increase in own resources, partly because he argued for budgetary discipline and took that for granted, and also to buy off any further federalist impulses from the Brussels pack. As the critics at the time foretold, such concessions simply whet the appetite for more power. In the splendid words of Kipling,

    "That is called paying the Dane-geld;

    But we've proved it again and again,

    That if once you have paid him the Dane-geld

    You never get rid of the Dane".

I believe that it is time to draw the line on sending further money in that direction. It is time to say, "Enough is enough". Then we should add, "at least until waste and fraud are somehow more under control". If they were, then further Danegeld would not be necessary.

5.54 p.m.

Lord Shaw of Northstead: My Lords, it is already clear that this is no ordinary finance Bill. Indeed, were it so, the widespread discussion that we have had today and which all of us have found useful and valuable would probably not have taken place in the way that it has. As someone who has chaired finance Bill committees in another place for a number of years, I am amazed to be dealing with a finance Bill of only two clauses, and I must say that there is a lot to be said for finance Bills of two clauses.

The interesting part of the debate clearly comes out in this House, as in the other place. It is that it is not just the finance Bill on its own, it is the finance Bill as part of a package composed of decisions taken at the Edinburgh European Summit in December 1992. I find, reading the proceedings on the Bill in another place and listening to the debate today, it has become clear that the justification for the Bill lay and still lies in its being a part of the package of aims agreed to at that summit. The aims were clearly spelt out—and noble Lords will be relieved to hear that I shall not spell them out again—by my right honourable friend the Chancellor of the Exchequer in another place and ably this afternoon by my noble friend Lady Chalker. I agree with both of them that the achievement made by the Prime Minister at Edinburgh was truly notable and greatly in the interests of this country.

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The question that must be asked is: why should there be such a fierce debate in the other place and here? Since the Edinburgh Summit meeting was greeted with such general approval, why should this Bill have met with such opposition? In the end, of course, the Bill passed its Second Reading in the other place with an overwhelming majority, as I hope it will today. So what were the worries that were disclosed and that gave cause for the debates that have taken place?

The worries which so concerned some of my honourable friends in the other place were the continuing incidence of substantial fraud and inefficiency in the management of the European Union finances. In particular, there was the worry that nothing was being done to respond to the serious matters disclosed each year in the reports of the Court of Auditors. I say to my honourable friends in the other place that they are right to have been worried. Those who have expressed worries today are also right, but so too are the Government. It is both untrue and unfair to try to argue—as the Second Reading amendment claimed—that Her Majesty's Government were taking no action to cut fraud and waste in Europe. If we were to deny the Bill its passage through to the statute book on the basis of such a claim, the cost of losing the Bill and consequently the package that was so skilfully achieved in Edinburgh would be very great indeed.

However, importantly—and above all the other reasons that have already been stated—by the successful passing of the Bill we would ensure that we remain in the forefront of the pressure within the European Community for responsible financial control. It is this country above all that has continually sought for action to be taken against fraud and waste. It has been, and doubtless too often will be, a slow and sometimes thankless task.

We must never forget that the development of the European Union has been a gigantic undertaking. The need for review and change within its organisation has been constant. Having committed ourselves to the creation of the Community, now the Union, there is nothing to be gained by seeking to stop taking part in any of its developments. As has so often been said, we must be continually at the centre, trying to lead it forward in what we believe to be the right direction.

I give an example. Perhaps it is a small example compared with all the other big topics that have been discussed today, but nonetheless it is a very important one. I was charged with revising the financial regulation in 1977. Incidentally, this shows another side to the noble Lord, Lord Bruce. We regard him sometimes as a rather fierce critic. But there is another side to him. He can be very constructive. He can be prepared to wait to get the right results. It took me two years to get that financial regulation altered with continual reference to the other institutions that were involved. I know full well that often behind the scenes, as well as in Committee, I had during that time the full and very helpful support of the noble Lord, Lord Bruce of Donington. I am always grateful to him for what he did at that time. It pays to keep trying and working hard, and gradually things will fall into place. It is no use giving up.

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Similarly, when the Court of Auditors was first set up in 1977 it was clear that its power and terms of reference could not be regarded as fixed and unchanged for ever. In the changed financial regulation of 1977 I realised that. I built in a clause, Article 107, to insist that the regulation be reviewed every three years. There is no such clause with regard to the Court of Auditors, but nonetheless it must be obvious to everyone that as the Community develops there must be changes in the responsibilities and authority of the Court of Auditors.

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