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Lord Tugendhat: Like my noble friend Lord Stewartby, I have had experience of budget councils. Indeed, for some eight years I was budget Commissioner and am one of the two Commissioners who did not speak yesterday. I agree with my noble friend that standards of public life and financial probity vary substantially from one member state to another. However, I cannot help feeling that if one stands back a little from the debate, one might suppose that we are citizens of a country in which fraud and financial irregularity is completely unknown and a phenomenon to be found only on the other side of the Channel. That is not the case, as we know, in relation to income tax, social benefits, the workings of the CAP in this country and in relations with the Community, as we have found when court decisions have gone against us. I cannot help believing that a modicum of modesty about the righteousness of our position and the wrongness of other people's might be helpful on these occasions.

Although we have high standards of public life and financial probity, we are not alone in that. Denmark and Holland have standards that are equally high. Germany and a number of other countries also have high standards. If we are criticising other countries for having lower standards, it is tempting to believe that there is an element of nationalism and xenophobia, to which my noble friend Lord Beloff referred, in particular when one criticises them when they are trying to do something about it. I believe that the events in Italy—the extraordinary courage of the Italian magistrates facing dangers that in this country are known only in Northern Ireland—deserve praise rather than what has seemed to me from time to time to be supercilious contempt.

In large part, the same applies to what is happening in France. It is no part of my brief to defend the French way of doing things but I believe that a country which can bring its Ministers to book, which can prosecute Ministers who break the law and which can even put Ministers in prison, is a country which is doing something about the standards in public life and not one

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that is going rapidly down hill. I believe that recent events in France and Italy should give one some encouragement rather than the reverse. I am reminded of the problems that the Security Services used to run into when they uncovered Soviet spies working in MI5. They were always more criticised for uncovering them than they would have been had they let them remain in operation.

My next point is addressed primarily to my old sparring partner in the European Parliament, the noble Lord, Lord Bruce of Donington. He draws a great deal on the reports of the Court of Auditors and on other accusations that are made. It is worth pointing out—and I am sure that he will agree with me—that perhaps the principal source of information about fraud in the Community are the Community institutions. Again, one ought to draw some encouragement from the fact that the Community institutions take this issue so seriously that they have brought before the public the great body of evidence on which this debate has centred. The Court of Auditors has played an important part in that. As the noble Lord will recall, the Court of Auditors produces a report and the Commission produces a reply. In the interests of balance and fairness, it might from time to time be reasonable to quote not only the accusations of the Court of Auditors—accusations which I am sure are fully investigated. Our mutual friend, Mr. Daniel Strasser, with whom we used to have so many dealings together, is an illustrious member of the Court of Auditors. I believe that before throwing on to the table accusations that appear in the Daily Express or some other periodical, it would be worth considering the Commission's response.

I hope that in respect of my final point I might carry with me the noble Lord, Lord Bruce of Donington. Surely, one of the biggest failings of the European Parliament in recent years has been the failure to make sufficient use of the discharge; that is the point at which it goes over the way the money was spent. Making more use of the discharge would be one of the best possible ways of putting a check on the extent to which funds can be made available subsequently for misuse. It is in the power of the discharge that the European Parliament has the opportunity to make a considerable contribution to dealing with what is undoubtedly a serious problem. It is a problem that all of us ought to take seriously and it is one which the Community institutions do more than anyone else to bring to public attention.

7 p.m.

Lord Henley: I welcome my noble friend Lord Tugendhat to the debate. He is not the last of the former Commissioners to speak; there is one more member of that vast body of expertise to lend his weight to our deliberations.

I have considerable sympathy with the sentiments which motivated the tabling of the amendment. We have had a useful discussion but at the same time one ought to remember the wise words of my noble friend Lord Tugendhat in asking certain Members of the Committee to put these matters into perspective. It would be idle of me to repeat all that my noble friend Lady Chalker and I said yesterday about what the Government are doing

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in the fight against fraud and the changes that we have seen in the CAP. The fight will continue and Her Majesty's Government will be at the forefront of it.

As regards the amendment, I give the assurance that, through explanatory memoranda, debates and liaison with Select Committees, the Government always keep Parliament in close touch with developments on this front. However, I do not believe that there is any need for a section in the Act spelling out exactly how that should be done.

The Government do much to keep Parliament informed of all developments on fraud and financial mismanagement. Indeed, as I said in respect of an earlier amendment, one of the criticisms most often heard is that there are too many documents and reports and not too few. In 1994 approximately 700 explanatory memoranda were submitted, of which about 60 covered budgetary matters. I daresay that even the noble Lord, Lord Bruce of Donington, might be overwhelmed by such a large number of documents for his perusal.

Lord Bruce of Donington: No.

Lord Henley: I live in hope! What is needed is that the various documents and reports available should be brought together in one document. As I said earlier, in another place the Paymaster General confirmed the Government's view that one of the essential tasks is to keep Parliament fully informed about what they are doing to counter fraud and mismanagement. That is why my right honourable friend gave the assurance that he did, which I repeated earlier to the Committee on the amendment moved by the noble Lord, Lord Stoddart of Swindon, to expand the Annual Statement on the Community Budget to include what is being done as regards budgetary discipline and mismanagement and to counter fraud.

In the light of the Government's commitment to improve the annual statement to cover the points which have been raised, I hope that Members of the Committee will accept that a legislative obligation to do that is unnecessary.

Perhaps I may deal with a couple of paragraphs in the amendment moved by the noble Lord, Lord Beloff. With regard to subsection (a), the noble Lord asks that an annual estimate should be given of the amount of money lost to fraud. I repeat that the level of fraud and waste is a matter of great anxiety to the Government, as it is to all Members of the Committee. But I believe that all would agree that the level of fraud and irregularity, whether it is fraud against those funds, fraud at home against the social security budget or tax fraud, is something which, by its nature, is incalculable. We cannot know to what extent findings are representative of the whole picture. Contrary to many press reports, the European Court of Auditors does not give an estimate, despite the fact that it obviously has access to a great deal more information than the Government. However, although we shall expand the reports to which I referred earlier, I regret that it would not be possible for the Government to give an estimate which would be of any use whatever to your Lordships.

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Secondly, subsection (d) of the amendment asks whether the annual statement could contain details of efforts made by other member states to counter fraud. Obviously the Government are very interested in what other member states are doing to combat fraud. Indeed, we were instrumental in achieving European Council conclusions at Essen which invited all member states to produce a report to the Council on just that. However, I do not believe that it would be appropriate for the Government to submit statutory reports to the United Kingdom Parliament on what other member states are doing. Following Essen, it is for the member states to produce those reports for the Council. Her Majesty's Government are not in a position to do so.

Perhaps I may deal briefly with the question of financial mismanagement and irregularity because I believe that we have focused to a greater extent on fraud than on those matters which were discussed when we debated these issues yesterday. We agree with the noble Lord, Lord Bruce of Donington, that financial mismanagement and irregularities are problems for the Community budget as well as the criminal fraud to which we have referred. I believe that our approach to fraud and mismanagement is parallel. I have already explained our approach to fraud. On mismanagement, the Edinburgh European Council spelt out that Community policies should be subject to periodic review and that individual projects should be subject to thorough appraisal before resources are committed to ensure that they yield economic benefits in keeping with the resources deployed. Since Edinburgh, the need for prior appraisal has been built into the cohesion and structural fund regulations and into the fourth framework programme for research and development. I assure the noble Lord that the Government will continue to press for all new policies to contain similar provisions. The Court of Auditors will play an important role in ensuring that the appraisals are carried out according to the appropriate standards.

As regards irregularities, Article 13 of the new budget discipline decision agreed on 31st October 1994 provides for the possibility of temporarily reducing or suspending monthly advances to cover CAP expenditure where irregularities are suspected or where there is a problem as regards the quality of data provided to the Commission by member states. I believe that those are positive steps which the Government will continue to pursue.

We shall continue to press also for further improvements. I assure my noble friend Lord Stewartby that we are receiving greater assistance from member states which are or are about to become net contributors and which have strong traditions of intolerance of fraud and waste. I assure my noble friend that we shall continue to work extremely closely with all those states which are or are about to become net contributors.

With regard to the Daily Express article of 12th November to which the noble Lord, Lord Bruce, referred, I assure him that we are aware of the investigations into the Italian official mentioned in that article. When we are aware of allegations against Community officials, we shall pursue those matters as is appropriate through the Council. In the light of earlier

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discussions this afternoon on the subject of the sub judice rule, it would not be wise for me to comment further on that matter at the moment.

In the light of what I said both on this amendment and on the earlier amendment in relation to the assurances that the Paymaster General and I have given as to the improved annual report which the Government will put before Parliament, I hope that my noble friend Lord Beloff will not press the amendment.

7 p.m.

Lord Beloff: We have had a jolly run round the course again. There have been some interesting contributions. The noble Lord, Lord Cockfield, repeated the suggestion that he made yesterday and gave the analysis which led him to it. My problem is that, if it is the governments of certain countries who are responsible, it is rather difficult to see how they can also be made the agents for curing the problem. The noble Lord's idea is that the answer would be to raise locally a proportion of the money. However, that presupposes that, if there were no transfers between member states, there would be no irregularity or fraud. That seems to me to be a very difficult proposition to sustain. But we can continue to disagree at the moment. None of our solutions looks likely to deal conclusively with what is bound to be a continuing problem.

It was valuable to have the intervention of yet another former Commissioner, but I believe that the noble Lord who accused me of superciliousness was quite wrong. I was not suggesting that Britain is uniquely virtuous or that other countries are uniquely vicious. I suggested merely that, in a continent in which countries differ so greatly in their fundamental attitudes to so many matters, to try to create a federal system in which all of them would participate freely is, at this stage, asking too much and that the attempt to impose such a system is one of the reasons for discontent.

I should not wish further to prolong the debate. No doubt we shall have many more debates and I gladly accede to the Minister's polite request and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 2 agreed to.

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