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Lord Tomlinson: Unlike the noble Lord, Lord Bruce of Donington, I have had the benefit of obtaining a copy of the Court of Auditors report on the last financial year, which was published last week. I do not pretend that my bedside reading has necessarily led me to read it cover to cover but I have read it substantially. There is no reference to fraud amounting to £5 billion. As ever, there is a fairly substantial reference to irregularities and the continuing reminder to member states in the Court of Auditors that 90 per cent of the

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EU budget—primarily the budget for the common agricultural policy and structural funds—is expended by the authorities of the member states. It states that most of the irregularities occur within member states, where accounting principles are inconsistent with those that are laid down at the centre. We should not put too much credence on the bold figures that have been quoted. There should be an attempt to distinguish between fraud and irregularity, and the report by the Court of Auditors does that.

I agree with the comments of my noble friend Lord Bruce on the valuable report by the European Union Committee. It has now been around for several months—I believe that it was published in April or May of this year—and it should have been debated in your Lordships' House. It does not heap paeans of praise on the Court of Auditors; it makes substantial criticisms of the court—about the way in which the court is structured and works, about the lack of professional audit capacity in it and about its unpreparedness for enlargement, which is the major challenge for the EU. I am sure that the proposal about applying QMV in this case makes no substantial difference whatever to the competence of the Court of Auditors or its role.

Lord Biffen: I want to take up the point that was made by the noble Lord, Lord Bruce, about the availability of the European Union Committee's report on the Court of Auditors, which was proposed by this House. It was widely acclaimed and should be central to our discussions. The way in which the amendment is drafted inevitably prevents a wide-ranging discussion—it would be similar to the discussions that we have at Second Reading—of the topic. The situation is a commentary on the way in which we treat EU legislation. We treat it quite differently from our own domestic legislation; less determination—less precision—is involved. If ever there was a case for paying more attention to European legislation, this matter demonstrates that need.

I echo the remarks of the noble Lord, Lord Tomlinson. I cannot pretend that the question of whether the appointment is made by QMV or not is a ditch in which one is prepared to die. I have a purely practical request: how will the effective work of the Court of Auditors be improved as a result of its being appointed by QMV? How will the decision to choose the members of the court be improved by undertaking qualified majority decisions? If a change of this character were essayed in our domestic legislation, it would be subject to the most relentless examination of exact cause and effect. That would be done not as a result of partisan politics but with a desire to ensure that whatever the House of Lords or Parliament fashioned as law should be justified and effective.

Lord Monson: The £5 billion may consist mainly of fraud or as the noble Lord, Lord Tomlinson, suggested, of irregularities; whichever is the case, is it not sinister that there seems to be so little concern about it on the Continent and within European

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institutions? It appears that if one draws attention to it one is considered almost a "bad" European. If the amendment does anything to reduce that vast sum, it will be well worth supporting.

6 p.m.

Lord Pearson of Rannoch: I feel that this amendment is unlikely to reduce the vast sums. As I hope that I shall explain to your Lordships, this is likely to make for a weaker Court of Auditors. If we follow, for the record, the Euro-creep at work in this amendment to the TEC, we need to look at what was said before the Treaty of Nice and before the Treaty of Amsterdam. The original wording that we are now changing may go back to the Treaty of Rome. Article 247, as it became at Amsterdam, was previously Article 188b. It is illuminating to see how much more rigorous the court was supposed to be under the original treaty.

Article 188(b) simply said:

    "The Court of Auditors shall consist of 15 members".

We then have the same qualification that they should be chosen,

    "from among persons who belong . . . in their respective countries to external audit bodies or who are especially qualified for this office. Their independence must be beyond doubt".

That is not altered, although sometimes one wonders. The wording that we are changing with this treaty says:

    "The Members of the Court of Auditors shall be appointed for a term of six years by the Council, acting unanimously after consulting the European Parliament".

That was the position.

I submit to your Lordships that the fact that it did not matter from where these auditors came but that they had to be approved by unanimity by the Council must be a point in their favour. On the other hand, we now move to an arrangement whereby there must be one national from each member state. I suppose the Treaty of Amsterdam masquerades as preparing the European Union for enlargement. The draftsman of this new clause had in mind one national from each of the new member states which, it is alleged, will one day join the European Union.

Paragraph 2 of Article 247 continues as it was before and as I have quoted, and paragraph 3 states:

    "The Council, acting by a qualified majority . . . shall adopt the list of Members drawn up in accordance with the proposals made by each Member State".

I am sure your Lordships will be grateful for the elucidation that my noble friend Lord Howell has asked the Minister to give the Committee on exactly how that will work.

Before, it did not matter where the auditors came from, but they had to be approved by unanimity and, therefore, they had a stronger chance of being the best people for the job than if one of them had to come from each member state. They were appointed for six years only and now their appointment is renewable. In view of the fraud or irregularities, or whatever one wants to call it, I believe that this is a serious situation.

As we are talking about the Court of Auditors, perhaps I can ask the Minister whether he can tell the Committee what has happened in the wake of the

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mass resignation of the Santer Commission. I know that Mr Kinnock, a Commissioner, is in charge of cleaning up the place, but is there any evidence that the Court of Auditors' report has found great improvement as a result of Mr Kinnock's efforts? Is the £5 billion that is at stake any less than it was before?

I have a question for the Minister that I could have tabled as a separate amendment. Of course, I could do so at the next stage of the Bill. However, it appears to me—I do not know what the Minister will think of this—that instead of having one person from each member state of the European Union, many of which are recipients and many of which caused the problems referred to by the noble Lord, Lord Tomlinson, with the common agricultural policy and so on (I do not exclude the United Kingdom from that), would it be better if the Court of Auditors consisted of representatives of the donor countries? Would that not be much fairer? What would the Court of Auditors find if it consisted of some good, solid German, Danish and British accountants? Does the Minister believe there is any chance that it would find a figure as small as £5 billion missing every year? I doubt it.

As to the plea of the noble Lord, Lord Tomlinson, on the innocence of the whole system—that irregularities take place in member states—the well-known policy when dealing with fraud is to follow the money and, if necessary, to withhold the money. If such matters are taking place in member states, we simply should not give them the money in the first place. Can the Minister tell me whether I am being oversimplistic or unreasonable?

Lord McIntosh of Haringey: First, I shall deal with the issue raised by my noble friends Lord Bruce of Donington and Lord Tomlinson. I do not know why the report of the Court of Auditors was not in the Printed Paper Office or how my noble friend Lord Tomlinson acquired it when my noble friend Lord Bruce did not. Of course, that is a matter for the authorities of the House. I can assure noble Lords that they will have heard the criticism and the matter will have to be sorted out.

Perhaps I may reassure the noble Lord, Lord Biffen. The report of the Select Committee is not missing from the Printed Paper Office. That has always been available.

Lord Biffen: I never suggested that it was. I am quite aware that the report of the Select Committee has been available for some while. The fact that it has been available and has not yet been debated ahead of this debate appears to me to be quite deplorable. In that sense, I was echoing the remarks of the noble Lord, Lord Bruce.

Lord McIntosh of Haringey: There was either a slip of the tongue or, more likely, I misheard the noble Lord. When the report of the Select Committee is debated is a matter for the usual channels.

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I was taken aback by what the noble Lord, Lord Howell, said. I have done what the noble Lord, Lord Pearson, has done and looked at paragraph 3 of Article 247. The noble Lord is right. The members of the Court of Auditors shall be appointed for a term of six years. That is in the existing text.

    "The Council, acting by a qualified majority after consulting the European Parliament, shall adopt the list of Members drawn up in accordance with the proposals made by each Member State".

That follows a provision in paragraph 1 that the Court of Auditors,

    "shall consist of one national from each Member State".

It sounds to me as though a very small difference is proposed and all that is provided by qualified majority voting is that someone from one member state cannot veto the nominee of another member state. It strikes me that that provision may be useful, but may not always be required. It certainly does not lead me to consider that there is any danger in it. On the other hand, in response to the noble Lord, Lord Biffen, it does not lead me to consider that the work of the Court of Auditors will be improved. I believe that the possible difficulty in the decision-making process for the appointment of the Court of Auditors will be removed.

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