Statement by Ed Balls MP, Economic Secretary
to the Treasury, to the House of Commons
A year ago, under the UK's presidency of the
EU, finance Ministers agreed important conclusions on strengthening
the EU's internal financial control framework. Progress has since
been made in this area, and agreement is close on a revised EU
financial regulation.
So it is highly regrettable that, once again,
the European Court of Auditors, in its annual report published
on 24 October, was unable to give a positive "statement of
assurance" on the EU's accounts. The Court once again qualified
the reliability of the EU's accounts—for the 12th year in
succession—and found that not all EU money had been spent
strictly in line with the regulations.
This comes as a considerable disappointment
after the work that the EU has done to improve financial management
in recent years. The Court's standards are high, and rightly so.
So it should be of real concern to all member states that the
proportion of spending on which the Court had doubts is the same
as in the previous year.
Improving EU financial management and achieving
a positive statement of assurance on EU spending will require
further action across a broad front by all the parties involved:
the Commission, the Council, each member state working with its
national audit institution, and the European Court of Auditors
itself. Unless we all accept our responsibilities, we will not
achieve the positive statement of assurance that EU taxpayers
are entitled to expect.
It is particularly important that member states
take action at national level to improve their management of agriculture
and structural funds spending, for which they share responsibility
with the Commission.
In this context, the Government warmly welcome
the recent report on "Financial Management and Fraud in the
European Union" by the House of Lords EU Committee (HL paper
270). The report offers a timely and balanced analysis of the
problems and makes some interesting and far-reaching recommendations.
It also serves to dispel some popular myths about fraud and corruption
in the EU. The Government will respond to all the detailed recommendations
in the report in due course and in the normal way.
However, the Government are determined that
the UK should take a lead in promoting the sound management of
EU funds. I have therefore written today to the Chairmen of the
Public Accounts Committee, the House of Lords EU Committee and
the Treasury Select Committee to inform them that the UK will
now undertake further reforms to demonstrate how EU funds can
be better managed at the national level, and how national parliaments
can be more closely involved in scrutinising EU spending.
In particular, we now intend to pursue, in close
consultation with Parliament and the National Audit Office, the
proposal for a statement of assurance on the national use of EU
funds. The Government intend, subject to these detailed discussions,
to prepare and lay before Parliament an annual consolidated statement
on the UK's use of EU funds, prepared to international accounting
standards, which would be audited by the National Audit Office.
The statement and audit opinion would also be made available to
the European Court of Auditors and European Commission.
These arrangements would enhance audit and parliamentary
scrutiny of our own use of EU funds, help detect any irregularities
and thus improve financial management. The Court of Auditors and
the Commission could take into account the NAO's audit opinion
when performing their own audit and controls.
In time, the UK hopes to be able to welcome
similar reports about the national use of EU funds in other member
states. I know that the Dutch Finance Ministry and Danish national
audit office are already developing similar initiatives.
I will therefore be sending copies of this statement
and the House of Lords report to my counterparts in other EU countries,
encouraging them to reflect fully on all its recommendations,
and urging them to take similar initiatives to our own to improve
national accountability for the sound management of EU funds.
It is of fundamental importance to EU taxpayers
that EU money is spent correctly. That is the focus of the House
of Lords report. But it is also of equal importance that EU money
is spent effectively. In the view of the UK, we need to go further
in equipping the EU with a performance-driven and results-oriented
system of financial management and administration, which ensures
EU money is spent both efficiently and effectively. That will
be a focus of the review of the EU budget that will be conducted
in 2008-09 and on which I will make further reports to the House
in the coming months.
20 November 2006
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