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Amendment No. 119 in the name of the noble Lord, Lord Blackwell, and the linked Amendment No. 120 relate to the control of our energy supplies. The Lisbon treaty does not allow the EU to take control of our oil stocks or reserves. It clearly states:

Declaration 35 to the Lisbon treaty goes on to say that,

So, in answer to noble Lords who posed this crucial question, we are not passing over the power to protect the security of our energy supply—no nation would.

Paragraph 9.34 of the EU Select Committee report states:

I was asked why we had initially opposed putting an energy article into the treaty. We could not accept in the draft treaty in the convention of 2003—which prepared the now-defunct constitutional treaty—an energy article which we did not think at the time was in our interests. We were concerned that a new article should not restrict what was already possible using other articles—which, as I say, is the way we have done it in the past—but we also wanted to protect our rights over natural oil and gas reserves and make sure that we could act to ensure security of supply in emergencies. We believe that we have secured this in the final text and I have quoted from that part of the treaty. In particular treaty language, it makes it clear that, first, member states determine their own energy mix; secondly, that member states retain control over their own energy resources; and thirdly—and very significantly—all tax issues are decided by unanimity. These safeguards did not exist in the draft treaty that was part of the 2003 convention. That is why we could not accept it.

Lord Blackwell: I thank the Minister for his helpful reassurances but can he explain exactly the language in Article 87 of the Lisbon treaty which states that in areas of supply difficulty the commission may take whatever measures are necessary without prejudice to other procedures provided for in the treaties? Does that not provide an ability for the European Union to override all those reassurances if it determines that there is a situation of supply difficulties?

5.30 pm

Lord Bach: We do not think that it does. I called it Article 100; I think that we are talking about the same animal—numbers are difficult in this, as the noble

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Lord agrees. This article inserts a reference to “a spirit of solidarity”. A similar reference is included in the new energy article. Noble Lords should not be too concerned about that. It is unlikely to result in significant change, given that Article 2 of the treaty establishing the European Community already includes the task of promoting solidarity between member states. It is certainly a form of words and it may be more than that, but it should not be of great concern.

Lord Forsyth of Drumlean: Why not?

Lord Bach: Because the phrase “a spirit of solidarity” is a repetition of a phrase that appears in Article 2 of the treaty and does not overcome the article and the declaration that I have already quoted. That is certainly the Government’s view.

Lord Pearson of Rannoch: Would the Minister be amused to hear that he reminds me of the noble and learned Lord, Lord Mackay of Clashfern, who, standing where the Minister is standing at the Dispatch Box during our debates on Maastricht, said exactly the same about doubts that we raised on the future of justice and home affairs? If any noble Lord has not yet read the speeches of my noble friends Lord Kingsland and Lord Blackwell in our previous day in Committee, on exactly where we have got in spite of all that meaningless language in Maastricht, I suggest that they do so.

Lord Bach: The noble Lord has paid me—I do not know whether he meant to—one of the greatest compliments that I have ever been paid, which is to be compared with the noble and learned Lord, Lord Mackay of Clashfern. I think that I shall leave my answer at that and sit down before the noble Lord changes his mind. I have attempted to answer what noble Lords have argued in their amendments, which I hope noble Lords will not seek to press.

Lord Howell of Guildford: I am grateful to the Minister for the good-natured and thorough way in which he sought to answer some of the worries raised in this debate. I am not in the least bit reassured. When we debate energy in this Chamber, we do it rather well. A great reservoir of expertise is here and a good deal of apprehension about what is coming on the energy policy front, because it is clear that many difficulties are looming to which we have perhaps not given enough attention, so keen have we been to fix our eyes on the longer horizons of saving the planet and so on. There will not be any planet to save if we get all our energy problems wrong.

Throughout this debate there has flowed a quality of—what can I call it?—mandarinesque naivety about what is really happening in energy policy throughout the whole of the European membership. We are playing games. We talk about liberalising—and of course that is right. We dream about a better European energy market. We are, as is often said, playing cricket while others are pushing their own national monopolies, securing their own energy supplies and getting on with the job of looking after the number one requirement of a national Government, which is to ensure that energy flows continue.

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I heard the noble Lords, Lord Wallace and Lord Hannay, assert the virtues of the regional energy market. There is no regional energy market. It is pure imagination to assume that our neighbours, whatever they may say in their rhetoric, are pursuing the free energy market policies required to create such an entity. We know the realities. While the continental champions E.ON, EDF, Iberdola and others are supplying us and taking over our concerns, nobody asks how many French consumers or German consumers are being supplied by British concerns. The answer is none at all. The whole thing is lopsided. Our neighbours in Europe, while talking about common energy policies and drafting them to put into this treaty, are getting on with their own energy policies in quite different ways and doing separate deals with the Russians, as in the case of the Germans, and so on. That is the reality.

Lord Wallace of Saltaire: If I have followed the logic of the noble Lord’s argument, he is saying that we should return to a protected national energy market.

Lord Howell of Guildford: No, the logic is the exact opposite. We should be realists. We should see that if we want to develop an effective energy scene for ourselves, we should do so on a global basis and look after our interests. If we talk about energy markets while others pursue completely different targets in completely different directions, we will find—as we found with the gas market—that it is impossible to be the liberal island in a larger area that is not liberal and which is governed by completely different principles. That is what I am saying.

I was going on to say how much I enjoyed the speech of the noble Lord, Lord Rowlands. He and I served together and had many adventures in the international scene in the distant past. The question that he pressed was, “What do these provisions do?”. That is a true and accurate question indeed. As my noble friend Lord Blackwell said, the treaty provisions—quite aside from whether they do anything; we are still not clear what they do—are extremely vague.

As for the International Energy Agency, we signed up to it and gave certain undertakings. I suppose that we could have walked out on it at any time. I have a personal experience to share with your Lordships. In 1979 I went to Paris and chaired a meeting at which I signed up to various production, output and stock-sharing agreements with our neighbours in Europe in a spirit of solidarity. When I got back to London the then Prime Minister, my noble friend Lady Thatcher, was not at all pleased. In fact she glared at me and said, “David, you are giving away our oil”. These are arrangements that we could have rescinded at any time, but the question in the future is whether our freedom to share our oil resources is in any way further restricted than it is already. Frankly, the IEA is not troubled at all by anything that my noble friend Lord Blackwell is saying. In fact, it provides perfectly adequately for good stock sharing. I do not understand why we need these extra provisions.

The noble Lord, Lord Lea, talked about the mirage of energy policy. The real mirage is the EU energy policy because it is not there. If we believe that it is

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and others carry on because it is not, we will greatly damage the interests of our nation and our people very directly indeed. We want co-operation in Europe. As the noble Lord, Lord Bach, rightly said, there is plenty, but we do not need the further transfers of power set out in the treaty. We just do not need them.

As for biofuels, the European energy advisory agency—a senior body and part of the Brussels Commission structure as I understand it—looked at this matter the other day, and it urged abandonment of the Commission’s biofuels targets. It said that they caused environmental damage and that they were having an effect on world food prices. That now appears to be the policy of the British Government as well.

Baroness Quin: The noble Lord has mentioned biofuels on a number of occasions. Would he at least welcome the latest Commission communication with the aim of moving towards a lower carbon economy? It talks clearly about setting environmental criteria for biofuels and ensuring that the environmental disadvantages of biofuels use do not outweigh the advantages.

Lord Howell of Guildford: I welcome all movements on this front. In fact, the curious situation is that the British Government, through the mouths of the Prime Minister and the Chancellor of the Exchequer, are urging that the European Union should look at its biofuels policy again. The noble Baroness indicates that some second thoughts might be starting to develop, but the EU Commissioner concerned has said very bluntly that he does not see any connection at all between biofuels policy and rising prices. A number of other quite blunt assertions have been made that if this policy changes at all, it will not be by much.

It is therefore not wise for the Government of this country or the government of Europe to commit to an elaborate new legal base to confer further restraints or further centralisation on these vastly complex areas. We need the co-operation of our neighbours through the interconnector, and the enlargement of the French electrical interconnector was one of the things that I authorised in the early 1980s. However, we do not need a lot of further rules and regulations of the kind proposed in the Bill.

The Opposition should be strong to anything that will damage the flexibility and existing co-operative arrangements which have worked reasonably well but are about to be tested most vigorously by the coming energy crisis. On the biofuels issue, even the noble Lord, Lord Stern—now a Member of this House, and the apostle of climate change and the need for renewables and so on—warned that Europe was on the wrong track. If we do not have the strength and the freedom to see that others are on the wrong track and to develop our own pattern and perhaps encourage others to develop theirs, if we bind ourselves by these new regulations and provisions, we are making a grave mistake for the future. We will look back in your Lordships’ House and see that that is what we have done.

In the mean time, because the Minister has given certain assurances on the QMV side—and I would like to examine those more carefully—I am prepared

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to think about this again and perhaps return to it on Report. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 71 and 72 not moved.]

[Amendments Nos. 73 to 78 had been withdrawn from the Marshalled List.]

Lord Willoughby de Broke moved Amendment No. 79:

“(i) Article 2, paragraph 230, amending Article 246 TEC (TFEU), relating to the Court of Auditors, and(ii) ”

The noble Lord said: This group of amendments is probing in nature. It tries to tease out the Government’s attitude to the unfortunate situation with the accounts of the European Union and what they think of the role and composition of the Court of Auditors.

In November last year, the EU audit committee refused to sign off the EU accounts for the 13th year in succession. Its 2006 report issued a qualified opinion on EU expenditure, saying that,

Please note the words,

The areas of expenditure on which the court has given an adverse opinion account for something like 57 per cent of the EU budget—nearly €50 billion. As I think we are still the second biggest contributor to the EU budget, that means that something like €5 billion or €6 billion of the British taxpayer’s contribution is open to fraud.

Just to put a little flesh on that, I should say that agriculture is one of the areas most prone to this abuse. The EU spent €50 billion funding agriculture in 2006 but, according to the Court of Auditors, €15 billion was not subject to proper checks. The court found that one-quarter of the payments tested at final beneficiary level revealed overpayments. Nearly a quarter of olive growers in Italy, Spain and Greece have declared at least 5 per cent more olive trees than they owned, in some cases netting significant EU funds. Greece, in particular, came in for severe criticism. Again according to Court of Auditors, something like €850 million was paid to Greek farmers under what it called “unsatisfactory control conditions”. It also found that 50 per cent of Greek sultana producers should not have qualified for the payments that they received at all. There were high levels of error in the rural development budgets which are supposed to deal with environmental matters. They were aimed mostly at developments for farmers. In seven of the eight cases that the European Court of Auditors investigated, the farmers had not met the necessary commitments to qualify for these grants.

5.45 pm

The court also criticised the Commission's oversight of national agencies, such as the Rural Payments Agency, that make the payments to farmers. The noble Lord, Lord Bach, who is not in his

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place at the moment, will recall that example rather painfully. It further found that 1998, 10 years ago, was the last time the Commission updated its records on how much money member states owed the EU budget. The report stated:

Structural funding was another example. The court noticed little improvement in the €32 billion budget and said that the situation remained similar to previous years—that is, entirely unsatisfactory. Of the projects that the court audited, only 31 per cent were found free from error. It warned that there was a high risk that the project costs were overstated and that there were large numbers of claims for ineligible expenditure. The report states that there is generally a lack of evidence to support the calculation of overheads or the staff costs involved. As well as criticising the member states on the control of these funds, the court also criticised the Commission’s supervision of how the funding was spent. It said that,

There are a number of really worrying developments there. It is not as if it was just one or two years; this is the 13th year in which the accounts have failed to be passed. The Commission has always tried to say that it is not its problem but is due to the member states not being able to control the budgets or the money that it gives them. It has always said that the responsibility for the fraud is at national level and not with itself. The Court of Auditors comes down quite severely on the Commission on this point. It criticises the Commission for attempting to spin its findings and blame member states.

Article 274 of the Maastricht treaty reminds us of the situation. It is the Commission's direct responsibility to uphold a “sound financial management”. The European Court repeats that by saying:

The Commission tried to put a positive spin on the report by saying that,

Coming from one of the European Union’s own bodies, that is quite a damning verdict. I believe that Europe's taxpayers deserve better.

I now turn to the useful report of the European Union Select Committee of 2006. I am very pleased to see the noble Lords, Lord Grenfell and Lord Radice, in the Committee. Of the two reports, I refer to the second one—the committee’s response to the government response to its recommendations; that is, the Government and other bodies mentioned. I want to see whether there is any improvement following the suggestions and recommendations made in this useful

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report. It made some good recommendations, as did the noble Lord, Lord Tomlinson, who sadly is not in his usual place this afternoon. He is a swivel-eyed Europhile, keeping an eye on swivel-eyed Europhobes. He is normally only too pleased to do that. For example—this issue is covered in one of the amendments I am speaking to—he suggested:

I note that in the treaty there is still a provision for one member of the Court of Auditors from every member state. I do not know whether there is any further thought on that or whether that is slightly arcane and rather like moving the deck chairs around on the “Titanic”—however many members the Court of Auditors has does not seem to make much difference to the EU accounts.

I want to raise three more points with the Minister, although I do not expect her to answer them this afternoon. She has an enormous brief which she carries out—if I may say so without sounding too smarmy—with great charm and patience. I raise my first point by noting that the committee said:

The Government replied to that by saying:

Has this happened? Is there a list of member states demonstrating poor management of European funds? If there is such a list, is the United Kingdom on it?

The second recommendation in this report is:

It goes on to say that the Dutch do this and that we should follow that. The government reply to that recommendation was:

Again, has this happened? I have not seen such a report presented to Parliament but I stand corrected if it has.

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