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Finally, the committee recommended very sensibly that,

It goes on to say that there is misreporting in the newspapers about the whole thing and that the problem is not really with the accounts but with

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the way it is reported in the Murdoch-ite press so beloved by the Liberal Democrats. The committee said:

Again, has this happened or is it going to happen? I repeat that I do not expect the Minister to reply in detail to these questions this afternoon but perhaps if she cannot do that she could write to me and put a copy of that letter in the House.

Is this not still a rather unsatisfactory position? We have had 13 years of qualified accounts and there does not seem to be any real progress on this. We are told it does not really matter, that it is just a formality and that the EU accounts are absolutely satisfactory but that is not the case. It is a huge amount of money and it is not satisfactorily accounted for by the EU’s own Court of Auditors. I wonder whether the Government have any ideas on how to improve this situation. Perhaps an international firm of accountants could be asked to run an eye over the EU accounts to see what the problem is or perhaps methodological means should be used. Perhaps, in the future, Europe Day could be not 9 May but the day when the European Union accounts are finally approved by the Court of Auditors. I beg to move.

Lord Radice: The noble Lord has tempted me to reply, as he mentioned the Select Committee report. However, perhaps I may first ask him a question. I noticed that he did not say what the purpose of his amendment was—that is, apart from the fact that it gives him the opportunity to speak. I certainly do not understand the amendment. Is he proposing to remove the Court of Auditors or is he proposing ways of improving the Court of Auditors? Perhaps he could answer that before I continue.

Lord Willoughby de Broke: I agree that this was not mentioned in the report but the noble Lord’s noble friend Lord Tomlinson suggested that the Court of Auditors could be improved by not having a member from each of the 27 member states. That may be an improvement, but I also have a question for the Government. Might there be a better way than using the Court of Auditors? At the moment, European accounts are a very grey area, notwithstanding all the reports that we have had and the questions that have been raised over the years. I repeat: these accounts have failed to be passed for 13 years in succession. There must be a better way of doing things.

Lord Radice: I was asking the noble Lord to explain his amendment, not what the noble Lord, Lord Tomlinson, said. I do not understand the purpose of the amendment, apart from, as I said, giving him an opportunity to speak.

Lord Willoughby de Broke: It provides an opportunity to probe what we are going to do about the continual misapplication of funds in the European Union. Surely that is worth debating in this Chamber, particularly when the Court of Auditors is mentioned in some detail in the Lisbon treaty.



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Lord Radice: I agree that it is useful to discuss that, but should we do so on the basis of an amendment which would weaken the Court of Auditors? I am not certain and that is why I asked the noble Lord to explain the purpose of his amendment. He is right to say that it is a matter of regret that the European Court of Auditors has not been able to give a positive statement of assurance, although he might have mentioned that that does not necessarily indicate that high levels of fraudulent or corrupt transactions have taken place. In addition, Sir John Bourn, who was the head of our National Audit Office, told us that, were he required to do so, he would be unable to give a positive statement of assurance for the UK accounts similar to one that would be issued by the European Court of Auditors. I am not suggesting that this is not a matter of concern but I am suggesting that it should be put in context.

The noble Lord is also right to say that we were strongly in favour of the introduction of national statements of assurance signed by a Minister and senior civil servants, and, like him, I should like to know what is happening on that front and what the Government are doing about it. Of course, as more than 80 per cent of European funds are dispersed within member states, the Commission alone cannot be held responsible for the irregularity of these transactions. The national Governments have to take responsibility as well.

Lord Pearson of Rannoch: Under the treaties, the chief financial officer of the Commission is responsible. Surely the Commission could say to countries with which they were not satisfied, “You’re not getting any more money until you satisfy us that it is not disappearing in fraud and other irregularities”.

Lord Radice: I see that I have three noble friends who want to get involved in this debate. It is true that the Commission has a role in this under the treaty. My point is that it cannot be held solely responsible; national Governments have a responsibility as well. I hope that our Government, who have agreed with that point, are going to take this matter very seriously and produce a statement of assurance.

6 pm

Lord Brooke of Sutton Mandeville: I am not affected by whether my erstwhile noble friend moved his amendment for particular reasons; he has provided an opportunity for others to ask questions. I am going to ask one which, frankly, somewhat embarrasses me, but has been prompted by listening to the debate today.

Twenty years ago, I was on the Budget Council and the Minister responsible for just about everything in the Treasury that came in the housekeeping category—I was the only one of the eight Ministers who served in the Treasury, during my time, who had never worked in the City. Whether it was thought that I understood the outside world I do not know; it was certainly thought that I might be usefully employed on matters which were not related to the City. The then Treasury, under my now noble friend Lord Lawson, introduced

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a special unit to assist the rest of government with issues of purchasing and procurement. I can recall driving to see the Court of Auditors, after a Budget Council meeting, through a profound fog—climatically apposite to the subject we were looking at. I recall being told on that occasion that I was the first president of the Budget Council who had ever visited the Court of Auditors; that is a little alarming since 1986 was some 29 years after the foundation of the Community.

The question I want to ask relates to the second unit, for which I was responsible, in relation to procurement and purchasing. As we set that up, we recruited able people from the private sector to come and look at how government entities were handling the ordinary efficiencies of their job. One young man had taken an interest in the costs that were being incurred by the storage of commodities under the CAP and related matters. He realised that the storage was being charged and costed at a rate which was rising in line with the retail price index. He took the trouble to go down and visit the various storage contractors around the country and was very struck by the ubiquity of BMWs in their car parks. As a consequence, he made further inquiries into what the ordinary movement of costs in the storage industry were and discovered that we were going through a happy technological period where the costs were going vertically downward. I am not going to go any further into that issue. I have made the important points about it. What interests me—it embarrasses me that I did not ask the question at the time— is how far there is a system for communication and collation within the Union, either at the level of the Commission, or at the level of the Court of Auditors under which good practice in individual countries is reported on and thereby reflected in other countries within the Union.

Lord Stoddart of Swindon: The noble Lord, Lord Radice, asked what the purpose of this amendment was. It is to probe the arrangements that the EU has to control fraud within its finances. It is very relevant for that matter to be discussed in this Parliament because we contribute about £12 billion a year towards the finances of the European Union. That is taxpayers’ money which should be taken proper care of and should not be converted to fraudulent use. So this is an excellent opportunity to discuss this matter, although not at great length.

I remember—as most of us in this Chamber will—the late Lord Bruce of Donington, who spent half his life in investigating the fraud in the EU and the role of the Court of Auditors and how we could improve matters so that fraud did not exist or was at least reduced. Prime Ministers have got involved in this because they are so concerned about it. Margaret Thatcher, when she was Prime Minister, was very concerned; I think she actually mentioned a figure of £6 billion which was converted fraudulently. Various other people, including the Government, are concerned about it. The Chancellor of the Exchequer sees that a lot of the fraud is caused through the CAP, which is one of the reasons he wants to get rid of it.

Lord Dykes: I hope that the noble Lord will forgive me for introducing an extraneous comparison. He mentioned a figure of £6 billion; was it not interesting

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to reminisce about the exact same figure, which was the cost of the repair job done by the then Conservative Government after the collapse of the poll tax?

Lord Stoddart of Swindon: The noble Lord is usually spot-on with his interventions, but I think he is a little out of line with this one. I do not believe that fraud was involved in the introduction of the poll tax, so I do not see its relevance to our present debate. In any event, that was nothing to do with the EU—it was everything to do with a mistake by a Tory Government, which we all resent, and which the Tory party has always regretted. That is a diversion from this debate, which is important. A very good Prime Minister who was with it, who understood finance and was very well qualified was concerned about this £6 billion-worth of fraud, so we ought to be concerned about it too.

The objective of the amendment is to get the Government involved in finding a different and better means of controlling fraud within the European Union. Our own Public Accounts Committee does quite a good job, but that is not relevant to the EU.

Baroness Ludford: I was rather surprised at what the noble Lord has just said. I agree that member states should be more involved in countering fraud, but the other amendment, which is part of this group, seeks to remove the obligations on the EU institutions in member states to counter fraud. The noble Lord, Lord Radice, asked the noble Lord, Lord Willoughby de Broke, the reason for the amendment, which appears to seek to abolish the Court of Auditors, and was told that it was just a probing amendment so that we could discuss the matter. Surely that does not justify the other amendment, which wants to take out the obligations on the EU institutions of the member states to counter fraud. The new Article 325 in the treaty says that the Union and the member states shall counter fraud and any other illegal activities affecting the Union’s financial interests and that member states shall take the same measures to counter fraud affecting the Union’s financial interests as they take to counter fraud affecting their own financial interests. This is a very important part of the treaty. The noble Lord said that we want member states to get more involved in countering fraud, yet the amendment wants to take out the fraud-busting provisions in the treaty, so I am quite puzzled.

Lord Stoddart of Swindon: Some of us do not have confidence in the existing arrangements and we are not sure that the proposed arrangements will be any better. They will certainly not be any better unless the Government can tell us exactly how they would proceed under them. What ideas do they have to improve them? I hope that the Leader of the House will be able to tell us exactly what the Government’s view is. We can then perhaps be satisfied and the noble Lord, Lord Willoughby de Broke, may well want to withdraw his amendment, although that is a matter for him.

Lord Dykes: I am grateful to the noble Lord, Lord Radice, for asking such a pertinent question of the noble Lord, Lord Willoughby de Broke, although he

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did not receive an answer. To be fair to the noble Lord, Lord Willoughby de Broke, I recognise that he said that this is a probing amendment, tabled to reiterate some of the discussions that have been held before. However, he rather repeated all the points. A feature of the UKIP contributions is the constant, inexorable and relentless repetition of points, even when they are not necessarily accurate. I accept that there is a serious problem with fraud in the EU member states, which has to be tackled.

Lord Willoughby de Broke: I am sorry—

Lord Dykes: I am going to rest on the suggestion of the noble Lord, Lord Tomlinson, although he is no longer in his place. He said that, in order for us to make more progress, he would not necessarily give way. I am invoking my right not to give way. I would love to give way, but the debate goes on too long.

Baroness Ashton of Upholland: The noble Lord, Lord Willoughby de Broke, will of course have a right of reply at the end of the debate, so perhaps he can deal with the matter then.

Lord Dykes: I am grateful to the Lord President for that. As the noble Lord, Lord Tomlinson, said, if we give way all the time—much as I would love to for the purposes of the debate and the exchanges—we just get, at excessive length, the propaganda from UKIP, of which there are two Members, with the independent Labour Member sometimes supporting them. Other colleagues genuinely wish to make progress with the Bill. I feel that a majority of Members—without our being oppressive of the minority views—is in favour of beginning to accelerate the progress of the Committee, albeit in a way that is not undemocratic and does not deprive people of the opportunity of saying a few words. The realistic appraisal is that there is a strong majority in your Lordships’ House for the treaty and therefore for passing this Bill. A lot of patience has been shown to the UKIP Members, which I feel they should acknowledge by making shorter speeches. Indeed, I am sorry for the length of my remarks in dealing with that matter.

If the noble Lord, Lord Willoughby de Broke, had correctly answered the question that he was asked, he would have said, “I’ll withdraw the amendment and will support the provision in the treaty”. I believe that everyone agrees that the Court of Auditors needs substantially to increase resources. It is now dealing with 27 member states and needs, without going too far overboard and being too expensive, to be a much more powerful body in terms of personnel. The problem of having one person from each member state also needs to be solved, although the main problem relates to the detailed administration travelling down through the member states to the ground.

I think that the noble Lord, Lord Brooke, was referring to examples in the United Kingdom when he mentioned the young man, which gives me the opportunity to remind colleagues that there have been cases of fraud in the UK, too, although I mean no disgrace to redound on any British Government. Indeed, the UK

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has often been quite high on the Court of Auditors’ list in its measurement of fraud. That is partly because of the sad reality that there were certain dodgy people in the City a few years ago who were very good at devising equally dodgy agricultural investment schemes. The combination of our strength in agricultural management as an industry—unlike in Germany, where industry is strong but agriculture has always been weak and fragmented—and the City spivs to whom I referred, although obviously without mentioning any names, was powerful and explosive in creating some interesting and ingenious schemes some 10 to 12 years ago. The reality must be that we should support the Court of Auditors in its work.

Because of time, I will not refer to Amendments Nos. 80A and 85, except to say that they are part of the same picture. The European Court of Auditors has done a good job and the sovereign member states have their own responsibility to respond to the central responsibility of the Commission and the Court of Auditors to ensure that money is managed properly. Putting 27 national public finance and financial management cultures together in the increasingly enlarged European Union is a difficult task for both the Commission and the Court of Auditors. In many ways, they have done a marvellous job. As a Member of the other place, I made various visits to the Court of Auditors; one could only be struck by its efficiency and expertise in dealing with these matters.

6.15 pm

Lord Pearson of Rannoch: I was not going to intervene, but the remarks made by the noble Lord, Lord Dykes, are too tempting. I remind him that the propaganda budget—the information budget, as I think it is called—of the European Union is somewhat larger than that of the UK Independence Party.

Now that I am on my feet, perhaps I may put an idea to the Government. I have put it to them before in these proceedings, but I did not get an answer. My idea is based on our agreement that the Court of Auditors is the least malign of the institutions of the European Union. None the less, it is still part of the EU; it is the EU’s internal auditor. There is no external auditor as anyone understands that expression for these vast amounts of money that we pour down the throat of this octopus in Brussels. As the noble Lord, Lord Stoddart, said, there is no equivalent even of our Public Accounts Committee.

My idea is that, as a major contributor to this budget, we should simply withhold our contributions until Brussels appoints a major firm of international auditors, chosen by the donor nations, to oversee the accounts of the European Union. If that means standing down the Court of Auditors, so what? As noble Lords will know, we in the UK Independence Party do not mind if the whole thing collapses. However, surely a firm of international auditors appointed to work either alongside the Court of Auditors or in the nation states might take us some way forward. I fear that nothing else will, despite the blandishments of the noble Lord, Lord Dykes, and his Europhile friends.



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Lord Hunt of Wirral: I thought that the speech of the noble Lord, Lord Willoughby de Broke, was very sensible, so I am slightly mystified by some of the reactions to it. If anything, I thought that he erred on the side of euphemism. He referred to a number of “worrying developments” and said that he found the situation “rather unsatisfactory”. I believe that the situation that we have been discussing is unacceptable and must be resolved as quickly as possible. As he reminded us, the Court of Auditors has not been able to sign off the EU’s accounts for 13 years. One would have thought that, by now, we would have sorted it out.

The noble Lord, Lord Radice, intervened to question exactly what the amendments would do and the noble Baroness, Lady Ludford, and the noble Lord, Lord Dykes, interrupted the noble Lord, Lord Stoddart, as he was trying to stress the importance of some of the substantial figures involved. It is quite clear to me that Amendment No. 79 gives us the opportunity to examine the membership of the Court of Auditors. Should it consist of one national of each member state? Should there be independent members? Is this the right provision? Amendment No. 80A, which we are taking in this group, enables us to examine whether the right words are used. Should they refer only to examining,

or should other areas be included in the terms of reference? Finally, Amendment No. 85 gives us the opportunity to examine the reports of the Court of Auditors. I thought that all the diversion, which took about 10 to 15 minutes, was a little irrelevant. I hope that the noble Lord, Lord Radice, does not mind my saying this, as I believe that the committee of which he is a member has done a good job in raising a number of key questions, to which we still await answers.

The European Commission tends to blame national Governments for why the accounts are not signed off. But the Court of Auditors says it is the Commission, so we really have to examine who is right.

In the preliminary draft Budget debate, Mr Ed Balls said:

That is next year. He continued:

We all await the words of the noble Baroness with great interest.


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