CHAPTER 6: summary of conclusions
Accuracy of the Commission's figures
102. Based on this analysis, the figures cited
by the Commission in its annual report only offer a glimpse of
the level of fraud perpetrated against the EU's finances. Commissioner
Šemeta argued that the EU budget is no more or less vulnerable
to fraud than national budgets whilst the Government argued that
EU programmes will always be vulnerable to fraud and, in some
Member States are increasingly so. If the Government are right
then the final figure will be even greater than €5 billion
(paragraph 21).
103. These figures suggest that the vast bulk
of fraud against the EU's budget is never brought to the Commission's
attention, and probably never sees the light of day (paragraph 22).
Member States' responsibility to report fraud
104. The lack of enthusiasm displayed by the
Member States in reporting fraud to the Commission, coupled with
a lack of uniformity throughout the Member States in the definition
of fraud, clearly undermines the Commission's efforts to grasp
the full extent of this problem (paragraph 25).
105. Fraud is, by its nature, opaque but the
Member States and the Commission have no reliable estimate of
the extent of fraud committed against the EU's budget. We are
unable therefore to see how their claims to protect the EU's financial
interests effectively can be justified (paragraph 26).
Duty to report fraud to the Commission
106. We expect the Government to take its responsibility
to report EU fraud to the Commission seriously and we would now
anticipate the levels of reported fraud against the EU's agricultural
budget in the UK to increase in the Commission's next annual report
(paragraph 37).
Who leads the UK's fight against EU fraud?
107. The Government repeatedly claim that they
take EU fraud seriously but the Exchequer Secretary was unclear
as to whether any particular Government department takes the lead.
We are concerned that no single Government department or body
takes this lead and that the Exchequer Secretary was unable to
tell us whether at any stage the figures from various departments
are brought together. This seems to support the evidence from
our other witnesses that Member States, including it seems the
UK, do not devote significant resources in pursuing the matter
and reporting fraud to the Commission (paragraph 40).
108. We recommend that the Government nominate
a single department or agency to coordinate the fight against
EU fraud and take responsibility for attempting to quantify the
problem and report to the Commission where it is appropriate.
The information should then be shared with all the relevant Government
and EU crime fighting agencies (paragraph 41).
Is MTIC fraud against the EU's budget?
109. At the outset of this inquiry, as we have
already noted, the Government were of the view that VAT fraud
was outside the scope of our investigations. However, we consider
that we were justified in pursuing the matter since the Exchequer
Secretary told us that although the majority of VAT raised stays
in the UK Treasury the very small proportion due to the EU amounts
to £2 billion which is a large enough sum to be of concern
both to the UK Government and the EU (paragraph 55).
110. We have heard evidence of very significant
levels of VAT fraud. The Committee understands the Government's
opposition to any measure or action which would extend the EU's
competence into tax enforcement in the UK. But this legitimate
concern should not allow fraud which diminishes the amount due
to the EU to be ignored or not pursued with vigour. It is beholden
on the UK Government to come forward with alternative robust proposals
that will address these matters (paragraph 56).
111. We remain of the view that the proposed
fraud Directive has merit; in particular, its attempt to bring
uniformity to the EU's classification of these offences. We expect
that it would have a positive impact on the Commission's ability
to acquire a more accurate statistical analysis not only of VAT
fraud but also levels of fraud in general in the EU. In turn this
will assist everyone in their efforts to protect the EU's financial
interest (paragraph 57).
OLAF's budget
112. We regret that budgetary restrictions force
OLAF to be selective about the cases of EU fraud that it pursues.
While OLAF cannot be given a blank cheque, the current restraints
place a significant limitation on its effectiveness (paragraph 63).
OLAF's independence and its Supervisory Committee
113. Aside from the breakdown in relations between
OLAF and its Supervisory Committee (discussed below), we have
not received convincing evidence that the current arrangement
on OLAF's independence within the Commission needs to be changed
(paragraph 65).
OLAF's Supervisory Committee
114. We hope that the CONT Committee of the EP
will continue to monitor closely the ongoing relationship between
OLAF and its Supervisory Committee. The Supervisory Committee's
role is to ensure OLAF's independence and we urge all those involved
to find a solution to this situation (paragraph 72).
Lack of follow-up
115. We are of the view that the decision to
prosecute must remain a national matter. The Member States must
also recognise that if OLAF were to be seen as a body whose recommendations
are never followed up, it will remain hamstrung in its ability
to protect the EU's financial interests. This is another limitation
on OLAF's effectiveness (paragraph 82).
116. A solution to this problem would be a requirement
that the Member State authorities provide OLAF with direct responses
to the cases referred to them and the actions taken to tackle
them (paragraph 83).
OLAF's Interaction with UK authorities
117. We note that the creation of a single point
of contact between OLAF and the UK authorities is a requirement
of the new OLAF Regulation. With that in mind we welcome the discussion
between the Home Office and the City of London Police; this discussion
should include the devolved administrations. We expect to see
a successful outcome to this discussion (paragraph 87).
118. We hope that the creation of a single point
of contact in the UK will improve the relationship between OLAF
and the UK national authorities (paragraph 88).
Interaction with Europol and Eurojust
119. The tangled web described by the Exchequer
Secretary between the three EU crime agencies of Europol, Eurojust
and OLAF contributes to the lack of a coordinated response to
fraud on the EU's budget which is a further limitation on OLAF's
effectiveness. We are particularly concerned that this lack of
cooperation could be hampering the effort to get to grips with
the massive amount of cigarette smuggling which is both a fraud
on the EU's budget and a major manifestation of international
crime. We look forward to considering legislative proposals designed
to clarify the respective roles of the EU's crime fighting agencies
(paragraph 93).
European Public Prosecutor's Office
120. The Commission has not yet formulated a
proposal and it is unfortunate that the Government have ruled
out participation without first having had the opportunity of
considering the details of any proposal and without knowing what
form an EPPO would take. Since apparently the Government are not
disposed to revisit their decision on the EPPO then they should
explain how they propose to tackle the shortcomings in the system
for combating fraud against the EU's finances discussed in this
Report without participating in any EPPO (paragraph 101).
| 
