European Community

HC Deb 04 March 1982 vol 19 cc467-502 7.54 pm

The Financial Secretary to the Treasury (Mr. Nicholas Ridley)

I beg to move, That this House takes note of the Annual Report from the Court of Auditors concerning the financial year 1980 together with the replies from the Institutions (European Community Document No. 11456/81) and supports the Government in seeking to ensure the sound management of Community finance.

The purpose of this debate is to give the House an opportunity to express its views on the Court of Auditor's report concerning the Community's 1980 financial year so that Her Majesty's Government can take account of them when the Council considers the report. The Government agree with the Scrutiny Committee and the hon. Member for Birmingham, Erdington (Mr. Silverman) on the importance to be attached to this whole subject. This debate is taking place at an appropriate time in relation to consideration of the report in Brussels.

The report is at present being discussed within the Council, which will very soon be deciding on its recommendation to the European Parliament on the discharge to be given to the Commission. It will be possible to take full account of the views of the House when deciding the United Kingdom's position in the council on the recommendation.

The House will be aware that the recent fifth report from the Public Accounts Committee gives a full description of the tasks of the Court of Auditors, its organisation and the way in which it carries out its tasks. It may help the House if I describe briefly the procedures of the production of the report and its subsequent consideration.

The procedures are laid down in the treaty and amplified by more detailed rules in the financial regulation. Briefly, the Commission is required to submit accounts relating to the implementation of the budget to the Council and Parliament by 1 June of the year following that to which they relate. The Court of Auditors is required to send its comments on the accounts to the Commission and the other institutions concerned by 15 July. Each institution has to give its comments in reply to the court's comments by 31 October. The court is then required to submit its report, and the replies of the institutions, to the Council and the European Parliament.

The European Parliament is required to give a discharge to the Commission for its execution of the budget, acting on a recommendation by the Council, before 30 April of the following year. The financial regulation states, however, that if that deadline cannot be met the Parliament or the Council shall inform the Commission of the reasons for the postponement. In the past it has several times proved impossible to keep to the procedural timetable as described, and this timetable is indeed rigid and compressed. It is also, in our view, unrealistic.

Unfortunately, when the financial regulation which contains the timetable was last revised in 1977, the Court of Auditors had only just been set up. It did not have the time before adoption of the regulation to give a detailed opinion on it and lacked the practical experience on which to base a view. The United Kingdom at that time questioned whether the timetable was realistic. Other member States agreed that it was compressed but considered it was more important to ensure that the audit was completed promptly. It is, of course, important that the audit be carried out promptly but not at the expense of thoroughness.

The financial regulation is once more under review, proposals having been made by the Commission for this purpose. Detailed discussion has not yet started in the Council, since the opinion of the European Parliament on the Commission's proposals is awaited. As a result, the court has had time to deliver its detailed opinion on the proposals and this will be available to the Council during its discussions.

During those discussions Her Majesty's Government intend to take up once again the question of the timetable. Audit, financial control and sound financial management are too important to be constrained by an unrealistic timetable. This is one major way in which we hope to improve the financial management of the Community.

The report before the House this evening is very detailed and raises a large number of issues. This is to be expected since that is the purpose of audit. There is a change of emphasis in this report compared with an earlier one, since the issues raised concern more the question of value for money than the more pedestrian questions of whether decisions were taken strictly according to the rules. The Government welcome this trend, since part of the court's remit is to consider whether financial management has been sound. It is also welcome because it shows that the court has come across fewer cases of failure to observe regulations strictly. This is encouraging.

I am sure that right hon. and hon. Members will take up a number of points raised in the Court of Auditors' report. We shall take careful note of any detailed points that are raised and refer them to the Council when it meets to consider the report, so that the views of the House are well known by the United Kingdom representatives at the Council. In so far as there is anything that I can do to comment on or elucidate any point, it may be for the convenience of the House if I seek leave to reply at the end of the debate.

I am sure that the House will understand, however, that I cannot answer for the implementation of the report, which will be for the Commission. The British Government's concern is to make sure that we do the most that is possible to ensure sound financial management of the Community, and that will be our objective in the coming weeks.

8.1 pm

Mr. Robert Sheldon (Ashton-under-Lyne)

The House, which listened to the Financial Secretary with interest, will have read with care the report of the Commmittee chaired by my hon. Friend the Member for Birmingham, Erdington (Mr. Silverman).

There are a number of financial aspects of the Community. Among the most important is the major disproportion between the amounts that we pay and the amounts that we receive back as a result of our membership. Another is the dominant role of the common agricultural policy, to which much reference is made in the House. A third is that which concerns us tonight—the question of value for money. The hon. Gentleman rightly drew attention to the way in which the Court of Auditors is concerning itself more and more with this most important aspect of its work.

The court was established by the Treaty of Brussels in July 1975 and came into being in October 1977, after ratification, so it is a relatively new body. It must be looked at in the light of the vast amount of work that it does, the need for support for that work and the need for its continuing inquiring role, which we must support whenever it produces reports such as that which we are debating.

The court consists of one member from each of the 10 member States. They serve for six years. The member from the United Kingdom is Sir Norman Price, who was the most distinguished chairman of the Board of Inland Revenue, and who is superbly qualified for the appointment. He is one of the great public servants that we have produced, who do not, in these sad days, always receive the recognition that great public servants should receive from the House and from the Government.

The court has a staff that is small in comparison with its task. It has an establishment of 284, of whom only 220 were engaged when the Public Accounts Committee visited the Commission in Brussels last November, and of whom only about 12 have recognised qualifications. Before we start expressing our dismay—and "dismay" is the right word—we must remember that in regard to our own Exchequer and Audit Department, which has a staff of 600 or 700, for nearly 20 years I and many others have continually deplored the lack of outside qualification.

The court and our Exchequer and Audit Department have difficulty in obtaining qualified staff. We know of the difficulties caused by the pay differential in accountancy between the public service and the private sector, which is large and not to the advantage of the public servant. However, there has not always been the interest in, and concern about, obtaining that type of expertise both in this country and—although I am much less qualified to speak about this—on the court.

I should like to confine myself to a few general questions of principle about how the court should proceed and then go on to a number of examples from the report.

Clearly we need to have a body such as the court. I suppose that we have always seen it as being analogous to our own Comptroller and Auditor General, though it has a more difficult task, because there are differing traditions within the Community.

In order to create and maintain confidence that public money is being used for the public good, the court will not be able to compromise in the way that many other European institutions can. There is a certain amount of fudging along the lines of communication. That is made inevitable by the difficulties of bringing together a number of different traditions, but, however inconvenient it may be, and however expensive it may be, to operate a system of control that can be fully justified we must go along this path; we must justify the trust which the placing of public money imposes on those privileged to disburse it. This is an essential task, and the difficulties and the cost must not affect the way in which it is carried out.

We must at all times be unhesitatingly on the side of the court in so far as it is carrying out that task, even when it is in conflict with the Commission, as we are—or perhaps I should say "as we should be"—on the side of the Public Accounts Committee when it comes into conflict with the Government. We must not be too complacent about that, because there is on the Order Paper an early-day motion signed by several hundred hon. Members saying that the appointment of the Comptroller and Auditor General should be in the hands of Parliament, that he should not be selected by the Government of the day. The motion also says that he should inquire into matters such as British Leyland, as my hon. Friend the Member for West Lothian (Mr. Dalyell) constantly tells us. However, we do not have the power to order that.

We are asking the Community, which in some respects has more power to intervene, to extend that power still further. We must not be too complacent about the kind of advice that we give others when we are failing to take some of it ourselves.

The way in which the Executive dominates Parliament in the auditing of its accounts is scandalous. It is perhaps copied, but only slightly, by the way in which the Commission is attempting to dominate the court. That is the matter that is before us, and in it we must unhesitatingly be on the side of the court, as I am sure we and the Government are.

Following the court's report, the European Parliament gives a discharge to the Commission on how the budget has been implemented.

Sir Anthony Meyer (Flint, West)

I do not want to make the right hon. Gentleman say more than he is saying. I am deeply interested in his speech, and am with him all the way. Does he accept that the logic of his argument so far is that if the Community is to function efficiently it must have at its centre an organisation that is in a position to override the differing views of bodies over-swayed by national considerations or by short-term political considerations, as the Commission sometimes is, and in a limited sphere to impose views which it is necessary to impose in the interests of the community as a whole? From that, certain other consequences follow.

Mr. Sheldon

I am not sure whether I fully follow what the hon. Member is saying. If he is saying that the Court of Auditors must command not only our respect but our support, I agree with that. That is the burden of what I am trying to say.

When I mention that the European Parliament gives a discharge to the Commission on the implementation of the budget as a result of the report from the court, I am reminded of the fact that Treasury Ministers must be happy that we do not have the same procedure in the House. Many of us wish that we had. The way in which the Administration are able to override so many of the areas that are the direct concern of Parliament is nothing short of scandalous. I am sure that if the House ever had the right to give such a discharge there would be many occasions on which it would fail to do so.

The report shows that there is a great deal of tension between the court and the Commission. There is even a quarrel over who has the last say, and the Public Accounts Committee did a notable service when it visited Brussels. In its report of 9 December 1981 it talks about the permanent conflict that seems to exist between the Court of Audit and the Commission. I agree with that. We understand that there are problems of political and financial control. The Committee gives the example that a decision whether to build public buildings is not based on cost, as it would be in any one of the Community countries and as it is in this country. As we are dealing with a number of different countries there are political arguments over where that building should be. We have similar problems, but the political realities are on the basis of a rather wider agreement than is possible in the Community.

The Public Accounts Committee and the auditors say that they hope that they can eventually reduce the size of the annual report. I shall believe that when I see it. I hope so, too.

I shall now deal with some of the detailed aspects of the report, which, given the size of it, is quite well put together, and it is relatively easy to look at some of the major aspects of where things have gone wrong. The most serious criticism made by the Court of Auditors is in paragraph 2.4. When looking at the method of controlling the accounts it says: A basic means of control is the regular reconciliation of the bank balances in the general accounts with the bank statements.

We all know that is so. The same thing happens in any small organisation in our constituency. It sends to the bank for its statement and tries to reconcile it with the actual cash distribution. In the case of some of the Commission's bank accounts, which were held in the national currency, the reconciliations were made only at irregular intervals.

The report continues: For example, at 30 April 1981, the reconciliations of 31 December 1980 were still not finalised in the case of several bank accounts, two of which showed balances of 30.7 and 8.7 MEUA respectively. In the case of accounts held in the EUA no reconciliations have been made at all. That is unacceptable. I have read the arguments of the Commission, which is enabled by the processes that it has to give contradictory views, in the latter half of the document, but I am still of the opinion that there is no real defence to such a practice.

If one looks at paragraph 2.6, one sees that there are two methods of holding the account. One is based on the computer, which is presumably an adequate method, but it seems to be somewhat slow and the information is difficult to extract. In addition to the accounts on the computer, there is a parallel system of accounts held manually which are used for the day-to-day basis of accounting. It is absurd to have two parallel methods, and I hope that that will come to an end.

If one looks at paragraph 2.8, one sees that, as is the normal practice in all these matters when the auditors move into an area, they look for outside confirmation. That is their task, duty and obligation, and it is a procedure that is widely used in modern accounting practice. It consists of having the account holder ask the banker to send direct to the auditor certain information on the operation and the balances of the accounts that are with the bank.

While the Department at the European Parliament accepted that procedure immediately—which is, after all standard practice—the Commission found it unacceptable that financial information could be sent to the Court of Auditors. It insisted upon acting as a post office. All communication between the bank and the Court of Auditors had to be made through the Commission. That is manifest nonsense and is disgraceful in a number of areas.

Whereas the Court intended to employ a modern, effective method of audit such as is widely used in both the public and private sector, the banks were not asked by the Commission for all the information that the court had requested. As is mentioned in paragraph 2.9(c), the bank accounts of the external delegations and information offices, the bank accounts reserved for borrowings and loans, and the Treasury accounts of member States were not available and the court was unable to fulfil its audit objective in relation to the cash accounts at 31 December 1980. There are a number of firms which would find themselves in great trouble if they attempted to operate a system remotely like that which impeded the work of the auditors. That is something that we must look at and disagree with most strongly. I hope that the Minister will make that point to the Commission and end that disruptive method of interfering with the audit operation.

Mr. John Roper (Farnworth)

Is it not the case that part of the problem is that there are different practices in different member States? In Belgium and Luxembourg it is not the custom for auditors to have direct access to bank accounts. Will the right hon. Gentleman tell us whether the multinational companies that have operations in Belgium and Luxembourg have found a way by which their auditors can have direct access to bank accounts? If firms have done that, it is an important lead, which the Court of Audit can follow.

Mr. Sheldon

Private money and its operation is one matter, but when we are dealing with public money and its disbursement, if the laws of the particular member State prevent us from being sure that public money is being used for the public good it is up to us to ensure that changes are made in its legislation. It will take a little time, and I understand the problems.

I continue with paragraph 2.28: The continuing weaknesses in the accounting systems, already emphasised in previous years and its findings for the financial year 1980, together with the obstacle met by the Court in its audit of the cash accounts, mean that again the Court of Auditors has not been able to satisfy itself that the consolidated balance sheet as at 31 December 1980 adequately reflects the Communities' assets and liabilities at that date. If a public company had to qualify its accounts in any way remotely like that, the shares would plummet immediately. That is the measure of the failure to allow the auditors the means by which they are empowered to obtain the information that they require.

Under paragraph 6.8, we see that in a number of cases expenditure was higher than the appropriations. Table 6.4 shows that under one budget heading 4½ million units of account were overcommitted, under budget heading 5011 the figure is 0.8 million units of account and under heading 511 it is 0.5 million units of account. Those substantial sums of money were spent in excess of the appropriations.

We all know the complications that arise from variations in the European units of account in respect of national currencies. Part of the overspending is due to that. However, there must be better control of the expenditure so that when money is appropriated the expenditure is kept in check.

Mr. Tim Rathbone (Lewes)

Will the right hon. Gentleman remind the House, from his experience at the Treasury, of the extent of his Government's over-expenditure in their last complete fiscal year?

Mr. Sheldon

The hon. Gentleman seems to have missed the point. We are talking not about Supplementary Estimates, but about appropriations and expenditure in excess of appropriations. That money should not have been there. If money is not there, it cannot be spent. We have a problem of virement, which is one of our difficulties. However, over the years we have been able to satisfy ourselves on that. This matter is different and much more basic and we cannot allow that lax form of control to continue.

I come to some smaller points that are easier to understand and are more comprehensible because of their smallness. First, I refer to the number of days given as public holidays to Members of the European Parliament. That is something that we can all understand. One does not need great expertise to understand it.

Paragraph 10.32 states: According to Article 61 of the Staff Regulations, a list of public holidays is drawn up by agreement between the institutions. The implementing measures for this provision give a list of days which are considered public holidays and days which may be considered public holidays. It also allows an institution, by special decision, to derogate from these rules. The whole of this legislation is designed to ensure observance of the principle of equal treatment of officials of the Communities, whatever the institution to which they belong. Accordingly, each year the heads of administration, following the consultation procedure … draw up a list. Thus, for 1980, the heads of administration agreed on a list comprising 18 days of public holidays. An enquiry into the number of public holidays actually granted in 1980 showed that the maximum of 18 days had been respected in all the institutions except the European Parliament. The officials of this institution received 21 days' public holiday. The grant of three additional days of public holiday is contrary to the idea of equal treatment". The cost of Euro MPs giving themselves holidays was about £500,000.

The next matter is a little more serious, although I do not deny the seriousness of the first. It concerns the receipt of allowance for motor car expenses by those who are already in receipt of such expenditure elsewhere. Paragraph 10.36 states: A survey was carried out in Brussels at the Commission and the Council to see if there were cases of receipt of these allowances and use of official cars at the same time. Those people had the benefit of the allowance as well as the use of official cars.

The report continues: This survey revealed that:

1. (a) at the Commission, out of the 1,037 recorded journeys of official cars from the pool in June 1980, 222, i.e. 21.42 per cent., involved persons in receipt of the allowance;
2. (b) at the Council, out of the 153 journeys…46.5 per cent. Were reserved for the transport of officials in receipt of the allowance.

The Court of Auditors is strongly of the view that all institutions should take the necessary steps to ensure that any request by a person in receipt of the travel allowance for an official car for travel within the town where he is employed is refused. The Court requests the Commission and the Council to put an end to this abuse as quickly as possible.

That is a matter that we can all understand. I take it that there is no question but that that decision will be implemented immediately. There cannot be any quarrel with either of those two recommendations, which are simple and clear and which must be carried out to assure us of the basic competence of our institutions to look after public money.

The paragraph referring to typing pools reads like something out of Beachcomber. The pages per typist employed in the European Parliament amount to only about seven a day, but in the European Court of Justice the total is 15 a day. It is not immediately apparent why there is that enormous variation in the work load. That is not such a serious matter as some of the others, but, like many of the other questions, it demands an answer. I hope that the Financial Secretary will ensure that an answer is obtained.

In paragraph 12.6 there is a reference to the failure to obtain information from Euratom about its accounts. That is serious. Anyone in receipt of public money must have an obligation to prepare and present all the figures required by the Court of Auditors. I hope that the Financial Secretary will also press that point.

There is one arcane matter which perhaps I should not deal with at great length, although I might have a word with the Financial Secretary on a subsequent occasion. It concerns the laxity of the system of provisional twelfths. That is the means by which the money is obtained to carry on expenditure, which is topped up month by month. That is a serious deficiency, which the Financial Secretary should investigate with care.

Mr. Julius Silverman (Birmingham, Erdington)

When the Parliament turns down the budget.

Mr. Sheldon

That is also a possibility.

Finally, I comment on the state of warfare between the Commission and the Court of Auditors. There is a big difference between the cash balances that it accepts and which the Court of Auditors says ought to exist.

Although I understand the point made by the hon. Member for Farnworth (Mr. Roper) about the laws of banking confidentiality in both Belgium and Luxembourg, I am sure that if there is sufficient will it will be possible to get the bank, with the agreement of the Commission, to present those figures. This is nothing more than a subterfuge, which is preventing the Court of Auditors from obtaining the information that it needs to undertake the important work that it must do.

We have a long way to go before we discover a proper system of control that we would accept as reasonable and that the House would find acceptable. The standards of financial integrity and judgment are a long way from being harmonised. I do not say that Britain has the best record in this respect, but we have a record of considering it to be important and we ought to bring that to bear. We have a long way to go and it is up to Her Majesty's Government to support all efforts to obtain the sort of control that we would consider acceptable.

8.29 pm

Mr. Tom Normanton (Cheadle)

First, I express my strongest support for the inclusion on the Order Paper today of this item. I am even more pleased to see that it stands in the name of my right hon. Friend the Prime Minister and members of the Government and that it includes the words: and supports the Government in seeking to ensure the sound management of Community finance. If that does not commend itself to both sides of the House, some hon. Members will give up hope.

We are creating in the European Community what I hope will be proven in the short-term that our actions are a major step towards achieving the more efficient and cost-effective management of public moneys in an appropriate manner. I must confess that I applaud what the right hon. Member for Heywood and Royton (Mr. Barnett) has been saying in debates, in Committees of this House, on the radio and on television, that we are doing that in this House in a most ineffective manner.

We firmly believe in this House that we control the public purse. I have no hesitation in saying that that is a complete myth, by comparison with the means now at the disposal of the European Community, to do precisely that operation for which parliamentarians from all 10 countries were elected in 1979. I say "1979" because this House should be conscious and proud of the contribution which Westminster Members, over many years before that date, made to establishing the introduction of this system and new development and the taking of control over public expenditure.

We are talking tonight about a spending budget and we shall debate a revenue—raising Budget in the House on Tuesday. With great respect to both sides of the House, there is a great difficulty in using the word "budget". This House has a different interpretation of that word from that held by the European Parliament and Community.

This debate relates to the Court of Auditors which has only had time to produce four reports. In reality, all the preceding reports, to all practical intents and purposes, were dry runs. However, right hon. and hon. Members, while serving in this House and the European Parliament, made enormous efforts to introduce this as a method of monitoring and influencing the pattern, method and control over public spending and the House should be rightly and justly proud of that. I regard the Court of Auditors as a real Expenditure Committee.

The Financial Secretary to the Treasury referred to the Council of Ministers and the European Parliament. However, this Parliament would be ill advised to ignore the way and extent in which the European parliamentarians have worked out, in the years before the Court of Auditors started operating, methods, techniques, structures and procedures for carrying out this important function. I would particularly refer to three or four former colleagues. The late Sir Peter Kirk would command widespread European commendation for his part. My hon. Friend the Member for Scarborough (Mr. Shaw) also rightly shares in the public recognition, on a European basis, for the contribution which he made. Many others have contributed on the basis of what they see as good in this Parliament, but which could and must be made even better in Europe.

The procedures and the methods of working, or what I would call, to use the jargon, the "competencies" of the Court of Auditors, the budget control committee of the European Parliament and the budget committee itself, which is concerned with making up the budget and not examining it after the event, are only the start, but an extremely promising start, along a long road. Even before the report of the Court of Auditors was issued and, indeed, for the previous year or two, the European Parliament had been chalking up a number of significant achievements.

I declare an interest as a member of the European Parliament ever since Britain joined the Community. First, the European Parliament established its authority as absolute in fact and in reality and not simply because it was written into the Treaty of Rome. The methods by which the Court of Auditors was evolved have given to the elected parliamentarians an authority which in effect can be described as absolute. That power is contained in the discharge. The discharge is not a formality. In 1980, it was not regarded as a formality by the Court of Auditors itself, by the Commission, by the Council of Ministers or by the Parliament.

The discharge is analogous to the auditors' certificate of a public company. If one cannot get the certificate of clearance from one's auditors, one has to look out. Hon. Members fall far short of reaching that state of accountability, scrutiny and control over public spending in broad terms, let alone in detail. Secondly, it is a conditional discharge on a firm commitment given by the Commissioners collectively and by the Commissioners individually, given to the Parliament publicly and given by Commissioners individually to the individual "spending committees". I use the word "spending" advisedly because they are, in practice, spending committees of the European Parliament. I am vice-chairman of the energy and research committee. That is a spending committee by whatever means one cares to interpret the word.

Commissioner Davignon spent tens of hours discussing with us, analysing the report of the Court of Auditors, and analysing also the report of one of our colleagues in the committee. I refer to Mr. Edward Kellett-Bowman and his intensive investigations as a member of the budgetary control team. That analysis was just as crucial, discriminating and critical as would be that of the auditor examining the spending, authority, and performance of the spending of the budgeted sums that had been allocated in any private or public company.

This resulted in firm commitments being given by the Commission during 1981 not simply to correct the losses, disappearance, or unaccountability of cash but, more important, to react to the recommendations of the committee for reorganising or restructuring the system, including the reorganisation of the staff of the Commission itself and their distribution of funds. I refer in particular to the Joint Research Centre at ISPRA where large sums of money from the public of Britain go each year. It is money for which we, as a Committee, feel we have a political and actual responsibility for monitoring.

I need hardly say that some of the findings of my fellow Member of the European Parliament, Mr. Kellet-Bowman—they are firmly on the record—were, to say the least, hair raising. Some of the points brought out in this report could be, by normal standards, interpreted as such. That must be regarded—

Mr. Richard Body (Holland with Boston)

Of the hair-raising examples that my hon. Friend might quote, does he agree that a place might be found for what the Court of Auditors said in its annual report of 1978, and repeated in its report of 1979 about the way Members of the European Parliament were allowing themselves subsistence allowances in excess of those laid down in the regulations? Was that a good example for the European Parliament to set? Can my hon. Friend tell us whether it has now been put right, after the Government have criticised the European Parliament in two successive years?

Mr. Normanton

I am not disturbed by my hon. Friend's intervention but I cannot tell him directly whether the individual point that he raised, and which is referred to here, has been corrected. That is for the simple reason—I hope he will accept this not as an explanation but as a statement—that spending committees and their members in the European Parliament concentrate on those sections for which they are specially responsible. The one interest in which I am involved, and from which I shall make my comments from first-hand experience, relate to energy and research. There are many pieces of evidence in this report that demonstrate the serious defects, omissions and shortcomings in Community expenditure on that subject, but I assure my hon. Friend and the House that those faults that have been pointed out in this report have already been corrected and dealt with or are in the course of being corrected. On my hon. Friend's particular point, I cannot give an authoritative answer.

Mr. Body

These are the subsistence allowances given to the Members of the European Parliament for which they are responsible and which they must know about. They are in excess of the regulations and in conflict, as has been pointed out by the Court of Auditors, between the money that the Members of the European Parliament collect for themselves and what should be paid under staff regulations. They have been told in both 1978 and 1979 that this is unfair because it conflicts with the principle that there should be equal treatment in the matter of subsistence allowance rights. Surely this is something that could have been put right if it had been alleged as long ago as 1978?

Mr. Normanton

In the often used words, I shall take note of the question that my hon. Friend puts and perhaps in another way and at another time I shall make sure that he gets the official answer on that point.

I am deeply glad that my hon. Friend the Member for Holland with Boston (Mr. Body) raised his point because this is precisely the kind of occasion when we should take an intelligent interest and concern in Community public expenditure and do so by putting questions, on this occasion no doubt to the Financial Secretary, but also direct to the elected representatives in the European Parliament as well.

Mr. Tony Marlow (Northampton, North)

I am glad that my hon. Friend has taken up the point of my hon. Friend the Member for Holland with Boston (Mr. Body) as a White Paper shows that every European Member costs £¼ million. That is a fantastic amount, and doubly reinforces the point made by my hon. Friend the Member for Holland with Boston and I am grateful to him for raising it.

Mr. Normanton

I am not sure whether my hon. Friend will be quite as grateful when I come to the end of my speech—I hope that the House will be patient. My main contention and contribution to the debate lies in the fact that we deceive ourselves, as effective parliamentarians, into believing that we know what is being spent, that we have control over the expenditure and that we, in detail, make the decisions as a Parliament in the detailed policies for spending. We do not. It is a myth. On the contrary, that is not the case in the European Parliament.

An important point can be made on the discussions between Commissioners and the spending committees of the European Parliament. This point is illustrated in the comments I shall make about Commissioner Davignon, having had many hours of discussion with him. He not only noted the criticisms in the Court of Auditor's report, but refused to pay lip service to them. He set about implementing, in an organisational sense, the recommendations of the energy and research committee, and the budgetary control committee of the Parliament. These are already in hand. He did that in a highly commendable manner. First, the report was discussed. Many weeks later, after lengthy discussions in the committee and with his officials, he announced to the committee the structural, organisational, financial and policy control mechanisms that he intended to introduce as a result of the report. He spent the best part of one day outlining them himself.

Next, he appointed two new director-generals. One was from Whitehall, Mr. Christopher Audland, who was put in charge of the energy directorate of the Commission. The other was a new director-general for research, Professor Fasella. They each gave presentations to the energy and research committee of their responsibilities, their new divisions of responsibility and their remits. They invited contributions from each of the heads of division on how they would carry out their responsibilities and report back to the European Parliament committee concerned.

In that process of exchange and close collaboration in these committees lies the best prospect of achieving more effective control over expenditure and, more important, over the policies on which the money is spent. The two processes are linked together—a quarterly report on progress to the Committee brought immediate reactions and criticisms by elected parliamentarians. Very few hon. Members, when they reflect on that, would cavil at that sort of control over public policies and expenditure.

My main aim is to highlight this unique development on parliamentary control over the Executive. The House deceives itself grievously if it believes it has such a control. I doubt whether it ever has had, but the sooner the House gains that control, the more satisfied will be the public about the working of Parliament.

As my hon. Friend the Financial Secretary said, it is crucial that where spending is remote—the Community is one stage removed from national Government expenditure—that spending should be seen to be under constant scrutiny. The policies to which spending relate must be seen to be controlled and under the influence of elected representatives. The means must always be available for the electorate, through its elected representatives, to challenge, question and expose.

There may be a temptation in this debate for one or two right hon. and hon. Members to see in the Court of Auditors' report nothing but defects, failures, and even scandals. That may be true, but I prefer them to be revealed than to be concealed. It is a salutary lesson that I hope that all right hon. and hon. Members will take on board.

Mr. Keith Best (Anglesey)

My hon. Friend has raised an important issue. Much play has been made by my hon. Friend the Member for Holland with Boston (Mr. Body) about the Court of Auditors' report in 1978 and 1979 concerning the expense allowances of Members of the European Parliament. The matter was drawn to the attention of the European Parliament by the Court of Auditors' report. Is my hon. Friend satisfied that machinery exists in this House to draw attention to similar problems, or does he feel that what my hon. Friend the Member for Holland with Boston said endorses his argument that, because the matter was raised in the Court of Auditors' report and drawn to public attention, something can therefore be done about it?

Mr. Normanton

My hon. Friend, as a Member of this House, has said more effectively and tellingly what I as a Member of the European Parliament would not dare to say. Deep anxieties exist in the minds of the public that there is a vast and growing area of public expenditure of which the public and even their elected representatives in this country have inadequate awareness and comprehension. If that includes the ways of working of this House and its right hon. and hon. Members, who am Ito refute my hon. Friend's hints or suggestions?

8.51 pm

Mr. Julius Silverman (Birmingham, Erdington)

I shall not follow the hon. Member for Cheadle (Mr. Normanton) in discussing the merits or demerits of the European Parliament or European parliamentarians, nor their contribution to financial control. There is sufficient to discuss in the report. However, I am astonished to hear him say that the control of finance in the European Community is superior to that in this Parliament. Whatever the defects—and there are defects—in the control of finance in this Parliament, what the hon. Gentleman said flatly contradicts the auditors' report. I am obliged to say that there would be a riot if it were possible to make the sort of comments in relation to this House that the auditors' report makes about financial control in the Community. I am not quite sure whether the hon. Gentleman has read the report. I agree with him that it is a good thing that the details of the report should be published. Unfortunately, that is not the attitude of the Commission.

Let us see what the Commission said, and what the Court of Auditors said in reply: In its replies to the comments of the Court concerning the financial year 1979, the Commission expressed regret that the Court did not pay more attention to the Commission's efforts to improve implementation of the budget and too often restricted itself to criticism … The court evaluates the Commission's activities from a negative point of view rather than from a positive one, and in consequence finishes up with an assessment which does a disservice to Community integration. That is an astonishing thing for a body such as the Commission to say about an independent organisation of the Community. The Commission subsequently replied in a similar vein to a question by a Member of Parliament. I assume that that means a European Member of Parliament. In view of this it seems necessary to explain the Court's approach to its role.

The court approached its role, and pointed out its functions and duties, as set out in the report of the Committee of Public Accounts, Session 1981–82. The report states that the duties of the ECA are to examine the accounts of all revenue and expenditure of the Community, and to verify that all revenue and expenditure has been received or incurred in a lawful and regular manner, and to assess whether the financial management has been sound. That is all that the Court of Auditors has done in the matters that it has reported. It has done no more, no less.

If an accountant finds certain things wrong, he should disclose them fearlessly. He should say not "Some of your other accounts are all right; are you making efforts to correct the mistakes?", but "This is what is wrong." That is what the Court of Auditors is doing. The decision by the Community to appoint the Court of Auditors is a good one, and deserves credit.

The Committee, of which I have the honour to be Chairman, made a report on the first report of the Court of Auditors in relation to the accounts for 1978. The issue of obligatory expenditure was mentioned in that report. It said that a major part of the Community's expenditure, largely the agricultural fund and other items, was obligatory and was expenditure about which neither the Commission, the Council, nor any other body had any option. The report stated that financial control of obligatory expenditure was a contradiction in terms. It also stated that in 1980, but the problem still exists. It is true that the agricultural part of the Community is somewhat smaller than it was, but the position is the same.

The Court of Auditors' report referred to frauds and irregularities. That problem exists today. It stated: The Court notes that the Commission's statistics on fraud and irregularities are of limited significance and that staff of the Court were not allowed access to important files. On the other hand, the Commission contend that such files are not available for external scrutiny until the cases are closed. That is an unfortunate state of affairs.

Similarly, in its report on the 1978 budget, the Commission referred to transfers between chapters. That is still going on. At virtually every meeting of the Committee of which I am chairman there are three or four items of transfers of chapters—money which was voted for one purpose and then transferred to another. Sometimes those are small matters. At other times they involve substantial sums. It is impossible to keep adequate control over how the money was voted and what it was used for. That happens practically every week.

Mr. Michael Shaw (Scarborough)

The hon. Member for Birmingham, Erdington (Mr. Silverman) has not stressed one point. Transfers now, as distinct from the old days, are made known so that comments can be made by various authorities, including the valuable work of the hon. Gentleman's Committee.

Mr. Silverman

I am sure that is correct. There has been an improvement in that respect. However, the procedure makes it more difficult to chase the money—the revenue and the expenditure. The procedure still exists and there are still criticisms of the EDF and allegations of general slip-shod accountancy. The Commission states that less than half of the proposals that it made in 1979 concerning the 1978 budget have been attended to. That means that we are almost back where we started.

I shall now deal with my Committee's report. It states: In regard to accounting matters … the Court identifies serious shortcomings in the internal control of the cash department of the Commission … It finds that the central accounts of the Commission do not include all the bark accounts. The Minister has dealt with that to some extent. The report refers to useful transactions whose results appear in the financial statements; the accounts department is unaware of the bank accounts reserved for borrowing and loans"— that is one hand not knowing what the other is doing— and of the accounts used by the external Commission delegations in the Mediterranean and ACP countries. As a result about a hundred bank accounts appear to escape the control of the Commission's accounting officer. The Commission replied to the Court that bank accounts reserved for their borrowing and lending operations were managed by the Directorate General of Credit and Investment; the relevant data were collated by the Commission's accounting officer before the financial statements were prepared. They said that bank accounts used by external Commission delegations are supervised by the European Association for Co-operation, whose accounts are audited by the Court of Auditors; they state that copies of other bank account statements are sent regularly to the Commission's accounting officer for supervisory purposes. That is obviously inadequate and unsatisfactory. No accountant in Britain would accept that as a sufficient discharge of his duties.

Mr. Normanton

In the hon. Gentleman's capacity as Chairman of the Select Committee on European Legislation, will he give serious reconsideration to the vital need for documents of this sort to be considered alongside the documents prepared by the European Parliament's committees? One set of documents poses the questions and exposes the defects while the other answers them in a much more significant and meaningful form. I respectfully suggest that the hon. Gentleman's Committee may be an ideal body for bringing these two areas of reporting together.

Mr. Silverman

I agree with the hon. Gentleman about the importance of bringing the reports together. That is precisely what the Commission does not allow the Court of Auditors to do. It does not allow it access to the bank accounts, which it should have if it is to have effective and proper supervision of the Community's accounts. In that respect, I think that the hon. Gentleman is right. My Committee can only bring these shortcomings to the attention of the House. It is the watchdog and servant of the House—no more, no less.

It is claimed that supervision can be exercised by the accounting officer over accounts that do not appear in the general balance sheet. Surely that is a contradiction in terms. The court expresses the opinion that the end-of-year presentation of assets and liabilities is not comprehensive and does not meet the statutory requirements … Despite some improvement in the form and presentation of the consolidated financial statement, the Court has not been able to satisfy itself that the balance sheet of the Communities as at 31 December 1980 adequately reflects the Community's assets and liabilities at that date. The count concludes that much remains to be done in organisation and accounting management before reliable financial information will be available.

In reply, the Commission comments in a conciliatory fashion, pointing out that the number of improvements would entail employment of more staff and that the extension of the existing dialogue between itself and the court could make for a more productive relationship.

In addition, there is an account of what might be called a fraud relating to the traffic in rice which arises from the various operation of exchange rates. There are also some comments concerning regional development, with which it has dealt before.

Comment is made on the way in which the regional funds are operated. Perhaps in that respect the report is being a little unfair, because regional funds are operated by individual nations. They decide—as do this Government—where the regional funds should go. On the other hand, there is clearly inadequate supervision by the institutions of the Community. We do not have time to go through all that. A good many of those matters have already been related. In total, they undoubtedly constitute a great indictment of the way accounts are being kept at present, and that is bound to create a good deal of alarm inside and outside the Community.

The Government, in their motion, say that they should be supported in what they are doing to improve the situation. I hope that, in reply, the Minister will say exactly what the Government are doing to improve the situation and what concrete proposals they are bringing before the Commission and the Community to put its house in order as regards the control of expenditure. That is basically the theme of my address as Chairman of the Committee.

9.7 pm

Mr. Michael Shaw (Scarborough)

I am grateful to the hon. Member for Birmingham, Erdington (Mr. Silverman) for what he said. It did not surprise me, because it was what we would have expected from the Chairman of the European Legislation &c. Committee. I agree with his remarks about the duties of the Court of Auditors. He is right. The Court of Auditors is exactly what it says it is. It is an auditor in the commercial sense of the term.

My hon. Friend the Member for Cheadle (Mr. Normanton) said that if a clear certificate cannot be obtained from the auditors one must look out. In fact, many companies do not get clear certificates from their auditors. Of course, they do look out. They know that they have to justify what their auditors do not approve of. It is not action by the Court of Auditors that is required after it has reported, but the action of others. We should ask what steps the Council and indeed the Parliament—because they are the joint budgetary authority—are taking as a result of the strictures and comments in the auditors' reports. That seems to be the way ahead.

This is the fourth annual report from the court. It has rightly been said that the court is growing in stature and expertise and is building up a peculiarly skilled force for its unique task. No other organisation has to cover such a wide field in so many languages. Much of the expenditure and revenue-earning is dealt with by national systems rather than by its own international system. The situation is complicated, and it is bound to take time before the best system can be worked out and before the staff are skilled in handling all the problems that face them.

We should not neglect another matter. The draft change in the treaty was drawn up in 1975, but it was only in 1977 that the court came into being. Until then the Commission had had things very much its own way. That is not a criticism, but a statement of fact. It began from nothing and built up complicated systems, some of which involve putting work on to the various States for implementation.

Over the years it was only natural that such a growing organisation should feel that it often knew best and that its methods were the best. Therefore, when the Court of Auditors came into being differences of opinion were bound to arise. The conflict is not as great as hon. Members have depicted. From time to time there has undoubtedly been conflict, but that is healthy. Those who know anything about commerce will know that auditors and firms have fairly big tussles from time to time. That is healthy and will always go on.

Nevertheless, I hope that the discussions between the Commission and the court will ultimately lead to increased respect for each other and to improvements in the various systems. In other words, I hope that in the long run they will act for their mutual benefit, but not in collusion. The first lesson is that the Commission and the court must learn to work together. The second lesson is that the Council and Parliament must learn to work together. Both of those lessons are clearly stated in the fourth report. I shall not go into the details, but will stick to the principles involved.

The Council and the Parliament are the joint budgetary authority. One way or another, they must agree the budget between them. One way or another they give the discharge, although the final discharge is given by the Parliament. Therefore, they must jolly well agree. They must agree for practical reasons, and for one other. We must persevere with the Common Market and build it up in accordance with the hopes of those of us who have spent much of our time working for it. Therefore, we must show those within the Community and in the rest of the world that the Parliament and the Council are capable of working together.

The greatest evidence for that must come from the work of the joint budgetary authority. I was sad that the 1982 budget was not agreed by the Council and Parliament at the correct time. The genuine hard work put in by the Minister and by other hon. Members, who have worked closely together, should have been crowned by an agreed budget at the appropriate time, last December. There was a difference about interpretation, and that difference must be resolved, but I do not see why the budget should have been held up.

Every year under the new system there has been disagreement within the budgetary authority. I do not wish to sound vainglorious, but I was the Rapporteur for the 1978 budget, and I made it my clear objective to see that there was agreement in that first year of the new system. I believed that it could be shown that we could work together thereafter and that there was a future in the organisation.

I am sorry to say that, for one reason or another, we have had disagreements, fallings out, delays in implementation and all the rest of it. All those points are brought out clearly in the document. Such disagreement cannot be good either for the efficient working of the one-twelfth system or for the reputation of the Common Market.

Those are the two general lessons to be drawn. One or two practical matters should also be examined. I have mentioned the first. We have seen the report by the Court of Auditors and we have heard the criticisms. We have not yet heard how the Parliament and the Council will deal with those criticisms. That is an important matter.

Secondly, if we are to have such scrutiny, and if the budgetary control committee is to work—it is now doing useful work, and I am glad to have been there at the start—there must be some discipline within the Parliament. As a Member of the Public Accounts Committee, I know that if we go into secret session and I break the codes by disclosing outside the Committee confidential information given to it before it has reported, I shall rightly be in trouble. No such discipline applies in the European Parliament.

We cannot justify pressure being brought to bear on people to give confidential information to a committee of that type unless we have some disciplinary hold over our own members. As my hon. Friend the Member for Cheadle has heard me say many times, one day the European Parliament must face the absence of such discipline and do something about it.

The report does not fill me with gloom. On the whole, I am filled with optimism, as it shows that the process is beginning to work. It is beginning to be effective and to bite. It will be appreciated as well as criticised by the Commission in the long run. The Council and the Parliament must now look to the consequences of the report by the Court of Auditors, which they themselves originally set up.

9.14 pm

Mr. Teddy Taylor (Southend, East)

I am astonished to hear my hon. Friend the Member for Scarborough (Mr. Shaw) say that he is optimistic about the report. To my mind, it is a horrifying account of a scandalous and wasteful spending of public money.

There are many signs in the report that the Court of Auditors, rather than being optimistic, is fed up to the teeth and frustrated. It is denied the information that it requires and its advice is completely ignored or shoved aside into one of the many expensive pigeon holes in the European set-up.

What we have is an account of a great uncontrollable colossus which is both a scandalous gravy train and an appalling way to spend public money. Most upsetting is the way in which the court has tried to do the job of supervising public spending, but has been frustrated and, when it tries to point out what is happening, nothing is done.

My hon. Friend the Member for Cheadle (Mr. Normanton) was optimistic. He saw good signs. He said that the situation was improving and that things were happening. My hon. Friend the Member for Holland with Boston (Mr. Body) drew attention to the complaint in the 1978 and 1979 reports that the daily subsistence allowance rates of the European Parliament were considerably higher than those fixed in the regulation. Given all the great new ways of getting things done, my hon. Friend asked what had been done about that. My hon. Friend the Member for Cheadle, being a very courteous person, said that he would try to find out and let my hon. Friend know. He need not bother. I have read the reports in great detail, and the answer is in paragraph 10.15 of the 1980 report. The Court of Auditors says: Although the Court of Auditors, in its 1978 and 1979 annual reports, criticised the scale of daily subsistence allowances used by the European Parliament, the rates applied still remain considerably higher than those fixed by the Council Regulation. It then clearly states: This is a contravention of both the Staff Regulations and the principle of equal treatment for Community officials.

A scandal was exposed in 1978, 1979 and 1980, which is against the regulations and against the court's principles Yet nothing has happened,. It is not a complicated question; such as how to reorganise the common agricultural policy, but a simple matter of cash paid to MEPs. Yet, three years later, nothing at all has happened. How can anyone honestly be optimistic about anything else when, in the only case raised—and a very simple one—nothing has happened, although it was stated to be a contravention of the regulations?

The frustration of the court has been referred to briefly, in that it has had difficulty in obtaining details of bank accounts showing the money that is in the Common Market. That money is paid by all of us, but the court cannot get the information.

With regard to fraud, I urge hon. Members who have not read the report to read paragraph 4.36, which states: Public opinion finds it difficult to accept the existence of frauds and irregularities … The announcement by the press at regular intervals of spectacular frauds adds to the doubts expressed as to the sound financial management of the common agricultural policy … However, the Commission has refused to communicate to the Court all relevant information on cases of fraud or irregularity that are not yet closed … In practice the Court has not been able to satisfy itself that the Commission acted with diligence in certain spectacular cases of fraud, which were often exposed by the press without having been earlier declared in accordance with the procedure in … the Regulation".

We know that the court cannot obtain the information that it requires about bank accounts. It cannot even get the information that it demands about fraud, and, in its view, the Commission's attention to the matter is absolutely appalling.

I see no evidence of hope. All that we see is this gigantic colossus spending our money like water—and spending more all the time. Although we are lucky to have the report of the Court of Auditors to spotlight some of the scandals, again it is ineffective and nothing is done.

In paragraph 10.6, relating to the preparation of payrolls-the cash paid to people who work in the Commission—the court says: The persons who are empowered to authorize changes in the personal information upon which payment of salary is based … do not regularly ensure, alone or by delegating this responsibility, that all their decisions… have been correctly applied by the salaries department. It also says: Existing decisions are not always re-examined to see whether the conditions which were present at the time of the decision still obtain. This is the case, in particular, in respect of the fixed secretarial allowance.

There is also the most appalling indication of how the money is spent by the Community in its various programmes. I hope hon. Members will take time to look at paragraph 14.40, which mentions a preliminary study for a hospital in Benin. The technical staff of the Commission protested at the casual way in which the consultants' carried out their work, yet these consultants were still entrusted with detailed technical work. As a result, the contractor was obliged to redraft all his plans. The contractor has since gone into liquidation and the building of the hospital, which should have been completed in August 1979, was at a standstill when the court went out to see it in 1981.

We also had a report in paragraph 14.46 of splendid food production units which were meant to do very well but which could not work because a small section of the road that was required had not been built.

Mr. Normanton

My hon. Friend referred to the scandal of money being wasted on the hospital concerned. Was he talking about a hospital on the Continent, or public buildings in this country where such things, or even worse, have happened, or are still happening, and the House still has no access to inside information about them? I hope he will bear that point in mind in his contribution.

Mr. Taylor

I am not saying that no Government or public authority wastes money. Of course they do. Our experience as Members of Parliament is that local authorities and Governments tend to waste money, but, under the rigid eye of the Treasury, at present it is more difficult to do so.

What I mean by my example was that when these things are pointed out, unlike this country where steps are taken, nothing appears to happen and things get worse. The court complains of the number of missions by the Parliament, and it is planning more. It is all there in the report.

We also have a scandalous attitude to the use of public money. All public representatives should accept that the money entrusted to them by the people should be looked at more carefully than their own. I wish that those who are interested in these things, and our friends in the Treasury, would look at the example given in paragraph 11.7 of an astonishing fitness centre on the Commission's premises, supplied free and open only during working hours, complete with swimming pool, gymnasia, saunas and all the technical installations and service rooms. We have already heard about the typists, who have this massive output of seven pages per day. I wonder what our own private secretaries would say if they were to have some kind of incentive system applied on that basis.

I hope the Government will look, in particular, at this further appalling revelation about the organisation known as the European Movement, which, until recently, was sending out public appeals to the effect that it received no support from public funds. I hope that the Financial Secretary will look at paragraph 12.27, in particular, where we have another account of the European Movement. He will be aware that I have recently asked questions in the House about the activities of its subsidiary—European Movement Investments. Companies incur all sorts of trouble in Britain for not submitting accounts, but this organisation has not submitted accounts in this country for 1978 and 1979.

We read that the European Movement, which receives about half of its income from the European Commission, was found not to have adequate internal control arrangements. Nor had it ever been subject to external audit. Its failure to provide accounts to the Commission should have alerted the Commission.

I should like to ask those of my hon. Friends who describe themselves as optimistic how an organisation that has never had its accounts audited can get hundreds of thousands of pounds over a period from the Commission. Why did our Government give £30,000 last year to the European Movement, which has not had its accounts subject to external audit or even had them published? It is an appalling situation and, like my hon. Friend the Member for Scarborough, I should like to know what is going to happen about it. Surely something must happen.

Mr. Marlow

There has been a great deal of publicity today about research assistants in the House offering their services free. Is it not possible that some of them are being financed by the European Movement? We would not know about it if they were. If they were here, would they not be propagating certain views about the European Community which were not in the interests of the United Kingdom or the British Government?

Mr. Taylor

I understand that the movement believes in a federal Europe. I know that the Government have said that they do not want that, but they are still giving it money. I am sure that my hon. Friend the Financial Secretary, who is a wise and prudent man, will, having heard this astonishing, scandalous story about the so-called European Movement, do something about it and make sure that if the European people cannot stop taxpayers' money pouring into it at least our Government will. I hope that there will be a public inquiry into the activities of the organisation, which appears to act in a more appalling way than some of the banks and companies which have been scandalously publicly attacked in this country. Something must be done about that scandal.

A whole number of such matters is quoted. I accept that it might be worth while if we could say "The scandals have been revealed and something will happen about them". The sad thing is that I do not know who will do something about them. Our splendid Treasury team can do nothing about them. There is not the slightest indication that those involved in the Common Market at any level are doing anything about them.

When we receive the reports, questions are asked. o Things come up time and again. When the poor old court, which seems to consist of decent, clever people, tries to get on with its job, it is denied information. How can we ensure that the court sees the bank accounts that it wants to see? How can we ensure that it has access to the papers on frauds and irregularities which it is not allowed to see? Whose job is it? Who can tell us?

The sad fact is that nobody seems able to control anything. Money is spent like water. No one seems to want to know what the others are doing. I should like something to be done about it. I do not think that that will happen through having more European Parliament committees and more delegations going to Brazil and Tokyo to see what is happening there.

The court seems to consist of a good crowd of people. Could we not get them to do a thorough efficiency probe of the set-up? What they can do now is to look at the accounts On the basis of the policies agreed. For example, if the European Parliament says "We are going on a trip to Brazil and we are taking 400 interpreters", the court can ask "Are 400 needed?" If the Parliament decides to organise a reception and spend £10,000 on a big meal, the court can say "You should have gone not to that contractor but to the other". It cannot dictate the policy or the structure.

Is there any way in which the Government can get the court or any other body to look at the whole structure of the EEC and ask "How can we make this work more efficiently, so that cash is spent more prudently?". For example, there is the basic question whether we need the so-called European Parliament at all. I accept that there are some very good people in it. My hon. Friend the Member for Cheadle is a very good chap. He does much good work here, and I am sure that he works hard wherever he goes. But if the European Parliament disappeared tomorrow, if it closed its doors and nothing more happened, who would notice? An enormous amount of money would be saved.

I do not want to be unkind, and I do not want to be insulting to any of my hon. Friends, but I think that by and large the calibre of Member in the European Parliament is probably slightly higher than the calibre here. However, as far as I can see, there is not a great job to be done.

My hon. Friend may say "You are wrong. It is a great thing, and it does a lot of good work." He has his views and I have mine. People may think that both of us are slightly biased. I do not want my hon. Friend to do it, and I do not want to do it. I should like the court to look at the Parliament and ask "Do we need this at all?"

I should also like the court to look at the Commission and ask "Does it need all the people and the departments that it has?" We need a great efficiency audit—a kind of Ian MacGregor stepping into the whole Common Market set-up and asking "How can we make this work efficiently and not waste taxpayers' money?"

Sir Anthony Meyer

My hon. Friend is having a lot of fun. No doubt what he says will arouse a great deal of enthusiasm. I think he should be a little more careful. Listening to "Any Questions" the other night, Patrick Moore had a great deal of applause when he said that the only person he would like to see come to the Palace of Westminster was Guy Fawkes. I think he would get just as much applause for saying that the European Parliament should be blown up.

Mr. Taylor

I am not saying that we should bring Guy Fawkes into this. I am not saying that we should abolish the European Parliament. I am probably among those who are slightly critical of the European set-up. My hon. Friend is among those who, in my view, appear to be rather enthusiastic and overlook some of the obvious problems. To that extent, we are both a bit biased.

I should like to see the Court of Auditors, some top accountants, Ian MacGregor, or Michael Edwardes—a sensible man used to controlling money—look at the whole set-up. I want that done because I accept that we are in the Community. We have had a referendum and we are more and more enmeshed in it. I cannot understand why the Labour Party does not like it. It is all that it would want. It has all the things—such as organising agriculture, steel and employment on Socialist terms, with a grand plan and plenty of Eurocrats and inspectors to make sure that people do not produce too much, interfering with the market, and having big subsidies—that are pure Socialism. I cannot understand why the Labour Party is against it. Will it stop it applying Socialism? M. Mitterrand has shown that one can have everything that a British Socialist would want to achieve within the Common Market.

The Labour Party could have European employment plans, energy plans and organised protective tariff walls keeping everything out. It is pure George Brown, Michael Foot Socialism. It is there for the taking. What on earth is the Conservative Party doing supporting this set-up? What splendid work the Prime Minster does with her attempt to control spending, cut out inefficiency and allow the free play of market forces. Those are all things that the EEC works against. It is the nature of the organisation.

In those circumstances, as we are stuck with the thing and there is no lawful way of leaving, what we need is not people standing up saying that they are optimistic or pessimistic, but an organisation of clever people. I should like to see Ian MacGregor, Michael Edwardes, the Cowl of Auditors and others look at the whole structure and ask the simple questions "Do we need the European Parliament at all? Can we cut down the size of the Commission? Do we need more legislation?" Let us have efficiency. That is what the Court of Auditors was set up to do and is not being allowed to do. I say three cheers for this court if only it is given some scope. May we have a real, proper, efficient look by independent experts at the whole Common Market structure?

9.37 pm

Mr. John Roper (Farnworth)

I do not think that the House expected the hon. Member for Southend, East (Mr. Taylor) to be over-optimistic about the development of the Community, and we have not been surprised. To take up one of his later points, perhaps the European Community as it is developing is rather purer social democracy than it is Socialism. That is for others to judge, and not for me at this stage.

I do not wish to take up all the points that the hon. Gentleman made, although it is rather unfortunate that he ceased his reading of the important document at about page 164 and did not have time to read the replies that were prepared by the Community's various institutions, which answer a number of the specific points that he made.

It is not for me to get involved in too much detail about the way in which the European Parliament has treated its mission allowances. On page 205 the hon. Gentleman will find the European Parliament's reply to the criticisms made by the Court of Auditors. I accept that it is not a completely satisfactory reply, but it is a reply to which the hon. Gentleman should have drawn attention. He should not have said that there was no response, because the European Parliament has responded.

The hon. Gentleman made two points about the European development fund. We know from our experience with overseas aid projects that have been put forward by our Overseas Development Administration that often some of the money that is spent in that area is dealt with in an unsatisfactory way. The hon. Gentleman referred to paragraph 14.39 and subsequently to paragraph 14.45, dealing first with education and health projects and then with road projects.

It is important to put the hon. Gentleman's examples of things going wrong in the context of the report of the Court of Auditors. In paragraph 14.39 the court said: As with agricultural projects the comparatively severe comments of the Court should not obscure the fact that two of the four hospitals and most of the educational projects are satisfactory as a whole. One must not take the exceptions and say that everything is going wrong. The Court of Auditors said that that was not so.

Similarly with road projects, clearly things go wrong when one tries to build a road in the tropics. Paragraph 14.45, which the hon. Gentleman quoted, states: The investments financed by the EDF which the Court has examined have been undeniably useful. Most of the projects have attained their initial objectives. The report refers to three projects—among a large number—that have proved less useful than expected. They therefore represent a partial failure. It is worth looking at the response of the Commission to the court's report about the road projects, as it takes on board the criticisms that were made.

I was concerned about the criticisms of the Court of Auditors in the section of the report dealing with the lack of accounts of the European Movement, with which I was associated at one time. Therefore, I was relieved to turn to page 245 and read what is said there about that matter. It is important that paragraph 12.22 of the Commission's reply, on page 245, should also be quoted in the debate, in view of what the hon. Gentleman said. It states: Balance sheets and reports from the European Movement for 1977, 1978 and 1979 were made avilable to representatives of the Court of Auditors at an inspection visit in February this year.

It is made clear that, although the report for 1980 is not yet available, an accountant's report for that year was sent to the Court of Auditors in June. It is important to give both sides of the story when we are considering these matters. Important criticisms should be made. Thank goodness we have a Court of Auditors that makes those criticisms.

It is also important that there is a dialogue between the Court of Auditors and the Community institutions and those bodies to whom the Commission makes grants. Although I am not satisfied with all that I read on page 245, the picture is a good deal more satisfactory than one would have been led to believe if one had just listened to the hon. Member for Southend, East.

We do not have as many debates on European matters as we did at one time. The hon. Member for Birmingham, Erdington (Mr. Silverman) and his Committee were right to bring the document to the attention of the House. I am glad that the business of the House has worked out in such a way that we are having the debate at a civilised hour, stretching over a longer period that has sometimes been the case in the past.

The document is important and is one that the House ought to debate and consider. I am sorry that not more Opposition Members who are frequent in their criticisms of the European Community are present to listen to the debate, to hear the arguments and to see what is being done to tackle some of the criticisms that they make about the European Community.

There are clearly many problems, and of course attention has rightly been drawn to them this evening. However, having served on the Select Committee on European Legislation &c. between 1974 and 1979, I can appreciate, from the fourth report of the Court of Auditors, the sort of progress made in recent years to get a satisfactory grip on the Community's affairs. It is not yet perfect—far from it—but it is progress along the right road. Whatever may be said by the hon. Member for Southend East, the role played by Members of this House when elected to the European Parliament is to ensure that there is an effective procedure for auditing and an effective ,. and public dialogue in these matters.

Although he is not here tonight, it would be fair to pay tribute to the hon. Member for Fife, Central (Mr. Hamilton), who, when a Member of the European Parliament, played an important part in trying to ensure that institutions were developed within it to carry out the process of auditing.

There are clearly many outstanding problems. However, is that surprising? This extraordinary experiment attempts to knit together the administration and accounting systems of 10 countries which have different ways of doing things. It is a complex arrangement and the countries have different standards, styles and—dare one say it?—different levels of efficiency within their administrations. It is a remarkable achievement to bring those countries together, and I hope that what has happened will be improved and that there will be a response to the recommendations in the Official Journal of the European Communities.

Before concluding I draw attention to perhaps one of the most useful parts of that journal, although no reference has so far been made to it. I refer to the second annex, pages 170 onwards, which gives perhaps the clearest account of the European Community's budget and sets out a series of diagrams. Page 184 shows the make-up of the Community's resources, contributions from different States, Customs duties, agricultural levies and so on.

The right hon. Member for Ashton-under-Lyne (Mr.Sheldon) is lucky enough to have a coloured version. The Vote Office was able to provide me only with a black and white copy, which is much less attractive. In either case, it gives an extremely informative account of the way in which the Community gets its money and clearly sets out the budget dilemmas, which we are not discussing tonight, but which the Community must come to terms with in the near future.

Although my right hon. and hon. Friends are firmly committed to continued British membership of the European Community—

Mr. Marlow

The hon. Gentleman referred to the commitment of his right hon. and hon. Friends and to the forthcoming discussions and negotiations about the Budget. Will he take this opportunity of telling the House whether, with regard to the Budget, he believes that the United Kingdom should be in broad balance, or where he would draw the line?

Mr. Roper

The hon. Gentleman tempts me to go further along a line which I know that you, Mr. Deputy Speaker, would rule out of order. We are not discussing the budget tonight, but the material in the journal sets out the facts and is of considerable value. Tonight we are discussing the Court of Auditors' report, and I am sure that before long the House will have useful opportunities to discuss the budget.

While my right hon. and hon. Friends strongly support continued and developing British membership of the European Community, we believe that it would be wrong to be complacent about the many unsatisfactory aspects of the Community. This document and the responses from Parliament, the Council and Commission represent an important point from which to start to tackle some of those problems.

As the Financial Secretary to the Treasury said, it is important that the Council and the United Kingdom Government, within the Council, should press for the full implementation of this report. It is important that the European Parliament, playing its role, should press as hard as possible for full implementation, even in those sectors where it may mean reorganising the work of the Parliament itself.

Those hon. Members who sit not only in this House but in the European Parliament should listen to what has been said in this debate about the defects within the Parliament to which the Court of Auditors has drawn attention and they should act to deal with those problems that are directly within their competence. I hope that the Government, in their half-yearly White Paper reporting to the House on the work of the Community, will consider including a section on how they see the report of the Court of Auditors being implemented within the institiutions of the Community. That would give the House a further opportunity to see whether the important recommendations in this document are being put into practice and for hon. Members to return to this discussion on a later occasion.

9.50 pm

Mr. Richard Body (Holland with Boston)

I agree with the hon. Member for Farnworth (Mr. Roper) that some progress has been made. I do not see, however, that a report every year from the Court of Auditors can be respected until the European Parliament itself behaves more responsibly over criticisms addressed to it. I have made this point before, but I must repeat it for the sake of my argument.

As long ago as 1978, the Court of Auditors criticised the European Parliament for taking upon itself allowances far in excess of those laid down. Members of the European Parliament are treated in a similar manner to hon. Members. They are given allowances substantially the same as those of senior civil servants. If we in this House were to take allowances in excess of what was laid down and in excess of what civil servants were receiving, there would be a hue and cry. We would be rightly condemned.

In 1978, the Court of Auditors rebuked the European Parliament for taking more money than it should have done for allowances while its members were away from home. Nothing was done about the matter. The European Parliament paid no attention.

In the following year, the annual report contained the same criticism. Again, the Parliament did nothing about it. Now we have the 1980 report. For the third time, criticism is made of the allowances of Members of the European Parliament which, I am told, amount to about ₤59 a day. What does the European Parliament say in its own defence? It had the opportunity of replying to the Court of Auditors. It is true that some comment was made about the cost of missions abroad—that is acceptable—but no reasonable account was given to explain why allowances were being exceeded.

I am glad that my hon. Friend the Member for Southampton, Test (Mr. Hill) is present. My hon. Friend can perhaps give some explanation. I do not know whether he was a Member of the European Parliament in 1978. I believe that he was. I do not know whether he can be persuaded to intervene. It would be helpful if he could recollect the Court of Auditors' criticism of the allowances to Members of the European Parliament in excess of those laid down in the regulations.

The Court of Auditors rebuked the European Parliament not only for being in breach of the regulations but also for behaving unfairly. It was taking more money than officials of standing in the Commission. The Parliament was therefore wrong on two counts, yet, to this day, the Parliament is unwilling to put its house in order. If the Parliament is to persist in paying itself allowances greater than those laid down in the regulations, it cannot be much respected. Worse, if the Parliament is to behave in this disgraceful manner, the Court of Auditors will not be treated with the respect that it should receive.

9.55 pm

Mr. Tony Marlow (Northampton, North)

We are today debating the motion that we should take note of the Annual Report from the Court of Auditors concerning the financial year 1980 and support the Government in seeking to ensure the sound management of Community finance. Hurrah for the second point, although I cannot say that I am very optimistic about it. With regard to the first point of the motion, we are supposed to be taking note of this document. One can hardly weigh the wretched thing, let alone take note of it. There are 260 pages of highly complex, cross-referenced text, largely, if not all, translated from the French into Civil Service English, that is difficult to follow, to understand or to make sense of.

Mr. James Hill (Southampton, Test)

I would point out that the chairman of the Court of Auditors is the next inspector of taxes in the United Kingdom and there is no reason why anything should be written in French.

Mr. Marlow

I am grateful to my hon. Friend for his intervention. I thought for one happy moment that he would offer to translate the document so that I could understand it.

We are talking about a massive expenditure of about £8,000 million of public money, albeit on a European scale.

Sir Anthony Meyer

My hon. Friend alleged that the document is written incomprehensibly. Perhaps he would care to give us a sample passage of the incomprehensibility?

Mr. Marlow

All things come to those who wait. I have that in mind and I shall not disappoint my hon. Friend.

Some £8,000 million of public money, albeit European public money, has been raised from the taxpayers of several European countries. That sum of £8,000 million slips off the tongue quite readily. It is an immense amount of money. It is more money than would be required to provide this country with a modern, sophisticated nuclear defence system such as Trident, which even at the most exaggerated estimate would cost less than that sum. It therefore behoves us to ensure that the money has been well spent.

I think that my hon. Friend the Member for Southend, East (Mr. Taylor) referred to one of the things that must give one a great deal of cause for concern, and that is contained in paragraph 4.36 concerning frauds and irregularities, and difficulty of access to important files. It says: Public opinion finds it difficult to accept the existence of frauds and irregularities in the management of the EAGGF, Guarantee Section. The announcement by the press at regular intervals of spectacular frauds"— this is very regular intervals— adds to the doubts expressed as to the sound financial management of the common agricultural policy"— which gobbles up some three quarters of the money that is spent within the Community— and naturally in such circumstances it is generally expected of the Court of Auditors that it will examine carefully the manner in which the Member States and the Commission fulfil their respective obligations under Regulations No. 283/72. That is a cross-reference. Of course, it would be generally accepted that the Court of Auditors would wish carefully to examine the manner in which these things have taken place and the Commission fulfils its duties. However, the Commission has refused to communicate to the court the relevant information on all cases of fraud or irregularity. Why is that so? Is it because the Commission cannot, is it because it is embarrassing, is it because it does not want to? Surely this is something that the House would not tolerate. It is a sad day when a document such as this is brought to us to take note of when it is apparent that these frauds can take place, have taken place and are not effectively and efficiently dealt with by the Court of Auditors, who would properly wish to deal with these frauds. It is a savage and terrifying indictment of the way that the Community runs its affairs.

Where does the money come from, and where does it go to? On page 194 of the report we find the source of income. In particular, we find the VAT payments for 1980. The VAT payments which have found their way into the community coffers from the United Kingdom have been about two-thirds higher than those from the Republic of Italy. The gross national product, the population and the amount that is bought and sold in Italy is much the same as it is in the United Kingdom. So why do we pay two-thirds more in VAT? That is bad enough. In the White Paper which the Government have kindly produced today we find that the factor is much the same. So depite this discrepancy in 1980, no improvement has yet come about.

It does not matter who pays so long as the receipts are fairly equitable. So let us look at the receipts. If we look at the guarantee part of the agriculture policy, we find that the United Kingdom received in 1980 nearly 900 million units of account. How much did the Irish Republic receive, with a population one-fifteenth that of the United Kingdom? The answer is 564 million units of account—two-thirds the amount, one-fifteenth of the population.

How much would one expect the Dutch, with a population one-fifth our size, to receive from the policy? Would it be 900 million units of account, as in the case of the United Kingdom? Let us be generous. No, it is 1,500 million units of account. These figures are devastating, and show how lopsided and unfair are the existing policies of the Community.

My right hon. Friend the Prime Minister and her right hon. Friends are currently in negotiation with the Community in an attempt to sort out these unfairnesses and to ensure that in future the situation is more equitable than it has been in the past. Still the likelihood is that this year we shall have to make a net commitment to the European Community of some £620 million—£12 a head for every man, woman, and child in the country. If we are to negotiate, the first thing that we must know is whether, looking at these figures and at future figures, we are negotiating from a position of strength.

This country provides a market for the agricultural surpluses of the European Community. Not only do we provide a market for them, but our housewives are force-fed those commodities at twice world market prices. We provide a massive market for the surplus of manufactured products from the European Community—so massive that, in the last two months of last year, we had almost as great a deficit in manufactured goods with the Community as in the whole year with with the Japanese.

If we are to negotiate with the Community, as we must, we are the givers and they, all along, are the takers. If we are to stand up and say "Look at 1980. Look at our Budget deficit for 1980; look at the way you spent our money in 1980; so far and no further; this coming year not one penny of net contribution to the Community Budget", what will they say? Will they say "No trade with the United Kingdom. We shall not sell you agricultural surpluses"? Never. They have the bargain, and we are paying for it.

The Conservative Party is the party of the United Kingdom, unlike the Social Democrat Party which goes toadying and crawling to Europe. We are the party of the United Kingdom. Let them be the party of Europe. As the party of the United Kingdom, let us go forward into battle to ensure that our Government and our people get a fair deal, for which we have been waiting far too long.

Sir Anthony Meyer

I waited with bated breath for the example that my hon. Friend was going to give of Franco-British gibberish, which he says is contained in the document that we are considering.

Mr. Marlow

I have read considerable texts from the document. I had hoped that my hon. Friend was listening, but apparently he was not.

10.5 pm

Mr. James Hill (Southampton, Test)

I shall not go into the pros and cons of whether the report is exposing the Community's weakness or strength. I wish to put on record special praise of a former Member of the European Parliament with whom I served in 1973 and who is no longer with us in the House of Commons. Mr. Rafton Pounder was one of the Belfast Members and an auditor by profession. Rafton Pounder started the flow of decisions that led eventually to the establishment of the Court of Auditors, which is a worthwhile body. Having been proposed in 1973, and having been supported by me, it took five years or more before it became a part of the Community.

There was natural resistance by the Commission. There was resistance by the other institutions, because the Court of Auditors covered the European Investment Bank, the European Coal and Steel Community and other European institutions. Rafton Pounder, who I believe is prospering in Northern Ireland as the secretary of a building society—I hope that I have not given him too much prominence—was the thrusting force of the movement that recognised the need to scrutinise the Commission's expenditure. Surely none of us, whether pro or anti-Community, would deny that that was the right way to go.

Mr. Robert Sheldon

I am happy to join the hon. Gentleman in the tribute that he pays to the work of Rafton Pounder. I knew a bit about him, because I was his pair. I assumed that with a majority of the size that he had in Belfast I would remain his pair for many years. It was only the upheavals in Northern Ireland that denied the House the advantages of the work that he had done being continued for many years.

Mr. Hill

I thank the hon. Gentleman for that compliment. Rafton Pounder and I worked closely together. When I was appointed chairman of the Transport and Regional Policies Committee in Europe, Rafton was a member of the committee. We realised immediately—perhaps he was ahead of me in his recognition—that there were occasions when scrutiny would be needed of the vast expenditure of European units of account. He pressed for that scrutiny, and even after he was defeated at the polls he remained in Brussels to set up the first imaginative scrutiny of what would be needed to form a Court of Auditors.

The Select Committee on European Legislation &c. has visited the Court of Auditors in Luxembourg. We met Sir Norman Price and his colleagues and the Committee was assured that the scrutiny would be above board. The first report revealed many problems that the Community was facing. It revealed also vast expenditures on motorways and hospitals that were not needed, or on motorways that ended nowhere. There was a need perhaps to expose the warts and the boils. That is because in Europe they are invariably used by anti-Marketeers to denigrate the system rather than to identify the imperfections of auditing at its highest level.

I was chairman of the regional policy programme and from time to time we found that there were, perhaps, anomalies. In particular, the United Kingdom would not allow particular regions to apply directly to Brussels for regional development funds. That was a mistake, but it was carried through in the Council of Ministers. As a result, Scottish or Welsh councillors sometimes took deputations to Brussels for regional funds that we could not provide. Those funds must come through Government Departments. Therefore, it was impossible to short-circuit the Government.

There were many other anomalies, particularly in the common agricultural policy. I even agree with my two colleagues, who are so anti-Common Market that it is usually impossible to do so. However, I agree that there are anomalies and loopholes. Pigs can be driven from the South of Ireland to the North and bought back the next day with a subsidy. The Court of Auditors was set up to prevent such anomalies.

Mr. Marlow

I have only a small point to make, but it is important. My hon. Friend referred to me and to my hon. Friend the Member for Southend, East (Mr. Taylor), who can no doubt speak for himself. He said that we were anti-EEC. I am certainly not anti-EEC and I do not think that my hon. Friend is either. We are pro the United Kingdom. That is an important difference that should be made when discussing these issues.

Mr. Hill

I apologise if I was mistaken. My hon. Friends have always given me the impression that they are anti-EEC, but if they are only pro the United Kingdom and not anti the other Nine, they hold a neutralist position. I shall honour them if that is the position that they hold.

It is difficult to be a neutralist in the Community. When I joined the Community there were only nine member States, but there are now 10. When going to Brussels, Strasbourg or anywhere else to attend a meeting, one must have faith and believe that it will do some good. The difference between my two hon. Friends and myself is that I believe that the Community is doing some good and that it is holding us together. In Europe there is a feeling that we are working as a family of nations. I am no longer a Member of the European Parliament, but I am a Member of the Council of Europe, which consists of 21 nations. I always feel that the free exchange of information benefits the Community. I should be only too pleased to accept the anti-Market view if someone could tell me how our debates could reach the 20 other countries or the nine other nations with the necessary impact.

Mr. Body

My hon. Friend said that anyone who went to the European Parliament had to have faith and soon. However, those who go there receive a daily subsistence allowance. Ever since 1978 people have been drawing the allowances that have, year after year, been criticised by the Court of Auditors, because they are in excess of the regulations. That may be some compensation for what they have to do, but how can it be justified?

Why does the European Parliament, year after year, cock a snook at the report of the Court of Auditors, which consistently rebukes Members of the European Parliament for drawing daily subsistence allowances that are substantially in excess of the regulations and of the amounts received by the officials who are meant to receive the same amount? Is it fair that Members of the European Parliament should take more than the officials, who are meant to have exactly the same as them?

Sir Anthony Meyer

My hon. Friend might care to point out to our hon. Friend the Member for Holland with Boston (Mr. Body) that he has perhaps not read the report as closely as he might, as this part of the report deals not with Members of the European Parliament, but with the staff, which is a different matter.

Mr. Hill

I do not wish to become involved with the petty cash of the organisation. It is like trying to dot the i's before we have written the word. I am here to defend not MEPs or allowances, but the Court of Auditors, the accuracy of its report and the necessity for its scrutiny, which I believe is first class.

Whatever the Court of Auditors wishes in this matter—if it wants more teeth, as my hon. Friend the Member for Southend, East (Mr. Taylor) suggested it does—it will come. As Europe evolves amd moves forward, the Court of Auditors will gain strength. This is only its second report. I believe that the Commission, taking cognisance of the report, will act accordingly and moderate whatever excesses my hon. Friends wish it to deal with. To me, the whole purpose of the Court of Auditors is to do away with the anomalies and to do away with any criticism of the Community. As I said at the beginning to my then honourable colleague, Mr. Rafton Pounder, whatever one says about Europe we shall stop criticism if there is a Court of Auditors to scrutinise every action of the Commission.

Mr. Marlow

If I heard my hon. Friend aright, he said that no doubt all these things will be ironed out and the Court of Auditors will be able to sort them out. He will be aware that the report states on page 62 that the Commission has refused to communicate to the Court all relevant information on cases of fraud or irregularity", so how can he be so confident that it will all turn out for the best?

Mr. Hill

If perfection was today, one could answer that. Not until Britain joined the Community was there any movement for a Court of Auditors. We now have the second report, which reveals fewer anomalies than the first. If my hon. Friends had examined the first report they would have seen evidence of serous near-frauds. The Court of Auditors is doing a wonderful job. We cannot denigrate it today. We are simply taking note of its report. It is not perfecton, but perfection must eventually come.

From my experience in Europe and of dealing with the Commission in particular, I know that many loopholes needed to be closed, and the Court of Auditors in Luxembourg is doing precisely that. I know nothing of the infringements of daily allowances that have been cited. I know that we go to Europe. An information service and a very static daily allowance is provided. We receive no other perks. We are expected to do the double job regardless, and there are no extraneous finances.

As we sit here criticising the rest of the Community, the Community is beginning to take advantage of our criticism. I believe that when the next budget is debated the Prime Minister will have an increasingly difficult time as a result of the current massive criticism of the Community, but I hazard a guess that, if a referendum were held now and many of us who are dedicated to Europe could put concise arguments over a period of four or five weeks, the result would be little different from the result in 1975. Indeed, I should welcome the opportunity of another referendum, as I believe that the few anti-Marketeers who are left of the multitude that once was would then be convinced that Europe is here to stay, warts and all.

The Court of Auditors is a worthwile institution. We should not merely support it. We should support it to the extent of accepting its report today, with all its warts and boils. I fully support the second report, and I hope that it will be accepted by the House.

10.20 pm

Mr. Ridley

With leave of the House, may I say that we have had a very interesting debate which has sometimes strayed from the technical details of the work of the Court of Auditors into wider European issues which I am sure the House will forgive me if I do not follow. Where I think there was total agreement was on the importance of the work of the Court of Auditors, the good work it has already done and our hopes for the future, despite the fact that there are different traditions and different accounting practices in all ten countries. It must be very difficult not to see in a different way of doing things an irregularity. It is to be hoped that eventually all these different ways of doing things will be brought together. We must be a little tolerant for that reason.

It was particularly nice and apt of my hon. Friend the Member for Southampton, Test (Mr. Hill) to pay tribute to Rafton Pounder, whom I so well remember. We can all take pleasure from the fact that it was very largely a British initiative which caused this court to be set up.

What emerged from all the speeches was the very great importance of the independence of the court from both the Council, the Parliament and the Commission. It is an absolutely vital and obvious point but one which I thought the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) got a little muddled over, when he was trying to make comparisons with the Comptroller and Auditor General here. He even went so far as to say that the Government were dominating Parliament over this issue. I think his words were "little short of a scandal."

I must insist that the Comptroller and Auditor General is absolutely and utterly independent. Although we may have our disputes about one or two aspects, I do not think the right hon. Gentleman would suggest that he was not independent or, whatever his relationship with the House, that he should not continue to be independent thereafter.

Mr. Robert Sheldon

The words were extracted from the comments of the right hon. Member for Taunton (Mr. du Cann), backed up by my right hon. Friend the Member for Heywood and Royton (Mr. Barnett).

Mr. Ridley

I do not think I would accept that. The right hon. Gentleman must also beware that any solution to this problem keeps the Comptroller and Auditor General as independent as the Court of Auditors.

This brings us to the question of tension, referred to in the Public Accounts Committee's report, between the various organs of the Community and particularly the Court of Auditors. In reply to the hon. Member for Birmingham, Erdington (Mr. Silverman), it is a strange thought that a firm of auditors or a court of audit should be encouraged to be more positive in supporting the good things which have been done. I do not know any commercial company whose auditors have ever patted it on the back, or even been asked to do so, in such a way as to detract from criticisms which they have made.

There should be that tension. As my hon. Friend the Member for Scarborough (Mr. Shaw) pointed out, there should be a healthy independence, a certain tension, but a creative tension, which they speak to each other in order to improve the relationship and to listen to what the court has asked it to do, and there is already a better atmosphere, but not one that detracts from the proper relationship between the auditor and those whom he audits.

The right hon. Gentleman, the hon. Member for Erdington and my hon. Friend the Member for Scarborough referred to access to the Commission's accounts at the bank. I am happy to tell the House that I understand that the Commission and the court have now agreed on a procedure which both find satisfactory. This is one of those matters which arise from practice in the Benelux countries different from our own. I believe that the problem has been solved. I do not think that one is justified in regarding the Commission as having deliberately frustrated proper accountability by its attitude. Quite the reverse—it was seeking to behave with propriety in another direction.

There was lighthearted and good-natured banter between my hon. Friends about the Members of the European Parliament and whether they had been observing the court's dictates. There were accusations about excessive public holidays for the staff and excessive expenses for the staff over and above what the regulations allowed. I agree with my hon. Friend the Member for Flint, West (Sir A. Meyer) that it would be wrong to level that accusation at Members of the European Parliament. It is about the expenses of the staff, including the motor car expenses, and the difficult, but hardly fraudulent matter, of how many pages are produced by each typist.

All that auditors can do is to make information public. It is for those to whom the blemish appears to right that wrong. My hon. Friends who are critical have a point, in that if the Parliament is criticised by the court, for big matters or small, it, too, is beholden to deal with them. The hon. Member for Erdington rightly asked what the British Government would do about all this. In fact, it is not for the Government, the Council or the Commission. It is for the Parliament. Each of us must put right those blemishes which are within our responsibility.

The right hon. Gentleman's last point was about the provisional twelfths regime. Last year was the first in which it arose. It clearly did not work out properly on the first occasion, but I am happy to be able to tell the right hon. Gentleman that, in the review of the financial regulation, consideration is being given to a better way of arranging these matters, if we have the misfortune ever to have another provisional twelfths regime.

We agree with my hon. Friend the Member for Cheadle (Mr. Normanton) that the United Kingdom has made a great contribution to expenditure control in the Community. Dealing with the alleged blemishes would greatly enhance the reputation of the European Parliament. My hon. Friend probably heard hon. Members' criticisms.

I should also mention in reply the hon. Member for Erdington, my hon. Friend the Member for Southend, East (Mr. Taylor) and my hon. Friend the Member for Northampton, North (Mr. Marlow) who raised questions about frauds and irregularities. The problem is that the Commission believes that it would be wrong to release information relating to cases which have not yet been concluded before the courts. One can see both sides of the argument. Practice and legal matters are often different in the various countries of the Community. That is something we all understand with our sub judice rule. I am inclined to believe that the Commission has tried to do its best in a very difficult area, particularly in those cases where member States consider taking legal action.

I understand that discussions are in progress between the Commission and the Court of Auditors to agree a procedure which would be satisfactory to both institutions. As far as I can see, there could be no objection to releasing files which, for example, are about debts that are being recovered following negotiations for payment by instalment.

Mr. Roper

There is a difficult problem of timing. The investigation of fraud may run on during the period that the audit is carried out. By the time the investigation has been completed the auditors may have concluded their work for that particular period. There may have to be some variation in the regulation to enable the Court of Auditors then to start looking at a particular fraud.

Mr. Ridley

The hon. Gentleman is quite right, but I believe that it is encouraging that there is the possibility of an agreement between the two organs concerned. We must remember that our traditions have grown up over hundreds of years and are still evolving. How we can expect the European Community to get all those things right in such a short time, I know not.

Mr. Michael Shaw

The PAC runs across this just about every week. We have to make allowances and adjust our procedures accordingly.

Mr. Ridley

I am grateful to my hon. Friend, as I was grateful to him for his speech. I could not have agreed more strongly than when he said that we have to find ways of resolving those difficulties and learn how to work together in all three institutions.

My hon. Friend was particularly telling in relation to the 1982 budget, which was so near and yet so far. I make one slightly obstreperous observation, that we go through all the discussions about the need for Parliament to control expenditure—whether it be the United Kingdom Parliament or the European Parliament—as if that was all they ever strove to do. My experience both of the European Parliament in the autumn and of this Parliament over 22½ years is that all it ever strives to do is increase expenditure. I believe parliamentarians have to make up their minds what is meant by controlling expenditure, and whether it means more or less. There is in practice quite a big difference between the two.

I am happy to tell my hon. Friend the Member for Southend, East that the fitness centre is something that we all condemn as a Community expense and we have strongly supported criticisms of that expenditure which have been made in the Council. I am glad to hear that an entrance fee is now being charged. We will keep up the pressure to make sure that the centre is self-financing.

The same can be said for many of the points that my hon. Friend raised—for instance, the accounts of the European Movement. The accounts were eventually produced, as the hon. Member for Farnworth (Mr. Roper) said. Now it is agreed by the European Movement that it will reorganise its procedures and accounts so that they are satisfactory—again a tribute to the work of the Court of Auditors. I do not see anything wrong with that.

My hon. Friend the Member for Southend, East begged and bullied me to give him an answer on whether Mr. Ian MacGregor would go and sort the whole thing out. That is not within my responsibility, certainly not in this debate. Let us concentrate on the Court of Auditors, which is doing its best to do just that.

I know that there are a number of points that I have not been able to answer completely. I assure the House that everything that has been said will be reported to our representatives or to whichever Minister is next at the Council, so that what we feel about all the things that have been said is made clear.

I am sure that it is useful to have had this debate. If there are any points on which I can help hon. Members to whom I have not been able to reply, I assure them that I shall write to them. But they will accept that all that the Government can do is to express their view in the Council, which in its turn can express its view either to the Commission or to the European Parliament. Therefore, Her Majesty's Government's responsibilities are important, but not so easy to discharge. I am grateful to the House for the help that it has given us in our task.

Question put and agreed to.

Resolved, That this House takes note of the Annual Report from the Court of Auditors concerning the financial year 1980 together with the replies from the Institutions (European Community Document No. 11456/81) and supports the Government in seeking to ensure the sound management of Community finance.

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1. HOUSE OF COMMONS (SERVICES) 36 words