HC Deb 21 March 1983 vol 39 cc676-95 10.42 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 1981, together with replies from the Institutions (Official Journal of the European Communities C344 dated 31st December 1982) and supports the Government in seeking to ensure the sound management of Community finance. In its 11th report, issued at the end of last month relating to the year 1981, the Select Committee on European Legislation &c. concluded that the Court of Auditors' report was an objective survey of the administration of spending under the Community budget and that it represented a regular and valuable opportunity for parliamentary appraisal. The Government share that view.

Last year was the first time that the House had a separate debate on the Court of Auditors' report, but, unlike last year, I regret that it has not proved possible to hold this debate before we had to consider the report in the Council. We might have been able to discuss it during our debate on the Community budget on 21 February, but at that stage the Select Committee had not considered the report. Since the recommendation for debate, parliamentary timetable pressures have not allowed discussion before this evening. I shall arrange for any additional comments that arise today to be taken into account in our day-to-day contacts with the Community.

As the House will remember, in the Treasury minute on the fifth report of the Public Accounts Committee, Session 1981–82, the Government noted the views of the Public Accounts Committee and its recommendation that the Government should press for greater attention to be given to the reports of the Court of Auditors.

Subsequent to the publication of the PAC's fifth report, the House debated the Court of Auditors' report on the year 1980, almost exactly a year ago today. I then confirmed that the Government would pursue questions raised by the court through the Commission or the European Parliament. This we have done.

We are not seeking just to highlight the court's annual report; we are taking steps to ensure that a full consideration is given to the court's periodic special reports. By doing so I believe that we are taking a further step towards ensuring value for money from the Community budget. I am sure that we have the support of the whole House for this.

Last year I also reminded the House of the procedures leading to the publication of these annual reports and their subsequent consideration. The procedures are laid down in the treaty and amplified by more detailed rules in the financial regulations. I am sure that I need not cover this ground again this year, but if hon. Members have any questions about the drill, I shall be happy to try to answer them.

I should remind the House that the European Parliament is required to give a discharge to the Commission for its implementation of the 1981 budget, acting on a recommendation by the Council, before 30 April 1983. The German presidency has done its best within the tight timetable to enable the Council's recommendation to be given early enough to allow the Parliament a little time in which to consider the Council's recommendations and formulate its discharge document.

The Government had hoped to take advantage of the current review of the financial regulation to secure a less tight timetable. Unfortunately, detailed discussion of these matters in the Council has not yet begun, because the opinion of the European Parliament is still awaited. When we have the Parliament's views, the Government intend to return to the attack to achieve an improved timetable.

The report before the House is detailed and long and raises a large number of issues. As was noted in the court's report on 1980, there is a greater emphasis by the court on value for money, in addition to concern about financial regularity in the making of, and accounting for, payments. The court certainly sees its role developing in that way. The Government have generally taken a fairly restrictive view of the need for increased expenditure on administration and personnel within the Community, but we have consistently supported the need to pay the cost of the court's using qualified auditing staff.

As for the substance of the annual report and the 1981 accounts, including the Commission's response, the English version of the draft Council recommendation arrived from Brussels only today, but copies have been deposited in the Vote Office and an explanatory memorandum will be submitted to the Scrutiny Committee for consideration.

In the main, the Council confined its recommendations, with which the Government agree, to points on which it considered that the Commission had not dealt adequately with the court's observations. The Council is concerned about the rate of utilisation of funds available in the Community budget. It therefore stresses the need to exercise care in entering in the Community budget only such sums as are likely to be spent.

I refer to underspending on development aid in particular. It is specifically covered in the 11th report of the Select Committee on European Legislation &c. The Committee is concerned about the inadequate management of the Community's programme. Only about two-thirds of the sum available in the budget was spent in 1981. The underspending was worse than in 1980 and worse than in any other area of the budget. The Council's recommendations urge the Commission to take action on that matter. The Council recognises that any delay in the adoption of the Community's annual aid programme has a direct influence on the rate of implementation. It has, therefore, invited the Commission to accelerate the presentation of its proposals to enable decisions to be made earlier.

I do not propose to take up more time listing the Council's comments. This is more an occasion for the House to express its views on financial management and control in the Community. With the leave of the House, I shall respond to points made in the debate, but the House will understand that I cannot answer for the outcome of the report. The final responsibility for giving a discharge to the Commission on the accounts lies with the European Parliament. Implementation lies with the Commission.

However, I assure the House that the Government will take what action they can on points raised by hon. Members in the debate and will continue to take every opportunity to support the Court of Auditors in its efforts to ensure sound financial management and value for money.

10.48 pm
Mr. Jack Straw (Blackburn)

When the Court of Auditors' annual report for 1980 was discussed on 4 March last year, the Financial Secretary to the Treasury told the House that the Government agreed with the Scrutiny Committee about the importance to be attached to this subject.

Last year's debate took place in the early evening—a time appropriate to its importance. It is a matter of regret that the report should come before us after it has been discussed by the Council of Ministers, so that there is no formal way in which the comments of the House can be taken into account by the Council, and that it should come before us at the fag end of the day, when there is inadequate opportunity for hon. Members to debate it as it should be debated and inadequate opportunity for the press to give it the attention that it deserves.

The Court of Auditors is potentially one of the most important institutions of the Common Market. While the other institutions, especially the Commission and, I am afraid, the assembly, often appear to be dedicated to policies that waste public money on a stupendous scale, the Court of Auditors is the one body that should stand up for the taxpayer and try to ensure that our money—the British public's money as well as the money of the public of the other Common Market countries—is spent properly, if not wisely. Given the size and complexity of the Common Market institutions and the inadequate resources of the court, it is a Herculean task, with which it has only just began to grapple.

The Financial Secretary said that the report was fairly complex. That is true. It is also a most alarming read. I have read the whole document. I read it with mounting alarm and shame that institutions with which this country and Her Majesty's Government are associated could be administered in such an unacceptable way. The report discloses a degree of inefficiency, incompetence and fraud by Common Market institutions that would not be tolerated for a single day in the worst-run town hall or Civil Service office in the United Kingdom.

Mr. Tony Marlow (Northampton, North)

Does the hon. Gentleman exclude Lambeth and tile Greater London Council from that?

Mr. Straw

I would not exclude a single local authority from that comment. There is no local authority, Government Department, company or whelk stall in the British Isles that could be run as badly as the Common Market's institutions.

Mr. Richard Body (Holland with Boston)

Does the hon. Gentleman agree that at least the electors in Lambeth have some redress, whereas in the Community we do not have redress?

Mr. Straw

I entirely agree with the hon. Gentleman. That is another point. The only redress that the British public have is indirect redress through the so-called European Parliament. One of the chief culprits in terms of mis-spending of the public's money turns out, according to the report, to be the very European assembly that is supposed to be the watchdog of the expenditure of moneys in the Common Market.

Lest hon. Members think that I am exaggerating when I accuse the Common Market of inefficiency, incompetence and fraud on the basis of the report, I shall take hon. Members through a few of the comments that are made in it. On page 12, the report starts with the bald statement that The presentation of the balance sheet as at 31 December 1981 is not satisfactory. We are told that with regard to the Commission The bank reconciliations were made too late for the operations to be presented correctly. This has created certain anomalies and irregularities. We are then told than an entry of 4.2 million ECU, which is the equivalent of about £3 million, correcting a difference in the ECSC account is without documentary justification. In other words, £3 million has gone missing. On page 15 we are referred to the holiday camps account. We are told that The 'holiday camps' account, in which expenditure to be recovered from officials is entered, is not properly monitored". A sum of £13,000 included in the balance of that account remains unexplained. We are told that recovery of the amounts advanced to officials takes far too long". I could not believe that in the body of a report about the Common Market there was an entry about holiday camps. I discovered that it is part of the many benefits that Common Market bureaucrats receive—no doubt the leader of the Social Democratic party received that benefit when he was there. The holidays of bureaucrats' children can be paid for by the Common Market—by the British and European taxpayer. They pay the money back later, if the Common Market accounting bodies are lucky. However, £13,000 of the holiday camps account has gone missing and remains to be collected.

I come now to revenue. We find that the Commission, without any authority, waived £19 million on the late payment of own resources, of value added tax and such like by member countries. On page 19 we are told that Extensive frauds have occurred in the meat sector in the Netherlands following insufficient control measures. Long-running frauds have taken place through the manipulation of monetary compensation amounts. They are discussed on page 35. We find that there has been no satisfactory resolution to the merry-go-round of pigs and cattle across the Northern Irish border. We are told that the Community has up to now not been able to take appropriate special legislative measures to exclude any possibility of fraudulent profit. In other words, the possibility for fraudulent profits from the merry-go-round of pigs going across the Northern Irish border is unchecked.

On page 39 there is a simple reference to the fact that the Common Market has no idea how much food aid Poland cost during 1981. That is because no budgetary statement for that aid was ever established. The prose of the document states: Since, however, the financing mechanisms of the common agricultural policy were used for these operations but no special budget headings were created, further investigation will be necessary. I am sure that all hon. Members were in favour of giving food aid to Poland, but we would all like to know how much it cost. The fact is that none of us can know.

We also learn about the repair of earthquake damage in Venezia Giulia in Italy. At the end of page 52 there is the quaint reference to the fact that The terms 'restoration' and 'improvement' have sometimes been applied"— by the Italian Government— very freely, some of the projects financed (particularly the construction of cheese-processing plants) appearing to be mainly for new types of plant. In other words, we find that earthquake relief moneys have been used for the construction of entirely new cheese-processing plants in Italy.

In chapter 8 on research, energy and industry, there is a continuing saga of research projects that are quite out of control, particularly the JRC Ispra project in Italy. We then come, as did the Financial Secretary, to the management of the Common Market's aid budget. The Opposition have given great support to the encouragement of additional aid to the developing countries, and nothing that I say should be seen as derogating from that encouragement. However, it is important. for the developing countries as well as the taxpayer, that there should be some certainty that when a Common Market institution decides to grant aid to a particular country, the money is applied for that purpose. But on page 78 we find that Considerable amounts of budget appropriations'— which together total almost £700 million— cannot be audited by the Court of Auditors. There are no vouchers or sufficient accounts to audit a good proportion of that £700 million.

As evidence of incompetence, we find on page 83 that there are enormous physical losses of skimmed milk powder simply because the Common Market cannot ensure that it is put in bags that hold together when the powder is transported over rough roads. The standard for those bags has been drawn up and a quality description has been laid down, but they are not used. Instead, weaker bags which break are used. The Community also uses the wrong size of tin for butter oil, despite the fact that the tin that has been recommended has on numerous occasions been found in practice to be more durable.

These simple lessons of packaging, which even the British Army got together three centuries ago, have not been learnt by the Common Market, and as a result good food is going to waste when it is shipped to developing countries.

Perhaps the most worrying aspect of the report concerns the self-serving way in which the staff of the EC use the money of European taxpayers for their own benefit. Chapters 10 and 11, on staff expenditure and operational expenditure, are hair-raising by any standards. If directors of companies ran operations in a similar way, their companies would be compulsorily wound up and they would find themselves in court for a fraud on their shareholders.

Mr. Teddy Taylor (Southend, East)

They could find themselves in prison.

Mr. Straw

Chapter 10 starts with the announcement that There are a number of weaknesses in the system of payment of remunerations at the European Parliament, with the result that the relevant legal requirements are not fulfilled. That is the least of it. On page 97 we learn that There is no comparison of the remunerations of successive months, including the effect of intervening changes, so as to establish that the most recent month's payment is correct. In other words, there is no proper payroll system. At the same time, there is no procedure to inform the authorizing departments that their financial decisions have been correctly applied. … The monthly payment of remunerations takes place without the accounting officer having an authorization from the authorizing officer which has been first approved by the Financial Controller". So the system lacks authority.

Page 98 describes a mind-blowing system of entertainment allowances not only for those who might have a marginal claim for such allowances but also for messengers and secretarial assistants. A skilled messenger received a service allowance of 12,000 Belgian francs a month. That is about £180. I do not wish to denigrate the skill of messengers, but to classify messengers as skilled employees may suggest a grade drift within the European Parliament that is unknown even to the British Civil Service. It taxes one's imagination to think exactly how a skilled messenger should be spending an entertainment allowance of 12,000 Belgian francs. It certainly taxed the imagination of the Court of Auditors. It states that In the decisions of the appointing authority on these allowances, no grounds were given either for the choice of staff concerned or for the size of the sum granted to them. Turning to operational expenditure, we find in paragraph 11.0.(a) that Audit firms and engineers required by the Commission to inspect steel undertakings were engaged in breach of Article 32 of the Financial Regulation. Hon. Members will remember that as part of the attempt by the European Commission to police the various quotas and ceilings on steel production, auditors were appointed from private practice by the European Commission. It appears that there was no authority to appoint those auditors and no proper system for checking their expenditure.

The coup de grace is found on page 104. It concerns the expenses and payment of those European bureaucrats who staff the delegations' press and information offices in the various member countries, including the United Kingdom. That is a gravy train that lacks any controls whatsoever. On page 104 we are told that Neither the Commission nor the Parliament have so far drawn up statements of costs for each of their offices. They have no budget. Then in paragraph 11.17.—this must make anyone's hair stand on end—we are told that Both the Commission and the Parliament calculate and pay the monthly salaries of officials working in these offices through their central administration. No check is made of the number of officials actually employed against the number of salaries actually paid. The weakness in the system of internal control means that, for example, unjustified payments to non-existent officials could eventually not be discovered. I shall read that again, because it is such an elementary error.

No check is made of the number of officials actually employed against the number of salaries actually paid. Those free-loading offices in London, Edinburgh, Cardiff, and Dublin, and all over the EEC, are out of control. The auditors, the Commission and the Parliament that pays the salaries have no idea how many people are actually working and how many salaries are paid. For fraudulent abuse of taxpayers' money, it puts the Mickey Mouses and Donald Ducks of Fleet Street right in the shade.

Mr. Marlow

Is there not a risk that the money is being misapplied in strong propaganda campaigns in favour of perpetuating the activities about which the hon. Gentleman so rightly complains?

Mr. Straw

I agree entirely. There are the gravest risks. Although I have no direct evidence of slush funds and money being laundered for purposes for which it was never intended, the financial controls of the Common Market are so lax that the opportunities for such practices are legion. That is well illustrated by the fact that, despite the length of time for which the EC and the offices involved have been operating, no check is made of the number of officials actually employed against the number of salaries actually paid. If one wanted to run a slush fund or an unofficial fund for propaganda, what could be easier than to add four or five names to the payroll, knowing that no check would be made?

The Dublin office obviously takes the prize for imaginative use of Common Market funds. Paragraph 11.19 states: Throughout 1980 there were cases of irregularities in the calculation of overtime for all five local staff of the Commission office in Dublin. These could be discovered because at the end of this year four of the five employees purported to have worked exactly the same number of hours overtime. It was found that this overtime had never been worked and that the payments for it were intended simply to raise the salaries of the local staff by illegal means. Even more worrying, it is plain that the system of payment for unworked overtime was followed with the connivance and encouragement of the Commission in Brussels. It was not as though the local offices were doing something underhand and covering it up. They had the full encouragement of the Commission. The next paragraph states: For 1981, the head of the Dublin office was informed in a letter from a senior official of the Directorate-General responsible … you can "distribute" 50 per cent. of the previous year's total however you wish among the different members of your staff. In other words, a 50 per cent. bonus was offered to the staff of the Dublin office for no good reason other than that the Common Market bureaucrats were awash with money and wished to find some receptacle for it.

Anyone reading the report or hearing that horrifying catalogue of extracts from it will share our view that the finances of the Common Market are quite simply out of control. There is no question about it. Not only are thousands of pounds going into the pockets of European bureaucrats when they should not, but millions of pounds are being lost through inefficiency and fraud and the systems for identifying losses are wholly and woefully inadequate.

What is especially worrying in these circumstances is not just the facts of the incompetence, inefficiency and fraud but the staggering complacency of the Commission and the assembly.

Mr. Bob Cryer (Keighley)

They are part of it.

Mr. Straw

Of course they are. Their comments at the back of the report suggest that officials in the Commission and the assembly are simply not bothered about this kind of leakage and fraud. It is no reassurance whatever to the House or to the British public to learn that the assembly has to give the discharge to the Commission for the expenditure because the assembly is as much implicated in the incompetence and fraud as the Commission and the Council.

The only people who can get a grip on the Common Market's finances while that teetering organisation still exists are members of the Council of Ministers. When the Financial Secretary to the Treasury replies, I hope that he will tell us rather more fully than he did in his opening speech what the Government will do to get a grip on what is going on in the Common Market. What will they do about the extensive frauds that are even taking place within the borders of the United Kingdom through the manipulation of monetary compensatory amounts? What will they do about the scandal about the way in which nonexistent staff are being paid, staff are being paid salaries that they do not deserve, and so on? What will they do to ensure that there is a thorough overhaul—nothing less is needed—of the Common Market's financial system?

Chapter 14 of the report deals with the United Kingdom's contribution to the EC budget and the rebate that we have received. I am confused about the net payment that the British Government had to make in 1981—the year covered by the report—and subsequent years. In last year's public expenditure White Paper, Cmnd. 8494, we are told in paragraph 26 that net payments, excluding overseas aid, come to £60 million in 1981–82 and that it was £520 in the following financial year. In this year's White Paper, Cmnd 8789, the £60 million appears to have increased to £157 million and the £520 million appears to have increased to £616 million. I should be glad to know whether the figures in this year's White Paper are regarded as final or whether there will be another upward adjustment to the size of our contribution in those two years and the size of the expected contribution in 1983.

The report raises many serious questions about the running of the Common Market. The British Government, like the Governments of the other nine member countries, have it within their power to change the way in which the money of the taxpayers of Europe is spent. I hope that the Financial Secretary to the Treasury will say that, at long last, the Government will get a grip on the scandalous waste that is taking place every day in the EC.

11.12 pm
Mr. Tom Normanton (Cheadle)

When I put in an appearance at debates of this type, I ask myself where, in heaven's name, some of the participants have been in the past 10 years. It is a tragedy that the Opposition have never established—indeed, they have failed ignominiously to establish—any relationship with their representatives in the European Parliament. Therefore, they are lamentably in the dark. Perhaps they have chosen to be so on this important subject, but it contrasts strongly with the stance adopted by my right hon. Friend when he introduced the report. He did so objectively, calmly, with much confidence, while retaining a critical awareness of what the report contains.

The speech of the hon. Member for Blackburn (Mr. Straw) implied that those who criticise the European Parliament, the Commission and the institutions of the Community are just as fully aware of what happens in governmental institutions in Britain as they claim to be by reading reports such as this. The tragedy is that right hon. and hon. Members are lamentably in the dark on points such as those brought out so succinctly and clearly in this report. But the fact that those points are presented for us to read is in itself the biggest commendation for the report.

There are and always will be areas of public expenditure that introduce new policies and problems, and lessons must be learnt from the experience gained from such new developments. Several have been mentioned in the report, which is already under scrutiny by the budgetary control committee of the European Parliament. The House still does not recognise the importance of that fact, but we can draw upon this experience and learn from it how we can better manage governmental expenditure.

Mr. Marlow

Perhaps I may take my hon. Friend back to his first point. Would he care to expand it by saying that he believes that the waste of money, fraud and lack of proper accounting in this country is nothing like that which takes place in the European Community at the moment, or is that not the point that he was trying to make?

Mr. Normanton

The answer is simple. I do not know. I suggest that no hon. Member has access to information that would give him the slightest ground for saying yes or no to my hon. Friend's question.

Will my right hon. Friend the Financial Secretary to the Treasury bring greater pressure to bear for the further budgetisation funds that are not at present included in the Community budget? The report states that there are five European development funds for aid to third countries, but they are not budgeted in the same way as the expenditure of the Commission, the Parliament and the Council of Ministers. My right hon. Friend should bring further persuasive powers to bear on the Council of Ministers, because if the funds are budgeted differently hon. Members and those who serve in the European Parliament from our respective parties can better make decisions on the greater effectiveness of expenditure by the Community.

In the five reports published by the Court of Auditors, we have seen repeated references to underspending. The evidence of underspending of money that has been firmly allocated and written into the Community's budget should cause no satisfaction. In some cases the fault—I have personal experience of this—lies in the machinery for reaching a legal basis for approving projects after the making up and during the implementation of the annual budget. There is a wide gap between what the Commission and the Parliament believe should be spent and the authorising mechanism for individual projects. I hope that my right hon. Friend the Financial Secretary will take that point on board.

There are a number of other points. I shall not respond to those that have been put by the Opposition Front Bench, because they were good, parliamentary, knock-about stuff, clearly showing a lamentable lack of awareness and, worst of all, a lack of awareness of how we, in our local and national Government, account for our money.

11.20 pm
Mr. John Roper (Farnworth)

I pay tribute to the hon. Member for Birmingham, Erdington (Mr. Silverman) and the Select Committee on European Legislation &c. for reporting this document to the House, because it has provided us with an opportunity to have yet another debate in the annual round of debates on Community matters. I agree with the hon. Member for Blackburn (Mr. Straw) that it is regrettable that the debate should be taking place so late. There have been three Divisions tonight. Therefore, the debate started even later than usual.

I think that I am right in saying—I shall be corrected by those who know more of the activities of other Parliaments in the Community—that ours is the only Parliament in the Community that has such a debate on the annual report of the Court of Auditors. It is important, because, although we are not shareholders in the Community, we are representatives of the members of the Community just as much as the European Parliament is. Therefore, it is right that we should make our views known to our Government, who have a place in the Council of Ministers and can improve the way that the Court of Auditors and the Community institutions function in relation to the proper management of their accounts.

It is welcome to note, as the Select Committee noted in its report, that the procedure for the way that the Court of Auditors works has evolved over the past two years by a more informal exchange between the court and the various Community institutions during the process of the audit. It would be useful to get an idea as to the extent to which the court feels that the accounting processes of the Community have improved from year to year.

The court is one of the most valuable of the Community's institutions. As we can see from the report, it has an important function, because an institution that covers a large number of countries and is developing all the time itself is liable to have untidinesses in its financial procedures.

I may have said this last year, but annex III to the document—the financial information, with its diagrams—is one of the clearest and most effective explanations of the Community's budget. I am glad that this year, unlike last year, I was able to get a coloured copy. The annex is a clear and useful exposition of the Community's budget. It is as valuable to those who are in favour of Britain's membership of the Community as it is to its opponents.

The hon. Member for Blackburn will not be surprised if I tell the House that I found some of his remarks somewhat exaggerated. As in previous years, although he made a cursory reference to annex IV and to the responses by the Parliament and the Commission, in the introductory part of his speech, when he selectively quoted from the report, he did not reference the specific criticisms that he made to the replies made by the appropriate Community institutions in the section from page 125 onwards.

Mr. Straw

The hon. Gentleman is right, but I read annex IV carefully in preparing my speech, and in every case I checked what was said by the Court of Auditors with what the Commission or assembly said in reply. That led me to make the judgment that the approach of the Commission and the assembly was extremely complacent. While they may have taken action in two cases, they are far too relaxed, given the scale of inefficiency and incompetence disclosed earlier in the report.

Mr. Roper

I am glad to hear that the hon. Gentleman has worked through them. The hon. Gentleman had serious criticism to make of the Commission and the Parliament. The annex contains fairly satisfactory replies, or, if not satisfactory, replies that should be taken into account in making criticisms of the Community's operations.

The hon. Gentleman referred to aid in the form of beef given to Poland. In its response, the Commission said that it acted at that speed on the instructions of the budgetary authority—the Council of Ministers. It is hard to blame the Commission when it was told that it should get the beef to Poland as quickly as possible for political reasons.

Mr. Straw

It is surely not beyond the wit of man, quickly and speedily, to set up an accounting system to enable the Commission to know the amount of beef that was sent and its value.

Mr. Roper

The hon. Gentleman will see from the response that attempts are now being made to get that information. There are occasions when the Council of Ministers should give instructions for aid to be sent to Poland. The hon. Gentleman stated that the sending of aid was a good thing.

I wish to deal with the points effectively made by the hon. Gentleman on the Community's information operations, especially the delegation and information offices to which reference is made in paragraph 11.17 on page 104 of the report. In order to examine the criticism made by the hon. Gentleman about people being paid who were not employed, it is necessary to turn to paragraph 11.17 on page 204. One sees that what was clearly an unsatisfactory procedure has been resolved. The paragraph responds precisely to the criticisms made by the Court of Auditors. It states: As of this year all officials and other staff are paid by the administrators of imprest accounts in each Office. These payments are checked at headquarters. A justifiable criticism has therefore been remedied since the time of the report. That is the value of the Court of Auditors. It can draw attention to weaknesses. What is satisfactory is that the Community is then able to respond to those criticisms and make corrections. There are some matters, such as that in Dublin, that are unusual. Again, however, on page 204 it is stated that the director-general of information has been instructed to make the administrative investigations required into those matters.

Mr. Teddy Taylor

The hon. Gentleman said that the director-general "has been instructed". Will he say where that is detailed on page 204? If he "has been instructed", will he say by whom? I believe that what the hon. Gentleman stated is wrong. I think that he knew it was wrong.

Mr. Roper

I shall quote precisely. I quoted somewhat loosely. I shall give the exact words. The paragraph states: The Director-General for Information is making the administrative investigations required by the Court's comments. It will be interesting to see whether next year the Court of Auditors reports on what has happened. If it does not, I trust that the appropriate committee of the European Parliament, to which reference was made by the hon. Gentleman, will investigate this matter and ensure that a report is made on the subject. It is clear that matters of that type bring the Community into disrepute and provide ammunition for attacks by those who are less enthusiastic about British membership of the Community. It is right that these matters should be brought into the open and corrected, and the House should be told about the corrections when they have been made.

I wish to speak about the work of the European development fund, which was not dealt with in detail by the hon. Member for Blackburn. There are several worrying examples in that chapter of ways in which development aid was utilised. Although many hon. Members are in favour of the expansion of development aid, no one will be in favour of the misuse or abuse of development aid. This year, as last year, hon. Members can see that the Court of Auditors did a valuable job by criticising constructively the work of the European development fund. Having read those criticisms—and they are not terribly encouraging—it is worth noting what the Court of Auditors says at the beginning of the section on the European development fund. Paragraph 15.3 states: Notwithstanding the particular criticisms made below on certain projects, the court wishes to make it quite clear that, taken overall, the situation is satisfactory, and to stress the important contribution made by EDF to the development of the countries concerned. It is important to recognise that the court, after carrying out a most detailed analysis and having, quite rightly, drawn attention to several specific and important criticisms of the work of the development fund—those are matters that I trust will be corrected next year or in the near future—states that overall a satisfactory job is being done and that the funds which go from Britain and the other nine countries of the Community to the European development fund are making an important contribution to the development of those countries.

This is an important debate. It is important for hon. Members to have a chance to examine the weaknesses in the operation of the Community and to draw some of them to the Government's attention. The Financial Secretary can no doubt pursue them in the Council of Ministers. I trust that in future such debates as this will take place not only earlier in the day but before the Council of Ministers has to recommend the discharge of the accounts.

11.34 pm
Mr. Teddy Taylor (Southend, East)

The Opposition spokesman, the hon. Member for Blackburn (Mr. Straw), said that he was sorry that this debate was taking place at this hour because the people of the country would not be listening to it and the press are not present. Having read this document, in detail, as has the hon. Gentleman, I am glad that we are having the debate at this time of night when the public are not aware of some of the scandalous irresponsibilities in spending by the so-called European assembly, by the Commission and by the EC structure. Quite frankly, if the public were fully aware of what is disclosed in this document, it would not just damage the Common Market and its institutions but it would do a grave disservice to the cause of democracy. What is contained in this document simply serves to give democracy a bad name.

My hon. Friend the Member for Cheadle (Mr. Normanton), in his astonishing speech, suggested that hon. Members should not pay too much attention to this document because, perhaps, the same things go on in our Departments and we do not know about them. How splendid it is that a court of auditors can examine these matters. Coming from my hon. Friend, whom I have regarded as a sensible person, that is a quite outrageous response when we are talking about public money. Surely we should be even more careful about looking after public money than we are with our own money. It can only be my hon. Friend's over-enthusiasm for the Common Market that has driven him to an astonishing justification of the unjustifiable.

The argument put forward by the hon. Member for Farnworth (Mr. Roper) was that we should not bother too much, because things have already been done. However, he should look at some of the points made, and at the so-called responses. For example, there was a statement about the astonishing bogus overtime payments that were made in 1980. That is three years ago. What is the response? The report states: For 1981 the head of the Dublin office was informed in a letter from a senior official of the Director-General responsible"— the director-general of information— 'you can "distribute" 50 per cent. of the previous year's total however you wish'". What is the response? First, the Parliament says that that is not so much its business as that of the Commission. It is then stated that the director-general of information is making the administrative investigations required by the court's comments. That is the same bloke who said that those involved could do what they like in splashing out the money. That happened three years ago. It is not in any way a tolerable response, and something should be done.

There are some quite astonishing and scandalous reports. For example, among the separate national courts of auditors, the Netherlands Court of Auditors was worried about frauds in the meat sector. It carried out a special check. Page 26 states that checks were made on 23 out of 45 firms involved and frauds were discovered in 17 cases, involving own resources estimated at between 4 and 4.5 million ECU. That is about £2.5 million.

If hon. Members study the document as I have done, they will find that it reveals an appalling state of affairs. However, what worries me is that we had the same debate last year, and we expressed the same concern. By and large, the same hon. Members were present then as now. A small number of us say the same things to each other in much the same way.

Mr. Michael Latham (Melton)

The same could happen next year.

Mr. Taylor

That is true. My right hon. Friend the Financial Secretary has a duty to tell us what the blazes we are to do. Let us consider the scandalous entertainment allowances for those who do not have to entertain. The European assembly's officials said that they just arrived at the decision in accordance with the rules. They did not seek to justify why messengers and secretarial assistants should receive huge entertainment allowances. Those involved do not try to justify it but just say that it was done in accordance with the rules.

However, we cannot allow such things to continue. What can be done? Instead of reciting the scandals year after year, we should ask seriously what can be done. Such scandalous activities would not go on in our Departments and in the Civil Service. If they did, they would be revealed and the Public Accounts Committee would talk about them. There is no possibility that the so-called European assembly will sort this out. Such things tend to become worse. We can see what is happening, because many Members of the European Parliament are clearly sickened by what is going on and want to leave its green pastures for this House. I am sure that they contemplate that because they are sick of the goings-on at the European assembly and want nothing more to do with it. Some of them have great ability and are very conscientious, and they obviously find this state of affairs sickening and an affront to democracy. However, they are powerless to sort it out. That is why they are trying to leave to come to this House.

What can we do? As a gesture of protest, we could contemplate withdrawing our representatives from that silly European assembly, in the hope that it might just fade away. I believe that, if it disappeared tomorrow, nobody would notice and we should probably do a major service to democracy. I doubt whether that is practical, because the House of Commons has no authority to withdraw Members. Since direct elections were introduced we cannot simply say "We are withdrawing our deputation." That cannot be done.

Who will do something about this scandalous abuse of public money? That should interest not only people such as myself who have been critical of the EC from the start but supporters of it. They should be anxious to find a way of sorting out the problem.

The only way that the problem can be resolved is for the Council of Ministers to take the initiative and demand a thorough overhaul of the way in which the Community works. It will probably have to renegotiate the treaty to take from the assembly some of its authority to splash around money as it does now. The Government could start by conducting a special inquiry into the propaganda activities of all agencies in the European set-up.

We have just heard how the European democrats, which apparently involves some of our Conservative Members and some Danish people in the assembly, have hired Saatchi and Saatchi to spend about £2½ million—British taxpayers' money—to sell the Common Market in Britain. That is daft, because the European Parliament, the Commission, the Foreign Office and the so-called European movement have already spent money doing that. At any conference one is cascaded with free colourful documents inviting one on trips to Brussels and Strasbourg.

If they started in a small way, the Government could initiate a real inquiry into the vast sums being spent so foolishly to try to sell the Common Market as an institution. Despite all the money spent trying to persuade the British people that the Common Market is a rational and sensible organisation, they are still not convinced. We must remember that people are not daft. The people know the score and, despite the expenditure of millions of pounds and all the activities of slick firms such as Saatchi and Saatchi, the people of Britain are not misled by such silly propaganda.

Although my right hon. Friend the Financial Secretary is always fair, it is not enough to have this debate each year. We must have some guidance from the Government about how we sort out this lavish approach to the spending of public money.

I hope that all, irrespective of political views, will appreciate that many of us find it worrying and sad that important items of public expenditure are prevented, or delayed because of pressure on the public purse. Irrespective of our views, we are all aware that fast decisions are sometimes involved. I would not mind if the same rules applied to the careful management of public funds. I believe that what is going on in the European setup has to come to an end if we are to have the same prudent and sensible approach to the expenditure of public money for which the Government have a name.

I hope that the Financial Secretary will give us some guidance on how the problem is to be resolved. I believe that the only way is a special effort by the principal administrators—soon. If that does not happen, the European assembly and Commission will continue to give democracy a bad name. That should worry us all.

11.45 pm
Mr. Nigel Spearing (Newham, South)

The hon. Member for Southend, East (Mr. Taylor) emphasised the extent to which the pipes of the EC are leaking gravy all over the place. Those of us who have not been very keen on the organisation have been justified to some extent. It is clear that a large majority of those who are now actively advocating continued membership of the European Community have some direct or indirect financial interest in the arrangement.

It is not only a matter of inefficiency. When money is being made available irregularly on such a scale, there must be at least some suspicion that it is not always ending up in the right quarters. Those who wish to see proper respect for European institutions have an important job to ensure that these issues are dealt with and that that is done quickly. It is all very well for the hon. Member for Cheadle (Mr. Normanton), who is a Member of the European assembly, to say that we do not know all the facts and that in any event certain things are happening in this country. He was not courteous enough to tell us what action he intended to take, although I understand that he bears some responsibility. I am sorry that the hon. Gentleman has left the Chamber.

Some of the EC's institutions are not directly accountable even to the Council or the Commission. We know how even official information offices run footloose with funds. Even messengers and secretaries have entertainment allowances. When one considers what happens in the olive oil pools and the intervention store agencies, the mind boggles, especially against a background of the flamboyant misapplication of public funds in the more official bodies.

Under the heading "European Schools", the report says in paragraph 12.6 on page 108: The Court recommended a thorough-going review of the systems governing the payment of salaries, with particular reference to the question of computerization, and urged the Board of Governors to review the schools' financial regulations and instructions in a number of respects. It also looks forward to learning what action the Board of Governors intends to take following presentation by an independent expert of a report on the schools' internal control problems. I think the House will recall that in previous reports it has been stated that the financial control of the so-called European schools, which are not only for officers of the European Communities, has been far from satisfactory. Extremely lavish salaries are paid and the schools are very well funded.

At page 205 of the report we find the reply from the Commission. Paragraph 12.6 states: Although by virtue of the Statute of the European Schools these criticisms are not directed at the Commission, it has taken note of them and conveyed to the Board of Governors of the European Schools the concern expressed by the Court of Auditors which it shares. When are we to get a reply? What happens to those criticisms and referrals? Do they merely go into the sand?

It appears that the European schools are not even accountable to the Commission. If they are not accountable to the Commission, are they accountable to the Council? I infer from the report that they are not accountable to anyone. The court can huff and puff year by year and the Commission can shrug its shoulders and say "It is not up to us. The statutes do not apply to our control of the governors of the European schools." Whom do the statutes apply to and who is accountable? If the Commission is not accountable, should not it be made to be?

My hon. Friend the Member for Blackburn (Mr. Straw) outlined some of the notable features of this sad report. It is ironic that they are being debated under the name of the Financial Secretary to the Treasury, the right hon. Member for Cirencester and Tewkesbury (Mr. Ridley). The right hon. Gentleman has been opposed to public expenditure and much in favour of proper controls. I see that he nods. Let him exercise his considerable talents and ingenuity in chasing up some of these matters, which ideologically he would be only too pleased to do.

I was rather surprised by the terms of the explanatory memorandum submitted by the Treasury and signed by the Financial Secretary on 10 February 1983, which tells us about this report. There is nothing in his memorandum to lead us to suspect the irregularities to which my hon. Friend the Member for Blackburn referred. Paragraph 11 states: The Report is the main document which the Council takes into account in deciding whether and in what terms to recommend that the European Parliament grants discharge to the Commission in respect of the implementation of the Budget. I wish to draw the attention of the House to the procedure which must now take place and ask the Financial Secretary some questions. The motion that he has moved supports the Government in seeking to ensure the sound management of Community finance. How will he ensure sound management of Community finance, because he has only to grant or not grant a discharge certificate? As I understand it, we have had an auditors' report every year and the Council of Ministers has granted such a discharge. Will the Financial Secretary say, if not tonight, perhaps he will write to me, whether this discharge certificate is taken as an "A" point or whether it is discussed by the Ministers?

As a member of the Scrutiny Committee I asked the right hon. Gentleman's predecessor, the present Secretary of State for Energy, about this matter some time ago and it appears that in the past the Council of Ministers never had the discharge certificate on its agenda formally. It has been nodded through by the Committee of Permanent Representatives. If that is so, it shows considerable neglect by Treasury Ministers. They count candle ends, cut hospitals and schools and do all kinds of terrible things in this country, and yet the discharge of the EC Commission accounts—in the past, at least—has been left to the Committee of Permanent Representatives and has not been discussed by the Ministers. That is what I have been told, although it may not be correct. I hope that it is not, but I trust that the Minister will tell us in his reply whether that has been the practice and, if so, what he intends to do in the future.

The Financial Secretary owes it to the House to say when the Finance Council will meet to discharge the audit board report. Will it be next week, or next month? Will the subject be on the Council of Finance Ministers' main agenda and, if so, what points will he raise at that meeting, or will he tell us that he will not raise anything? I suggest that he is under an obligation to tell the House that he will raise the subject, if only to go into some of the points raised by my hon. Friend the Member for Blackburn and by the hon. Member for Southend, East.

Would it not be a good idea to withhold that discharge certificate for a while and for some of the Council of Ministers to confer with the auditors or call in officers of the Commission and ask them questions? Cannot the Council of Ministers act as its own Select Committee and take up certain points, because if it cannot I suggest that the Council has no proper control over the funds of the member states that it represents, and if that were so it would be quite improper and unconstitutional. We know that the EC is not punctilious in its constitutional procedures, but I suggest that the Financial Secretary to the Treasury is capable of investigating the misappropriation of public money in this way. He would have plenty of opportunity in this forum.

I hope that the right hon. Gentleman will tell us when the discharge is to be given and what he intends to do at that time. I understand that the effective instrument is the discharge from the European assembly and that all that the Council of Ministers can do is to make a recommendation to the assembly. That makes the Council's role more significant, because it is clear that the Council can make comments when recommending a discharge.

In the past, the recommendation has been formal. I suggest that this year the Financial Secretary should write his name into the annals of the EC by ensuring that strong recommendations are sent to the assembly so that it takes into account the Council of Ministers' views before granting a discharge of what is becoming an annual scandal.

11.56 pm
Mr. Tony Marlow (Northampton, North)

Many right hon. and hon. Members will have noticed on the news agency tapes that alarm bells are ringing at the Brussels meeting this evening. My right hon. Friend the Prime Minister is rightly doing what she can put right the desperate situation in the Community budget and particularly the injustice perpetrated regularly against the United Kingdom.

We hear that the French President is reluctant to cooperate and that he believes that the only way that we can move forward is by increasing the own resources and source of funds of the Community. It is clear from what we have heard in the debate and what we have seen in the report of the Court of Auditors that it would be a fantastic dereliction of duty for the House to permit a single extra penny of British taxpayers' money to go to the Community.

I should like my right hon. Friend the Financial Secretary to tell the House and President Mitterrand that the Government will not authorise, think about or talk about the possibility of increasing the own resources of the Community. If the Government made the mistake of moving in that direction—it is unlikely that they would—the majority of the House would implacably oppose such a move. I say to President Mitterrand that, if he wants to move in that direction, the entente cordiale will be seen in retrospect to have been an aberration and we in Britain will revert to our traditional view of the French.

I notice that between 1976 and 1981 expenditure on the Commission—the bureaucracy—doubled, expenditure on the common agricultural policy doubled, expenditure on the regional and social funds, from which we are said to benefit more, trebled, though it is still puny, and expenditure on the European assembly quadrupled and far outstripped increased expenditure on any other institution or fund in the Community.

I remind the Financial Secretary that the Prime Minister, when addressing the House on the subject last Thursday, referred to the institution as an assembly. That is what it is. It is not a Parliament or a legislature. Let us get it right and be consistent. It is a European assembly. It may wish to be a Parliament. That is one of the great dangers. As my hon. Friend the Member for Southend, East (Mr. Taylor) said, some talented people, with ambitions, time on their hands and taxpayers' money at their disposal, wish they were not members of an assembly and wish to acquire the powers of a Parliament. We see that day by day, before our very eyes. Let them not get away with it. Let us remind them that they are not a Parliament and never will be, and are merely an assembly. In the year 1981 they spent £100 million of taxpayers' money. As the hon. Member for Blackburn (Mr. Straw) said, there is no procedure for informing the authorising departments that their financial decisions have been correctly applied. Someone authorises the expenditure of £100 million and someone completely different somewhere else decides how to spend £100 million.

There is no control, no link and no proper safeguards on how the money is spent. Payment of remuneration—cash stuffed into people's pockets—takes place without the accounting officer receiving authorisation from the authorising officer, which has first been approved by the financial comptroller. Money is paid without authorisation. Where is that money going? Where is the control? How can we in the House allow British people's money to be spent in that way? We would not do that with our own public money. How can we do it with European money? How can we contemplate any addition in own resources such that more British people's money would be spent in such an appalling and unsafeguarded way?

If one looks at some of the details of the expenditure, one sees that some 1.3 million ECUs, which amounts to about £7,000 or £8,000, has been spent on Members' allowances, when they have been going to parliamentary committees, political groups and so on. Some £13,000 is spent per meeting, and there is £350 of expenditure for each Member of the European assembly as they globe-trot from one end of the European Community to the other. Venice cost twice as much as anywhere else. Why on earth did they have to go to Venice, and spend twice as much Community taxpayers' money, to have their meeting? Why can they not settle down in one place to have all their meetings and get on with it? What do they think we are—people doling out largesse so that they can indulge in their every single whim?

I ask my right hon. Friend two questions. My first is on the money that will be given to the European assembly and to the political parties to be spent on the forthcoming European elections. It is a matter of grave concern to many right hon. and hon. Members on both sides of the House how the money will be accounted for, for what other money it will be a substitute, and what effect it will have on the feelings of political parties here on how we should deal with the Community when that useful amount of money is made available to us. It is unconstitutional and should not be permitted.

Secondly, I know that my right hon. Friend has no power over the allocation of Community funds. Will he follow seriously the point that was made by my hon. Friend the Member for Southend, East? Because of the constitutional implications, the ambitions of other institutions within the Community to effect their policies within the United Kingdom and the dangers to the sovereignty of the United Kingdom, will he set up an inquiry and a study urgently into the expenditure of Community funds in the United Kingdom? That is of the essence. I hope to hear a positive answer from my right hon. Friend.

12.3 am

Mr. Ridley

More questions have been raised in the debate than I can possibly answer in the short time left to me, but I shall do my best.

My hon. Friend the Member for Southend, East (Mr. Taylor) is right in saying that Members of the European Parliament are seeking as hard as possible to come here. I wonder whether that fits with his view that the pastures in Strasbourg and Brussels are so lush and that the aspirants to the House are so puritanical and shocked by what they see that they would prefer to come here. That might be evidence that life is not so cushy in Strasbourg as my hon. Friend and many others suggested.

I assure the House that we have in the Court of Auditors perhaps the finest instrument there would be for finding out those things. I am happy to say that this country was instrumental in getting the Court of Auditors set up and developing it and now in having for the first time, two years running, a debate on the report. Such a debate gives publicity to the many points that have been made by hon. Members in a way that can only be good for controlling such excesses and such things as have gone wrong in the European institutions. A great job has been done by the Court of Auditors. As the hon. Member for Farnworth (Mr. Roper) said, the fact that we alone among the Common Market countries debate these issues can serve only to ensure a more rigorous climate for the conduct of affairs, and that can only be for the public good.

This should not be a cause of complaint, either for this Government or for the Community. The more that these things are exposed—and they have been exposed extremely successfully by the Court of Auditors—the more the House ought to be grateful.

I do not know what the ratio of improper expenditures of public money in this country is compared with public money in the EC, nor do I know the ratio of exposure by our Public Accounts Committee compared with the Court of Auditors. But, without knowing all the facts, it seems hard to blame Europe for what has been exposed by an effective Court of Auditors.

I shall give the hon. Member for Blackburn (Mr. Straw) any information he wants about the cost of our budget refunds. He quoted financial years and gave the total budget for the Community, excluding overseas aid. It might help if I gave calendar year figures for our net contribution on the allocated basis. In 1980, it was 337 million ECUs. In 1981, it was 12 million ECUs. We do not yet know the figure for 1982, but on a first estimate it is likely that the figure will be between 850 million and 900 million ECUs.

The Council has asked that staff salaries should be restrained. With effect from July 1981, a levy has been imposed to reduce the pay award for Commission staff. The British Government pressed for this to take place, and it has now been redressed.

As to the famous holiday camps, the Council has also asked that in future the appropriations entered under this article are used for category C and D officials only—that is, the secretarial and ancillary staff. The Commission has stated that steps have been taken to shorten the time needed to recover the funds advanced. Again, the Council is taking action.

The hon. Gentleman also referred to the concern expressed by the court about pigs crossing backwards and forwards across the Irish border. The existence of MCAs provides an opportunity for fraudulent profits, and what he said has been taking place. Pigs can be smuggled across the border in one direction and re-exported, thereby claiming an MCA refund. However, I am happy to say that the United Kingdom and Irish Governments have tightened up customs control on the border, without the Commission's prompting, and it is thought that this, too, has been brought to an end.

I must tell my hon. Friend the Member for Cheadle (Mr. Normanton) that, if we were to budgetise the funds presently outside the budget, such as the funds for the European development fund, that would not of itself improve control, but it would have serious implications for our net contributions as they are currently financed by direct contributions where our share is less than for the general budget. I therefore hope that he will not press that point too hard.

Reference has also been made to the interest on the 29 million ECUs on the late payment of our own resources, which was waived by the Commission. That is something for which we should be grateful. That interest relates to the disputes over the 1980 and 1981 budgets. The Commission's position, which the Council endorses, is that the interest accrued as a result of a political dispute and that the dispute might have continued even longer if the interest had not been waived. The Commission was therefore acting within its area of competence.

It being one and a half hours after the commencement of proceedings on the motion, MR. DEPUTY SPEAKER put the Question pursuant to Standing Order No. 3 (Exempted Business).

Question agreed to.

Resolved, That this House takes note of the Annual Report from the Court of Auditors concerning the financial year 1981, together with replies from the Institutions (Official Journal of the European Communities C344 dated 31st December 1982) and supports the Government in seeking to ensure the sound management of Community finance.