Court of Auditors

HC Deb 13 March 1991 vol 187 cc1053-67 10.44 pm

Mr. Jonathan Aitken (Thanet, South)

I beg to move, as an amendment to the motion, at the end to add: congratulates the Court for once again producing a detailed

and comprehensive account of the appalling waste, mismanagement and incompetence of the institutions of the European Community; and much regrets that there is no effective vehicle within the European Community to ensure that appropriate action is taken on the issues raised in the Report. You may have noticed, Mr. Deputy Speaker, that the wording of the amendment is somewhat sharper than the congratulatory tone of parts of the speech of my hon. Friend the Minister. It is not difficult, therefore, to raise the temperature a little, because the prose style of the Court of Auditors' report must rank as among the most boring in the world, and my hon. Friend the Financial Secretary delivered his comments upon it in a most appropriately soporific style—perhaps in the hope that none of us would notice some of the irregularities that he was talking about.

I was troubled by my hon. Friend's lack of indignation about what the amendment calls the appalling waste, mismanagement and incompetence of the institutions of the European Community". I try to imagine myself for a moment not in the House of Commons talking about the European Community and its Court of Auditors' report, but at an annual general meeting of a public company in this country, discussing with the shareholders an auditors' report couched in such terms. In any half-decent company which had an auditors' report highlighting such failures and weaknesses, there would immediately be demands for the resignation of the chief executive and changes in the board, while the institutional shareholders would be up in arms. Even in public finance, the Public Accounts Committee would make a serious song and dance.

After reading the extraordinary catalogue of irregularities, creative accountancy, unlawful switchings of accounts, monitoring failures and plain vanilla frauds which all seem to be part of the staple diet of Euro-folk, I thought that the European Commission needed a new signature tune. I would suggest the old nursery rhyme, "Frère Jacques"—"Are you sleeping? Are you sleeping?" It is apparent that brother Jacques Delors and his merry men in Brussels have been disgracefully and incompetently asleep at the switch when it comes to running the proper financial management of the Commission. Instead of running a tight ship, I suppose that they have been dreaming of political unity.

We need to focus on some of the things in the report and address seriously whether we should not merely criticise in sharp terms—much sharper than those used by my hon. Friend the Minister—but also try to do something about it——

Mr. Hugh Dykes (Harrow, East)

I very much agree with what my hon. Friend has said. Does he agree that it is interesting that, each year, when the Court of Auditors' report laments that it needs more staff and more resources for its investigations, it always confirms, above all, that all these misdemeanours occur in all member states equally?

Mr. Aitken

It also confirms, year after year, that the frauds go on and on and get worse and worse. My hon. Friend's comment seems to prove what is happening year after year. We need to do something about it.

When one goes through the report's small print, one does not know whether to laugh or cry. In certain places one can do both. I shall have a stab at stimulating both emotions in the House. Let us, for example, tackle the subject of redundancies in Europe, which seem a different form of redundancy from any that I can discover. Some of us have long known that the Brussels Commission is the Valhalla of jobs for the boys, but what is new in the report is that it also turns out to be the El Dorado of golden handshakes for the Euro-researchers.

I found the comments of my hon. Friend the Minister amazingly complacent and self-satisfied about what he thought had gone on in the research department. He seemed to think that there were "continuing problems", or something like that. However, chapter 9 of the report discloses a jolly little tale—an expensive tale—of 150 temps in the Commission's joint research centre who were made redundant. They knew that they were temporary staff, because they had a contract stating that they were temporary staff and that the contract was terminable on either side at three months' notice. However, when the temps were made redundant, they received not the three months' money that they might have expected, but 70 per cent., of their salaries for each year of their working lives until the age of 65.

In the last three years, that has worked out at £30,000 per researcher. That exercise cost £4.5 million in 1988, 1989 and 1990. Presumably it will be a continuing cost to the Commission until those temps celebrate their considerably enriched 65th birthdays. It adds a new meaning to laughing all the way to the bank.

The European Commission puts it rather differently and in rather more moderate language. It simply says: Why it was necessary to give such terms to staff engaged on temporary contracts terminable at three months' notice is not clear. Obviously, a lot more is not clear in the wonderful world of Euro-retirements and redundancies.

The Father Christmas munificence towards those who get the sack in Brussels becomes even more incredible when we reach the European Parliament. Chapter 15.4 of the auditors' report criticises the incredible payment of £2.2 million to three redundant persons. It is not clear whether the fortunate trio were Members of the European Parliament, MEPs' staff or European Parliament cleaning ladies, but at £730,000 per head of redundancy money for getting the sack, they too will have laughed all the way to the bank as a result of being dismissed by the Commission. The auditors say that the payments were made because of a "considerable system defect". The data on which the payments were made had not been checked either by the administrators responsible or by the Financial Controller". It is very different from the world of our own dear Fees Office here in the House of Commons.

Such everyday stories of European Commission money folk in the Court of Auditors report are always expensive. Sometimes they are funny, sometimes they are sad. To me, the saddest parts of the report are those which deal with European Community aid, far too much of which is wasted by sheer incompetence.

In the House we hear a great deal from my right hon. Friend the Minister for Overseas Development about how glad she is that most of Britain's overseas aid is channelled through the European Commission, but one might take a different view after reading through the passages of the report on aid to west Africa and Bangladesh. The auditors say that, of last year's £25 million of food aid to Bangladesh, only 38 per cent. was actually distributed. The remaining 62 per cent. was either eaten by senior civil servants—I suppose that is food for the boys—or sold by them for a profit. The poorest Bangladeshis simply did not receive the aid that they were supposed to receive.

In west Africa, the story is much worse. Let me focus the attention of the House on the story of EC aid to Benin, a country that I happen to know quite well, and which is one of the poorest countries in the whole of Africa. This sad story is to be found on pages 206 to 216. Here is what was wasted. There was a E3 million EC aid project for village water wells. All the wells had to be abandoned because they did not work properly and had not been properly surveyed. There was £40 million EC aid for a cattle-rearing project. It failed because of delays and inadequate financial management and, again, a failure to do proper surveys. The same fate befell a Benin fish farming project, to which EC aid of £1.5 million had been given. That failed because its self-sufficiency was doubtful, if not non-existent. A Benin wildlife park failed to open its gates for many of the same reasons.

But perhaps the most shocking story of aid to Benin that went wrong involves a European Community aid transfer of £5 million in cash, called a STABEX transfer. The money was tranferred from Brussels to a joint EC-Benin bank account in July 1988. It was supposed to be under the control of the joint signatories of a Benin official and an EC official. The EC official forgot his duties, and the Benin official moved the entire sum to another bank account without proper authorisation by the EC official, who did not notice for another seven months that the money had been moved. Then the bank to which the £5 million in cash had been moved went bankrupt, and the whole amount of aid had to be written off.

Five million pounds is a lot of money in aid when children are starving and aid is desperately needed in a poor part of Africa. It is not amusing but desperately sad that such incompetent mismanagement of the EC aid programmes should occur.

Mr. Rowe

Does not my hon. Friend agree that this is the same story, writ large, as is sadly so often the case with national aid programmes, where we encounter exactly the same difficulties despite our best efforts? Does it not suggest to my hon. Friend that we should reconsider the policy under which aid is given? It might be better to allow organisations and companies with an established track record of delivering good work in a country to be given additional assistance, rather than, as at present, the frequent setting up, de novo, of schemes by people with no proven track record?

Mr. Aitken

My hon. Friend's intervention had several themes, but I do not think that I agree with any of them. Perhaps one with which I do agree is that anybody other than the EC would be better doing the job. If my hon. Friend has up his sleeve some organisations with a track record, let us send them the money. I do not agree that: the national performance of our Government or civil servants has been nearly as bad as that of the EC. I have not heard any horror stories about a British Government official who allows £7 million in cash to be transferred to the wrong account and does not notice the transfer for seven months, so that the full amount is written off and wasted. That is a disgraceful story. I cannot accept that there is any comparison between such mismanagement and anything that I have heard of within the British Government.

Mr. Cash

Does not my hon. Friend agree that, in light of the tremendous activities of charities seeking to raise money to help those who are starving in the third world, it is incredible that figures such as he has mentioned should be squandered? That is a total disgrace and must be sorted out.

Mr. Aitken

I am glad that I seem to have raised the temperature in the House, because that is what I intended to do. Some of the wastage is heart-breaking, but it does not seem to matter to those in Brussels. If the message goes out from this House that people care about the scale of incompetence, which can be heart-breaking for those involved in the world of aid, it will be a good thing.

Agriculture is the biggest item in the EC budget and features extensively in the criticisms in the auditors' report. It is perfectly clear that the European Commission's financial accounting methods for agriculture are roughly those of Polly Peck or Bernie Cornfeld's Investors Overseas Services. One can find examples after example of that. Page 55 of the report criticises the Commission for treating food aid gifts to third-world countries as sales at intervention prices, so making fraudulent profits and improving the agricultural budget. On another page, the report states that agricultural expenditure is kept within its guidelines only by the dubious accountancy practice of transferring from those sectors with underspends to those with overspends.

Page 83 contains a pretty clear hint that the co-responsibility levy is continuously evaded by continental farmers, who pretend to consume large quantities of the cereals on their farms in order to qualify for benefit. I noted the Court of Auditors' comment that none of the member states visited, except the United Kingdom, took steps to check the reliability of global figures and check farms on a test basis. Only Britain operates on a level playing field.

European agricultural spending today faces a new budget crisis, largely because of the cost of buying in east German corn, which has risen to a cost of more than £1 billion this year. That will mean cuts in European Commission agricultural spending. As we have the Court of Auditors' report in our hands, it is a good moment to ask what Mr. Delors is going to do about it. We know the answer from some interesting recent press reports. Mr. Delors has decided to cheat and continue the sort of fraudulent, creative accountancy cycle that we find in the auditors' report.

Why do I say that? I shall quote from a fascinating article, written by Mr. Boris Johnson, the Brussels correspondent of The Daily Telegraph, which appears in this week's Spectator. Mr. Johnson states that the EC must make some cuts. The article states Just to keep within budget, this means moderately painful price cuts for farmers in the whole of Europe. Resistance is being led by the French, and amazingly, Delors himself. Last week he startled officials by allowing himself to be outvoted by his 16 Commission colleagues after a flagrant attempt to protect French farmers. While his colleagues agreed with the Irish farm Commissioner, Mr. Ray MacSharry, that there was no choice but to make the cuts, Delors said it would be better to admit defeat and break the EEC budget. Voted down, he fumed: 'I will not defend this in public.' MacSharry: 'Do you mean to say you will not defend a collegiate decision?' Delors: 'I will not take moral lessons from you, MacSharry!' That is the sort of conversation that sets a Brussels cocktail party a-twitter, and raises questions about marbles. The report is important, because it raises the curtain on a whole series of totally unacceptable financial manage-ment practices. At times, they are fraudulent, deceitful and dishonest. I shall not press the matter to a vote, but I take issue with the tone of my hon. Friend the Minister, who misjudged the mood of the House by not saying as clearly as I hope he will if he speaks again at the end of the debate, how shocked the House and, I hope, the Government are at some of the revelations in the report.

Year after year, we turn up for these late night debates and simply accept that somehow there is a continuing financial shambles in the Commission. It is not good enough. The amendment asks that we take action to ensure that appropriate action is taken on the issues raised in the Report. I hope that the debate will encourage the Government to take some truly effective and thorough action.

11.1 pm

Sir Russell Johnston (Inverness, Nairn and Lochaber)

As hon. Members have said, we are debating a detailed two-volume report. The first volume has 133 pages and the second has 85. There are also many tables. As the hon. Member for Bexhill and Battle (Mr. Wardle) said, it is now March 1991 and the report is for 1989, and we have an hour and a half in which to debate it. That is not a very effective way in which to proceed. Despite what the hon. Member for Thanet, South (Mr. Aitken) said, the Minister did not misjudge the mood of the House. He caught it just right, because the mood is somnolent and the Minister was reflectively somnolent.

One can only pick out some matters. Even the critical hon. Member for Thanet, South could pick only the odd bit of the report, and in dealing with any organisation one can always find awful things that have gone wrong. I shall pick three matters in the report, and the first of them is not a criticism. It is to note, and it is worth noting, the size of the bureaucracy. The report tells us specifically that the total staff for all European Community institutions is 24,266. That includes everybody—the cleaners, the electricians, the doormen, the lot—and the Commission takes 17,257 of those. For a Community of 338 million, and bearing in mind the policy areas that are covered and allowing for error, sometimes gross error as we have heard, that represents good value for money.

Mr. Bob Cryer (Bradford, South)

Will the hon. Gentleman give way?

Sir Russell Johnston

How could I refuse?

Mr. Cryer

The hon. Gentleman advances an argument used by many pro-marketeers, that the EEC has a small bureaucracy. Does he take into account the fact that a large part of the EEC bureaucracy is administered by individual member states? For example, our Ministry of Agriculture, Fisheries and Food employs 3,500 civil servants solely on EEC matters and that is repeated in almost every Department. The idea that there is a relatively small and efficient group of people administering the EEC is not true.

Sir Russell Johnston

It is true, but I shall not argue at length with the hon. Gentleman. It is not true that other Departments employ the 3,000-plus that the Ministry of Agriculture, Fisheries and Food, and presumably the Scottish Office Agriculture and Fisheries Department, employ. The Ministry is in a special position. The hon. Gentleman has made his point.

My second point concerns fraud and irregularity, on which the hon. Member for Thanet, South properly laid great emphasis. The United Kingdom has a good record in putting European legislation into effect. However, no country is perfect, and the hon. Member for Islington, South and Finsbury (Mr. Smith) gave examples of where we have not gone along with what we have been required to do.

The Court of Auditors makes a major and admirable effort to cover the field, but it is not clear that there are effective measures to deal with defaulters. Financial sanctions were supported by a recent vote in the European Parliament, and I wish to know whether there has been any progress on this. At the administrative level, for example, one notices in paragraph 1.73 that the court says: There is no systematic linkage of information concerning frauds to the entering of own resources in the accounts. Such information could, however, have an effect on the recording of the entitlements established. In particular, the Commission does not make out any recovery orders, even in the case of amounts that have been properly identified. That is not satisfactory. The response from the Commission, on page 226, is long and complicated. I simply ask the Minister whether we are getting on top of this. If the hon. Member for Islington, South and Finsbury is correct, 30 fraud detectors for 300 million people does not seem a good ratio.

My third point concerns a matter which has, for a long time, caused all those interested in an effective European Community regional fund, based on agreed criteria, deep dissatisfaction with the attitude of this Government and of the Labour Government before them, after the establishment of the regional fund. As hon. Members will recall, that was made the responsibility of the then George Thomson, now Lord Thomson of Monifieth. I am talking about additionality.

The Court of Auditors' report expresses the problem succinctly and clearly at paragraph 7.106, where it says: The principle of complementarity"— these are awful words— aims at ensuring that Community action is in addition to national action to assist the regions and is not used as a substitute. The implementation of this concept requires the drawing-up of adequate procedures to ensure that Community contributions to regional development are not in practice diverted from their purpose We do not do it that way. In the past, regional funds, which were usually based on a negotiation of a fixed proportion, have been treated by the Treasury as a clawback of what the former Prime Minister, the right hon. Member for Finchley (Mrs. Thatcher), used to call "our own money". I do not accept that concept, and I should like to hear the Goverment's opinion of the clear statement by the Court of Auditors of what is proper—a statement of which we are in breach, and to which no reference is made in the commentary by the Treasury or the Scrutiny Committee.

My last point is about the unpredictabilities of politics. When he was briefly Foreign Secretary, the Prime Minister had to write the interim White Paper on European Community developments between June 1989 and January 1990. He said: For the first time in years Community spending, including on agriculture, is under proper control. The reason for that was increased resources. Until then, resources had lagged behind policy decisions, and that was the reason for the Delors package, which had been reluctantly accepted by the right hon. Member for Finchley. The report gives a generally good picture of the Community picking up momentum.

However, by the end of the year, the Berlin wall was down, the effect of agricultural imports from central and eastern Europe were being felt, and the drought in the United States was sending up world prices. On all those things, my views are contrary to those of the hon. Member for Thanet, South. Those uncertainties in the world argue for closer and closer integration in the Community.

I conclude as I began, by remarking on the ineffectiveness of the whole procedure. In my experience, it is often made worse by a tendency among Ministers simply to ignore questions that are asked of them. In a short contribution, I have asked only two or two and a half questions. I very much hope that they will be answered.

11.9 pm

Mr. Christopher Gill (Ludlow)

Thank you, Mr. Deputy Speaker, for calling me so early in this important debate.

I have spoken regularly in debates on the reports of the Court of Auditors. What is significant about this evening's debate is that there is a much greater attendance, which is most encouraging because many of us have been concerned about the lack of interest that the House has shown in these important matters.

The other feature of the debate which I welcome very much is the invitation of my hon. Friend the Minister to make suggestions about how affairs in the Community can be better controlled and organised. I want to make suggestions on three subjects—the unsatisfactory nature of the division of responsibilities within the European Community, the unsatisfactory systems that are represented by some of the European policies, and the sheer unintelligibility of much Euro-jargon.

On the division of responsibility, I quote from the Court of Auditors' report: Management of numerous important areas of the Community finances is shared between the administrations of the member states and the Commission. I suggest to my hon. Friend that in that division of responsibility there is the classic recipe for confusion, disaster and total lack of control. There is too much opportunity always to leave it to the other chap to do what needs to be done.

The report is valuable, important and excellent. As my hon. Friend the Member for Thanet, South (Mr. Aitken) has pointed out, it contrasts very much with the auditors' report that we in commerce would expect to see. One only has to flick through the pages of the report to find criticism after criticism about the way in which the finances of the Community are organised. The report is littered with phrases like: The system of budgetary and financial management in force needs to be improved"; the accounting and internal control shortcomings"; and More rigorous financial management by the Commission would provide better information". There is much criticism in the report. One looks hard to find any reference to things that the Commission is doing efficiently and with probity.

With regard to systems, I am sure that many hon. Members will understand that the systems defy reasonable control. I have on previous occasions in the House talked about fraud in agricultural products. No number of accountants and no army of inspectors could control the abuse and fraud involved in commodities because they cannot recognise what they are looking at. That is a mat ter of simple practicality, but it goes well beyond that.

I was interested to read the supplementary explanatory memorandum on the management and control of export refunds by the Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food, in which he states: the level of subsidy has been determined with insufficient regard to the need for economy; the Commission's arrangement of export subsidies has not satisfied the requirements of public accountability; and national controls provide an insufficient safeguard against fraud. On the implications of this, he says: The Government is concerned that the objectives of the refund system should be achieved as economically as possible and regards fraud against the Community budget as a serious problem which needs to be tackled quickly and effectively. He welcomes the court's report, which underlines the need for improved management of EC expenditure and greater effort to minimise fraud. Those are all very welcome expressions of sentiment. So often in these debates we hear expressions of sentiment as to how we would like to see matters improved, and we utter platitudes along those lines; but so much of the fraud and the abuse can never be resolved unless we tackle the system that allows them to take place.

In a Committee Room in this House we have been considering the transport of live animals within the European Community. Part of the evidence submitted to us in Committee is that 31 bulls were exported from a market in the midlands for meat in Sicily. As a practical man involved in that trade, I cannot think of any legitimate reason why beef animals should be exported from the middle of this country to the island of Sicily to provide Sicilians with freshly butchered meat. I suggest that the only possible reason for the extremely long journey of those animals was to satisfy the fraudulent intent of, perhaps, the mafia.

Perhaps my hon. Friend the Financial Secretary to the Treasury would see whether something could be done to help all of us in the House to assist him and the European Community to get a better grip of the Community's finances. There is an important role for the House in scrutinising the many regulations and directives which come from Brussels. I am sure that other national Parliaments look to see what we are doing at Westminster to scrutinise such matters as are before us tonight. I am also sure that many hon. Members are deterred from looking closely at many things to do with the European Community simply because of the complexity of the legislation and of the detail put in front of us, the sheer incomprehensibility of much of it and the frustration that builds up as we feel that it is impossible to get to grips with this huge and monolithic bureaucracy.

In looking at the whole question of the European Community, we must not allow our idealism to blind us to realities; nor must we allow our innate common sense to be subordinated to theory. Earlier today in the House we saw how an ideal or principle had gone awry simply because the practical difficulties were not fully recognised and were underestimated.

In our efforts to be so communautaire, to demonstrate that Britain will play a leading role in the councils of the European continent, passing many directives and regulations and participating in the intergovernmental conferences and other meetings, we must keep our feet on the ground.

Many of the complaints that are itemised in so much detail in the auditors' report arise because the system is so fundamentally flawed. Agricultural support spending is out of control. Fraud is endemic. What assurances can my hon. Friend the Minister give the House? Can he promise the House that the programmes in which fraud is endemic will be abandoned? Will the Court of Auditors' recommendations be implemented? Platitudes and promises will not do. In the final analysis, if there is no improvement, the House must be prepared to withhold funds.

11.20 pm

Rev. Ian Paisley (Antrim, North)

I am not holding a flag for the Commission, but does not the Council of Ministers have responsibility to oversee the administration as carried out by the Commission? Is that not part of its powers under the treaty? I should like the Minister to elaborate on that.

It is no use hon. Members simply attacking the Commission. The Commission has fallen short and it is open to justifiable criticism, but the Council of Ministers has a responsibility. The Minister cannot answer for the Commission, but he can answer for the Council of Ministers, because he is part of that Council. Knowing the way in which the Common Market operates, we cannot expect the Minister to stand at the Dispatch Box and defend the Commission because he is not responsible for its workings. But, as a member of the Council, he is responsible for overseeing the administration carried out by the Commission, so he should be able to answer on that.

I should have thought that pro-marketeers, such as the hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston), would be glad to have done with the evils and shortcomings of the Common Market, instead of trying to gloss over them. If the hon. Gentleman reads the document that the Minister has produced for us—on which I congratulate the Minister—he will see that it is a fair, perhaps even a biased, summary in favour of the market. Yet that document alone is a terrible overall indictment of the administration.

I agree with the hon. Member for Thanet, South (Mr. Aitken) that, if the books of any company were in the state that the books of the Common Market are in today, the directors would all be fired and the fraud squad would be called in. It is no joke that £5 million that should have gone to the needy has gone astray and that that has been glossed over. I have heard Commissioners boasting about what they are doing for the third-world countries. What could that £5 million have done to help people in their dire need? The House has a right to highlight that and to pay attention to what is really happening.

Mr. Cash

Does the hon. Gentleman agree that that was only one of the examples that my hon. Friend the Member for Thanet, South (Mr. Aitken) produced? The £5 million is only the tip of the iceberg. If that sum is quantified in terms of the fraud taking place in the Community as a whole, the total sum is enormous. The situation has gone beyond the pale, and action must be taken.

Rev. Ian Paisley

I agree with the hon. Gentleman. It would be impossible to highlight every example during this short debate.

Surely it is amazing that the Court of Auditors has continually to say to the Commission that the presentation of its accounts and of its administration has many shortcomings. Surely the Common Market should have its act together by now. It should be able to present an overall summary to the Court of Auditors. The summary that has been produced fails to differentiate between compulsory and non-compulsory expenditure. Accordingly, the auditors are in difficulties when they come to examine the books. They have to do considerable research in trying to carry out their duties. The Court of Auditors is to be commended.

Many of the members of the Court of Auditors are strong pro-marketeers. Some of them were members of the European Parliament and were committed to the Common Market, but the court is not biased. Although some of its members have the background that I have outlined, they are alarmed by what is happening. When the court draws attention to irregular carry-overs, the Commissions merely states that it is applying the rules. It adds that some flexibility is still required. Under the smokescreen of flexibility, the Commission excuses what it is doing.

Money should be returning into the coffers of the Common Market, but we find that the interest on arrears of payments of our own resources is not even being collected. The Commission is not collecting the money that should be coming back to the Community. Surely the House should be concerned about that. The document that the Minister has produced shows that we are getting into a sorry pass.

I have always been worried about the inadequate customs control of certificates. It is something that we know about in Northern Ireland. It seems that it is possible to obtain certificates to make repeated crossings of the border. It must be remembered that every crossing takes money out of the EEC's pocket. I am sure that the hon. Member for Inverness, Nairn and Lochaber is as concerned about that as I am, he being a Scotsman. I am a Ballymena man, an area which is known as the Aberdeen of the north. We are told that there is no proper documentation and that the Court of Auditors cannot undertake proper scrutiny. That is alarming.

The court refers to serious weaknesses in the implementation of the levy system. Any Member who has farmers in his constituency will be worried about that. I am worried about slow payments. The court has highlighted the delays in processing requests for payments. Surely those who deserve to benefit from the subsidies should be paid on time. We should be trying to ensure sound financial management, so that they get their moneys when they are due.

I am alarmed by the offhand way in which the Commission seems to dismiss the matters to which the Court of Auditors has drawn attention. It does not say, "The Commission is prepared to face these matters and to take steps to ensure that the deficiencies do not continue."

The time has come for the Council of Ministers to take the Commission to task, and to say, "It is in the interests of us all to get honesty and integrity into the way that the funds are expended." That would remove a great deal of current criticism, which would be in all our interests. I am not a Common Marketeer; I have always been anti-Common Market. However, it must face up to its responsibilities. It cannot continue to be dishonest; it must now start to be honest.

11.30 pm

Mr. Charles Wardle (Bexhill and Battle)

The hour is late. It is that time of day when the Whip fixes one with a baleful stare and asks whether one really wishes to make some comments. I shall be brief, and restrict my comments to three observations about the 1989 annual report and the functions of the Court of Auditors.

First, I wish to emphasise that the accounts are produced very late indeed. I expressed that concern when my hon. Friend the Financial Secretary allowed me to intervene in his speech. If the accounts are produced in December of the year following the year end, they are too late for the Council of Ministers and the European Parliament to enable that information to have any bearing on spending plans and decisions for the year that follows, even in a normal year. In a year when there has been some structural change in the Community—such as following German reunification, when five additional German Lander became part of the Community—the need for information from the previous year is most important. That is lacking. Although my hon. Friend said that the report was the principal means of scrutinising how money is spent on the Community's behalf, unless that information is delivered sooner, so that it can apply to the following year's budget process, the system can be of little use.

Secondly, the Court of Auditors has no teeth. Much political importance is attributed to its work, and it is certainly active. It produces many papers—for example, 13 in 1989 and 14 in 1990. However, there are no powers to demand remedial action and to enforce changes. That means that for all the virtuous pronouncements in its reports, there is no power in reserve to hasten the pace of change and to enforce budgetary control. With the volume and complexities of CAP spending and the voluminous growth of regional fund expenditure, that becomes doubly important.

My third point concerns the anti-fraud efforts, upon which hon. Members have already commented. A few weeks ago, on a Treasury and Civil Service Select Committee visit to Brussels, I had the opportunity to meet the Commissioner in charge of the budget, Mr. Schmidhuber. He made the fundamental point that, no matter what effort is made by the budgetary team and by the Court of Auditors, it depends very much on the efforts of the member countries if fraud is ever to be tackled. Even with an expert team of 30 staff, all their efforts will come to naught unless the Council of Ministers debates the matter in earnest and ensures that each member country makes a determined effort.

The report is a mine of information, and I cannot resist detaining the House for a few seconds to read from paragraph 118 of section 1: The Commission regrets that it has no internal documentation on the general accounts at the moment. Over the last few years, priority has been given to the modernisation of computer applications … This effort entails a heavy workload, not only for computing depts but even more so for accounting depts … Since the same officials would also be responsible for compiling a manual of accounting procedures, it was therefore impossible to begin work before March 1990. As hon. Members have already said, if that were to happen in the corporate world, there would rightly be fireworks.

Unless there is an effort to produce the accounts more swiftly, unless the Commission is given teeth, unless the Council of Ministers ensures that greater efforts are made, and unless fraud is combated at member state level, the production of the accounts will prove to be largely academic.

11.34 pm

Mr. William Cash (Stafford)

Much has been made of the importance of budgetary discipline in the Community. The introduction to the annual report of the Court of

Auditors states: the Court observes that, of the measures adopted to impose discipline on agricultural expenditure"— which is by far the greatest proportion of the total— those it examined have not, as yet, attained the desired level of effectiveness. It continues—this is highly important— The apparent control of agricultural expenditure is above all the result of a favourable situation on world markets."— In other words, budgetary discipline hinged more upon favourable world markets than on the intrinsic methods employed to achieve it. That is not a very good start.

Furthermore, there is a reference in the introduction to the famous Delors report, that deserves a little explanation in the context of the intergovernmental conferences and the references to budgetary deficits and so forth in relation to economic and monetary union. Paragraph 1.52 states: The Court considers that the first cases of implementation of the new rules on budgetary discipline are still a long way from management with 'due and proper care' and from the 'spirit of rigour' described when the Delors package was introduced in document COM(87)100 final of 15 February 1987". In shorthand, that means that the application of the rules which have been given such an enthusiastic welcome within the Community—the Delors package—are clearly not working, or were not for the financial year ending December 1989.

In view of the enthusiasm with which some member states and the Commission have received the Delors report, we are entitled to insist that the Minister tells us whether he and the Government are satisfied with the way in which the Delors package is working, given the importance that we have attached to budgetary discipline.

As regards the European agricultural guidance and guarantee fund guidance measures and the general conclusions drawn from them, the court states: Three years on"— after the system was first put into effect— the same shortcomings are evident: undefined objectives, vague expressions, dispersal of measures, lack of operational guidelines and lack of effective coordination of the various aspects of the common agricultural policy. At best, the measures financed under the structural policy result an fragmented, generalised financing of investment relating to agricultural or forestry activities. In regard to the most critical questions facing the report —agriculture and budgetary discipline—at best it can be said that it gets two out of ten. That is not a criticism of the Court of Auditors—I am grateful that it has done such a good job in identifying these matters—but, we must go beyond the question whether the Court of Auditors has done a good job and consider whether the objectives of the budgetary arrangements are being implemented. If they are not—this report deals with the entire expenditure of the European Community—we are entitled to ask some serious questions about the viability of the system as a whole.

It is not good enough for my hon. Friend the Financial Secretary to explain in accountancy terms, and in a sombre, melancholy, downbeat manner, what he thinks has occurred. We need vigorous criticism of the system from our own Government, to ensure that the aspect on which we lay so much emphasis—budgetary discipline—is delivered. As the Court of Auditors itself is so critical of the lack of budgetary discipline, we might have expected some comment from my hon. Friend the Financial Secretary along the same lines.

The report is full of examples of fiddling, fraud, waste, and extravagance—you name it, Mr. Deputy Speaker, and it is there. It is about time that we put our foot down. When my hon. Friend attends the Council to discuss the Community's budgetary arrangements as a whole, I hope that he will speak his mind and get them sorted out once and for all.

11.42 pm

Mr. Maude

With the leave of the House, may I say that we are, sadly, drawing to the end of the debate, and I have been rebuked by hon. Members in all parts of the House for the way in which I approached it. I have been accused of being soporific, sombre, melancholy, and, inaccurately, by the hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston), somnolent—I plead not guilty to that charge.

If I have been sombre and melancholy, it is because we are dealing with a sombre and melancholy subject. I am glad that no one accused me of not taking it seriously. It is a serious matter, and I am pleased that the House treated it as seriously as it did.

If I have any criticism of the debate, it is that those hon. Members who are enthusiastic about the idea of the European Community have a tendency to approach such reports in a spirit almost of apology. They suggest that, if a fault exists, it is that member states have denied the Commission the resources that it desperately needs to avoid waste and inefficiency. Later, I will refer briefly to resources dedicated to guarding against fraud.

With respect to the hon. Member for Inverness, Nairn and Lochaber, the approach that I described is not the correct one to take. Of course we must ensure that member states, but the Commission as well, can monitor the situation properly, exact full value from the funds, and ensure that they are spent properly.

On the other side of the argument, some seek ammunition with which to lambast the Community, for which they have little sympathy. One is bound to admit that the report provides a rich arsenal of such ammunition.

However, an auditor's report tends, by its very nature, to highlight things that have gone wrong. Its purpose is to shine a spotlight on problems, and to point to remedies.

The faults that have been identified fall into two categories, in the way they have been addressed tonight. Into the first fall those that arise from a system that some of my hon. Friends argue is incapable of delivering a satisfactory outcome. Into the second fall the perhaps more remediable problems that arise because, although the system is satisfactory, its execution leaves much to be desired.

As an optimist, I do not believe that the systems concerned are incapable of improvement. If they have proper objectives, are properly managed and operated, and are rigorously scrutinised, I am confident that they are capable of producing satisfactory results.

However, it must be said that the report draws attention to some lamentable lapses. Some of them, as my hon. Friend the Member for Thanet, South (Mr. Aitken) said, are humorous, while others are deplorable. Important sums of money which have been voted and deployed for the relief of poverty in some of the poorest parts of the world have not made it to their destination. That is lamentable.

I assure the House that, when we debate the issue in the Finance Ministers Council on Monday, I shal, as British Ministers always do, make clear our views on the subject. If I can offer my colleagues a word of comfort, may I say that, as I attend Finance Ministers' meetings, I find increasingly that our view about the need for rigour is being echoed by our partners as——

It being one and a half hours after the commencement of proceedings on the motion——

Mr. Deputy Speaker (Mr. Harold Walker)

In the light of the earlier comments of the hon. Member for Thanet, South (Mr. Aitken)——

Mr. Aitken

I beg to ask leave to withdraw the amendment.

Hon. Members

No.

Question put, That the amendment be made:—

The House divided: Ayes 16, Noes 72.

Division No. 97]	[11.45 pm
AYES
Abbott, Ms Diane	Paisley, Rev Ian
Aitken, Jonathan	Skinner, Dennis
Barnes, Harry (Derbyshire NE)	Spearing, Nigel
Body, Sir Richard	Spicer, Michael (S Worcs)
Cash, William	Taylor, Rt Hon J. D. (S'ford)
Gill, Christopher	Taylor, Teddy (S'end E)
Gordon, Mildred
Mitchell, Austin (G't Grimsby)	Tellers for the Ayes:
Molyneaux, Rt Hon James	Mr. William Ross and
Nellist, Dave	Mr. Bob Cryer.

NOES
Alison, Rt Hon Michael	Brown, Michael (Brigg & Cl't's)
Amess, David	Campbell, Menzies (Fife NE)
Arbuthnot, James	Carrington, Matthew
Arnold, Jacques (Gravesham)	Chapman, Sydney
Arnold, Sir Thomas	Chope, Christopher
Baker, Rt Hon K. (Mole Valley)	Clark, Dr Michael (Rochford)
Bennett, Nicholas (Pembroke)	Coombs, Simon (Swindon)
Boscawen, Hon Robert	Fishburn, John Dudley
Boswell, Tim	Forsyth, Michael (Stirling)
Bottomley, Peter	Franks, Cecil
Bowis, John	Freeman, Roger
Brazier, Julian	Goodlad, Alastair
Bright, Graham	Greenway, John (Ryedale)

Gregory, Conal	Patnick, Irvine
Griffiths, Peter (Portsmouth N)	Redwood, John
Hague, William	Ryder, Rt Hon Richard
Hamilton, Neil (Tatton)	Sackville, Hon Tom
Hicks, Mrs Maureen (Wolv' NE)	Shaw, David (Dover)
Hughes, Simon (Southwark)	Shepherd, Colin (Hereford)
Hunt, Rt Hon David	Smith, Tim (Beaconsfield)
Hunter, Andrew	Stanbrook, Ivor
Irvine, Michael	Stern, Michael
Janman, Tim	Stevens, Lewis
Johnston, Sir Russell	Taylor, Ian (Esher)
Jones, Gwilym (Cardiff N)	Taylor, John M (Solihull)
Jones, Robert B (Herts W)	Thompson, Patrick (Norwich N)
King, Roger (B'ham N'thfield)	Thurnham, Peter
Kirkhope, Timothy	Twinn, Dr Ian
Knight, Greg (Derby North)	Waller, Gary
Lennox-Boyd, Hon Mark	Wardle, Charles (Bexhill)
Maude, Hon Francis	Watts, John
Miller, Sir Hal	Widdecombe, Ann
Mills, Iain	Wood, Timothy
Mitchell, Andrew (Gedling)	Yeo, Tim
Morrison, Sir Charles
Neubert, Sir Michael	Tellers for the Noes:
Nicholson, David (Taunton)	Mr. Nicholas Baker and
Paice, James	Mr. David Davis.

Question accordingly negatived.

Main Question put and agreed to.

Resolved, That this House takes note of the Annual Report of the Court of Auditors of the European Communities for 1989.