ENTRY INTO FORCE (PROTECTION OF FINANCIAL INTERESTS)

HC Deb 07 December 1994 vol 251 cc384-417

'This Act shall come into force only when the House of Commons has come to a resolution on a motion tabled by a Minister of the Crown as to whether the United Kingdom Government should adopt a Council Regulation on the Protection of the Community's Financial Interests.'.—[Ms Quin.]

Brought up, and read the First time.

Ms Joyce Quin (Gateshead, East)

I beg to move, That the clause be read a Second time.

The First Deputy Chairman

With this, it will be convenient to discuss also the following: New clause 10—Annual report on fraud and waste— 'Each year Her Majesty's Government shall make a report to Parliament on the proposals it has made and the progress achieved in combating fraud and waste in Community expenditure as documented in the relevant annual reports of the Court of Auditors.'. New clause 13—Fraud in the European communities: annual reports— 'Her Majesty's Government shall make an annual report to Parliament on their efforts to eliminate fraud in the spending of the European Communities' General Budget.'.

Ms Quin

New clause 3 is important because it allows the important subject of fraud to be discussed in this debate.

The new clause states: This Act shall come into force only when the House of Commons has come to a resolution on a motion tabled by a Minister of the Crown as to whether the United Kingdom Government should adopt a Council Regulation on the Protection of the Community's Financial Interests. We know that such a regulation is being mooted, and I think that on this occasion the Government will claim to have been active in proposing it. I understand that the regulation was partly a British initiative and dates back to the early part of the year, when the British Government said that they wanted the rest of the European Union to consider the protection of the Community's financial interests, how money is spent and how best to crack down on fraud. I also understand that there have been discussions in the Council of Ministers as a result.

As is often and frustratingly the case, it is difficult for hon. Members to get any information about what is happening in this important area. I understand that protection of the financial interests of the European Union was on the agendas of the Justice and Home Affairs Council on 1 December and the Economic and Finance Council on 5 December.

Perhaps the Paymaster General can give us an update on the Council's consideration of that important matter when he replies to the debate. Any information that he can give us could greatly influence the attitude of hon. Members on both sides of the Committee towards that important issue and whether we feel that there is any real chance that fraud and financial mismanagement will be taken seriously.

The results of the discussions at the two Council meetings were unclear. What seems clear, however, is that the Council of Ministers has simply come out in favour of a resolution on the protection of the financial interests of the European Union. As we know, a resolution is a very weak instrument in the Union. Apparently, the Government are in favour of a regulation on the legal protection of the Community's financial interests, as I am certain that we would be. Perhaps the Paymaster General can give us an update on the progress that has been made towards such a regulation. I understand that the matter might be discussed at one of the meetings taking place as part of the Essen summit. We would be extremely interested to know what progress is being made on that important matter.

From recent debates and the long-standing interest of many hon. Members on both sides of the House, it is clear that hon. Members take the question of fraud in the European Union very seriously. None the less, I repeat that it is often difficult to get adequate information about what has been taking place.

In an intervention on the Paymaster General, my hon. Friend the Member for Durham, North-West (Ms Armstrong) rightly mentioned the rather murky negotiations about fraud which took place as part of the Budget Council on 16 November, when Britain apparently agreed to a cut in the European Union's anti-fraud budget at the same time as the Government were trying to persuade suspicious Conservative Members that they were trying to deal with the problem of European fraud. The fact that that was revealed in the press was especially frustrating to Opposition Members, including myself. I had tabled a written question to the Treasury, asking the Government to make a statement on the outcome of the Council held on 16 November. In the written answer that I received from the Paymaster General, which went into a certain amount of detail, there was no mention of the discussion of fraud. There is therefore a lack of transparency in the information that the Government are prepared to give the House on that important issue. I want the Paymaster General to deal with that matter.

Press releases are issued at the end of each European Council meeting. The release issued after the Council on 16 November has just been made available to us. Again, there is absolutely no reference to the discussions on anti-fraud measures that we now hear took place, or to the fact that the Council failed to increase the funds available to combat fraud and, indeed, cut anti-fraud measures in the Union. We want an explanation of why Members of Parliament and the general public are refused information about the Council of Ministers. Many hon. Members on both sides of the House have rightly complained about undue secrecy in relation to Council of Ministers proceedings and this would seem to be a flagrant example of such secrecy when it is clear that members of the public as well as Members of Parliament want information on the fight against fraud and the measures that need to be taken.

From the documents before us today, it is clear that the European Court of Auditors feels frustrated at the difficulty that it faces in getting information from the Council of Ministers. That comes over in the opinion of the Court of Auditors on the proposals for a Council decision concerning budgetary discipline.

Mr. D. N. Campbell-Savours (Workington)

I am sure that my hon. Friend knows John Tomlinson, who is a Member of the European Parliament. He issued a press release on 18 November 1993—12 months ago—which stated that, at a meeting which took place two weeks prior to that press release, the Council of Ministers failed to increase the budget to deal with fraud. One wonders whether that occurs every year, and whether the Council is now calling the same tune.

Ms Quin

My hon. Friend is right to detect an alarming trend, and the information that he gives to the Committee is correct. It is certainly true that, a year ago, the Council of Ministers was also prepared to cut anti-fraud measures in the European Union at a time when clear incidence of fraud was increasing at an alarming rate. The Court of Auditors report, which is produced annually, has made severe criticisms of fraud in the European Union for a number of years.

Rev. Ian Paisley (Antrim, North)

Is the hon. Lady aware that in a recent debate in Strasbourg, criticism was voiced about the reticence of the Commission in dealing in an upright and forthright way with the quaestors?

Ms Quin

The hon. Gentleman pre-empts a comment that I was about to make. I had started to refer to the difficulty that the Court of Auditors has in receiving information from the Commission and from other pants of the European Union about the extent of fraud, and in having the figures in good time to make timely comments about the problems which are arising.

The court's comments on the Council's decision concerning budgetary discipline say, in relation to article 2, that the proposal provides for the monitoring of expenditure to be tightened up and for statements of expenditure by chapter presented by member states to be sent to the European Parliament and the Council for information. The Court of Auditors understandably says that the paragraph in the proposed Council decision relating to the matter should be amended to include the Court of Auditors, so that it could receive data promptly.

When the Council decision was made on 31 October 1994, the request from the court for a change in the Council's decision was ignored. The court, even now, is in the frustrating position of not being able to get information in time to make criticisms at an earlier stage than it has been able to at present. In many ways, the court feels greatly frustrated by the fact that it has had to complain so long after the event. That makes its task in trying to get corrective measures adopted much more difficult.

8.45 pm

The Commission is castigated generally for its weakness in its approach to fraud, although it does have undoubted difficulties because so much fraud occurs within each member state. Lax controls within certain member states often give rise to many problems.

In that respect, I can understand the comments made in relation to the earlier group of amendments on the role of the Public Accounts Committee. The way in which the Government reacted was disappointing, although I take the point made by the right hon. Member for Mid-Sussex (Mr. Renton) that the Public Accounts Committee could take certain initiatives without waiting to be cajoled by the Government. It is an area to which I am sure that the Public Accounts Committee will be paying close attention in the future.

My hon. Friend the Member for Workington (Mr. Campbell-Savours) has referred to the Government's record on fraud. The Government like to give the impression that they are the leading fraud-busters. In fact, as my hon. Friend pointed out, their record is not quite so glossy. It is certainly true that the Government have voted against anti-fraud measures in the Council of Ministers, and a great deal more could have been done by the Government to campaign for reform of the common agricultural policy, which causes so many of the problems of fraud in the European Union.

Although this may seem to be a minor point, the Government have failed in another respect—by conniving with other Governments to perpetuate the European Parliament's position of meeting in two different places. Many of us feel that a certain amount of useful money could be saved if the European Parliament was not forced into that expensive travelling circus. It is a great pity that the Edinburgh summit in 1992 confirmed the dual nature of the seat of the European Parliament. Of course, some elements of the Parliament still have their base in Luxembourg. The situation is absurd, and members of the public feel that it is quite crazy. Perhaps if there were more publicity about it, there would be more pressure to put an end to that waste of money in the European Union.

The question of the common agricultural policy is crucial to any discussion on fraud in the European Union. The Court of Auditors report gave many examples which were fully quoted in the debate that we had a couple of weeks ago. None the less, they are staggering. For example, there was the money paid out for the destruction of trees which are in fact still standing. There was the tremendous scandal of the wine lake, and the amount of money claimed in export refunds for wine supposedly exported from Italy to the countries of central and eastern Europe, when eight times more money was claimed than could be backed up by the figures for exports to those countries. It seems a strange and unjust system whereby the Italians and other wine-producing countries in the European Union can export with subsidies to countries in central and eastern Europe which are trying to build their own economies and in many cases have potentially excellent wine industries of their own but find themselves being undercut by that type of activity in the European Union.

A similar situation exists with regard to the olive oil industry, where substantial fraud has been reported in the Court of Auditors report. Sub-standard olive oil was none the less claimed for as though it were of a high standard and high quality. It is a very sad situation when people notice how expensive olive oil is to buy at a time when there is a huge level of production in the European Union and a huge amount of money is being spent on subsidising that production.

Mr. Oliver Heald (Hertfordshire, North)

If what the hon. Lady is saying is right, why have Labour MEPs voted to double the increase to the future European budget that is proposed in the Bill? They did not make any of the provisos for which she is asking in new clause 3.

Ms Quin

The provisos in new clause 3 have been pressed consistently by Labour MEPs since 1979. I can inform the hon. Gentleman of that fact, partly because I was a Member of the European Parliament from 1979 to 1989 and I took part in the debates, and partly because of the efforts of the Labour members of the budgetary control committee in the European Parliament: John Tomlinson has already been mentioned, and Terry Wynn is also active on that committee. I can assure the hon. Gentleman that what we are proposing here is fundamentally in line with what we have said on many other occasions, both here and in the European Parliament.

Mr. Stevenson

Is it not strange that Conservative Members should make the comments that they have, given that a Conservative Government have presided over and agreed to a £5 billion increase in common agricultural policy expenditure since 1992–93?

Ms Quin

It is indeed. The Conservatives—particularly in the European election campaign—claimed to have tackled, for example, the scandal of costly food mountains; yet, at the time when they made that claim there were about 200,000 tonnes of butter, 112,000 tonnes of cheese and 430,000 tonnes of beef in store. As my hon. Friend points out—he is in a good position to do so in view of his experience on the agriculture committee of the European Parliament—agricultural expenditure has increased greatly. In certain sectors, production has continued to rise, despite the measures that have been taken.

Rev. Ian Paisley

The hon. Lady will know that I, too, am a Member of the Strasbourg Parliament and I can confirm that Labour Members of the United Kingdom Parliament have continually opposed those developments on the Floor of the House.

Ms Quin

I welcome the hon. Gentleman's comments. I believe that he has been a Member of the European Parliament since 1979; he will therefore have participated in many debates of this kind and will know what was said on those numerous occasions.

I could give many more examples. For instance, there has also been a great deal of fraud in relation to tobacco. A large amount of money has apparently been spent on subsidising unusable tobacco; given the health problems that tobacco causes, subsidising usable tobacco may be slightly worse than subsidising unusable tobacco, but in any event it is scandalous that tobacco should be subsidised to that extent in the European Union.

It seems crazy that tobacco farmers—if that is the right word—can obtain export credits for tobacco that is sold nowhere because it is unusable, and can then simply dump the tobacco. It would be cheaper to provide them directly with a livelihood without their having to produce the substance at all—not that I am suggesting that that should be done in the European Union, but it seems crazy that adopting such an approach would save money for the EU budget. It is regrettable, to say the least, that the Court of Auditors' report on tobacco fraud and misuse was ignored by EU Agriculture Ministers.

The common agricultural policy itself is, unfortunately, a fraud-friendly system. There has been a huge increase in CAP fraud. Even the legal operation of the policy is tantamount to fraud: an absurd circular system of subsidy can arise, so that a farmer may be paid a subsidy for not putting one field into production while being paid another subsidy for increasing the yield from another field. We also know of the policy's negative effect on the trading for third world agricultural products.

It is clear from the report that there are huge inefficiencies and irregularities in the use of European Union funds, that the .administration of the European guarantee fund in agriculture is ineffective, that fraud is encouraged by weak internal systems and complex legislation, that there are no proper clear and fixed objectives for expenditure, that there are breaches of rules in contracts with third parties, that there is confusion between administrative and operational spending, and that the Commission's delegation of financial management to national Administrations and third parties has led to a serious loss of control. That reinforces the point made earlier about the Commission's culpability.

It is vital for member states to improve their accounting, internal control and auditing of European Community operations. The whole saga adds up to gross weaknesses in what should be sound financial management, and very poor value for money. That explains why so many hon. Members on both sides of the House have expressed concern about the issue recently, and why the new clauses have been tabled.

New clauses 10 and 13 call for annual reports on fraud to be presented to the House of Commons, which I think would be very sensible. I can foresee some of what the Paymaster General will say: he will say, for instance, that there are already many opportunities to raise such matters. There is, of course, a six-monthly report on events in the European Union, as well as the various procedures and documents that are considered in Committee—often, I may say, with inadequate media attention. Much of the work done in European Standing Committees is worthy of much more attention that it receives.

Given the interest that the House has expressed in the issue, it strikes me as sensible to hold an annual, focused debate on it alone. I believe that we should continue to hold such annual debates until the fraud problem ceases to exist in the European Union; we all look forward to that time, but it seems unlikely to arrive in the near future.

Earlier, my right hon. Friend the Member for Llanelli (Mr. Davies) forecast a certain meeting of minds between Euro-sceptics and those who are more positive about the European Union. I am not sure whether his forecast will be proved right, although I respect his experience: he has been in government, and has seen some of the matters that we are discussing from the viewpoint of the Council of Ministers. I know, however, that there is a great deal of cross-party agreement on this issue; I therefore hope that new clause 3 will receive the maximum support not only from Opposition Members, but from Conservative Members.

Mr. Dykes

I shall speak briefly. I welcome the interest and support expressed by hon. Members on both sides of the Chamber on endeavours to deal with the thorny problem of fraud in the European Community. I have no quarrel with anyone who suggests that that is necessary, although I remain sceptical about whether these or, indeed, any amendments to existing legislation are needed, or will deal with fraud in the best possible way.

I do not condone fraud either in member states—including this country—or in any of the Community transfer payments. Far from it. I am a member of the Select Committee on European Legislation—the Scrutiny Committee—and fraud is naturally one of our main concerns. It is a regular subject of discussion and deep examination, to the extent that we have the necessary information to hand. My quarrel, as emerged from the debate on Second Reading, is with putting it together with this legislation. That is why I would object to the proposed amendments, or any that were along similar lines.

The Bill should not have been opposed by any hon. Member because it was a routine Bill, dealing with a very modest increase in own resources as agreed at the relevant summit meeting in Edinburgh. I shall not repeat the Second Reading debating arguments for that, but it remains a literal truth about the text, and the two clauses are entirely routine and should not even be gone over in that way. However, we know why that happened—for a totally different reason, and that is why fraud has been built into the argument as a wonderful way for anti-European Members of Parliament here, and the press especially, to have a tremendous field day. Interestingly, the press are not here tonight—that is a different point—but they certainly were here on Second Reading because they anticipated trouble and enjoyed the anticipation thereof.

To hound the European Community and say that it is riddled with fraud is a good, populist thing to say, but it is totally untrue. No one would condone any fraud at the margin anywhere, including in member states, and substantial fraud takes place in the United Kingdom that has nothing to do with the European Community. That needs to be tackled energetically by the various relevant authorities as well, and I hope that that will happen.

For the hon. Member for Gateshead, East (Ms Quin) to be so optimistic as to say that fraud could be eliminated, either between member states of the European Union and the Commission handling all those payments in a complicated budget, or in the individual member states, is perhaps a little bit naive. I am afraid that there are some wicked people in the world. Unfortunately, our skill at financial techniques in this country, allied with agricultural payments, agricultural activity and other aspects, means that this country is full of people who practise those things, and that happens in the other member states.

9 pm

Mr. Austin Mitchell (Great Grimsby)

Will the hon. Gentleman give way?

Mr. Dykes

At the moment, I do not intend to give way at all, because I want to be brief, to give other hon. Members a chance. I shall not give way at all unless I am deeply moved by an especially unusual and esoteric intervention. However, as, by definition, I shall not know that until I have given way and heard it, it is unlikely that I shall do that tonight. I want, therefore, to be brief, if the hon. Gentleman, with his extravagant obsessions about disliking the European Union, will forgive me on this occasion.

That problem also applies in the other member states. I gleaned from my visits that each one is equally concerned with national domestic fraud that has nothing to do with the European Union and with the fraud that occurs in the European Community.

However, let us keep the matter in perspective. Let us get rid of the hysteria. Let us get away from the £6 billion figure that was bandied about in the press, with no evidence to that effect; that equalled, by the way, the amount of money that the previous Chancellor of the Exchequer wasted in trying to defend an exchange rate mechanism rate that was untenably high, because we should not have entered at such a high rate against the deutschmark.

Perhaps £6 billion is a leitmotif figure for all those seeming political and financial scandals, and will be repeated in other areas as well. However, in our own report—

Mr. Campbell-Savours

rose—

Mr. Dykes

I have already said that I shall not give way.

In our Select Committee reports, and in the explanatory memorandum provided by the Treasury and signed, I think, by my hon. Friend the Paymaster General, it emerges repeatedly that fraud is a legitimate and serious preoccupation of all of us—but at the margin the size is grossly exaggerated by the anti-European propaganda— that the Commission has responded to the Court of Auditors' regular admonitions and references to those matters; and that the main problem is mishandling and mismanagement of financial payments, as was also discussed in the debate on the previous group of new clauses, rather than huge amounts of fraud in vast areas of the Community budget zones. That remains the literal truth. Therefore, it is a matter for the House of Commons to be extremely worried about, but let us keep it in perspective.

I quote from the latest report that the Select Committee had on the latest Court of Auditors' report. We referred in paragraph 56 of our report to the Commission's response: The Commission accepted a number of the Court's findings and has taken steps to implement them. The Commission's response to the main features of the report are detailed below". Then, in a specific example: The Commission comments that for Own Resources it is aware of the importance and value of post-import clearance checks and agrees with the Court that the effectiveness of the checks depends on the adoption of methods based on risk analysis. It is in contact with Member States to promote their use. The Commission does not accept that the overall GNP figures are not reliable but agrees that further efforts need to be made to ensure harmonisation of the national accounts. In the "blue-top weekly Europe bulletins" that we receive from the various local Commission offices in the capital cities, the matter was also put in perspective with the leading paragraph in the edition of 24 November: Commission rejects fraud allegations. Commission Secretary-General David Williamson has rejected media allegations that fraud was widespread in European budgetary spending. Commenting on the recent Court of Auditors report, he said that the document was not about fraud but about financial management or mismanagement. It mentioned fraud only once in its 484 pages"—

Mr. Duncan Smith

Will my hon. Friend give way? It is esoteric.

Mr. Dykes

I am not giving way. It mentioned fraud only once in its 484 pages, referring to just one transaction in Denmark. It was completely wrong to bandy about figures suggesting that fraud amounted to £6 billion or more, Williamson said. The Court of Auditors makes the point that more than 80 per cent. of EU funds", as brought out in previous debates, on the Opposition Benches as well, are managed on behalf of the Union by the Member States". I do not think that anyone in the Committee would regard Secretary-General David Williamson as anything other than a man of great integrity. He is an honest public servant with much international experience—a serious senior figure in the European Commission. He is from this country and I believe that he was a permanent secretary at the Ministry of Agriculture, Fisheries and Food many years ago before he went to Europe. He is a credit to this country and to the European Community and not the sort of person to tell lies. He should not apologise—he is not the sort of person who says that he agrees with The Sun and the Daily Star, and the gutter filth and poisoned propaganda against the European Community that one regularly reads in those journals and, sadly, elsewhere.

Let us keep the subject in perspective. When Ministers deal with such issues, they should not succumb to the temptation to stir up hysteria about fraud by saying that it is connected with the legislation. To be fair to them, Ministers have not done that, but the Opposition should not do so. The Opposition made a basic mistake—it is perfectly reasonable for, and open to, the Opposition to raise the subject of fraud in Europe or national fraud at any time without connecting it to the Bill. They have done a disservice to the cause of Europe in the House, where there is a natural, built-in majority for further developments after Maastricht among all parties. If there were free votes instead of the three-line Whip clamps put on by our nervous Whips—I understand why they do that nowadays—there would be large majorities in favour of all significant new developments in the Community. That is the important point on which to focus.

Keeping matters in perspective means being rational and pragmatic, not hysterical. I have a good example that is directly linked with domestic fraud. I believe that social security fraud—allowing for all systems, including income support and unemployment fraud—amounts to about £4 billion per annum. Would it be wise and right for payments to genuine and deserving applicants of whatever sort within the social security protection system to be denied financial assistance pending the resolution of the problem of fraud?

In the private sector, the Serious Fraud Office is, rightly or wrongly, under a great cloud of suspicion; it is suspected that it has adopted the wrong sort of investigative methods. Many people would be concerned if the SFO were too weak and had inadequate resources to do its job properly. Fraud also occurs when various spivs and crooks misuse public sector funds. There is fraud by way of tax evasion, not just avoidance—one can talk to any senior Inland Revenue officer about that. The sums involved amount to billions of pounds. Does that mean that ordinary, honest taxpayers should be penalised and brought into that category? No. Ministers should put the correct record on Europe in a balanced way. Newspaper propaganda and poison against Europe are moving from the merely alarming to the positively dangerous.

I do not think that I shall be out of order if I refer to some articles that refer, at least tangentially, to fraud. Two recent examples fill me with gloom and foreboding if they reflect future standards in the British press. The examples are not taken from The Sun, the Daily Star or the Daily Sport, but from serious journals. One example comes from The Spectator of 3 December—

Mr. Denis MacShane (Rotherham)

A Tory comic.

Mr. Dykes

I agree with that, and I thank the hon. Gentleman, who described it as a Tory comic. It is perhaps a right-wing comic. I am not sure that many of those Tories are genuine Tories in the old sense that I still respect.

I love the story of the British mother whose children were taken to Germany by a recalcitrant and difficult father. The theme of the article is that the case is the direct responsibility of the European Union. The writer wonders how the wicked Germans and Europeans dare to lake the wonderful children away from their mum in Britain. It is nothing to do with the European Union—that is poisoned propaganda—

The Second Deputy Chairman of Ways and Means (Dame Janet Fookes)

Order. This does not have much to do with the new clause either.

Mr. Dykes

I agree, Dame Janet. Although I shall not detain the Committee at great length by reading from the article, in other passages it refers, tangentially, to fraud. Were other hon. Members alarmed by the futuristic article in the Daily Mail last Saturday? It certainly referred to fraud. [Interruption.] I am grateful for the advice from the Opposition, but such matters are important because the press are doing it more and more. What the press do—in concert with some of our hon. Friends, because they all work closely together—is to repeat poisoned propaganda against the European Union. It is a self-feeding process which would be easily reversed and dealt with if the Government had the necessary boldness and courage to deny such allegations, put the matter into perspective and restore the traditional enthusiasm for European Union developments on which the Government were partly elected, although the main policy areas must have been domestic, economic and social policy.

As you are looking at me rather severely, Dame Janet—and understandably so—I shall conclude. If the Government give a balanced lead, acknowledge that these issues are important, reject the amendments, which are unnecessary and would not be an useful change to existing legislation, and express their determination to deal with matters where justified but keep them in a balanced perspective, they will get more support from all parts of the Chamber.

Mr. Campbell-Savours

I want briefly to intervene to tell the hon. Member for Harrow, East (Mr. Dykes) that I simply cannot understand his attitude. Like me, he has spent most of his life advocating support for the Community. He must see the dangers of a referendum and he must accept that if there is a referendum by the end of the decade, the likelihood is that it will be fought on the issue of fraud and not on the ballot paper, if that is what it will be called. If it is fought on fraud, we shall lose and there will be a major crisis in terms of our membership of the European Community. The strongest advocates of the European Union have a special responsibility placed on their shoulders to deal with the issue before it destroys a principle that we have advocated for most of our lives.

I was not here when my right hon. Friend the Member for Llanelli (Mr. Davies) made his speech, but I understand that he saw some consensus developing between those of us who are concerned as supporters of Europe with those who have historically taken a position in opposition. I recognise that a consensus will develop because it is in all our interests to resolve the issues.

The Lords European Communities Select Committee has now produced three reports of which I am aware: the 1989 report, "Fraud against the Community", the 1992 report, "The Fight Against Fraud" and the 1994 report, "Fraud and Mismanagement of Community Finance". The reports point to the problem within the Community. They are all set against a background of repeated attempts over the years by Labour and, if I am honest, I must admit, by Conservative Members of the European Parliament to deal with such issues. They recognised, particularly Conservative supporters of the Community, that the problem had to be dealt with before greater damage was done. Yet nothing has happened apart from measures being introduced as a result of the passing of the Maastricht treaty.

The problem is whether the will is there: some of us believe that it is not. Even if measures are introduced under the provisions of the Maastricht treaty, some countries within the European Community may set out to undermine whatever arrangements are made because their reasons for membership are selfish. As we heard in the previous debate, they are prepared to adapt their national statistics to ensure that they are beneficiaries.

I want to draw the Committee's attention to three particular pieces of information. The hon. Member for Harrow, East referred to a newspaper article. I shall refer to a Commissioner, Mr. Peter Schmidhuber, whom my hon. Friends will know. The EC Commissioner responsible for fraud prevention told MEPs in 1992 that the Commission was seeking to improve co-ordination between its own departments and member states. He told a public hearing of the European Parliament's budgetary control committee that Brussels is examining whether to pay rewards for information on fraud, or offer performance-related bonuses to investigators. I have asked the Minister to take note of my request as I shall be seeking a response from him. Those two propositions were considered by the Commission. What was the result of that consideration, and will the fraud measures that we understand are to be introduced include those two provisions, which will go some way towards dealing with the problem?

In 1992, Mr. Peter Schmidhuber went on to say: Demands for a further 35 fraud-busters have had to be shelved because of a general financial squeeze"— I find that remarkable in the context of the EC budget— and the effective devaluation of the Ecu, in which the EC budget is calculated, against the Belgian franc, in which most staff salaries are paid. 9.15 pm

Are we to believe that the Community, which seems to spend its money lavishly in many areas, could not find the resources to pay 35 fraud-busters? That is a Commissioner responsible for fraud prevention speaking to the European Parliament budgetary control committee.

Mr. John Tomlinson, Member of the European Parliament, in a press release in 1993, said: 'European Community Ministers are attacking funds for fighting fraud in the Community budget—at the insistence of the British Government', said John Tomlinson Labour MEP today in the European Parliament in Strasbourg. 'This will be resisted most strongly and a row is certainly brewing between anti-fraud campaigners in the Parliament and the Council of Ministers. The first move was when the Ministers slashed 25 million ECU (about £20 million) from the anti-fraud funds in next year's European Community budget.' Again, nothing happened.

On 10 March 1994, in a letter to the editor of The Independent, Terry Wynn said: Can I make one or two comments following Douglas Hurd's remarks about fraud in the European Community. In July last year at the Council of Ministers first reading of the 1994 EC Budget, the Council made sweeping cuts throughout the budget. However, when it came to agriculture, which accounts for half of the £56 billion budget of the EC, the only cut they made was to take 20 million off the anti fraud line at the insistence of the British Government. At their second reading, the European Parliament had allocated funds to create 50 extra posts in the Anti Fraud Unit, they voted against this also. Mr. Hurd should remember that under the British Presidency, the Edinburgh Council insisted that the European Parliament continue to meet in Strasbourg, which means Parliament pays about £100 million per year for this decision, rather than being centralised in Brussels. He really should remember that when it comes to fraud, Member States have the prime responsibility for preventing, detecting and prosecuting fraud against the Community Budget and for recovering sums unduly paid out. We all know what has happened about that promise. Many of us see it as a vague promise arising from the passage of the Maastricht treaty.

The truth is that unless we deal with the problem we will lose the Community because it will be destroyed and discredited. I tell the hon. Member for Harrow, East that it is all right trying to ignore it—[Interruption.] The hon. Gentleman's speech suggested to me that while he may be concerned about the problem, he believed that it was exaggerated. I believe that we are looking at only the tip of the iceberg.

I have spent much of my life in Italy. I lived there as a child, I have friends and contacts there now and I go there regularly. Fraud is rife not only in Italy but in Greece, Spain and in parts of the CAP budget in France—

Mr. Dykes

And in the United Kingdom.

Mr. Campbell-Savours

Yes, and in the United Kingdom.

Mr. Dykes

Everywhere.

Mr. Campbell-Savours

If it is, it should be dealt with. If we do not deal with it, we will lose the Union. That is why we have a special responsibility.

This issue will surface at the top of the British parliamentary agenda, not because we are anti-Community but because many of us are concerned that the Community might be wrecked unless the problem is dealt with.

Mr. MacShane

Is my hon. Friend aware that the Court of Auditors report, which many hon. Members have mentioned, shows that there were more fraud cases in the United Kingdom than in France or Italy? The sums were larger in France, because the French defraud in a more concentrated way there, but let us pay tribute to the British firms, farms and organisations that go out and show how to milk money from Brussels.

Sometimes I wonder whether we should put ourselves in the position of a German or a French parliamentarian ranting on about fraud in England. How quickly our xenophobic press would pick that up. Parliaments in the rest of Europe, however vigorous and vicious they may be, debate the issue in a rather more measured way.

Mr. Campbell-Savours

I can tell my hon. Friend why there is a higher incidence of fraud, if that is the right way to put it, in the United Kingdom. It is because we detect it. In some other Community countries, people simply do not want to detect fraud.

Mr. Dykes

Very naive.

Mr. Campbell-Savours

The hon. Gentleman may think that I am naive, but last year members of the European Standing Committee were heavily briefed on the subject, and I spent several days reading the material. One report in particular, which I have been trying to find, dealt with the different reporting mechanisms in the various European states, and showed how in some states there is resistance within the Administration to identifying fraud. The hon. Member for Harrow, East may shake his head at that; clearly he thinks that the source of the material was poor. But if I remember rightly, the document came from the Court of Auditors. If I find it after I finish my speech, I shall intervene and tell him what it was called.

Mr. Dykes

Will the hon. Gentleman give way?

Mr. Campbell-Savours

No; the hon. Gentleman did not give way to me.

Mr. Dykes

But the hon. Gentleman keeps referring to me. Will he give way?

Mr. Campbell-Savours

All right.

Mr. Dykes

I know that I did not give way to the hon. Gentleman, but that was because I was trying to be brief, and I had said that I did not intend to give way to anybody. However, the hon. Gentleman is repeatedly referring to me, so I am grateful to him for letting me intervene briefly.

As a member of the Select Committee on European Legislation I know that we scrutinise the annual report of the Court of Auditors. The hon. Member for Newham, South (Mr. Spearing), who does more homework than most hon. Members on such matters, knows that too. Every one of those annual reports says that there is fraud in every member state, including the United Kingdom. In many areas the incidence of fraud is greater here than in other countries. Detection systems and cultures vary, but I have visited all the other member states and, with one or two exceptions—deliberately, I shall not name them now—every country thinks that it has the best detection systems, and that others are cheating more than it is.

Mr. Campbell-Savours

That is the hon. Gentleman's view, but it is not mine. If I find the document, I shall give him the reference.

I have here a document, the Thomson report, which is about EC agricultural policy for the 21st century. Ministers have repeatedly told us in Parliament that we could not see that report, because it dealt with reform of the common agricultural policy. We have been told again and again from the Dispatch Box that it is a Commission document and is not available to us. My hon. Friend the Member for Stoke-on-Trent, South (Mr. Stevenson) tried to get access to the document before he left the European Parliament, and I understand that several other hon. Members have tried to get hold of it. Finally, I got my local Member of the European Parliament for Cumbria and Lancashire, Tony Cunningham, to extract it from the Commission by one means or another.

The document is extremely significant, and I advise all hon. Members to read it because it deals with reform of the CAP and makes many interesting proposals that should be debated in the House. If we really intend to deal with fraud in the Community we must tackle the structures and frameworks within which that fraud takes place. We must reform the CAP; it desperately needs reform.

I have been in the House for 15 years now, and the problem is that year after year Members get up and talk about reforming the CAP, but nothing ever happens. Ministers speak from the Dispatch Box in annual agriculture debates. We used to have an annual statement on the settlement, at which hon. Members always asked Ministers for assurances that work was going on to reform the CAP. Very little has happened. All that has happened is that larger amounts have been being spent despite the fact that we have been given undertakings that, over the longer term, there will be reductions in the CAP budget.

We must address the issue and there should be open debate. Documents should not be the unique preserve of Commission officials. The material should be made available to Members of Parliament so that we can deal with the issues. That is the only way in which we shall see proper reform in the Community.

Mr. Duncan Smith

I find myself in pretty near full agreement with the hon. Member for Workington (Mr. Campbell-Savours). He had a more honest and clear view of the problem than did my hon. Friend the Member for Harrow, East (Mr. Dykes), who spent most of his speech trying to hide away some of the problems. He seems to think that we should ignore them because we have to get them in perspective. The reality is that, unless these things are dealt with, there will not be a European Union, because it will have collapsed under the weight of its own inefficiency and fraud. If we wish to continue to see a marketplace here, we would not necessarily wish that to happen.

My hon. Friend the Member for Harrow, East went on to say something along the lines that one of the Commissioners had said that fraud was out of all proportion, and that it was really a question of mismanagement. I tell my hon. Friend and other hon. Members that I used to be a business man. When running a company, I would have looked at mismanagement of finance in the same way that I would have looked at fraud. Deliberate mismanagement is the same as fraud.

The point about the report by the Court of Auditors is simply that the court is not able to find out how much of the mismanagement is really fraud. In truth, the structures are such that mismanagement is endemic. The mismanagement is part of the system, and leads to further fraudulent mismanagement of money.

The argument for an annual debate on the finances of the European Community is now strong. Each year, we rightly discuss the Budget and the Finance Bill, when the Government seek money for the next year. Yet the reality is that each year, we sit here quietly while European money flows through the Consolidated Fund straight into the European Community. Until the Heads of Government get together to decide whether there should be any more money, Parliaments are denied access to the debate. It is ironic that we should debate the matter here, when the reality is that we do so on the basis of the increase and not the total budget.

The timely arrival of the report by the Court of Auditors has made the debate even more interesting. I looked at the executive summary of the report; the main book is very detailed. It is interesting that, at the beginning of the report, the authors talk about comparing the findings with the annual report for 1983. Even glancing through, one is struck by how little has changed. We have talked about the powers that Maastricht gave the Court of Auditors in the whole investigative process. From looking through the reports in 1983, one finds that the present report mentions essentially the same things. The court did not have all the extra powers in 1983.

There is no demonstration that the powers under Maastricht have suddenly opened this can of worms. The can of worms was on display; it is just that nobody had the political will to discuss it. There was not the drive. It is only now that we see the inexorable rise of money that the drive has come to find out where the money is going. The report says: it is clear that many of the problems then identified in accounting and financial management of the most important areas of Community expenditure have not yet been overcome. The report talks about the Commission having "made efforts" and about the proper level of financial management and control necessary in the complex environment of Community finances. Nothing has changed. The court was saying the same things back in 1983.

The report talks about mismanagement and about inducements; it touches here on the agricultural side. I know that the hon. Member for Gateshead, East (Ms Quin) went into detail on that point. I shall not go down that road, but will simply reiterate the point. The report says: Agricultural management measures are still failing to achieve balanced markets. The report talks about how aids for distillation, appropriate for temporary production surplus, have been made into permanent encouragement to the reduction of unsaleable wine. It goes on to say: the permanent abandonment of vineyards are offset by others which encourage investment in the sector. It is the particular part which talks about temporary production surpluses made into permanent encouragement which suggests a quiet slide across in practice. That is endemic. It was allowed to happen.

Another part of the report is even more fascinating. I ask the Committee to think about the matter as though I were talking about a local council, and that it were an investigation of how councillors were carrying through their practice. The paragraph says: The audit continues to discover breaches of the rules governing the placing of contracts with third parties … The financial controller's department has sometimes accepted that expenditure be charged to the wrong account or that a single operation be covered by several small private treaty contracts instead of one large contract which would have been put out to tender. I looked at that, and I could not believe it. I immediately thought that, if it had been a reference to a council in this country and we had been talking about councillors, the Audit Commission would have recommended surcharging them and their disbarment.

That is not only mismanagement. It is now entitled mismanagement, but it is fraud, because it is a misuse of moneys which the Community has no right to abuse and misuse. It is not a case of hiding the problem or pretending that it is out of all proportion: it is a reality. It was just the same in 1983. The travesty is that it is still happening.

9.30 pm

The report even goes on to say: The Commission's central accounting system is supported by inadequate documentation which fails to provide a clear 'audit trail'". That is accountants' doublespeak. On numerous occasions, I have seen business accounts vetted by accountants who talk in the first instance about difficulty in finding documentation; a lost trail. That is them giving hint to the fact that it has more than probably been deliberate, that in fact documents have gone missing which nicely hide the reality of the figures.

The report goes on: the Commission needs to devote a significantly larger proportion of its staff resources to securing the necessary improvements in the performance of its own services". I shall come to that matter later, because I want to ask the big question at the end: to whom will those people be accountable, and about what?

There are two other sections with which I want to deal briefly. One section, on the financial audit, makes very interesting reading. I recommend that right hon. and hon. Members read it. It says: Cases of avoidance of the rules and tenders, the granting of approval ex post facto by the Financial Controller or officials who are not authorised to do so, the absence or inadequacy of supporting documents, items which are not booked in accordance with the provisions of the regulations and various book-keeping procedures are all weaknesses in the internal control system. They are not weaknesses: they are disasters. Over that period of 11 years, there was no drive to tighten up those aspects.

It is not that we now have people looking into matters and saying that it is a problem. Nobody, at any stage, who controls the money—those same upright individuals about whom my hon. Friend the Member for Harrow, East talked—once asked themselves why they were living with those weaknesses, why they were not doing something about it, why they needed a policeman to come along to tell them it was wrong. If they did not intend it to happen, why did they not stop it earlier? It is the same for our own Government practices, and we should hunt those flaws down on the same basis. However, those disasters come through as weaknesses in the internal control system. The section of the report entitled "European Parliament Building Expenditure" is enlightening. I know that the hon. Member for Gateshead, East said that it was ridiculous that there were two buildings, and possibly a third, and I fully agree. I do not think that anybody in this Committee would for one moment believe that there should be more than one building.

However, in the midst of that discussion, we suddenly find a little gem. The report says: It was found that there had been no prior invitation to tender for the execution of the project"— the building of the Parliament. That is quite incredible. In other words, somehow that invitation was known about, quietly slid along and, somehow, the right people tendered a bid. It goes on: The Parliament is obliged to review these aspects for the purposes of obtaining long-term financing for the project at the lowest cost. The funny thing is that, when one reads the report, one begins to get the feeling that one is almost re-reading through some eastern potentate's book of accounts, because one begins to see the number of palaces growing, people with largesse and large salaries. It is as if we are talking about something that is both anti-democratic—

Mr. MacShane

Will the hon. Gentleman give way?

Mr. Duncan Smith

With all due respect, I shall not give way. I am aware that others wish to speak. I wish to draw my remarks to a conclusion.

Some information has been given to me by the hon. Member for Antrim, North (Rev. Ian Paisley), who is now in his place, about Pieter Dankert, who I believe was the president of the European Parliament. The information stems from the debate that took place on the Court of Auditors. I gather that Mr. Dankert said—I am paraphrasing—that it was strange that the Commission seemed not to have co-operated fully and speedily when the Court of Auditors was producing its report. He seemed to say that somehow the process was slowed down.

We must remember what was going on when the report was being written. A number of nations were applying to join the European Community and were holding their referendums. There were Austria—Switzerland rejected membership—Finland and Sweden. The process that I was describing was not completed until shortly after Sweden held its referendum.

I am not trying to suggest that an attempt was made to stop the Swedes knowing about the "company" that they were about to join, but the situation was rather like taking part in a company as a director, for example. Would such a person sign himself in only after he had read the accounts? Applicant countries did not have that opportunity, and they will now be saying, "What have we said we shall join?"

Rev. Ian Paisley

I can confirm what the hon. Gentleman has said, and what Mr. Pieter Dankert said. As the hon. Gentleman has said, Mr. Dankert was a president of the Strasbourg Parliament, and so could not be called a Euro-sceptic. He said that it was interesting to note that, if someone wanted to join a company, he would always examine the books, but in the instance to which the hon. Gentleman was referring the books could not be opened until the referendum took place.

I was a member of the Bureau of the Strasbourg Parliament. During a meeting of the Bureau, the French argued that, unless the issue of the new Parliament building was dealt with quickly and quietly, they would stop the European elections altogether. It was said that the members of the Bureau should not let the matter out of the meeting.

Mr. Duncan Smith

I am grateful to the hon. Gentleman for his intervention. He told me earlier that he wanted to make the specific point.

Time and again, hon. Members on both sides of the House reach the point when they say, "There are problems. There is endemic, deep-seated fraud." As the hon. Member for Workington said, we cannot rely on the figures of some countries when they investigate fraud.

Like the hon. Gentleman, I have lived and spent a long time in Italy and various other countries, and have done business with them. I know the culture, which does not lend itself to the genuine examination that I have witnessed in the United Kingdom and in some other countries. There is endemic fraud in certain countries, and it is their structures that have given rise to it. It is those structures that we must tackle.

It is no good saying that we should level police on police so that they can investigate each other. That will mean allocating even more money for the next structure that investigates the structure below it, and so on. That is exactly the problem with the Community now. The different structures are not co-operating but hiding themselves from each other as part of a game.

The common agricultural policy, for example, is no longer viable in its present form. Indeed, it has not been viable for a long time. So what must we do with it? The main problem is that moneys go into the Commission and then out to member states. There is no control at Commission level. The members of the Commission are the policemen, and at the same time they control the moneys that go out to member states. It is clear that they are not under any pressure to resolve the problem.

The issue could be settled by repatriating much of the control of the Commission back to member states and leaving the Commission, as it should have been in the first place, adjudicating between nation states. That would give the real cause and the real drive behind checking on fraud. Essentially, in that and all other matters throughout the cohesion fund and every other mechanism in the Commission, at present we give it that money in the first place and then watch it recycled back, through various means, to us and to others.

In reality, restructuring or changing is the answer, not a continual demand for more police, because they will not find out any more. They will just do in 10 years what they have done over the past 11 years, and that is to say, "Oh, surprise, surprise, there is fraud in the European Community, but we cannot obtain a full answer because we do not have full co-operation." Let national Parliaments ask their Governments why we are paying more tax.

Forums across Europe will be the right ones to investigate using their own versions of the Public Accounts Committee, not trying to give central control and central investigation. I therefore urge my hon. Friend the Minister to drive this matter forward into 1996 and reform root and branch the structures that exist in in Community; otherwise, as has been said, we shall inevitably watch the disintegration of what exists there at the moment.

Mr. Shore

I agree with much of what the hon. Member for Chingford (Mr. Duncan Smith) said. It contrasts very starkly with the remarks by the hon. Member for Harrow, East (Mr. Dykes). The hon. Member did not do his cause any good by seeking to minimise the extent and gravity of fraud in the European Community. He would have done very well indeed to have listened to the good advice of my hon. Friend the Member for Workington (Mr. Campbell-Savours).

One of the most telling phrases during the debate came from my hon. Friend the Member for Gateshead, East (Ms Quin). She said correctly and pointedly that the CAP is a fraud-friendly system. It is. No one who has turned his or her mind seriously to the character of the CAP would deny that.

I do not know whether I may formally move new clause 10 in my name, but we are calling for—

The Second Deputy Chairman

Order. The right hon. Gentleman cannot do so at this stage. Debate is possible, because new clause 10 has been grouped with new clause 3. If new clause 10 were moved, it would have to be moved in the order in which it appears on the amendment paper.

Mr. Shore

I may, however, refer to its terms. We say that Each year Her Majesty's Government shall make a report to Parliament on the proposals it has made and the progress achieved in combating fraud and waste in Community expenditure as documented in the relevant annual reports of the Court of Auditors. No one who has followed the annual documentation by the Court of Auditors on fraud, waste and inadequate financial control in the Community over the past decade can fail to see the need for such a new clause. The hon. Member for Chingford made a telling point when he said that the recent report of the Court of Auditors itself made the point that nothing has really changed in the past 10 years. That is a tremendous indictment not of the Court of Auditors but of the Commission and the national Government authorities which should be concerned with combating fraud.

To the dismay of the Government, no doubt, the Court of Auditors published its annual report for the year 1993 as recently as 24 November. What the Court of Auditors and the House of Lords Select Committee had to say in the two major documents to which I shall refer is very telling.

It is absurd for the hon. Member for Harrow, East, who is unfortunately not in his place, to refer to "poisoned propaganda". The Court of Auditors is a professional and competent body which can hardly be challenged by the people whom it has been appointed to investigate and whom it has found it necessary to censure. The Commission's defence is very unconvincing indeed.

9.45 pm

The Court of Auditors said a great deal about CAP and the overseas aid programme. At the beginning of its very gentle general summing up it says: Overall, it would be fair to say that the development of Community activities has not been accompanied, either in the Commission or in the Member States, by a commensurate development of the necessary financial management and control systems". It goes on to say: insufficient resources, both in quantity and in quality, have been allocated to ensuring the best use of public money and accountability for it. They are very measured words, but the charges are documented over and again in the 480 pages which form the report.

I find the last of the House of Lords European Communities Committee reports very convincing— the idea that it is "poisoned propaganda" is simply ludicrous. The report was published on 19 July this year, so it is very recent indeed. I draw the Chamber's attention to the report's summary, which says: The Committee's main conclusions are as follows: the Commission's new anti-fraud strategy is inadequate. It is an action plan with no plans for action. Its next finding states: there is not enough emphasis on fraud prevention as distinct from fraud detection …The former should be an objective of policy and much more attention should be paid to fraud-proofing regulations and schemes". The Committee's next conclusion says: the Commission must accept its responsibility for ensuring proper administration of Community funds and must specify precisely the procedures and controls to be followed by Member States acting as its agents".

Mr. Rowlands

Did the Government accept this?

Mr. Shore

I will come to that point in a minute. I wish to finish with their Lordships' conclusions because they are highly relevant. They continue: the Court of Auditors must be strengthened". They said that in July this year, knowing full well what had gone into the Maastricht treaty and what additional powers it had given to the Court of Auditors. They go on to say: the whole of the European Parliament should play a more active role in the fight against fraud and Member States should pay more attention to reports from the Budgetary Control Committee". Another important conclusion states: public opinion needs to be informed and motivated". The public must not be misinformed nor should the truth be hidden from them, as the hon. Member for Harrow, East, who is not in his place, would have us accept. The final conclusion states: the present step-by-step approach is not producing sufficient results. A Task Force of outside experts should be appointed to undertake a fundamental review of the way the Institutions are discharging their financial responsibilities and in particular the matters referred to in paragraph 53. Failing that, the European Council must insist on the Commission undertaking such a review itself with the help of outside professionals. That is a series of quite powerful recommendations. Those conclusions were reached after careful study by a body whose members could hardly be accused of being Euro-sceptics. On the contrary, they are very responsible people who, for the most part, are friends of the European Union.

My hon. Friend the Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) has prompted me to ask how the Government will respond to the House of Lords Select Committee report. I think that the whole House would like to have that response.

I conclude my dealings with the report by quoting paragraph 56, which says: We emphasise, as we have done in previous reports, that there has hitherto been a lack of political will in the Community to take remedial action, with the result that the integrity of the Community's financial statements is in doubt. I know that hon. Members on both sides of the Committee will concur fully with those words. It continues: It is Europe's honest taxpayers and traders who bear the huge sums"— the Committee's words— lost to fraud against the Community. These losses are a public scandal. Unless the measures described above are set in hand boldly and resolutely, adverse reports will continue to be issued by the Court of Auditors year after year, and such reports will inevitably fail to give the assurances required by the Maastricht Treaty. The Community in the meanwhile will continue to suffer grievous losses through fraud and irregularity. We do not think that any responsible Government would wish to allow that state of affairs to continue. Those are pretty weighty words. They fully express the proper anxiety that has been articulated in today's debate by hon. Members on both sides of the Committee about the extent of fraud and the difficulty that has been found so far in combating it.

The Government's response to that report is something that we would be interested to hear. The Government have not helped themselves or their reputation by turning down those sums of money which have been offered in two member states to help deal with fraud. My hon. Friend the shadow Chancellor cited some items during his speech on Second Reading. Only yesterday or the day before the political editor of The Guardian, Michael White, had this to say of recent meetings of Budget Ministers on 16 November. The article reads: Mr. Heathcoat-Amory agreed to a £3.9 million cut in the anti-fraud budget for 1995, currently set at £100 million and far less than demanded by the European Parliament. If the Minister agreed to cut £3.9 million from the anti-fraud budget, that undermines his credibility as a Minister who should take such matters very seriously.

The now absent hon. Member for Harrow, East quoted defensively the extraordinary reaction of the European Commission to the Court of Auditors' censure of it. He quoted Mr. David Williamson, the Secretary-General of the European Commission, who made an unwise and foolish statement. He went out of his way to diminish the impact of the report. That is not what he should have done as a person very much involved in the reputation of the European Community.

Reference has been made in the debate to the regulation and convention for the protection of the Community's financial interests. That occurs in the new clause moved by my hon. Friend the Member for Gateshead, East. It is obviously germane to the problem of fraud and financial irregularities. A regulation and convention for the protection of the Community's financial interests is now being negotiated within the Community. There is great difficulty in achieving an agreement on the content of that regulation and, indeed, that convention.

The regulation is that part of the procedure of the Community that comes under the old provisions of the Rome treaty and, if agreed unanimously, it would be imposed on us. The convention for the protection of the Community's financial interests has been negotiated on our behalf, under the third pillar arrangement of the Maastricht treaty, by the Home Secretary with the Ministers of Justice and Home Affairs of other Community countries.

The great difficulty is the lack of any agreement on what fraud is. If one cannot reach an agreement on a definition of fraud, frankly, one will not get far with legislation of that type, whether it be a regulation or a convention.

As the Committee will recognise, in new clause 10 we ask the Government to make an annual report to Parliament on their proposals and the progress achieved in combating fraud. That would precisely focus the attention of the Government on what we want to hear from them—not merely the extent of fraud, but what they are doing to combat it. Our proposal makes the Minister's reply a very important contribution to this debate, especially in relation to the recommendations made by the House of Lords Select Committee.

I have another proposal, which must have occurred to many hon. Members. Fraud should be given the high profile and urgent attention that it needs. Goodness knows, we have enough Commissioners—we do not know quite what to do with them all. One would have thought that the Commission should accept that a senior Commissioner should be given, as his main or only task, the responsibility of combating fraud and imposing adequate financial controls. It would be beneficial for the Commission and for all of us.

Mr. Tim Devlin (Stockton, South)

A Commissioner is already responsible for tackling fraud—Mr. Schmidhuber, whose name was mentioned earlier.

It was interesting to see how several hon. Members dealt with an intervention by my hon. Friend the Member for Harrow, East (Mr. Dykes). They said that he was trying to ignore the problems of fraud in the European Union. In fact, my hon. Friend was absolutely right. The report of the Court of Auditors is a report not on fraud but on financial management in the Union as a whole. In the information note attached to the report, which picks out the highlights, fraud is cited only once.

The interesting aspect of coverage of that subject in the United Kingdom is that we constantly hear references to a figure of 6 becu, which is said to be the extent of fraud in the Community. That figure has no basis in fact. Its origin can be found in a report carried out by a German academic some years ago, in an extrapolation of an estimate of 10 per cent. of the Community budget which is possibly lost to fraud. He based those calculations on a specific slaughter premium scheme and extrapolated the amount to all parts of the budget. As such, the example and the amount are totally without justification.

The Court of Auditors' report strongly criticises member states, including the United Kingdom, on financial management. The president of the court pointed out that, as Governments of member states effectively manage about 80 per cent. of the Union's budget, to some degree they are responsible for its proper management. We all know that there are differences in standards of financial probity in member states, but we must bear it in mind that, as the Secretary of State for Social Security has told the House more than once, we have sufficient fraud in our social security system without its negating the whole system. When discussing such matters, we have to take care that we do not debase the institutions themselves when labelling everything in the European Union as fraudulent and dishonest. Hon. Members should not forget that one third of the budget of the European Union is spent in disadvantaged regions of the Union, and that much is spent in the north-east of England, where I come from, and in Scotland. Since 1989, £30 billion has been spent in that way.

My hon. Friend the Member for Chingford (Mr. Duncan Smith) has said that it is interesting that, as greater financial contributions are made to the European Union budget, there will undoubtedly be greater scrutiny of the expenditure of the Union. That is only right. After all, each directorate in the Commission has its own computer system which has been contributed by different member states. I do not know which member state introduced the computer system—

It being Ten o'clock, THE SECOND DEPUTY CHAIRMAN left the Chair to report progress and ask leave to sit again.

Committee report progress.

Motion made, and Question put forthwith, pursuant to Standing Order No. 14 (Exempted business), That, at this day's sitting, the European Communities (Finance) Bill may be proceeded with, though opposed, until any hour.—[Mr. Kirkhope.]

Question agreed to.

Again considered in Committee.

Mr. Devlin

I shall return to the point which I briefly wanted to make. I have spoken for only three minutes so far. [Interruption.] I shall see my hon. Friend the Member for Salisbury (Mr. Key) later. [Interruption.]

The Second Deputy Chairman

Order. Before the hon. Gentleman continues his speech, may I say that I deprecate what appears to be the post-prandial gossip which is taking place in the Chamber? If hon. Members wish so to engage, I suggest that they leave the Chamber.

Mr. Devlin

It is nice to know that some hon. Members are making such a contribution to diminishing the European wine lake.

The point which I wanted to make briefly is that the systems within the Community can be scrutinised heavily. The situation regarding computers is that each directorate has selected a computer system from a different Community country. For instance, the education directorate's computer system has been installed by Greeks, and its software was written by a Greek. It is not one of the most worthy computer systems, and is prone to certain inefficiencies.

Across the Community institutions as a whole, there are a large number of well-paid officials who, frankly, are not finding enough to do with their time. Consequently, we could be looking for further productivity improvements from them.

We also have an historic opportunity with the joining of three new countries—Finland, Sweden and Austria—to the Community. A shift will take place in the Community which will give this country a fundamental opportunity. Up until now, the French-speaking countries have had a hold over the institutions in the European Union. We are seeing a shift, and a number of senior policy positions will be taken over by Germans, Austrians and other nationalities.

With the influx of Austrians, Finns and Swedes, English will be used much more as the working language in the Community. We are also seeing a massive improvement in information technology, most of which is written in English. That will have a serious effect on the management of the European Union, because it will mean that the standard of financial management which we have grown used to in this country will be much more amenable to the operating systems within the Union. With that in mind, we can see that there will be a much greater improvement in the future.

Let me finish by identifying an area in which an early improvement in financial systems would be very welcome. I refer to the allocation of European social fund objective 2, 3 and 4 status, and the management of the funds. In my constituency and throughout my region in the north of England, a number of local authorities, voluntary organisations and other institutions have applied for ESF objective 2 funding, but they will not find out until half way through the financial year—or even later—whether they will receive that money.

Organisations in my constituency that applied for funds for their projects in January still have not heard whether they will receive those funds. They are, however, required to spend their money evenly over the year; so they are speculating, taking money that they have earned from other sources—or borrowing money—and then spending it in the hope that later in the year they will receive the funds that they confidently expect. It is not a happy system, because it may mean that a number of worthy organisations are left out in the financial cold.

I look forward to further reforms in the future, but I agree with my hon. Friend the Member for Harrow, East that the whole question has been blown very much out of proportion. We must try to preserve the integrity of the European initiative without necessarily dressing it up in an erroneous cloak of fraud.

Mr. Austin Mitchell

I should have thought that the best way of preserving the integrity of the European initiative was by demonstrating the extent of fraud. That would show whether we can have faith in Europe's control systems and institutions. Rather than saying, as the hon. Member for Stockton, South (Mr. Devlin) seemed to say at one stage, that it is okay as long as some of the money comes to the north-east, we should want all the fraud to be detected so that we know what we are dealing with.

At present, unfortunately, fraud and the European Community are synonymous in the minds of a vast number of people. Indeed, the European Union could almost be called the European Union of fraudsters and related trades. Examples of fraud have been brought home to people by television reports and reports from the Court of Auditors. There is, for instance, the massive olive fraud in Italy: for years, people went around counting the olive trees on the estate and plotting them on maps; then they moved on to superior technology—aerial spotting of olive trees. Subsequently, that technology was itself improved: the spotting was done by means of ortho-chromatic, pan-chromatic, infra-red and ultra-violet film. By that method, all the olive trees could be minutely counted.

The comic aspect only gives ammunition to people like me who are strongly critical of the Community. It generates an atmosphere of alienation—a general belief that the Community is all about fraud. Other examples are the piggy-go-round, and the export rebates on goods that never leave the country or else return to it by some roundabout route. I am not talking only about the common agricultural policy, although it is a fraudsters charter that accounts for half the budget. The CAP, along with the enormous fluctuations in commodity prices, gives great scope for fraud, as does tobacco.

Our new clause 10 mentions waste as well as fraud. We need to deal with waste. We have spent £1 billion on growing tobacco in Greece, and more billions on expanding the wine lake. We have provided subsidies to cut wine production, and production has increased. All those examples are endemic in the CAP, but trading schemes are also a problem. An element of corruption is present in the Commission itself, and we must ask whether the European Parliament is an adequate means of dealing with fraud. Building contracts for the European Court are an example, as are the travel expenses claimed—fraudulently, in some cases—by Members of the European Parliament. Some claim the full fare and then pay a cut-price fare. Wasteful overseas trips are made. How can anyone have faith in an institution that is so redolent of fraud, when so many examples of it are hitting the newspapers?

The sad fact is that policing of that fraud depends on national Governments, who often have a vested interest in sustaining the fraud, or not revealing it because it will draw attention to what is happening, and national Governments who, in some cases, are corrupt.

The example of what is happening in Italy was mentioned by my hon. Friend the Member for Workington (Mr. Campbell-Savours). One cannot claim that fraud is not endemic in a system in which politicians are interrogated about fraud and politicians are carried off to prison as a result of fraud.

Perhaps, in passing, I should commend the example of Italy to the Government, because the effect of carrying politicians off to gaol has been a collapse of confidence in the lira; the lira has fallen and Italian exports and Italian manufacturing are booming. It is a precedent that the Government might well choose to follow, given the incompetent way in which they handled our own exit from the exchange rate mechanism.

One cannot assume that, in a system where that is happening in national politics, fraud and corruption are restricted to national politicians; they must be endemic in the society. If they are endemic in the society, we cannot know the scale of what is happening to the European Community's spending in that country.

Italian fraud, Spanish practices and the Irish beef scandal are all examples of a corrupt system that is essentially a fiddlers charter. Other problems are the huge scale of spending, which gives enormous scope for speculation, the conflict between European authorities and national authorities, and the pork barrel mentality whereby, as long as funds are channelled into the "Club Med" states and the poorer states, corruption is accepted. A conspiracy of silence develops in relation to it.

We do not know the scale of fraud. The Chancellor of the Exchequer says, with his usual insouciance, that it is on a small scale—peanuts—but he thinks that of so many things. Our budget contributions are on a small scale—peanuts. Only tomorrow, when he comes to the House with a package on a much bigger scale, shall we discover his definition of something that is not peanuts. It is all peanuts to the Chancellor—but what are the estimates?

The Court of Auditors produced an estimate of fraud and waste last year of between £600 million and £4 billion. I am happy to accept any estimate, provided that it is high enough. The fact is that we do not know. My estimates, from a prejudiced point of view, are as good as the estimates of people whose attitude to the Community is favourable.

That is the aim of the new clauses. It is simply to shed light on the issue from all points of view, as my hon. Friend the Member for Workington said. From the point of view of people who are enthusiastic about and loyal to the Community, it is important that the true scale of fraud, a cancer eating away at the heart of the Community, which is alienating public opinion on a considerable scale, should be known, just as it is important from my point of view that it should be known.

The true scale of fraud might be high, in which case it will probably fuel my frenzy; it might well be low, in which case it will fuel the enthusiasm of those people who are committed to the Community. We need to know, if we are to deal with the problem adequately and in the effective way in which we tackle fraud in this country; the public want to know, and it is essential for the enlightenment of the public that they be told the scale of the problem. There is a connection between the widespread alienation from Europe which exists, and which is shown by public opinion polls in this country, and the pervasive feeling that what is going on there is a fraudsters charter.

It is hypocrisy for Governments to come back, as the Government have done, year after year, and tell us, "We are strengthening the procedures for fraud, we are voting more money to deal with fraud," and then be found to be voting in the Council for cuts in the provision for tackling fraud. It happened last year, as was revealed by John Tomlinson—our Government supported a £20 million cut in the provision for tackling fraud. When the European Parliament suggested in this year's draft budget that 50 additional staff should be provided for the anti-fraud squad in Europe, the squad was cut with the concurrence of our Government. Such double-talk leads to a collapse in belief in terms of what people say about Europe—one thing is said here and another elsewhere.

What we need and what the new clauses will provide is more light on the subject. Much of the secrecy is due to the Council of Ministers, which is one of the obstacles to dealing with fraud. It will not provide the information to the Court of Auditors or to us. Our new clause 10 simply provides for a report to Parliament on what is being done to combat both fraud, which is endemic, arid waste, which is an even more serious problem. New clause 13, tabled by the official Opposition, does not mention waste and does not cover all Community expenditure as our new clause does; it merely deals with the general budget.

10.15 pm

I would expect a Government who are trying to persuade Parliament to agree to raise the ceiling on European expenditure to support the new clauses, and to defend and promote them. If we are giving a concession to the Community by raising the ceiling, it is surely essential to use that as a negotiating counter and say that we have to take action to deal with fraud. The Government have lavished money on the big six accountancy houses, including Coopers and Lybrand and Price Waterhouse. I do not know why the Government do not propose that one of the big six firms of auditors should audit the expenditure and financial procedures of the Commission and the Council.

I had a moment of hope when it was proposed that Sir James Goldsmith should draft into the Commission a team of 200 auditors to find out what is going on. What a good thing that would be. Why do the Government not propose that? Why do they not send Coopers and Lybrand to Brussels to deal with the problems and tell us what is going on? We are asking for more light and more information. If our new clauses are agreed to—they are an essential concomitant of the increase in expenditure and fraud—we shall have achieved that.

Mr. Heathcoat-Amory

I can at least agree with the hon. Member for Great Grimsby (Mr. Mitchell) that we are debating a serious issue. Over the past 10 years and more, the United Kingdom has often ploughed a lonely furrow in encouraging and arguing for prompter and more resolute action against fraud and mismanagement in all its forms. We believe not only in direct action to fight fraud, but in tightening up financial discipline at all levels in the European Community and introducing better systems of budgetary management to stop fraud arising in the first place. That is why we are extremely glad that a number of other European Union institutions now take the issue with the same degree of seriousness.

The European Parliament sometimes has a reputation for running a sort of global foreign policy rather than looking after the interests of taxpayers. It is extremely welcome that members of that Parliament are grasping the issue and using their own powers to bring the European budget under better control. Member states are also becoming interested, which may have something to do with the fact that more of them are becoming net contributors. Before the end of the century, in terms of net contributions per head, we shall be overtaken by France, the Netherlands, Sweden and Austria, with Germany remaining by far and away the largest net contributor. Italy too is becoming a contributor to the budget so the attitude of those countries towards the need for better financial control has been transformed in recent years.

New clause 3 does not make a great deal of sense because it assumes that it is the United Kingdom that adopts Council regulations. It is not; the Council of Ministers adopts them. We have a veto over their adoption because they must be agreed by unanimous vote, but that distinction is a important one. The regulation specified in new clause 3 has already been submitted to the Scrutiny Committee. That happened on 5 October and it has been recommended for debate, so we do not need a new clause to ensure that that draft regulation is properly scrutinised.

The Opposition sometimes speak as though the draft regulation against fraud were the only one that exists. It is important because it will bring into effect a European Union-wide system of administrative penalties which we very much welcome. A great deal has been happening quite separately from that initiative. For instance, my right hon. and learned Friend the Home Secretary put forward a British proposal under the third pillar of the Maastricht treaty which requires inter-governmental action. It suggested a series of measures to ensure that fraud against the interests of the Community is subjected to appropriate sanctions under national laws. Indeed, it was largely at his prompting that the Justice and Home Affairs Council has now agreed a resolution that will go forward to Essen to be considered by the European Council next weekend.

The hon. Member for Gateshead, East (Ms Quin), who introduced the debate for the Labour party, sought to suggest that the United Kingdom had voted against anti-fraud measures. I want to put that myth to rest. In the draft budget for next year, the Commission asked for anti-fraud resources of some £102 million. That was virtually granted in full by the Council. It is true that it represents a small cut on 1994 but that is because the 1994 budget for anti-fraud measures includes a number of start-up costs and one-off studies and the purchase of capital equipment which obviously do not have to be repeated every year, but the operational effectiveness and the number of people deployed on the ground against fraud will remain, and in some cases be enhanced.

Of course the European Parliament, as so often is the case, sought an increase in expenditure for this category as for many others. It wanted some £2 million more spent on agriculture to make sure that the inspection of animals in transit was enhanced. That did not find favour with the Council of Ministers. Another suggested item of expenditure would insert into the operational section of the budget a number of administrative expenditure budgets. Those two items were taken out by the Council of Ministers. If it is of any assistance to the hon. Lady, I can give her the categorical assurance that the United Kingdom did not vote for any cut whatsoever.

There is a wider point, however, that action against fraud is not simply a question of spending more public money. We want more preventive measures and better regulations in Community legislation. We want to improve the discipline of the budget to stop fraud arising in the first place. It is too often the instinct of the European Parliament and Opposition parties to meet expenditure with more expenditure and to judge any organisation simply by the amount of money being spent on it.

Mr. Campbell-Savours

What about social security?

Mr. Heathcoat-Amory

The anti-fraud measures in the European Commission and elsewhere are properly funded and have the required degree of political momentum behind them.

Mr. Campbell-Savours

rose—

Mr. Heathcoat-Amory

I am responding to the hon. Gentleman, who spoke earlier in the debate.

The hon. Gentleman referred to the Thomson report on agriculture. I think that he has a copy, but he can also obtain one from the Library where I believe that it was recently deposited by my right hon. Friend the Minister of Agriculture, Fisheries and Food. It is entitled, "European Agriculture in the 21st Century". I believe that it is a rattling good read and I commend it to the House. There is no question of the United Kingdom Government wishing to suppress well thought out and constructive contributions to the debate about CAP reform which itself has an important part to play in reducing the incentives for fraud.

My hon. Friend the Member for Chingford (Mr. Duncan Smith) wanted an annual debate on this and in my final remarks I shall mention an idea along those lines. First, I want to assure him that the United Kingdom Government were instrumental in obtaining for the European Court of Auditors full status as an institution of the European Union during the Maastricht negotiation and ensuring that reports from the European Court of Auditors are not simply filed in the bottom drawer in the Commission but are responded to and acted upon.

Mr. Shore

I hope that the Minister will address himself to the House of Lords Select Committee's July report which particularly mentions, as their Lordships saw it, the lack of powers of the Court of Auditors after the Maastricht treaty.

Mr. Heathcoat-Amory

I was coming to that very point. The right hon. Gentleman rightly drew attention to the good work that has been done in another place on the question of fraud and how to fight it. The Government will be responding in due course to their Lordships' latest report, but I can assure the right hon. Gentleman that already many of the constructive proposals that they put forward, including strengthening the European Court of Auditors, are being put in place. I met the European Court of Auditors in London earlier in the summer and I gave it an assurance that it would receive the full support of the British Government and, I presumed, of the House in the good work that it does.

I end by responding to the point about reports to the House. It is an essential task of the Government to keep the House fully informed about what we are doing on the question of fraud and mismanagement. At an earlier stage in the debate I mentioned the annual report submitted to the House on the Community budget. Starting from next year, I propose to expand the statement to include what is being done on budgetary discipline and mismanagement and to counter fraud. A point picked up by other hon. Members but suggested by me was that in some ways the House suffers from a surfeit of different reports, not all of them being properly scrutinised. Therefore, there is merit not in triggering yet another report as a consequence of today's debate, but in incorporating it into a single annual report which will draw together all that the Government are doing on this important issue.

Ms Quin

Despite what the Minister has just said, the Opposition consider that the new clause is still important and that it would be right for the Council to adopt this regulation on the protection of the Community's financial interests so that all of us could feel that something was being done to tackle the problem effectively. For that reason, we shall press the new clause to a Division.

Question put, That the clause be read a Second time:—

The Committee divided: Ayes 255, Noes 319.

Division No. 14]	[22.28 pm
AYES
Abbott, Ms Diane	Byers, Stephen
Adams, Mrs Irene	Callaghan, Jim
Ainger, Nick	Campbell, Menzies (Fife NE)
Ainsworth, Robert (Cov'try NE)	Campbell, Mrs Anne (C'bridge)
Allen, Graham	Campbell, Ronnie (Blyth V)
Anderson, Donald (Swansea E)	Campbell-Savours, D N
Anderson, Ms Janet (Ros'dale)	Canavan, Dennis
Armstrong, Hilary	Cann, Jamie
Ashton, Joe	Carlile, Alexander (Montgomry)
Barnes, Harry	Chisholm, Malcolm
Barron, Kevin	Church, Judith
Battle, John	Clapham, Michael
Bayley, Hugh	Clark, Dr David (South Shields)
Beckett, Rt Hon Margaret	Clarke, Eric (Midlothian)
Beith, Rt Hon A J	Clarke, Tom (Monklands W)
Bell, Stuart	Clelland, David
Benn, Rt Hon Tony	Clwyd, Mrs Ann
Bennett, Andrew F	Coffey, Ann
Benton, Joe	Cohen, Harry
Bermingham, Gerald	Connarty, Michael
Berry, Roger	Cook, Frank (Stockton N)
Betts, Clive	Cook, Robin (Livingston)
Blunkett, David	Corbett, Robin
Boateng, Paul	Corbyn, Jeremy
Bradley, Keith	Corston, Jean
Bray, Dr Jeremy	Cousins, Jim
Brown, Gordon (Dunfermline E)	Cox, Tom
Brown, N (N'c'tle upon Tyne E)	Cunliffe, Lawrence
Burden, Richard	Cunningham, Jim (Covy SE)

Dafis, Cynog	Jones, Martyn (Clwyd, SW)
Dalyell, Tam	Jones, Nigel (Cheltenham)
Darling, Alistair	Keen, Alan
Davidson, Ian	Kennedy, Charles (Ross, C&S)
Davies, Bryan (Oldham C'tral)	Kennedy, Jane (Lpool Brdgn)
Davies, Ron (Caerphilly)	Khabra, Piara S
Davies, Rt Hon Denzil (Llanelli)	Kilfoyle, Peter
Davis, Terry (B'ham, H'dge H'l)	Kirkwood, Archy
Denham, John	Lestor, Joan (Eccles)
Dewar, Donald	Lewis, Terry
Dixon, Don	Liddell, Mrs Helen
Dobson, Frank	Litherland, Robert
Donohoe, Brian H	Llwyd, Elfyn
Dowd, Jim	Loyden, Eddie
Dunnachie, Jimmy	Macdonald, Calum
Dunwoody, Mrs Gwyneth	Mackinlay, Andrew
Eagle, Ms Angela	MacShane, Denis
Eastham, Ken	Madden, Max
Enright, Derek	Maddock, Diana
Etherington, Bill	Mahon, Alice
Ewing, Mrs Margaret	Mandelson, Peter
Fatchett, Derek	Marek, Dr John
Field, Frank (Birkenhead)	Marshall, David (Shettleston)
Fisher, Mark	Marshall, Jim (Leicester, S)
Flynn, Paul	Martin, Michael J (Springburn)
Foster, Rt Hon Derek	Martlew, Eric
Foulkes, George	Maxton, John
Fraser, John	McAllion, John
Fyfe, Maria	McAvoy, Thomas
Galloway, George	McCartney, Ian
Gapes, Mike	McKelvey, William
Garrett, John	McLeish, Henry
George, Bruce	McMaster, Gordon
Gerrard, Neil	McNamara, Kevin
Gilbert, Rt Hon Dr John	McWilliam, John
Godsiff, Roger	Meacher, Michael
Getting, Mrs Llin	Meale, Alan
Gordon, Mildred	Michael, Alun
Graham, Thomas	Michie, Bill (Sheffield Heeley)
Grant, Bernie (Tottenham)	Milburn, Alan
Griffiths, Nigel (Edinburgh S)	Miller, Andrew
Griffiths, Win (Bridgend)	Mitchell, Austin (Gt Grimsby)
Grocott, Bruce	Moonie, Dr Lewis
Gunnell, John	Morgan, Rhodri
Hain, Peter	Morley, Elliot
Hall, Mike	Morris, Estelle (B'ham Yardley)
Hanson, David	Morris, Rt Hon Alfred (Wy'nshawe)
Hardy, Peter	Morris, Rt Hon John (Aberavon)
Hattersley, Rt Hon Roy	Mudie, George
Henderson, Doug	Mullin, Chris
Heppell, John	O'Brien, Bill (Normanton)
Hill, Keith (Streatham)	O'Brien, Mike (N W'kshire)
Hinchliffe, David	O'Hara, Edward
Hodge, Margaret	Oakes, Rt Hon Gordon
Hoey, Kate	Olner, Bill
Hogg, Norman (Cumbernauld)	Paisley, The Reverend Ian
Home Robertson, John	Parry, Robert
Hood, Jimmy	Pendry, Tom
Hoon, Geoffrey	Pickthall, Colin
Howarth, George (Knowsley N)	Pike, Peter L
Howells, Dr. Kim (Pontypridd)	Pope, Greg
Hoyle, Doug	Powell, Ray (Ogmore)
Hughes, Kevin (Doncaster N)	Prentice, Bridget (Lew'm E)
Hughes, Robert (Aberdeen N)	Prentice, Gordon (Pendle)
Hughes, Roy (Newport E)	Primarolo, Dawn
Hughes, Simon (Southwark)	Purchase, Ken
Hutton, John	Quin, Ms Joyce
Illsley, Eric	Radice, Giles
Ingram, Adam	Randal, Stuart
Jackson, Glenda (H'stead)	Raynsford, Nick
Jackson, Helen (Shef'ld, H)	Reid, Dr John
Jamieson, David	Robertson, George (Hamilton)
Jones, Barry (Alyn and D'side)	Robinson, Geoffrey (Co'try NW)
Jones, Ieuan Wyn (Ynys Mon)	Roche, Mrs Barbara
Jones, Jon Owen (Cardiff Central)	Rogers, Allan
Jones, Lynne (B'ham S O)	Rooney, Terry

Ross, Ernie (Dundee W)	Taylor, Mrs Ann (Dewsbury)
Rowlands, Ted	Thompson, Jack (Wansbeck)
Ruddock, Joan	Timms, Stephen
Salmond, Alex	Tipping. Paddy
Sedgemore, Brian	Vaz, Keith
Sheerman, Barry	Walker, Rt Hon Sir Harold
Sheldon, Rt Hon Robert	Walley, Joan
Shore, Rt Hon Peter	Wardell, Gareth (Gower)
Short, Clare	Wareing, Robert N
Simpson, Alan	Welsh, Andrew
Skinner, Dennis	Wicks, Malcolm
Smith, Andrew (Oxford E)	Wigley, Dafydd
Smith, Chris (Isl'ton S & F'sbury)	Williams, Alan W (Carmarthen)
Smith, Llew (Blaenau Gwent)	Williams, Rt Hon Alan (Sw'n W)
Soley, Clive	Wilson, Brian
Spearing, Nigel	Winnick, David
	Wise, Audrey
Spellar, John	Worthington, Tony
Squire, Rachel (Dunfermline W)	Wray, Jimmy
Steinberg, Gerry	Wright, Dr Tony
Stevenson, George	Young, David (Bolton SE)
Stott, Roger
Strang, Dr. Gavin	Tellers for the Ayes:
Straw, Jack	Ms Tessa Jowell and
Sutcliffe, Gerry	Mr. John Cummings.
NOES
Ainsworth, Peter (East Surrey)	Carrington, Matthew
Aitken, Rt Hon Jonathan	Cash, William
Alexander, Richard	Channon, Rt Hon Paul
Alison, Rt Hon Michael (Selby)	Chapman, Sydney
Allason, Rupert (Torbay)	Churchill, Mr
Amess, David	Clappison, James
Ancram, Michael	Clark, Dr Michael (Rochford)
Arbuthnot, James	Clarke, Rt Hon Kenneth (Ru'clif)
Arnold, Jacques (Gravesham)	Clifton-Brown, Geoffrey
Arnold, Sir Thomas (Hazel Grv)	Coe, Sebastian
Ashby, David	Colvin, Michael
Aspinwall, Jack	Congdon, David
Atkins, Robert	Conway, Derek
Atkinson, David (Bour'mouth E)	Coombs, Anthony (Wyre For'st)
Atkinson, Peter (Hexham)	Coombs, Simon (Swindon)
Baker, Nicholas (Dorset North)	Cope, Rt Hon Sir John
Baker, Rt Hon K (Mole Valley)	Cormack, Patrick
Baldry, Tony	Couchman, James
Banks, Matthew (Southport)	Cran, James
Banks, Robert (Harrogate)	Currie, Mrs Edwina (S D'by'ire)
Bates, Michael	Curry, David (Skipton & Ripon)
Batiste, Spencer	Davies, Quentin (Stamford)
Beggs, Roy	Davis, David (Boothferry)
Bellingham, Henry	Day, Stephen
Bendall, Vivian	Deva, Nirj Joseph
Beresford, Sir Paul	Devlin, Tim
Biffen, Rt Hon John	Dicks, Terry
Bonsor, Sir Nicholas	Dorrell, Rt Hon Stephen
Booth, Hartley	Douglas-Hamilton, Lord James
Boswell, Tim	Dover, Den
Bottomley, Peter (Eltham)	Duncan Smith, Iain
Bottomley, Rt Hon Virginia	Duncan, Alan
Bowis, John	Dunn, Bob
Boyson, Rt Hon Sir Rhodes	Durant, Sir Anthony
Brandreth, Gyles	Dykes, Hugh
Brazier, Julin	Eggar, Tim
Bright, Sir Graham	Elletson, Harold
Brooke, Rt Hon Peter	Emery, Rt Hen Sir Peter
Brown, M (Brigg & Cl'thorpes)	Evans, David (Welwyn Hatfield)
Browning, Mrs. Angela	Evans, Jonathan (Brecon)
Bruce, Ian (Dorset)	Evans, Nigel (Ribble Valley)
Budgen, Nicholas	Evans, Roger (Monmouth)
Burns, Simon	Evennett, David
Burt, Alistair	Faber, David
Butcher, John	Fabricant, Michael
Butler, Peter	Fenner, Dame Peggy
Butterfill, John	Field, Barry (Isle of Wight)
Carlisle, John (Luton North)	Fishburn, Dudley
Carlisle, Sir Kenneth (Lincoln)	Forsyth, Michael (Stirling)

Forsythe, Clifford (Antrim S)	Lennox-Boyd, Sir Mark
Forth, Eric	Lester, Jim (Broxtowe)
Fowler, Rt Hon Sir Norman	Lidington, David
Fox, Sir Marcus (Shipley)	Lightbown, David
Freeman, Rt Hon Roger	Lilley, Rt Hon Peter
French, Douglas	Lloyd, Rt Hon Peter (Fareham)
Fry, Sir Peter	Lord, Michael
Gale, Roger	Luff, Peter
Gallie, Phil	Lyell, Rt Hon Sir Nicholas
Gardiner, Sir George	MacGregor, Rt Hon John
Garel-Jones, Rt Hon Tristan	MacKay, Andrew
Garnier, Edward	Maclean, David
Gillan, Cheryl	Madel, Sir David
Goodlad, Rt Hon Alastair	Maginnis, Ken
Goodson-Wickes, Dr Charles	Maitland, Lady Olga
Gorst, Sir John	Major, Rt Hon John
Grant Sir A (Cambs SW)	Malone, Gerald
Greenway, Harry (Ealing N)	Mans, Keith
Greenway, John (Ryedale)	Marland, Paul
Griffiths, Peter (Portsmouth, N)	Marshall, John (Hendon S)
Gummer, Rt Hon John Selwyn	Marshall, Sir Michael (Arundel)
Hague, William	Martin, David (Portsmouth S)
Hamilton, Neil (Tatton)	Mates, Michael
Hamilton, Rt Hon Sir Archibald	Mawhinney, Rt Hon Dr Brian
Hampson, Dr Keith	Mayhew, Rt Hon Sir Patrick
Hanley, Rt Hon Jeremy	McLoughlin, Patrick
Hannam, Sir John	McNair-Wilson, Sir Patrick
Hargreaves, Andrew	Mellor, Rt Hon David
Harris, David	Merchant, Piers
Haselhurst, Alan	Mills, Iain
Hawkins, Nick	Mitchell, Andrew (Gedling)
Hawksley, Warren	Mitchell, Sir David (Hants NW)
Hayes, Jerry	Moate, Sir Roger
Heald, Oliver	Molyneaux, Rt Hon James
Heath, Rt Hon Sir Edward	Monro, Sir Hector
Heathcoat-Amory, David	Montgomery, Sir Fergus
Hendry, Charles	Moss, Malcolm
Heseltine, Rt Hon Michael	Needham, Rt Hon Richard
Hicks, Robert	Nelson, Anthony
Higgins, Rt Hon Sir Terence	Neubert, Sir Michael
Hill, James (Southampton Test)	Newton, Rt Hon Tony
Hogg, Rt Hon Douglas (G'tham)	Nicholls, Patrick
Horam, John	Nicholson, David (Taunton)
Hordern, Rt Hon Sir Peter	Nicholson, Emma (Devon West)
Howard, Rt Hon Michael	Norris, Steve
Howarth, Alan (Strat'rd-on-A)	Onslow, Rt Hon Sir Cranley
Howell, Rt Hon David (G'dford)	Oppenheim, Phillip
Howell, Sir Ralph (N Norfolk)	Ottaway, Richard
Hughes, Robert G (Harrow W)	Paice, James
Hunt, Rt Hon David (Wirral W)	Patnick, Sir Irvine
Hunt, Sir John (Ravensbourne)	Patten, Rt Hon John
Hunter, Andrew	Pattie, Rt Hon Sir Geoffrey
Hurd, Rt Hon Douglas	Pawsey, James
Jack, Michael	Peacock, Mrs Elizabeth
Jackson, Robert (Wantage)	Pickles, Eric
Jenkin, Bernard	Porter, Barry (Wirral S)
Jessel, Toby	Porter, David (Waveney)
Johnson Smith, Sir Geoffrey	Portillo, Rt Hon Michael
Jones, Robert B (W Hertfdshr)	Powell, William (Corby)
Jopling, Rt Hon Michael	Rathbone, Tim
Kellett-Bowman, Dame Elaine	Redwood, Rt Hon John
Key, Robert	Renton, Rt Hon Tim
Kilfedder, Sir James	Richards, Rod
Kirkhope, Timothy	Riddick, Graham
Knapman, Roger	Rifkind, Rt Hon Malcolm
Knight, Dame Jill (Bir'm E'st'n)	Robathan, Andrew
Knight, Greg (Derby N)	Roberts, Rt Hon Sir Wyn
Knight Mrs Angela (Erewash)	Robertson, Raymond (Ab'd'n S)
Knox, Sir David	Robinson, Mark (Somerton)
Kynoch, George (Kincardine)	Roe, Mrs Marion (Broxbourne)
Lait, Mrs Jacqui	Ross, William (E Londonderry)
Lamont Rt Hon Norman	Rowe, Andrew (Mid Kent)
Lang, Rt Hon Ian	Rumbold, Rt Hon Dame Angela
Lawrence, Sir Ivan	Ryder, Rt Hon Richard
Legg, Barry	Sackville, Tom
Leigh, Edward	Sainsbury, Rt Hon Tim

Scott, Rt Hon Nicholas	Thornton, Sir Malcolm
Shaw, David (Dover)	Thurnham, Peter
Shaw, Sir Giles (Pudsey)	Townend, John (Bridlington)
Shephard, Rt Hon Gillian	Townsend, Cyril D (Bexl'yh'th)
Shepherd, Colin (Hereford)	Tredinnick, David
Shersby, Michael	Trend, Michael
Sims, Roger	Trimble, David
Skeet, Sir Trevor	Trotter, Neville
Smith, Sir Dudley (Warwick)	Twinn, Dr Ian
Smith, Tim (Beaconsfield)	Vaughan, Sir Gerard
Smyth, Rev Martin (Belfast S)	Viggers, Peter
Soames, Nicholas	Waldegrave, Rt Hon William
	Walden, George
Speed, Sir Keith	Walker, A Cecil (Belfast N)
Spencer, Sir Derek	Walker, Bill (N Tayside)
Spicer, Michael (S Worcs)	Walker, Gary
Spicer, Sir James (W Dorset)	Ward, John
Spink, Dr Robert	Wardle, Charles (Bexhill)
Spring, Richard	Waterson, Nigel
Sproat, Iain	Watts, John
Squire, Robin (Hornchurch)	Wheeler, Rt Hon Sir John
Stanley, Rt Hon Sir John	Whitney, Ray
Steen, Anthony	Whittingdale, John
Stephen, Michael	Widdecombe, Ann
Stern, Micheal	Wiggin, Sir Jerry
Stewart, Alan	Willetts, David
Streeter, Gary	Wilshire, David
Sumberg, David	Winterton, Mrs Ann (Congleton)
Sweeney, Walter	Winterton, Nicholas (Macc'fld)
Sykes, John	Wolfson, Mark
Tapsell, Sir Peter	Wood, Timothy
Taylor, Ian (Esher)	Yeo, Tim
Taylor, John M (Solihull)	Young, Rt Hon Sir George
Temple-Morris, Peter
Thomason, Roy	Tellers for the Noes:
Thompson, Patrick (Norwich N)	Mr. Bowen Wells and
Thompson, Sir Donald (C'er V)	Dr. Liam Fox.

Question accordingly negatived.

Mr. Shore

On a point of order, Mr. Lofthouse. I raised the matter with Dame Janet Fookes when she was in the Chair. It was my clear understanding that there would be a Division on new clause 10.

The First Deputy Chairman of Ways and Means (Mr. Geoffrey Lofthouse)

I know of no undertaking being given.

Mr. Spearing

Further to that point of order, Mr. Lofthouse. We accept your ruling, of course, but would it be possible for you to read the relevant passage in Hansard tomorrow?

The First Deputy Chairman

I shall certainly read Hansard tomorrow.