EC Budget: Frauds (Hansard, 14 February 1989)

§ The Secretary of State for Trade and Industry (Lord Young of Graffham)
My Lords, the Council discussed the 1987 Court of Auditors report in March 1988 and made a recommendation to the European Parliament on the discharge to be given to the Commission regarding the implementation of the 1986 EC budget. The Parliament voted to grant the discharge on 13th April 1988.
The Court's 1987 report was notable for devoting a specific chapter to fraud and irregularities. ECOFIN welcomed this and drew particular attention to the setting up of an anti-fraud unit in the Commission. The Paymaster General and officials have subsequently had detailed discussions with the head of the unit about his priorities.

Lord Bruce of Donington
My Lords, will the noble Lord be kind enough to explain why it was, despite the specific instances of fraud set out in the 1966 annual accounts and the report of the Court of Auditors thereon and despite the misgivings that were raised by me in your Lordships' House on 20th January, nevertheless the Council of Ministers recommended the discharge of the 1966 accounts when its only method of obtaining a further investigation into the matter was to refuse the discharge until an investigation had been made?
Is the noble Lord aware that recently the new chief of the Commission's anti-fraud team estimated in evidence given before a European Parliamentary 65 Committee that at the moment frauds are running at somewhere between 10 and 20 per cent. of the Commission's budget? In those circumstances will the noble Lord instruct or cause to be instructed the council representatives that we have on ECOFIN to decline to discharge the 1987 accounts?

§ Lord Young of Graffham
My Lords, at the European Parliament's budget control committee hearing on fraud which took place on 23rd to 25th January of this year, Herr Waechter, who is the head of the Commission's anti-fraud unit, reported that many people had said that fraud could amount to as much as 10 to 20 per cent. of the Community budget but that he considered that to be an area about which nothing definite could be said. Later in the hearing the chairman of the Parliament's budgetary control committee suggested a figure of 8 per cent. to 10 per cent.
The only figures which we have concerning irregularities, including fraud, in the period from 1980 to 1987 amount to approximately £130 million of which some £4 million relate to the United Kingdom. Those figures relate to detected fraud. We all know that there is probably a substantially larger amount of undetected fraud. That is a matter to which Commission officials are now giving their full attention.

§ Lord Jay
My Lords, since on any interpretation according to the Court of Auditors fraud amounts to at least tens of millions of pounds, a high proportion of which comes indirectly from the British taxpayer and is apparently caused by corruption and fraud in the distribution of export subsidies from the Commission, is it not time that the Government took more effective action to stop what is surely a scandalous misuse of British taxpayers' money?

§ Lord Young of Graffham
My Lords, the Prime Minister is of course very concerned about fraud within the Community and intends to raise the matter at the next European Council meeting. I believe that that is the correct forum in which the matter should be raised.

§ Lord Cockfield
My Lords, while one accepts that the question of fraud is of great importance and that measures ought to be taken to curb it, and also that fraud extends beyond the CAP into other areas, can my noble friend explain why proposals which I put forward in 1986 on behalf of the Commission to amend the mutual assistance directive to enable the Commission in collaboration with member states to conduct investigations into fraud were vetoed by the United Kingdom in conjunction with the Finance Ministers of the other eleven member states?

§ Lord Young of Graffham
My Lords, my noble friend was a Commissioner at the time and knows full well the answer to that question. I suspect that there must be rather more to the matter than that the veto was led by the United Kingdom, which is the impression that he has given to your Lordships' House. I shall certainly look into the matter and consult my colleagues.

§ Lord Elwyn-Jones
My Lords, will the Minister give the House the answer to the allegation of the noble Lord?

§ Lord Young of Graffham
No, my Lords. The noble and learned Lord will know that I am not a Finance Minister and was not present at the meeting in 1986. If my noble friend cares to put down a Question I shall of course provide an answer to your Lordships' House.

§ Lord Benson
My Lords, is the noble Lord aware that the Court of Auditors made a report on the 1987 accounts of the Community and, to use the gentlest words that one can, states that those accounts are misleading—in short, they are subject to grave irregularities? Will he tell the House what the Government intend to do about the accounts of the Community, which are full of irregularities?

§ Lord Young of Graffham
My Lords, I already told the House in an earlier answer that the Prime Minister is very concerned about fraud in the Community, and that includes the way in which the accounts are audited. She intends to raise the matter specifically at the next meeting of the European Council.

§ Lord Cledwyn of Penrhos
My Lords, the noble Lord, Lord Cockfield, asked an extremely serious and fundamental question. Thus far the Minister has failed to answer his noble friend. In the circumstances, and as a member of a Cabinet with collective responsibility, why is he unable to answer on behalf of his right honourable friend the Chancellor of the Exchequer? Will he consider very carefully before he answers this question? Will he now give his noble friend a proper answer as to why on that occasion Her Majesty's Government vetoed his proposal?

§ Lord Young of Graffham
My Lords, the noble Lord the Leader of the Opposition and all Members of your Lordships' House should know the procedures which the House has adopted for the convenience of noble Lords in respect to the answering of questions. If he cares to put down the Question I shall be happy to answer it. Surely not even the noble Lord could expect that I would have the sum of all knowledge of all events which have taken place in the European Council from time immemorial, or at least since 1979.
My noble friend referred to a specific incident a year or two ago at a meeting of Finance Ministers at which I was not present. Surely the noble Lord the Leader of the Opposition cannot expect that I should have instant recall and know the answer.

§ Lord Stoddart of Swindon
My Lords. does the noble Lord realise that his response to his noble friend's question has given the impression that he is complacent about the whole issue of fraud?

Noble Lords
No!

§ Lord Stoddart of Swindon
Perhaps he has not given that impression to his noble friends behind him, but he has certainly given it to noble Lords on this 67 side of the House. He did so earlier this year in his original reply to my noble friend Lord Bruce of Donington. Is the Minister aware that the public have now been informed that the amount of fraud could involve as much as £6 billion every year and that this country contributes about one-third of that sum? Will he tell the House whether the matter was raised yesterday by our own Minister of Agriculture in the Council of Agriculture Ministers as was promised? If it was raised, as it should have been, what was the outcome?

§ Lord Young of Graffham
My Lords, while I accept full responsibility for all events which concern my department, and indeed all events which transpire in government, I cannot be expected to accept responsibility for impressions which noble Lords opposite might draw from my behaviour. I thought that I was absolutely firm in answering the question about fraud. I think that it is important to put the matter into perspective.
I quoted the words of the member of the Court of Auditors in reporting to the head of the Commission's anti-fraud unit that many people had said that fraud could amount to as much as 10 per cent. to 20 per cent. of the Community budget. At the upper level, that figure would represent £6 billion. However, no one has suggested a figure as high as that. I disclosed that the entire cumulative figure of detected fraud for the period from 1980 to 1987 was a total of —130 million. I said that the Prime Minister intends to raise the matter at the very next meeting of the Council of Ministers. I do not believe that gives any impression of complacency. I merely cited the facts. It is important that we should not be led astray by wild speculation.

§ Viscount Whitelaw
My Lords, as one who shares collective responsibility with my noble friend for the matter at issue today, I do not know the answer any more than he does. Nor would I expect that he should know it. I cannot accept that, because he does not know the answer to a question of a very specialised nature put by my noble friend Lord Cockfield, that means that either he or I is in any way complacent about the matter. I should have thought that it would be far better if he were able to give a considered answer if my noble friend chooses to put down a Question.

§ Lord Young of Graffham
My Lords, I am very grateful to my noble friend.

§ Lord Cockfield
My Lords, as I have now been named by my noble friend Lord Whitelaw, perhaps I may say this.

A noble Lord
Question!

§ Lord Cockfield
I shall put it as a question if the noble Lord will kindly possess himself in patience. Is my noble friend aware that my right honourable friend the Prime Minister raised the matter, very properly indeed? Does he recall that I began by saying that this is an important subject which needs 68 to be addressed? In those circumstances, does he agree that it would have been not unreasonable for the Minister to have been provided by his officials with adequate background briefing? While I could give an explanation as to why Her Majesty's Government decided to veto that particular proposal, is he aware that it is not my function but his to explain the actions of Her Majesty's Government? Is he further aware—

Noble Lords
Order! Too long!

§ Lord Cockfield
Is the Minister further aware that this is a matter of substantial importance?

§ Lord Young of Graffham
My Lords, it is obviously some considerable time since my noble friend stood in my position answering questions on these matters in your Lordships' House and he has perhaps forgotten the formalities of this matter. If my noble friend would look at the Question to see precisely to what it relates, he would realise that, as in the ordinary course of events, we cannot expect to be armed with knowledge of every single occurrence in every possible area. If my noble friend will merely do as I ask and put down a Question on the Order Paper, I am absolutely certain that he will receive an Answer that will satisfy him and your Lordships' House.

Lord Bruce of Donington
My Lords, in order to assist him in replying to my noble friend Lord Stoddart, is the Minister aware that his right honourable friend the Minister of Agriculture yesterday elicited a promise from the Spanish President of the Council that the matter would come on to the agenda sometime in March or April? I do not in any way accuse the noble Lord of complacency in this matter, but may I draw his attention to the fact that that does not apply to his right honourable friend the Paymaster General, who published a summary of the Court of Auditors' report on 24th January which nowhere mentions fraud at all?

§ Lord Young of Graffham
My Lords, I am grateful for the assistance that the noble Lord, Lord Bruce of Donington, has given me and for the incidental information that he has given to your Lordships' House about the occurrences at the agriculture Ministers' meeting yesterday. However, I said that my right honourable friend the Prime Minister intended to put this matter to the next Council of Ministers' meeting in March. I believe that to be the proper place for this matter to be raised, and there it will be raised.