EC Funds: Audit Procedures (Hansard, 13 July 1989)

§ The Secretary of State for Trade and Industry (Lord Young of Graffham)
My Lords, the Court of Auditors plays a major role in identifying legislative or procedural shortcomings which can lead to fraud against the Community Budget. Where it has details of individual cases, I understand that it passes them to the appropriate authorities.

§ Lord Campbell of Alloway
My Lords, I thank my noble friend for that charmingly anodyne Answer, but does the Court of Auditors maintain direct and effective contact with the prosecuting authorities in the member states?
Is the Minister satisfied that all relevant information is made available by the Court of Auditors to the prosecuting authorities here? Will proposals for improved enforcement machinery be put forward at the Council of Ministers level, not necessarily involving the Commission?

§ Lord Young of Graffham
My Lords, my reply may well be anodyne but it happens also to be accurate. What the Court of Auditors does is to show shortcomings in procedures. It is for member states to enforce those procedures. The Commission now has an anti-fraud unit that we have supported. Indeed we keep in close touch with it. As a result of that, for example on export refunds, an area which has been suspect in the past, the Commission would like 5 per cent. of all consignments eligible for export refunds to be checked. In the United Kingdom the Customs and Excise has an objective of checking 7 per cent. It is for us and for all member states to put our own houses in order.

§ Lord Hailsham of Saint Marlyebone
My Lords, does my noble friend agree that it is absolutely essential in this connection that there should be a unified law of fraud in these matters, setting up a unified law creating criminal offences, and that the courts throughout the Community should have ample jurisidction to prosecute such frauds and to 425 convict where need be, irrespective of the frontiers? Can the Minister tell me something about the negotiations for a proper convention regarding these matters between the Community states?

§ Lord Young of Graffham
My Lords, of course I bow to the knowledge of the law of my noble and learned friend. The law on fraud must be a very complex subject covering such matters as those which concern aspects of my department other than this specific matter, which is a fraud on Community payments. I should not have thought that there would be any great difficulty in the law on fraud. Where people were claiming refunds or payments from the Community on an incorrect basis, that would seem to me to be a matter that could easily be checked. However, I shall certainly take cognisance of my noble and learned friend's remarks and inquire of the appropriate authorities.

§ Lord Elwyn-Jones
My Lords, has any member state yet brought criminal proceedings in respect of frauds on EC funds? If the answer is that there is no evidence of that having been done, does it not point to an enormous omission and gap in the procedures of the EC? The fact and quantum of the frauds is notorious. So is not this majestic detachment on the part of the EC authorities greatly disturbing?

§ Lord Young of Graffham
My Lords, I am sure that the noble and learned Lord will realise that the use of the word "notorious" has to be proved by evidence to exist rather than there just being allegations that it exists. I am quite sure that in a previous time he would have made that point equally to me.
The Commission set up an anti-fraud unit in 1988, very much with the Government's support. We have been playing a leading role to ensure that fraud is brought under control. It is for member states within the Community to ensure that fraud does not take place within their own jurisdiction.
What is now happening is this. We have set down certain procedures and ways in which checking has to take place. It will be up to the Court of Auditors to ensure that member states put this into effect. It is recognised that a properly mounted programme against fraud will take from three to five years to implement. However, I shall check to see what prosecutions have taken place within the United Kingdom. I shall write to the noble Lord and put an answer in the Library.

§ Lord Stoddart of Swindon
My Lords, is the noble Lord aware that, despite what he has said, some people are still impressed by the lack of urgency about this fraud? It amounts to at least £2,000 million a year, a sum that would be sufficient if it occurred in this country to bring down the Government. Will he urge upon his right honourable friends, and indeed on the Commission, that this is a matter which has to be cleared up?
Will the noble Lord persuade his right honourable friend the Prime Minister that what causes this fraud is the continued existence of the absurd and protectionist common agricultural policy? Will the Government, together with other governments, do 426 more to phase out this disgraceful policy? It is inimical to the best interests of the Community and the rest of the world.

§ Lord Young of Graffham
My Lords, the noble Lord knows full well that the Prime Minister has been to the forefront in seeking to bring a sense of reality into the CAP. We are also well aware of the amount of fraud. It is a little dangerous to give estimates of the amount because they are only estimates and they have to be proven. However, it is for us to put our own house in order. I have already mentioned that the Commission wants an objective of 5 per cent. of consignments set. We have set an objective of 7 per cent. We already concentrate checks on high risk consignments and products. Additional training has been given by Customs to some 4,000 officers in order to begin to implement this enormous task of checking on fraud. CAP liaison officers have been appointed to improve the flow of information concerning the CAP fraud.
It is very much a matter that we have to bring home to the whole Community. It is not necessarily only within the United Kingdom that such matters take place. That is why we played a leading role in bringing home through the Court of Auditors the setting up of new procedures within the Community. I can assure the noble Lord that we shall be in the forefront of ensuring that our fellow members follow through these procedures rigorously.

Lord Paget of Northampton
My Lords, surely our trouble here is not too few laws but far too many. When we introduced what are substantially methods to control trade through elected public bodies at NATO, we were very naive indeed if we did not all know that that was a procedure which was going to involve wholesale fraud. These public international efforts to control trade always do. Is it not quite obvious that the right method is to try to get fewer laws, not more, because we cannot administer the ones that we have?

§ Lord Young of Graffham
My Lords, it is not a question of new laws but of enforcing those that already exist.

Lord Bruce of Donington
My Lords, the Government are well aware from reading a report that came from a Select Committee of your Lordships' House that the frauds that take place against Community funds are of an international character. They involve not only the countries of Europe, including, as the noble and learned Lord, Lord Hailsham, pointed out, our own, but also third countries. In these circumstances will the noble Lord explain why both the DTI and the Treasury declined to accept an invitation to the Seventh International Symposium on Commercial Crime held in Cambridge from 2nd to 7th July, attended by leading investigators, lawyers and other regulators from all parts of the world? Why was the invitation declined by Her Majesty's Government to attend something that might have been of very considerable assistance to them in promoting the exchange of information and in learning of the methods that other countries adopt for the detection and prevention of commercial crime?

§ Lord Young of Graffham
My Lords, I do not know to which conference it is that the noble Lord refers. His question is a long way from the Question on the Order Paper; but there is no shortage of international conferences in this world today about a whole variety of subjects. The only meetings that my department attends are those which it presumably considers are worth attending.