Fraud against the Community (Hansard, 30 April 1990)

The Earl of Caithness
My Lords, a detailed 45 point programme of work to combat fraud was approved by the ECOFIN Council in June last year. A progress report was considered by the ECOFIN Council in March this year. The council took note of the improvements which have been achieved but emphasised that much remained to be done. It made specific reference to the need to simplify legislation and the importance of continuing to improve and increase co-operation between the authorities of the member states and the departments of the Commission.

§ Lord Benson
My Lords, I am grateful to the noble Earl for that Answer although it does not encourage very warm thanks because it does not really answer the Question. Does the noble Earl agree that one cannot eliminate fraud until one gets rid of its causes, which was the point of the Question? Does he not agree that so far there has been no political will in the Community to make any attempt to set that programme of reform in hand or to employ the skilled staff necessary to make it work?

The Earl of Caithness
My Lords, I do not share totally the noble Lord's pessimism on this matter. It may be that not all member states attach the same priority to the issue of fraud as does the United Kingdom. However, I can tell your Lordships that our determination to ensure that the issue remains prominent on the Community's agenda is already bearing fruit. The noble Lord will be aware that the Community has done more to tackle fraud over the past 12 months than in the whole of the previous decade.

§ Baroness Robson of Kiddington
My Lords, is the noble Earl aware that your Lordships' Select Committee inquiry into fraud in the Community relied very heavily on the evidence from the Court of Auditors? One of the report's recommendations, which I have not heard the noble Earl mention, is the necessity to give greater powers to the Court of Auditors. We are approaching an inter-governmental conference on European monetary union and I understand that there will also be an inquiry into European institutions. Does the Minister agree that it is most urgent that greater powers are given to the Court of Auditors?

The Earl of Caithness
My Lords, I know that the whole House would like to compliment the noble Baroness on the work that she accomplished when chairing the committee on fraud, from which a report was produced which was read widely throughout the Community, as are all the reports of your Lordships' House on European matters. However, we are not convinced that the Court of Auditors is the appropriate body to produce the kind of report mentioned. Its main duty is to examine the Community's budget accounts. In doing that it fulfils a vital role in identifying weaknesses in management, organisation and legislation which might hold the risk of fraud. The Commission is far more directly involved through its anti-fraud unit and is in a position to produce an annual report promptly at the end of each calendar year.

§ Lord Seebohm
My Lords, is the Minister aware that the Treasury solicitor in his evidence to the committee pointed out that the amount of the penalties was entirely a matter for the members themselves to decide? They were in many cases so small that they could not possibly cover the cost of prosecution. That seems most unsatisfactory and I wonder whether the situation has changed. From the evidence we received certain countries have undoubtedly kept those penalties low in order not to interfere with farmers. Will the Minister say whether any approach has been made through diplomatic circles to put those extraordinary matters right?

The Earl of Caithness
My Lords, the Commission disallows expenditure when payments are not made in accordance with the rules of a particular scheme. The noble Lord was right to say that it is the responsibility of member states to enforce their own law and penalties on fraud. However, the commission is building up a database of national anti-fraud systems and penalties and consideration is being given to partial funding by the Community of enhancements to member states' existing arrangements.
On the noble Lord's second point, if we can simplify some of the legislation surrounding the matter, particularly on the agricultural side, which is something that the UK is already undertaking, it will minimise the opportunities for fraud.

§ Lord Murray of Epping Forest
My Lord, does the noble E£.rl agree that putting steel in the backbone of the Commission on the one hand and strengthening the powers of the Court of Auditors on the other are not mutually exclusive? Will the Government look again at the arguments for strengthening the powers of the court, which were so well set out in the report of the committee chaired by the noble Baroness?

The Earl of Caithness
My Lords, I shall look at the matter again without any commitment. But we looked at it with great care and felt that the special anti-fraud unit in the Commission was the right vehicle and that the Court of Auditors had a slightly different role from which it should not be diverted.

Lord Bruce of Donington
My Lords, is the noble Earl aware that the only main observation made by the government spokesman in another place when the question of fraud in the Community was discussed was to criticise the Court of Auditors for exceeding its terms of reference? That criticism of the Court of Auditors, which is responsible for unearthing most of the fraud that takes place, is hardly a sign of the Government's enthusiasm for the pursuit of anti-fraud legislation in Europe. Will the noble Earl give some indication of the action which Her Majesty's Government propose to take as a result of the ECOFIN Conference on 12th March, which discussed this matter at some length?

The Earl of Caithness
My Lords, I can update your Lordships regarding what happened at the ECOFIN Conference in March. The United Kingdom representative, my honourable friend the Economic Secretary, was the only Minister who spoke on the matter, which shows the great concern of the United Kingdom in trying to lead Europe on this matter, as it is leading on other matters.
With regard to the actions of the United Kingdom, we appointed a CAP liaison officer in each of the 20 Customs regional offices with the aim of better assessing the risks and targeting the resources. Refresher training has been given to 3,800 CAP Customs officers, and internal scrutiny by MAFF of a system of product classification for export refunds is in progress. That is a matter to which I referred in a previous answer.

§ Lord Cledwyn of Penrhos
My Lords, following my noble friend's supplementary question, does the Minister recall that at the time we debated the report of the noble Baroness 12 months ago his right honourable friend in another place said that the Government had it in mind to set up a supra-national agency to seek to control fraud? Will he say whether that is still the Government's intention? In order to simplify matters as we approach 1992 and given the public concern regarding fraud, will the Government not consider publishing a White Paper explaining in detail the steps that they are taking so that the House and the country may know exactly what they have in mind?

The Earl of Caithness
My Lords, I shall certainly pass that last thought on to my right honourable friend the Chancellor of the Exchequer. But it is not something on which Britain can act alone. It has to be tackled by every country in Europe. The only effective way is to take the other 11 member states along with us, and that we are seeking to do.

§ Lord Denham
My Lords, we are very nearly 30 minutes on and I wonder whether it would not be better to move on.

§ Baroness Robson of Kiddington
My Lords, I believe I have another minute.

§ Lord Denham
My Lords, I think the House may feel that we have dealt with the Question.