EC: Court of Auditors (Hansard, 21 January 1992)

Lord Bruce of Donington
asked Her Majesty's Government:
Whether they will propose amendments to the Treaty of Rome and the EC Financial Regulations (each as amended) in respect of the ability of the EC Court of Auditors to perform its functions satisfactorily.

§ The Minister of State, Department of Transport (Lord Brabazon of Tara)
My Lords, a number of improvements in financial management and accountability were agreed at Maastricht—largely at the UK's instigation. Among other things, they will strengthen the Court of Auditors' role in ensuring value for money from Community spending.

Lord Bruce of Donington
My Lords, is the noble Lord aware that Article 82a of the financial regulations, 1977, as amended up to date, require the production by the Commission of a consolidated balance sheet, which is required to be submitted to the financial controller? However, it contains no obligation on the Court of Auditors to certify the consolidated balance sheet or to give any opinion as to whether it expresses a true and fair view. Is the noble Lord aware that that is an entirely unsatisfactory position?
Is he further aware that from perusal of the Court of Auditors' report for the year ending 31st December 1990, which was published on 13th December 1991, it is apparent that the whole emphasis is on the authorisation of expenditure and various other technical matters but it places no kind of emphasis on the validity and soundness of the expenditure which was incurred?

§ Lord Brabazon of Tara
My Lords, the noble Lord will be pleased to know that at Maastricht some six specific improvements were made on that front. One of those improvements, which is particularly relevant to what the noble Lord said, is that the European Court of Auditors is to be required to provide the Council and the European Parliament with a statement of assurance on the reliability of the Community's accounts and on the legality and regularity of underlying transactions. That is a big step in the right direction.

§ Lord Campbell of Alloway
My Lords, does the Minister agree that the noble Lord, Lord Bruce of Donington, does a signal service by sticking to this particular last of Community fraud? The effective initiative among the member states was taken by this country first, under the aegis of my right honourable friend Mrs. Margaret Thatcher and then, at Maastricht, by my right honourable friend the Prime Minister. This country, more than any other country, has the primacy of place in tackling that problem. I ask my noble friend whether it was agreed at Maastricht that there should be sanctions against member states in default, with substantial fines and an effective enforcement machinery. Further, was there 724 any other aspect of the Maastricht agreement which is relevant to the Question asked by the noble Lord, Lord Bruce of Donington?

§ Lord Brabazon of Tara
My Lords, my noble friend is quite right. The noble Lord, Lord Bruce of Donington, does us a service by drawing our attention to those matters. Further, I agree with my noble friend that no other country has done more within the Community to highlight the problems. As I said in my Answer to the noble Lord, specific improvements were made at Maastricht: for example, as regards fraud, the progress was consolidated and new measures agreed since the Commission's anti-fraud programme began in 1989; on our initiative particular stress was given to improvements in the reporting of irregularities and further work on the simplification of legislation. We have been at the forefront in urging the updating of the programme to account for new priorities.

§ Lord Stoddart of Swindon
My Lords, is it not a fact that a huge proportion of fraud within the Community takes place within the common agricultural policy? That being so, would it not deal with the fraud more satisfactorily if we pressed for more stringent controls in the agricultural sphere and, perhaps even better, if we pressed for the repatriation of the agricultural policies of the nation states?

§ Lord Brabazon of Tara
My Lords, unfortunately the noble Lord was not in the House at Question Time yesterday when I dealt with a similar Question from the noble Lord, Lord Bruce of Donington. I was looking forward to the noble Lord's contributions on that. Yesterday we dealt with the common agricultural policy and this country's belief that that policy needs radical reform.

§ Lord Boardman
My Lords, is it not a most disturbing feature that the Court of Auditors drew attention to many abuses but the Commission failed to pursue those in order to prevent the repetition of such abuses?

§ Lord Brabazon of Tara
My Lords, my noble friend is right. One of the specific improvements agreed at Maastricht was that the European Court of Auditors should be given enhanced status as an official Community institution. I hope that that will improve matters.

§ Lord Orr-Ewing
My Lords, was any agreement made at Maastricht to limit the growth in numbers of the Commission staff, which last year reached 25,000 people paid on average £35,000 each, all free of tax? Why is that? Why are there special privileges in that direction?

§ Lord Brabazon of Tara
My Lords, my noble friend makes a good point. However, it is a different question from that on the Order Paper.

§ Lord Peston
My Lords, my noble friend Lord Stoddart of Swindon is right about the CAP; it is essentially a mechanism for fraud. That is its logical basis. However, we need not pursue that now. The noble Lord said that apart from the Court of Auditors having the classic accounting function of asking 725 whether the money is spent properly it also had a role in looking at value for money. Can he give us any examples over, say, the past three to six months where the Court of Auditors has done some work which indicates anything in regard to value for money from the Community?

§ Lord Brabazon of Tara
My Lords, I am not sure that I mentioned value for money in my Answer. I said that the Court of Auditors would provide the Council and the Parliament with assurance on the reliability of the Community's accounts and on the legality and regularity of the underlying transactions. In addition, the Commission's responsibility for sound financial management, which perhaps covers the noble Lord's point, is to be made explicit in the treaty.

§ Lord Peston
My Lords, I apologise. I swear I heard the expression, "value for money". I testify that I heard the Minister use the expression, "value for money". Can the Minister say that the court is not involved in looking at value for money but has a much narrower accounting function? It will be disappointing if it is limited in that way.

§ Lord Brabazon of Tara
My Lords, I shall have to reflect on what the noble Lord said and perhaps write to him on that point.

§ Lord Richard
My Lords, is the Minister aware that the noble Lord, Lord Orr-Ewing, is absolutely wrong? The staff of the Commission amount to 14,000 people —a quarter of them interpreters and translators. From my own experience I can assure the noble Lord, Lord Orr-Ewing, and the Minister that the income is not tax free.

§ Lord Brabazon of Tara
My Lords, the noble Lord would know. As I said, it is another Question.

Lord Bruce of Donington
My Lords, is the noble Lord aware that under Article 205 of the Treaty of Rome if the institutions of the Community and the national audit bodies do not have the necessary powers, the competent national departments shall forward to the Court of Auditors, at its request, any document or information necessary to carry out its task? Is the noble Lord aware that there has not been that degree of co-operation from Italy? It is well known in the European Parliament that that is the case; yet the Court of Auditors Report for the financial year to 31st December 1990 carries no specific mention of that defect by one of the member states.
I agree that the Government have taken a leading part in securing a far more satisfactory position. Will they take up the matter at ECOFIN or with the Council of Ministers?

§ Lord Brabazon of Tara
My Lords, I shall be happy to pass on the observations of the noble Lord to my right honourable friend who will be representing this country at ECOFIN. I hope that one of the enhanced powers agreed at Maastricht for the European Parliament to examine the Commission on the basis of the European Court of Auditors' observations and to 726 request it to report on action it takes in response, may go some way towards helping the problem identified by the noble Lord.