HL Deb 13 July 1992 vol 539 cc6-8

3.11 p.m.

Lord Benson asked Her Majesty's Government:

What steps are proposed in order to eliminate the defects in the procedures in the European Community for the payment of refunds to traders in milk products, as disclosed in the opinion of the Court of Auditors dated 22nd April 1992, No.92/C101/01.

The Earl of Strathmore and Kinghorne

My Lords, the Government accept that the report from the European Court of Auditors raises serious issues. We are arranging discussions in Brussels under our presidency to consider the court's recommendations and what measures might be taken to reduce further the scope for fraud.

Lord Benson

My Lords, I am grateful for that reply. Does the noble Earl agree that, as the Court of Auditors has pointed out an unsatisfactory financial administration in the Community for year on year, and as it costs the Community scores of millions of pounds a year, the proper course is for the Council of Ministers and the European Parliament formally to inform the Commission that they will tolerate that situation no longer and that failure to correct it will cause the appropriate sanctions to be invoked?

The Earl of Strathmore and Kinghorne

My Lords, faults do not all lie with the Commission. Member states also need to set their houses in order. Action is required by all parties. In our discussions of the court's report we will be seeking to reach agreement on such action at an early date.

Lord Boardman

My Lords, as these frauds cost the Community over 16 million ecus, can my noble friend say why neither the names of the companies concerned nor their nation states are disclosed? Can he confirm that the United Kingdom is not one of the nation states concerned and also say what action, if any, has been taken against those defrauding companies?

The Earl of Strathmore and Kinghorne

My Lords, I am unable to tell my noble friend the names of the companies today. I personally do not know them. As far as I understand it, the United Kingdom is not involved.

Lord Bruce of Donington

My Lords, is the noble Lord aware that the Commission itself has spent quite large sums of money in skirting round this question of fraud and that about two and a half years ago it was trying to minimise its significance? Is he further aware that the Commission itself spent in 1990 no less than £51 million; in 1991, £50.4 million and in 1992 it will spend £53.5 million? Does the Minister agree that those sums arc greatly in excess of the total cost of the Court of Auditors per annum and that they are roughly double the amount which that court has? Does the Minister agree that there is little to show for those sums? Will the noble Earl enlarge a little on what he means by having discussions with the Commission? Does he agree that it is about time that we got some results or that heads began to roll?

The Earl of Strathmore and Kinghorne

My Lords, the report will shortly be discussed by officials from the member states and subsequently by permanent representatives. In due course it will be considered at the ECOFIN council. I believe that that will take place in September. The report also identifies 11 specific instances where there have been overpayments totalling £3.52 million. But these should be considered as examples of potential problem areas. Not all the overpayments should be attributed to fraud. Over £1.3 billion was spent on export refunds in the milk sector in 1990.

Lord Boyd-Carpenter

My Lords, can my noble friend say what action has been taken as regards the officials who permitted this to happen?

The Earl of Strathmore and Kinghorne

My Lords, I do not have an answer to my noble friend's point. I shall endeavour to find out and then write to him.

Lord Gallacher

My Lords, can the Minister confirm that the two companies concerned in this Question account for approximately 10 per cent. of all refunds on milk products and that neither has been audited by its national authority since 1986?

The Earl of Strathmore and Kinghorne

My Lords, I believe that the noble Lord, Lord Gallacher, is correct in his figure of 10 per cent.

Lord Elton

My Lords, will my noble friend kindly complete his reply to my noble friend Lord Boardman by saying that he will endeavour to discover which are the national states concerned and that he will put the answer in the Library of this House?

The Earl of Strathmore and Kinghorne

My Lords, I shall most certainly do that. I understand that the companies covered by the report are based in Ireland and Germany.

Lord Williams of Elvel

My Lords, the noble Earl responded to my noble friend Lord Gallacher that in his view the two companies concerned had approximately 10 per cent. of the business that was going. He failed to respond to my noble friend's next question which was this: have these companies been audited properly by their national authorities since 1986 and, if not, why not?

The Earl of Strathmore and Kinghorne

My Lords, this special report is an interim report from an audit into the payment of export refunds. Two unnamed member states (I have just named them) are specifically covered by this report. The United Kingdom is not one of them. However, that does not mean that none of the weaknesses identified has not occurred in the United Kingdom. No doubt there is room for improvement here as well.

Lord Campbell of Alloway

My Lords, is my noble friend the Minister aware that the initiative to combat Community fraud was taken by Her Majesty's Government under the aegis of my noble friend Lady Thatcher? Is he able today to expand a little more as to where we have now got to and what is on the table by way of proposals for active discussion?

The Earl of Strathmore and Kinghorne

My Lords, the Government continue to look for ways to combat fraud. The United Kingdom will shortly discuss with other member states and the Commission what changes are necessary to update the Community's 45 point anti-fraud action plan. These changes should he endorsed by the ECOFIN council when it considers the Commission's annual report on fraud.