EC Budget: Fraud Allegations (Hansard, 9 June 1992)

The Minister of State, Department of Transport (The Earl of Caithness)
My Lords, the Government take very seriously allegations of fraud against the Community budget. We shall seek to ensure proper 1188 examination of the issues raised in the Court of Auditors' report by the ECOFIN Council. The court's report highlights failure by the Commission and member states to take responsibility for sound management of Community finances. Our objective must be to ensure that this responsibility is given proper effect.

Lord Bruce of Donington
My Lords, I am grateful to the noble Earl for that Answer. Unfortunately, it lacks the information that I require. What action will the Government take? Is the noble Earl aware that the report of the Court of Auditors gives a sample of the audit board's investigation of export refunds? It gives 11 instances in which frauds totalling over £3.5 million are revealed. The report also reveals the apparent inability of the French Government to co-operate with the Court of Auditors in certain important respects. Is this not a matter which ought to be raised in the Council of Ministers? Or will the Council of Ministers be perpetually somnolent?

The Earl of Caithness
My Lords, I am sure that on consideration the noble Lord will agree that I answered the Question he put on the Order Paper. That is, I said that we would raise the matter of the Court of Auditors' report in the ECOFIN Council. We want it properly debated because the report raises important issues. Your Lordships will wish to know that there is an explanatory memorandum in the Library of the House.

§ Lord Orr-Ewing
My Lords, will my noble friend consider publishing a list of those countries which will not co-operate with the Court of Auditors on important matters where money is going astray through corruption and other devious methods?

The Earl of Caithness
My Lords, that matter is more properly addressed to the Commission. However, we wish to see the problem dealt with because, when it comes to producing the accounts, it is right that the Commission should be satisfied that any moneys paid have been accounted for in the proper way and that the proper procedures have been used.

§ Lord Stoddart of Swindon
My Lords, is the noble Earl aware that unless the matter is taken seriously, the Mafia will increasingly spread its tentacles throughout the Community and demand and receive its rake-off?

The Earl of Caithness
My Lords, we do take it seriously. That is why I know that the noble Lord— who also takes it seriously—will be in strong support of the Maastricht Treaty which gives added powers to the Court of Auditors.

§ Lord Harmar-Nicholls
My Lords, if the report of the Court of Auditors is debated by the Council of Ministers and its findings are confirmed, what action can be taken? What sanctions has anyone against a nation which is included in the report from the Court of Auditors?

The Earl of Caithness
My Lords, as I understand the situation, if it is proved that there is fault by a 1189 company or group of companies acting in a way to defraud, the Commission can withhold the payments due. That would be a severe embarrassment to the company.

§ Lord Peston
My Lords, the noble Earl mentioned Maastricht. I shall refrain from rising to that fly. Can he enlighten us? I am a little lost as to why, if there is fraud, it is a matter for governments. Why are there no criminal proceedings in courts of law or similar procedures? Can the noble Earl tell us exactly what happens? There appear to be widespread allegations of fraud plus, as my noble friend said, actual evidence, but there seem to be no court cases.

The Earl of Caithness
My Lords, the report of the Court of Auditors drew attention to a number of irregularities, some due to lax implementation by member states of the existing rules, others due to systems which were deficient and yet others due to the fact that the regulations themselves were deficient. The Court of Auditors suggested that a separate unit should be established to cover those issues. All these issues are properly items for member states, which I am sure the noble Lord, Lord Bruce of Donington, would support rather than a central unit. However, we need to discuss the whole issue within ECOFIN so that the report of the Court of Auditors is taken note of and member states implement the procedures in the proper way.

Lord Morris
My Lords, is my noble friend entirely satisfied that other members of the Community and indeed ourselves have taken seriously the recommendations of the report of the Court of Auditors?

The Earl of Caithness
My Lords, we certainly take the recommendations seriously as, I hope, do the other member states. We shall draw the matter to the attention of the Commission. The Court of Auditors must have the appropriate powers. The Commission must also have the appropriate powers to ensure that member states take note of the report.

§ Lord Barnett
My Lords, will the Minister explain the difference between irregularity and fraud?

The Earl of Caithness
My Lords, I am not perhaps the best person to explain that difference. However, an irregularity may be something that is done unintentionally whereas fraud may be considered a deliberate act.

Lord Bruce of Donington
My Lords, is the Minister aware that the United Kingdom has a good record of bringing to book those people or companies convicted of fraud against the Community? No blame can be attached to the United Kingdom in that regard. Is he further aware that we greatly appreciate the fact that on 16th March last the Council of Ministers requested an opinion—on its own initiative remarkably enough —from the Court of Auditors as regards the efficiency of the Community's financial system over the past few years? Will the Minister take steps to ensure that the report of the Court of Auditors in response to the council's request is published whether or not the Commission likes that?

The Earl of Caithness
My Lords, I take careful note of what the noble Lord said and I shall pass on his comments to my right honourable friend. The report which is the subject of the Question does not mention companies in Britain. We come out of the report well. But there is never room for complacency. We continue to consider all our systems. The report referred to company A in country A and company B in country B.