§ 3.25 p.m.
§ Lord Jay asked Her Majesty's Government:
§ Whether they are satisfied with the auditing of export refunds under the common agricultural policy of the European Community, or with the results so far achieved in combating massive fraud.
The Parliamentary Secretary, Ministry of Agriculture, Fisheries and Food (Earl Howe)
My Lords, the House will be pleased to know that the Council of Ministers addressed the problem of fraud during our recent presidency. It established a high level group to examine a number of issues, including the audit of export refund claims, where steps were agreed which should improve controls on multinational companies. The Government, while pleased that positive steps to advance the effort against fraud were agreed during our presidency, will continue to press hard for effective measures to tackle fraud.
§ Lord Jay
My Lords, can the Minister confirm or deny that a total of almost £5 billion sterling is being lost through such frauds at present? At a time when corruption is not altogether unknown in Italy and French agricultural policy is periodically determined by rioting farmers and fishermen, is it tolerable that the British taxpayer should have to contribute several hundred million pounds a year to funds which are disappearing down that sink?
My Lords, the noble Lord has raised some important points. It is almost axiomatic that one cannot quantify the amount of fraud within the Community. However, there are some encouraging signs. In particular, one of the recommendations of the high level group on fraud in respect of export refunds was that there should be better co-operation by member states and that a stronger lead should be taken by the Commission on dealing with fraud involving multinational companies, which is a particularly difficult area, and transactions across a number of countries.
Lord Bruce of Donington
My Lords, is the noble Earl aware that all the laudable efforts which are being made to investigate and control fraud in the European Community are likely to be frustrated because the Commission is far more concerned with the proper authorisation of expenditure than with ensuring that the money has been properly spent?
Will the noble Earl give the House an assurance that he will take into account in any future developments in this direction the reasons which lay behind the recent resignation of the British representative on the Court of Auditors, Mr. Carey? Will he indicate whether the Government have yet held consultations with Mr. Carey as to the reasons which lay behind his resignation from the Court of Auditors?
My Lords, I cannot comment on that resignation. However, the noble Lord raised an important point. The Government strongly support the comments in the 1991 European Court of Auditors' report about the need for the Commission itself to ensure that member states' accounting and control arrangements are adequate.
§ Lord Boyd-Carpenter
My Lords, can my noble friend quantify even approximately the cost of those frauds to the British taxpayer?
No, my Lords. I cannot do so, for the reasons which I gave to the noble Lord, Lord Jay. It is almost impossible to arrive at estimates of the extent of fraud within the Community.
§ Lord Stoddart of Swindon
My Lords, is the noble Earl aware that the common agricultural policy is just one big fraud which costs the British taxpayer—and indeed all European taxpayers—very dear indeed? Can he say to what extent senior politicians in Italy have been involved in the very real fraud which has taken place in the common agricultural policy and perhaps elsewhere within the funds of the EC?
My Lords, there has recently been a report of substantial attempted fraud in Italy involving durum wheat. The extent of that fraud is estimated at £23 million. Five of the perpetrators have been arrested. Three also have alleged associations with the Mafia. The intervention agency is investigating possible frauds in previous years. The Commission is carrying out discussions with the Italian authorities but it is too early to assess what action it will take.
§ Lord Aldington
My Lords, shall we not debate this important matter on Monday on a quite full report from your Lordships' sub-committee of the European Communities Committee? Would it not be a good idea to have a balanced view after the debate?
My Lords, my noble friend makes a good point. The Government welcome the opinion of your Lordships' sub-committee in its report of 15th January of this year. Although the report recognises the progress that has been made to date, it stresses the need for a great deal more to be done if fraud and irregularity are to be contained. The committee recognised that the problem has to be addressed in a systematic and patient way. That is the approach that the Government adopt.
§ Lord Gallacher
My Lords, do the Government still support a modification of the regulation on the monitoring of exports of agricultural products receiving refunds so that the current requirement of 5 per cent. checks by Customs officers would be replaced by a lesser rate of inspection said to be risk targeted? Is that alternative supported by other member states? Can we be assured that it is not influenced by a desire on financial grounds to restrict time spent by Customs on such important checks.
My Lords, those checks on export refund claims are important. Claims are subject to a minimum of 5 per cent. physical check under EC rules. The UK achieved a 7.4 per cent. checking level against 749 that target in 1992. Export refund claims also come within the ambit of the post-payment scrutiny regulation, under which the commercial transactions of traders are examined after the event. Perhaps I may write to the noble Lord on the other questions that he raised which are somewhat complex. However, I hope that I have covered the principal point.
§ Lord Stewartby
My Lords, will my noble friend assure us that it is the intent of the Government to see that the powers and the effectiveness of the European Court of Auditors are strengthened? Whatever backing may or may not be forthcoming from individual member states or from the Commission, the Court of Auditors over many years has not proved effective in following expenditure of European Community money in the way that we expect our own PAC and our Comptroller and Auditor-General to follow through expenditure in this country. It is an important reform which still has a long way to go.
My Lords, I agree with my noble friend. The European Court of Auditors' role under the Maastricht Treaty has been enhanced. It will now be required to provide a statement of assurance as to the reliability of the Community's accounts and the legality and regularity of the underlying transactions.