EC: Financial Management (Hansard, 18 January 1994)

§ The Parliamentary Under-Secretary of State, Department of Employment (Lord Henley)
My Lords, the Government have, and will continue to pursue, policies which seek to secure sound financial management of the Community's finances. To that end the Government have been instrumental in developing the Community's fight against fraud in ways which reflect the Select Committee's recommendations.

§ Lord Benson
My Lords, does the noble Lord agree that the financial administration of the Community is now in such a serious state that it would be appropriate for the Council of Ministers to recommend to the European Parliament that it should not discharge the 1992 budget?

§ Lord Henley
My Lords, I believe that there has been some improvement in the finances of the Community. I think it is an interesting suggestion that the noble Lord makes. I would not like to speculate on exactly how we will react to such a suggestion at the next meeting of the Council of Ministers, the next meeting of ECOFIN. I shall certainly pass on the suggestion that the noble Lord has made to my honourable and right honourable friends.

§ Lord Barnett
My Lords, I note the general actions that the Government have in mind or are taking. However, I am sure that the noble Lord will have seen the Court of Auditors' report dated 16th November 1993 which refers to more than two years of action supposedly being taken, with no subsequent improvement. Our own House of Lords Select Committee sub-committee, as long ago as nearly five years, produced a list of recommended remedies in paragraph 183 of its report. Will the noble Lord say, first, whether he agrees with the remedies and, secondly, what specific action is being taken to implement them?

§ Lord Henley
My Lords, the Government have made quite clear that they generally support the recommendations of the Select Committee. But I think that all noble Lords ought to recognise, as I should be the first to do, that fraud will continue to be a major problem. But as the Select Committee made quite clear, any anti-fraud policy has to be a long-term policy in terms of requiring constant efforts. All member states have to take an active part in that.
What we have seen is an increase in the interest that all other member states take in their role in preventing, detecting and pursuing instances of fraud. Her Majesty's Government will continue to apply appropriate pressure, but in the end it has to be a question of political will by all member states. Her Majesty's Government, I believe, are in the lead on this and we will continue to apply appropriate pressure on other member states.

§ Lord Boardman
My Lords, can my noble friend give some indication as to when the measures which he has in mind are likely to show some effect in curbing the mass of abuses to which the Court of Auditors referred? When shall we start seeing some benefits?

§ Lord Henley
My Lords, without in any way wishing to sound complacent, I believe that we are already seeing some improvement. What I am saying is that these matters are long-term and require constant supervision and constant vigilance not only by this country, not only by the Commission, but by all member states. We have seen a change in the political will in all other member countries and the commitments made, for example, at the Copenhagen summit. We hope that in time that will lead to improvements.

Lord Bruce of Donington
My Lords, in the course of his reply to the noble Lord, Lord Benson, the Minister said that the Government were considering what attitude to take in determining whether or not they should recommend to the European Parliament that the Commission budget be discharged. Will the noble Lord reconsider that? It is quite monstrous. Surely he will agree that, on reading through the report, there should be no question about the attitude which the British Government should take. Will the noble Lord give the House the assurance that when the matter comes to be considered, either by COREPER or by the Council itself, the British Government will insist that the recommendation be that the Commission does not receive a discharge in the matter?

§ Lord Henley
My Lords, what I said, if the noble Lord listened to me, was that I would pass on what was a very interesting suggestion to my right honourable and honourable friends. It is certainly something which they will have to consider before the next meeting of the Council of Ministers.

§ Lord Harmar-Nicholls
My Lords, is not my noble friend convinced by now that all the circumstances surrounding the matter are so extreme and so well known that the advice given by the noble Lord, Lord Benson, is the only practical step to take? Will the 453 Government use the powers they possess to ensure that such advice is given to the European Parliament so that it can be put into effect?

§ Lord Henley
My Lords, all I can say is that I note what my noble friend has had to say. I have given the assurance that I shall pass on to my right honourable and honourable friends the views that have been expressed. I am also sure that the European Parliament will note what my noble friend and other noble Lords in this House have had to say. It will be a matter for the European Parliament then to consider what the Council of Ministers recommends.

§ Baroness Robson of Kiddington
My Lords, I thank the noble Lord for his replies to the previous questions. However, do the Government agree with the views expressed in paragraph 205 of the Select Committee's 1989 report that enormous sums are being lost due to fraud and irregularity in the Community and that those losses are borne by taxpayers and honest traders in Europe? Do the Government agree that it strikes at the roots of democratic society? It is a public scandal and, five years after that report, government action is long overdue.

§ Lord Henley
My Lords, the Government have taken a great deal of action. We have seen dramatic changes in attitudes. What I am trying to say is that I do not think there is room for complacency. We are grateful for the work of the Select Committee and its sub-committee and we shall continue to build on their ideas. The fight against fraud will obviously continue in that way. But there are no overnight solutions for dealing with the very extensive fraud that has occurred in some of the European institutions.

§ Lord Campbell of Alloway
My Lords, may I ask my noble friend why he says it is a matter for the European Parliament? Is it not surely a matter for the Council of Ministers and also primarily, so far as we are concerned, for Her Majesty's Government to take the initiative in the affair?

§ Lord Henley
My Lords, first, Her Majesty's Government have taken the initiative. Secondly, it is a matter for Her Majesty's Government, as one member of the Council of Ministers, to consider these matters. It is then a matter for the Council of Ministers to recommend to the European Parliament what action it should take. It is for the European Parliament then to discharge or refuse to discharge the 1992 budget.

§ Lord Eatwell
My Lords, can the noble Lord elaborate on the actions that Her Majesty's Government have taken? Is he aware that paragraph 62 of the Select Committee report states that, it is essential that the Commission should have all the powers necessary to carry out its well accepted responsibilities for ensuring sound financial management"? Can the Minister tell us what steps have been taken to provide the Community with appropriate greater powers in the UK since that report was published?

§ Lord Henley
My Lords, since that report was published, we have seen the Maastricht Act and further 454 powers being granted to the European Commission. For example, Article 206, as amended, extends the European Commission's duties and powers in this field. In terms of what actual concrete things have happened and what changes there have been, perhaps I may give two examples. First, the changes to the Structural Fund expenditure. There will not now be expenditure in this field without prior appraisal of projects, as happened in the past. Secondly, I think the reforms to the CAP, with the integrated control and administration system which is designed to help pick out fraud, are again concrete examples of the progress that has been made both by the Commission and on the initiative of Her Majesty's Government.

§ The Earl of Lauderdale
My Lords, will my noble friend say whether the matter will be decided in the Council of Ministers by the unanimity rule or by qualified majority voting?

§ Lord Henley
My Lords, I believe that I am right in saying that it will be a matter for the unanimity of the Council of Ministers, in terms of the decision it reaches, as to what it recommends to the European Parliament. It is then a matter for the European Parliament to make its decision as to whether or not it discharges the budget.

§ Lord Stoddart of Swindon
My Lords, is the noble Lord aware that his replies so far—to some of us anyway—sound very complacent indeed?

Noble Lords
No!

§ Lord Stoddart of Swindon
My Lords, I said "to some of us", not "to all of us". Is it not a fact, and can the noble Lord confirm, that we are talking about huge sums of money—some £2.5 billion—which makes the Westminster shenanigans pale into petty insignificance? In the light of the huge sums involved, is it not incumbent upon Her Majesty's Government to insist that immediate action is taken to reduce and, indeed, eliminate such fraud, which, quite frankly, in this country would be met with prosecution, trials and, we hope, gaoling?

§ Lord Henley
My Lords, I totally reject the allegation that we have been complacent. I have been trying to make it quite clear that we are in no way complacent and that we are at the forefront of the fight against fraud within the Community. We also hope to persuade noble Lords—but I dare say that we shall never persuade the noble Lord opposite—that the fraud damages the reputation of the Community itself. Those of us who believe in the Community, believe that it is therefore in the interests of all member states to help eliminate fraud so as to prevent that damage to the reputation of the Community.

§ Lord Harmar-Nicholls
My Lords, is my noble friend aware that when he quotes the Maastricht Treaty as being a new means of dealing with this problem, there is no need for the Maastricht Treaty to be brought in at all, since in 1981 the EC refused to discharge a budget for reasons which were minor compared with the problems expressed in the report?

§ Lord Henley
My Lords, I do not think that my noble friend and I will agree over the Maastricht Treaty. But I believe that all noble Lords will agree that the treaty did extend the powers of the Community in terms of its ability to fight and to deal with fraud of this sort.