HL Deb 10 January 1995 vol 560 cc112-52

4.46 p.m.

The Parliamentary Under-Secretary of State, Ministry of Defence (Lord Henley)

My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.

Moved, That the House do now resolve itself into Committee.—(Lord Henley.)

On Question, Motion agreed to.

House in Committee accordingly.


Clause 1 [Extended meaning of "the Treaties" and "the Community Treaties"]:

Lord Bruce of Donington

moved Amendment No. 1: Page 1, line 13, after ("1994") insert ("(as set out in the Schedule to this Act)"). The noble Lord said: In moving Amendment No. 1, I shall speak also to Amendment No. 7. They have as their purpose the incorporation of the Council decision of 31st October 1994 as a schedule to the Bill. Today we spent longer than expected on the extremely interesting Motion relating to Standing Orders. I and colleagues in other parts of the Committee have tabled amendments to the Bill. Without in any way binding them, I must point out that it will be necessary for me to curtail my remarks with the object of concluding the Committee procedure at a reasonable hour, preferably before dinner. Obviously, I cannot bind my colleagues, but those are my sentiments on the matter.

During Second Reading much was made of the authority of the Prime Minister to give an undertaking on behalf of Parliament—whether it was on behalf of Parliament or his own Government—to the provisions relating to own resources within the Community and within a new financial perspective.

It was said that the House and, indeed, Parliament should automatically agree to the new ceilings which are set out on the basis that the Prime Minister had given an undertaking to carry them into effect. For my part, and perhaps for the part of some of my colleagues, that authority did not exist on the basis of the Council of Ministers' deliberations in Edinburgh.

Therefore, I thought it necessary to clarify the matter beyond all reasonable doubt. I have before me the detailed proceedings of the European Council in Edinburgh and the conclusions of the presidency. Connoisseurs of the diaries of Mr. Alan Clark, which have been referred to on a number of occasions in relation to the deliberations of the Council, will confirm that sometimes those deliberations take place under rather unpromising circumstances. It will be recalled that Mr. Clark, as a matter of his own personal memory, commented on the sobriety or otherwise of members of the Council when taking part in its proceedings. Indeed, more recently, the right honourable gentleman the Member for Kingston-upon-Thames also ventured to suggest that very important decisions were taken over port and cigars in the evening without the benefit of papers. We all know that those presidential conclusions are, in the main, drafted before the conference takes place.

Bearing that in mind, it would seem that the presidency of 22nd December 1992 in Edinburgh reached two conclusions. The first conclusion was included in Part C at paragraph Ai, which refers to the own resources ceiling. It ventures to put forward the actual figures. It states that: The annual ceiling on own resources for appropriations for payments will be as follows and shall under no circumstances be exceeded". That assent by the British presidency to the proposition which is implied by the presence of that paragraph in the president's conclusions would seem to be conclusive.

But yet, it is followed almost on the next page, by another decision which is essentially in conflict with the one already agreed. It states: The European Council asks the Commission to prepare a new Own Resources Decision…", although one had already been agreed to earlier on in the communiqué, for the Council to approve and recommend to Member States for adoption by 1995 in accordance with the procedure set out in Article 201 of the Treaty. The ceilings applicable in 1999 will continue to apply until such time as the new Own Resources Decision is amended". Therefore, there is a half justification for the decision that has been taken by the Government.

However, one matter is certain on a reading of the documents: it was open to the Government, prior to the decision which was reached as a result of that conclusion, to seek to amend it before the Council decision of 31st October. Noble Lords will observe that it is the Council's decision of 31st October which I wish to have incorporated as a schedule to the Bill.

I am told that it is not proper for the decision to be incorporated as a schedule to the Bill because a schedule to a Bill can be amended and, therefore, the schedule should not contain that decision. All I can say is that I was advised by the Table that the amendment was quite in order. Who am I to suggest that the Table was wrong to advise that I could table the decision in the form of a schedule and add it to the Bill?

Of course, there is another purpose. If one goes back to the original Bill, one finds that it is very short. Its principal provision in Clause 1 is to incorporate: the decisions of the Council of 7th May 1985, 24th June 1988, and 31st October 1994, on the Communities' system of own resources". At this stage, I imagined that on seeing the Bill and being immediately seized of the necessity to grasp its implications thoroughly before any observations were made on it in the Chamber, there would have been a rush by noble Lords on the Printed Paper Office to provide copies of the decision which Members were invited to debate on Second Reading. I am pleased to say that the House was well attended on Second Reading. Therefore, I should have thought that the Printed Paper Office would have been overwhelmed by demands for copies of the decision. I doubt whether there were sufficient copies of the Council's decision, as a Community document, on the premises at the time. Therefore, by tabling the amendment my intention is that the attention of Members of the Committee should be drawn to the contents of the decision. I am quite sure that most Members of the Committee here today have a copy of those amendments. Therefore, by tabling this amendment, I have at least drawn the attention of Members of the Committee to what the Council's decision really comprises.

I see no reason why it should not be included as a schedule. There are legal, accounting and management considerations. Members of the Committee will have noted that Amendment No. 3, which we shall debate, states: Provided that Her Majesty's Government shall lay before both Houses of Parliament an annual report on the operation of Article 2(1) (c) of the latter decision". It would have been impossible for the Committee to have considered in detail the various matters relating to Article 2(1) (c), which has now been reproduced as Amendment No. 7, unless it was read in the context of the decision as a whole.

Therefore, I have quite properly tabled the amendment and when matters for elucidation under Amendment No. 3 come to be discussed, Members of the Committee will at least have the decision before them. Indeed, later amendments will also refer to the decision. Without having the decision in front of the Committee, it would be difficult to judge such amendments within the context of the decision.

That is why—and I am keeping one eye on the Clock, as well as trying to safeguard what remains of my voice—I urge the Government to accept the amendment. What conceivable harm is there in incorporating as a schedule to a government Bill a decision, in detail, which has already been agreed by the Government? Why should they be such blushing brides in the face of the results of their own detailed negotiations and ingenuity? Is there something in a decision reached on 31st October by virtue of which they feel we might find out something that they would rather we did not know? Why should it not be incorporated in the Bill?

There are other matters involved; as, indeed, will emerge from discussion on later amendments with which we are due to deal, albeit shortly, this afternoon. There are questions relating to VAT and questions relating to estimates or figures in respect of the gross national product or the gross national income of each country which are set out in some detail. Such matters are likely to be in dispute for some time and need to be discussed. On the way forward to the intergovernmental conference, it must not be imagined that the agenda which Parliament will discuss will be set for us in advance or that we shall be dictated to regarding what we shall or shall not discuss in the lead-up to the conference. Therefore, it is vital that the decisions arrived at are readily available, not only to Members of this Chamber but also to members of the legal profession in the UK. Such decisions should also be available to the European Court of Justice and in Europe generally.

Is it expected that those people will ask their respective sources of published data for copies of an opinion or explanatory notes by their own governments or, for that matter, explanatory notes by our Government, when there is a perfectly easy way of dealing with it by simply referring to the legislation itself which would be in the office of every lawyer in the country and in the offices of all the European lawyers? It would be a much greater advantage for them in terms of time and—dare I mention it?—in terms of cost to have the text readily available in the legal document that they are examining.

Therefore, I urge the Government, with all the powers that my croaky voice will permit, to accept the amendment. They will do themselves justice and they will greatly facilitate the workings of this Chamber and, possibly, of the courts. I beg to move.

Lord Boyd-Carpenter

I should be most grateful if my noble friend the Minister would inform the Committee as to the position on this and subsequent amendments which are, after all, amendments to what has been certified by Madam Speaker as a money Bill. As I understand it—and I am subject of course to correction in such matters—if this Chamber carries this or any other amendment it would have absolutely no effect because the Bill would proceed with Royal Assent in a few days' time in its present form; in other words, in the form that it left the other place.

Before Members of the Committee spend a great deal of time and care—as, indeed, the noble Lord, Lord Bruce of Donington, has obviously done—on detailed discussion of what would be good to put in the Bill, I believe that we should know whether that work will serve any useful purpose. In the Committee stage, or during any other stage of the Bill, we can express opinions which we hope will command attention outside—for example, in the media—and influence public opinion in the long term. Let us hope that that proves to be so. However, actually to carry an amendment to the Bill seems not only to be a waste of time but is also, if I may put it this way, asking this Chamber to make a fool of itself.

Lord Henley

It may be useful to my noble friend and to Members of the Committee if I repeat some of what I said on the subject yesterday when I confirmed, as my noble friend Lord Boyd-Carpenter put it, that Madam Speaker in another place had certified the legislation as being a money Bill. As my noble friend quite rightly said, it means that after Thursday of this week, the Bill may be presented for Royal Assent under the terms of the Parliament Act with or without agreement of this Chamber. There is no need for the Bill to be considered further in another place, whether or not this place amends it.

As I also stressed yesterday, because considerable interest had been expressed in the Bill, we felt it right to have a full debate on Second Reading. It was agreed by the usual channels—most unusually for a money Bill—that there would be a separate Committee stage which would allow noble Lords further to air their views on particular subjects. At the time, I said that amendments had already been tabled.

During yesterday's debate, I said that I felt there was no practical purpose to be served by amending the Bill and further prolonging the proceedings. I believe I said that I therefore trusted that noble Lords would not seek further to obstruct the passage of the Bill. I hope that we can have further useful discussion on those points this afternoon. However, for the very reasons given by my noble friend, I believe that it would be very ill-advised for this Chamber to seek to amend the Bill.

I turn now to the noble Lord's amendment. I see that my noble friend wishes to intervene. I give way.

The Earl of Onslow

I am much obliged. Am I right in saying that if, peradventure, the amendment of the noble Lord, Lord Bruce of Donington, which seems to be a very sensible amendment, were to be carried, the other place would not even bother to discuss it and would pay no attention to it at all? If that is the case, then however sensible we may be, the idiocies in other places—I use the word in the plural rather than the singular—cannot be coped with.

However, if the other place would actually discuss the matter again there is some point in continuing. But if the other place will not pay a blind bit of notice to what we say, however sensible, intelligent, wise or omniscient we may be, it seems slightly pointless for us even to attempt to be omniscient.

Lord Richard

I am not sure whether I am interrupting the Minister or saying something on my own account. However, whichever it is, I should like to make it perfectly clear. I should like the Minister to consider the following in his reply. As I understand the position, once the legislation is certified as a money Bill, then the Act applies and, so far as we are concerned, any amendment that we pass would have absolutely no effect whatever. Indeed, not only would it have no effect but also the other place would not need to discuss it.

It is not a question of saying to the other place, "Look, reconsider it: we think you ought to think again". None of that applies. In effect, we are indulging ourselves by discussing amendments and, should we pass them, the Bill would be changed so far as concerns this Chamber; but it would not have a scrap of effect. I am bound to say that I very much agree with the remarks made by the noble Lord, Lord Boyd-Carpenter. If we continue, I believe that we shall be making fools of ourselves.

Perhaps I may just say one other thing. I agreed that there should be two days' discussion on this Bill. Various representations were made to me, and on behalf of the Labour Party I thought it was right that we should have a full discussion on it. We therefore had a full discussion on Second Reading yesterday. I am bound to say that when I agreed to two days I did not think we were going to go through this charade of having a Committee stage which has no effect whatsoever. I had thought that what we would do was to have the Second Reading yesterday and today we would have had a Third Reading debate, in which no doubt those who spoke yesterday could have repeated on Third Reading what they had said on Second Reading. Perhaps indeed some extra people would have come in in order to support what they did not say yesterday but what they would have said had they been there yesterday. At the end of the day that would have been the Third Reading of the Bill and that would have been the end of it.

It still is my view that if the Chamber wishes to air opinions on this piece of legislation, and if it wishes to express its views—individually Members of the Committee have views to express—the way to do it is to have a Third Reading debate, and the way not to do it is to consider in detail amendments as if this were a Bill that we could amend with any kind of sense at all and send it back to the other place to reconsider.

Lord Henley

I do not—

Lord Hamilton of Dalzell

I feel that with this money Bill issue we put our finger on an important point as regards our relationship with Europe. The fact of the matter is that here we are unable to speak because this is a money Bill but it affects the constitutional position. Money is the key to the whole thing. The Committee might like to consider what my noble friend Lord Cockfield said in the Second Reading debate: it is a great pity that the Community did not proceed to a successful conclusion with economic integration before it embarked upon political union".—[Official Report, 9/1/95; col. 25.] He then explained how the economic integration would automatically lead on to the political issue he mentioned. I think the Committee ought to have a view on the political side of this matter. To be gagged, as we always are in the case of a money Bill, greatly inhibits us. I think the people—

5.15 p.m.

Lord Henley

With all due respect, if I could interrupt my noble friend, he is in no way being gagged at all and nor is this Chamber being gagged. My noble friend had every opportunity yesterday to make a speech at Second Reading; nor am I suggesting that he should be gagged at Committee stage or Third Reading. If I can depress the noble Lord the Leader of the Opposition, he has an opportunity for further debate at Third Reading and Bill do now pass, all stages of which we shall be taking today. In no way are we trying to gag my noble friend. He did have his opportunity to speak at Second Reading yesterday.

Lord Hamilton of Dalzell

I apologise to my noble friend; I accept his point on that. However, we are inhibited in that we cannot pass an amendment.

Lord Stoddart of Swindon

It seems that we have now got away from interventions and are back discussing the matter in Committee, and we shall await what the Minister has to say when he gets to his feet a second time. I did not intend to intervene on this until my noble friend did so. We have to be perfectly clear that it is the right of this Chamber to discuss—indeed, I believe it also has a duty to do so—these matters. It is perfectly possible for the Committee to discuss, and indeed to pass, amendments if it so wishes. There is absolutely nothing in the rules of this Chamber, nor in the Parliament Act, which precludes this Chamber from discussing and agreeing to amendments. What happens to them afterwards, of course, is a different matter. The House of Commons need not even consider them, that is true, but of course the House of Lords has the power to consider them as well. That is why it can be valuable for this House to be entitled to—and it often does have—a Committee stage. It may well be that some sensible amendment is moved here and passed here and the House of Commons suddenly says, "By God, that is not a bad amendment after all. We shall take it on board and we shall pass it".

The idea that the House of Lords Committee stage means absolutely nothing at all is completely erroneous. I repeat that we are entitled to have a Committee stage on a money Bill. The fact that we have not had them is neither here nor there. This Chamber is entitled to have such a stage. On this occasion we have had it. The House of Lords is perfectly entitled this afternoon to discuss amendments and, if necessary, to pass the amendments, and after that the House of Commons is perfectly entitled to look at those amendments and, if necessary, take them on board, pass them themselves and incorporate them in this Bill. That is the position. I am glad that the House of Lords has had this debate. I am also glad that it is having this debate this afternoon on a Committee stage which enables us to probe matters relating to the Bill and to probe them in the same way as we would probe them on any other Bill before us.

5.15 p.m.

The Earl of Onslow

I hope I may interrupt yet again. I feel quite strongly on this. I am emotionally on the side of the noble Lords, Lord Bruce and Lord Stoddart, on this matter. I find the Bill personally offensive. The Government have done silly things. They have provided money which was unnecessary. But if we are going to argue that we have to act constitutionally and rightly and we want Europe to behave in the same way as us we should not, I think, as a Chamber behave in what could be regarded as a silly fashion. We are in danger of being silly over this. I do not quite know whether what I am suggesting is in order, but I wish to suggest that we adjourn the Committee stage now and we discuss the amendments as a whole, without attempting to do any voting or anything like that, in a Third Reading debate. I think that would be a more civilised and more sensible way to proceed and one that is more in tune with the spirit of the constitution. I am an old-fashioned high Tory and I like the spirits of constitutions rather than their nitty or their gritty.

Lord Monson

Before the noble Earl sits down, he may be unaware that this Committee stage was agreed through the usual channels several weeks ago.

Lord Henley

I am not sure I can take the Committee much further on this point. As I said—and as the noble Lord, Lord Monson, has just repeated—it has been agreed through the usual channels that, most unusually for a money Bill, we would have this opportunity for further discussion and we would use the opportunity of the Committee stage to do it. My advice to the Committee would be to reject each and every amendment as it comes along because I think no useful purpose is served by passing amendments in this Chamber. But I think that it is possible—as many noble Lords have said, this has been agreed by the usual channels and by others—that we can have a discussion on these matters. It might be to the benefit of the noble Lords, Lord Bruce and Lord Stoddart, if they were able to raise their points and I, on behalf of the Government, could then give a considered response. But I hope that after they have listened to those considered responses, they will not feel it necessary to seek the opinion of the Committee on each or any of their amendments.

If I may, I would now, hoping that I shall not be interrupted, seek to address a little more briefly than the noble Lord did his own amendment, Amendment No. 1, which he moved and in speaking to it spoke also to Amendment No. 7. I have no intention whatsoever on this occasion of arguing that it is not a proper amendment. I would be quite happy to do that, whatever the advice of the Clerks, if I felt it was not a proper amendment. It is perfectly in order. But I have to say in passing that, because of the way he has transcripted it from, I presume, Cmnd. 2702, without, I think, taking into account the correction slip, the amendment itself would be defective. Should we have passed the amendment, I believe we would then have to come back at a further Report stage to amend his amendment.

I also wanted to assure the noble Lord that in no way was it necessary for him to put down the amendment merely to ensure that sufficient copies would be available. As he made that point, I asked one of my colleagues on the Front Bench to run, walk or whatever to the Printed Paper Office. My noble friend Lady Trumpington did exactly that and took advice from the Printed Paper Office. I received the assurance that there are sufficient copies there for the noble Lord and others who might want to have a copy of it.

I do not believe that there is a need to add the own resources decision as a schedule to the Bill. It was certainly not done in 1985 or in 1988 and there has never been any question of the status of those own resources decisions. Indeed, none of the legislation listed in Schedule 1(2) to the European Communities Act appears as a schedule to that Act.

The reference in the Bill is perfectly clear. The inclusion of the Own Resources Decision as a schedule would add nothing. The Own Resources Decision has been published as a Command Paper and is readily available. Such an addition to the Bill would quite simply further lengthen a piece of legislation unnecessarily. The noble Lord will be aware of the calls from many noble Lords on that subject on many occasions, and I see the noble and learned Lord, Lord Simon of Glaisdale, in his place.

Perhaps I may also deal with one other point which the noble Lord made. He referred to Part C of the future financing of the Community (the Delors II package), which I have in front of me. Page 5 refers to the fact that under the new Own Resources Decision the European Council asked the Commission to prepare a new Own Resources Decision incorporating those changes.

I believe that the noble Lord suspected that some funny business was going on. I can assure the noble Lord that there is nothing of the sort. The Edinburgh Council simply reached a political agreement on details such as the own resources ceiling. It simply then asked the Commission to prepare the new Own Resources Decision; namely, the legal text. That is what appears in the Command Paper, Cmnd. 2702, and was also published in the Official Journal of the European Union. That legal text incorporates that new ceiling. There is nothing sinister in the mention in subparagraph 5 of the new Own Resources Decision. I hope that the noble Lord will accept that assurance and will not feel it necessary to press the amendment on this occasion.

Lord Bruce of Donington

I am most grateful to the noble Lord for his reply and to all those who have taken part in this short debate. I believe it can be agreed that there are occasions when it is not possible at Second Reading to go into some of the details of various proposals which in the normal way are more appropriate to Committee stage. That is the purpose of Committee stages: to focus on matters of detail.

The noble Lord, Lord Boyd-Carpenter, may say that, in the light of our legal position vis-à-vis the Parliament Act and so on, it is largely irrelevant for us to discuss the matter here. However, I am quite sure that on reflection the noble Lord will agree that these are matters which it is proper for this Chamber to discuss in detail notwithstanding the fact that the Government in another place may pay no attention to them. As a testimonial for that position I draw the Government's attention—and that of the noble Lord, Lord Boyd-Carpenter—to the attendance in your Lordships' Chamber this afternoon on matters on which it is presumed to have little interest. I believe that the answer lies in the seats behind the noble Lord.

Lord Boyd-Carpenter

I am grateful to the noble Lord for allowing me to intervene. The noble Lord should be fair. I said that it was very good to discuss these issues in public and hope that they will be taken up by the media and public opinion, but that it would be pointless and foolish to divide the Committee when one knows that the result of the Division will be totally ineffective.

Lord Bruce of Donington

I am most grateful to the noble Lord, and ask the Committee to forgive the state of my voice at present.

Having accomplished my original purpose, I respectfully ask the Committee for leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Monson

moved Amendment No. 2: Page 1, line 13, leave out ("Communities"') and insert ("Union's"). The noble Lord said: I rise to move the amendment with more than my usual trepidation, partly because I am standing in for the noble Lord, Lord Pearson of Rannoch, at fairly short notice and partly because of the way in which the noble Lord, Lord Cockfield, yesterday (at col. 24 of Hansard) described those of us who oppose the Bill or have doubts or reservations about it. The noble Lord described us as disaffected elements, very much in the same way as a high-ranking officer in the paramilitary forces of the Russian Ministry of the Interior would describe Chechen freedom fighters. One can only hope that we United Kingdom freedom fighters do not face a similar fate.

The reason for tabling the amendment is not that we actually want the budget extended to cover European Union expenditure in addition to the narrower European Community expenditure. Far from it. However, whether we want it or not, it seems that it is already a fait accompli.

The European Parliament has already asked its president to rename the budget of the European Communities the "budget of the European Union". Although no reason was given it seems clear that that is to reflect the fact that the common foreign and security policy, together with the justice and home affairs expenditure, is included in the budget for the first time.

The noble Lord, Lord Tebbit, (who I am sorry cannot be here today) was told by the Government in our Maastricht debates that Titles V and VI of European Union expenditure would be allocated from the Communities' budget but would be limited to administrative costs and possibly—but only if agreed unanimously in the Council—also to operational costs. The draft budget for 1995 shows that 901 million ecu were allocated to external aspects of certain Community policies and "other co-operation measures". Can the noble Lord, Lord Henley, tell us exactly what those are? Is it, as promised by the Government at the time of our Maastricht debates, all being spent purely on administration or is the Commission using Community funds to draw a Union competence into its clutches?

Will the Government give an assurance that the distinction between the Community and the Union will not become blurred, as apparently the European Parliament wants to happen so that the Community and the Union ultimately become indistinguishable? We await the answer with interest.

Incidentally, I believe that this covers the point raised by the noble Lord, Lord Richard. In any Third Reading debate we could not expect detailed, semi-technical replies from the Government, whatever the matter being discussed. The noble Lord, Lord Bruce of Donington, also made that point very well. I beg to move.

Lord Henley

The Council decision is entitled a decision on: the system of the European Communities' own resources". It is not a decision on the own resources of the Union. I am sure that the noble Lord will agree that a description used in an Act of Parliament to refer to another piece of legislation should correspond to the title of that legislation.

There is also a good reason for the Council's decision being referred to as a decision on the system of the European Communities' own resources, for it is not based on any article of the Treaty on European Union (namely Maastricht). Instead it is based entirely on articles of the various founding treaties—the Treaty of Rome and the treaties setting up the European Atomic Energy Community, the Coal and Steel Community, and so on.

The noble Lord went on to say that the European Parliament has asked that the European Communities' budget should be renamed the budget of the European Union. That is true, although the Council does not accept the Parliament's renaming of the budget because it is the budget of the European Communities. There is no question but that the own resources system legally relates simply to the Community, based, as I said, on the articles of the various founding treaties, and not to the Union itself.

I hope that with that explanation the noble Lord will feel able to withdraw his amendment.

Lord Monson

I thank the noble Lord for his reply. I am pleased to hear that the Council has rejected the European Parliament's request. We shall have to continue to be very vigilant in the matter. However, I do not believe that we can go further today. I beg leave to withdraw the amendment. Amendment, by leave, withdrawn.

5.30 p.m.

Lord Stoddart of Swindon

moved Amendment No. 3: Page 1, line 14, at end insert: ("Provided that Her Majesty's Government shall lay before both Houses of Parliament an annual report on the operation of Article 2(1) (c) of the latter decision;"). The noble Lord said: As noble Lords will know, Article 2(1)(c) refers to VAT and to the determination of a uniform rate. I shall not read out the article. Article 10 refers to the arrangements for a possible introduction of a fixed uniform rate applicable to the VAT base.

I hope that I have understood the meaning of uniform rate. I take it to mean—I stand to be corrected—that we shall have a uniform rate for VAT across the Community, and eventually a standard base also. If I am wrong no doubt I shall be corrected. However, as I say, Article 2(1) (c) when taken in conjunction with Article 10 could be a ticking time bomb which, if allowed to explode, will have serious implications for parliamentary control of taxation and for the people of this country. They could find themselves paying taxes not strictly levied by their elected representatives. That seems to me to be taxation without representation. I hope that I read the article correctly, and that I shall be corrected if I do not. That means taxation without representation.

As I understand it, we already have the elimination of zero-rated VAT on such items as books, periodicals and newspapers, children's clothes, new buildings and transport fares hanging over our heads. The pass has already been sold on domestic fuel, which now has VAT levied at 8 per cent. No doubt in due course further attempts will be made to levy the full 17.5 per cent. tax on domestic fuel. We are already under threat of a big extension of VAT on essential items. The Commission will not be satisfied until we have VAT on everything, including all foodstuffs.

The implications for the economy alone, especially for the retail prices index with the inflationary pressures, of allowing anybody other than the properly elected Parliament and Government so to decide, are horrific. Yet that is what is being contemplated by the EC with the apparent full consent and approval of the British Chancellor and the Cabinet. No doubt that squares well with the Chancellor's fanatical support for a single currency which he knows perfectly well implies a single Government complete with taxing powers. However, it does not square with democratic government and parliamentary control. Indeed, if control was lost over the range of Vat rated items and the rate of VAT, that would be the final betrayal of Parliament and of the right of the people to proper representation before taxation, including the right to boot out those who would impose taxation which the people believe to be oppressive or unnecessary.

As I understand it, what the Chancellor has ostensibly agreed to will not be possible under the regime foreshadowed by the Council, by our own Government and by the decision in October 1996. I have no doubt that we shall be told that the Government have the veto over all matters of taxation; that qualified majority voting will not apply in the case of taxation. But we have no guarantee that the Government will not cave in to pressure as they so often do—and most recently did in allowing the Spanish fishermen further access to fishing grounds to the disadvantage of British fishermen, further endangering fish stocks in British waters.

Having given in, the issue will first be represented as a great victory—game, set and match, so to speak—and a triumph for our negotiations. Then when the truth is revealed—that it is a bad deal for Britain and the powers of Parliament—and Parliament shows signs of rebellion, it will be told that the Government made an international agreement which Parliament must honour. That is what the Government did over the Bill that we now discuss. The matter will then be made one of confidence, with dissolution threatened if Parliament dares to rebel. We know the end of the story because it is all written in the House of Commons Hansard.

We must ensure that Parliament, and especially the House of Commons, are never again faced with the blackmail that they encountered over the Bill. That is why the amendment should be passed in order to help Parliament to keep proper control over what the Government do, especially over taxation. I beg to move.

The Earl of Onslow

This pass has already been sold. When there was a row over whether fuel should be taxed, it was noticeable that the Labour Party—if peradventure by the most unlikely of coincidences it should ever become the Government—studiously avoided giving an undertaking that it would remove VAT from fuel. That particular pass has been sold. Parliament has already allowed its taxation rights to be inhibited. The issue obviously slipped through; perhaps people did not understand it, but it has happened. I do not know how we can claw that matter back. Somehow we must claw it back because the rights of taxation are at the root and core of all government.

If one takes away the right to tax, one takes away the power to govern. That is how the whole of English parliamentary tradition arose. Parliament said to the king, "You have run short of money, and if you want some more you will have to come and ask us for it". That is how the core of English parliamentary tradition and government arose. That is why, that directive having been agreed, we cannot now lower VAT below 15 per cent. If any amount goes on, that can only be agreed unanimously. But equally any amount can only be taken off unanimously. The idea that the Greeks may say, "No, you can take some VAT off children's shoes which has been imposed", fills me with total disbelief.

Anything which can be done to restrict the rights of the European Commission to impose any tax on British subjects must be encouraged above anything else.

Lord Cockfield

I am sure that the noble Lord, Lord Stoddart of Swindon, will be greatly relieved, if somewhat disappointed, that Article 2(1) (c) does not bear the meaning that he seeks to put on it. It could not possibly bear the meaning that he seeks to put on it; it has never borne the meaning that he seeks to put on it; and it will never bear the meaning that he seeks to put on it. It is merely an item in a calculation that has to be made to ascertain the contributions given by individual member states, all of which have slight differences or greater ones in their VAT coverage.

If you tax 12 or 15 people by means of a calculation based upon any concept you like, you must have a uniform concept on which to do it. Therefore, what is created is what is called a Community assiette. I am sorry to use foreign words in replying to the noble Lord, Lord Stoddart. You set up a notional system which would provide the same amount or the same basis of revenue which you then use to calculate the contributions. That has nothing whatever to do with the system that a member uses in its own member state. In fact, it is a recognition that systems differ from one member state to another.

There is one point on which I wish to support the noble Lord, Lord Stoddart. It is a great pity that we are not given more information about the financial relations between our own country and the European Union. In an earlier debate I suggested that the budget Red Book ought to contain a comparatively modest section—possibly of two or three pages and it already has many pages—which sets out clearly the financial relationships. That is not to produce an argument but merely to ensure that at least we have a solid basis of factual information which can underpin discussion of many of the issues.

Lord Bruce of Donington

I support the noble Lord, Lord Stoddart, on his amendment. I am quite sure that the Committee will be grateful for the usual authoritative utterances delivered with his customary modesty on what is really the state of affairs. He makes it quite clear that: the application of a uniform rate valid for all Member States to the VAT assessment base which is determined in a uniform manner for Member States according to Community rules remains for most Members of the Committee, and, I suspect, for Members of another place who bother to read the regulations, a matter of some mystery. Therefore, I hope that when the Minister replies to the debate, he will reveal to the Committee the nature of the calculations involved in the determination of a uniform rate. The noble Lord, Lord Cockfield, suggested that perhaps in some future budget—if it should ever be considered by your Lordships' House—there ought to be three pages explaining how the calculations are arrived at. However, for this afternoon's purposes we shall be grateful for a brief summary from the noble Lord of how the uniform rate is determined. I am quite sure that the Committee will agree that the calculations are a matter which we ought to consider in Committee. They are matters of detail but since they affect the amount of money payable from the Consolidated Fund into European funds, they ought to be carefully considered and should not remain shrouded in mystery.

If Members of the Committee examine Article 2 1(c) a little further, they will find the words, However, the assessment base to be taken into account"— and so far we do not know how that is calculated— for the purposes of this Decision shall, from 1995, not exceed 50% of GNP in the case of Member States whose per capita GNP in 1991 was less than 90% of the Community average; for the other Member States the assessment base to be taken into account shall not exceed"— and the article lists them: 54 per cent. of their GNP in 1995, 53 per cent. in 1996, 52 per cent. in 1997, 51 per cent. in 1998 and 50 per cent. in 1999. The article continues: The cap of 50% of their GNP to be introduced for all Member States in 1999 shall remain applicable until such time as this Decision is amended". I trust that the Committee is now seized of the detail comprised in Article 2 1(c). After all, they are matters of some importance in determining what the contributions of member states shall be.

Unhappily, GNP is nowhere defined. That makes it a little difficult for the matter to be considered even on Second Reading in general terms, let alone in Committee. The Government seem to resent even the existence of a committee to discuss the matter. So perhaps we may have the opinion of the Court of Auditors on it. The report of the Court of Auditors unfortunately arrived too late for the Government to take it into account when they were discussing the Bill in another place. However, in its latest report, the Court of Auditors has some pretty pungent observations to make about the way of determining GNP. With leave, I shall acquaint the Committee with what the report says about the matter. I trust that noble Lords will bear with me and the husky voice in which I deliver the comments.

Page 33 of the report of the Court of Auditors covering the financial year 1993 states: In order to evaluate the ability to pay, or the relative prosperity of the Member States, the regulations"— referred to in the Bill as "rules"— in force sometimes refer to GNP and sometimes to GDP, which are evaluated in some cases in ecus and in others in purchasing power standards, (PPS). The choice of concept has repercussions on the financial responsibilities of the Member States. The Commission should explain the criteria which led to the adoption of GNP in ecus in the area of budget financing". The report continues: In spite of the measures already taken by the Commission, the degree of comparability, exhaustiveness and reliability of the data in respect of the Member States' national accounts should be improved and considerable progress may still be made so as to obtain a genuinely harmonized system, as the Court pointed out … in its Annual Report concerning the financial year 1991". The report states further: As a result of the forecasting errors inherent in any GNP forecast there is a danger that the ceiling for levies provided for by Community legislation will be exceeded and the risk of bias in the allocation of the charge between the Member States, which then has to be corrected by means of an unwieldy system of balances". Finally, in terms of ducking the system or the lack of information available to it, the Court of Auditors concludes: Employing a statistical concept such as GNP, which does not correspond to a fiscal base which can be checked with a reasonable degree of certainty, may provide a means of ensuring that the financial responsibilities of the European Union are fairly divided up between the Member States. Nevertheless, the use of such a concept requires a considerable effort from the Commission and the Member States to ensure that the national accounts are reliable and harmonized, and thus to ensure that the budget and policies of the European Union are managed rationally". In other words, before the rules come into operation, the Commission and the member states of the Council have to agree on what GNP really is, and then to agree it so that beyond all reasonable doubt the ultimate contributions of the member states and the ceilings of the own resources demanded of them can be accurately determined. At the moment they cannot be.

One of the purposes in putting down this amendment is to acquaint noble Lords with the fact that many difficulties lie ahead and that, in spite of these abstruse calculations —which, if I may say so without offence, members of the Council do not themselves always understand—without some reliable check as to the accuracy of the assumptions that are made (the degree of accuracy which is insisted upon by firms of chartered accountants when they approve the prospectuses of companies; namely, that all the assumptions are correct and the calculations are reasonable) all this will be a lot of nonsense. Indeed, in their present form all they are designed to do is to obscure and ultimately damage the Council's perception of what may be the truth.

Lord Peston

Perhaps I may intervene briefly. I say to my noble friend Lord Bruce of Donington that I must admit I did not know that this amendment was to do with the correct definition of GNP or GDP. Having lectured on the subject for more years than I care to reflect on, I can only say that I have never had the slightest difficulty in knowing what either of the terms means or how to produce a consistent set of national accounts; and I cannot believe that the future of the European Community depends on matters of that sort. However, that is not the main reason for my intervention.

My noble friend Lord Stoddart of Swindon referred to the imposition of VAT on domestic fuel. I wonder whether the noble Lord, Lord Henley, when he replies, will agree that the decision to levy VAT on domestic fuel was taken by the previous Chancellor of the Exchequer, presumably in agreement with the Prime Minister. The decision was to levy VAT at the full rate in two stages. The current Chancellor of the Exchequer confirmed that decision. Again, the decision was taken by the Chancellor of the Exchequer and, I assume, again in agreement with the Prime Minister. The other place then got rid of the second tranche of that increase, precisely as would happen in the normal workings of our government and as has happened traditionally for a great many years.

Will the Minister therefore confirm that the decision was not taken by the European Community—that it was not taken by the Commission; that it did not instruct the Chancellor of the Exchequer to do that; and that the Chancellor of the Exchequer was at no time under pressure to do it? It is vitally important that we confirm that the Chancellor of the Exchequer in this country is still the person who leads us —together with the First Lord of the Treasury, who is of course the Prime Minister—in taxation matters of this kind. It is certainly news to me that this tax was levied because of the European Commission. I hope that the Minister can confirm that it was the Chancellor. Obviously I have a political reason for pressing that point: I wish to make it very clear now and in future that this loathsome tax was one that was decided upon by this Government, and is not a tax that was put on by the Commission. It is very important for the noble Lord, Lord Henley, for once to rebut the view expressed by my noble friend.

The Earl of Onslow

Perhaps I may interrupt the noble Lord on this point. Am I not also right in that, had the tax been put on, and had there been a Labour Government, they could not have taken it off? That is the fundamental taxation point. It is no good rabbiting on about how evil the tax is, blah, blah, blah, and then complaining that it is the European Community that levied it. If you cannot take it off, you are still hidebound by an outside authority which has taken away substantial taxation powers—historical powers which have been attributed and got by the Parliaments of this kingdom for a long time. That is the core of the rot that has set in.

Lord Peston

I hesitate to intervene a second time, but that was not the point that was made by my noble friend Lord Stoddart of Swindon. I hope that the noble Earl will recognise that it was Members in another place—and in particular some of his friends in the other place—who prevented the second tranche of that tax being levied, and who could, if they had so wanted, have prevented the first tranche being levied. He simply cannot get off the hook that it was the Government who levied the tax and not the European Commission. It is vitally important to remember what this Government did. But it is equally worth remembering what the noble Lord's friends in another place also managed to do.

Lord Henley

I start by thanking my noble friend Lord Cockfield for his intervention. I have a sneaking suspicion that it would have been convenient for the House if the noble Lord, Lord Stoddart, had intervened after the intervention of my noble friend Lord Cockfield, who gave a perfectly clear explanation of what we are talking about here, and withdrawn his amendment. However, I have a sneaking feeling that the noble Lord, Lord Stoddart of Swindon, knew all along that this has absolutely nothing whatsoever to do with the rate of VAT that is levied on goods and services.

Like the fat boy in Pickwick Papers, the noble Lord likes to make our flesh creep with stories about VAT and scares of that sort. The noble Lord knows perfectly well that any decisions of that sort that actually went to the Council of Ministers would require unanimity, just as any changes to the rebate negotiated by my noble friend Lady Thatcher in 1984 would also require unanimity. The noble Lord implied that we caved in on every occasion. I stress again to the noble Lord that it was a Conservative Government who arranged that rebate and we have no intention of caving in on that in the future.

I can also confirm that it is obviously my right honourable friend the Chancellor of the Exchequer who is the one who makes decisions, which then obviously have to go to another place, about levels of taxation, levels of VAT. As I said, this amendment and the clause with which we are dealing has absolutely nothing to do with the rate of VAT that is levied on goods and services. It relates solely to the formulae used to calculate own resources. The VAT-based own resource does not flow directly from the amount of tax that is collected but is a wholly separate calculation, as my noble friend Lord Cockfield stressed, based on member states' VAT bases which for this purpose alone are subject to statistical judgment to ensure the same coverage of all goods and services in all member states.

The noble Lord, Lord Bruce, asked for details—although I do not believe he really wanted that detailed an explanation —of just how that would work. I do not believe that it would assist the House if I gave the noble Lord the detailed explanation that he requires at the moment. But I can assure him—I am sure that he has the papers—that Her Majesty's Treasury did supply the committee with papers on 15th July and 26th September explaining the detail behind the United Kingdom's gross contributions and the calculations of the United Kingdom's abatement. I am sure that the noble Lord, if he has not already done so, will study those papers with the extraordinary detail that he normally devotes to these matters.

I can also assure the noble Lord, Lord Bruce, that work is going on to harmonise the methods of calculating member states' GNP. I note the points that were made by the noble Lord, Lord Peston. I am sure that noble Lords will remember his expertise in trying to come to a detailed and harmonised method of calculating such figures, which the noble Lord assures us is a matter of considerable ease.

The amendment requires the Government to produce further supplementary reports on the operation of the VAT resource. It might be worth my turning some little attention to that one particular point. Even if the noble Lord, Lord Stoddart, did not address that point, certainly my noble friend Lord Cockfield did.

I can assure the noble Lord that in another place it was suggested that information on the Community budget appears in too many reports and documents and may not be in the most user-friendly presentation. As a result of that and a as a result of those representations, my honourable friend the Paymaster General in another place at Committee stage—I refer the noble Lord to the comments that he makes at cols. 372 and 413 of Hansard on 7th December—undertook to expand and improve the annual statement of the Community budget. The noble Lord will be familiar with the annual statement that comes out in the spring of each year. I have before me the one for March 1994. That statement already provides for the amounts that are paid by each member state under the VAT-based own resource. I refer the noble Lord to Table 2 on page 9 of the annual statement which sets out each member state's VAT contributions in each year from 1991 to 1994.

I trust therefore that the noble Lord will agree that the inclusion in the Bill of an obligation on the Government to provide a report on the operation of VAT own resource would add very little indeed, if anything, to the information that the House will receive, bearing in mind the assurances and guarantees that my right honourable friend made in another place. I hope therefore that on this occasion the noble Lord will feel able to withdraw his amendment.

Lord Hamilton of Dalzell

Before my noble friend sits down, I wonder whether he will answer what to him is probably a rather simplistic question. I have found in various aspects of my life, in dealing with charities and listed buildings, that I have come up against the Treasury. The Treasury has written to me and said that much as they regret having to charge this tax, it is subject to a VAT directive and therefore nothing can be done about the matter. That seems to me to run somewhat counter to what my noble friend has been saying; namely, that VAT is a purely national tax levied by national processes.

Lord Henley

I can assure my noble friend that what he is discussing has nothing whatever to do with the Bill before the Committee on this occasion. It is true that the standard rate of VAT can be no lower than 15 per cent. The extent of zero-rating and reduced-rate VAT is certainly limited. As regards the decision as to where my right honourable friend wishes to put VAT, the noble Lord, Lord Peston, stressed that point in relation to VAT on fuel. We might disagree on the merits or otherwise of it but it was the decision of my right honourable friend the former Chancellor, confirmed by my right honourable friend the present Chancellor, to levy that particular duty, which, sadly, was not agreed to by another place.

6 p.m.

Lord Stoddart of Swindon

If we needed any justification for having a Committee stage on this Bill, the present discussion has just shown it. Many noble Lords, including myself, have learned much and been put right by the noble Lord, Lord Cockfield, and others. We now understand a lot more about VAT—how it is levied, the basis upon which it is levied and indeed the limitation, if there is one, on the ability of the European Community to impose taxation of a particular kind on the British people and indeed the British Parliament. So this Committee stage has been very useful. I hope that my noble friend the Leader of the Opposition will accept that it has been a useful exercise.

I must say to my noble friend Lord Bruce that I do not like being too fair to the Government. But in fact the Government raised no objection to a Committee stage. They were perfectly amenable to it all the way along. I have heard no criticism at all from them and that is to their credit. We cannot give them much credit but when credit is due, I believe in giving it. I give the Government credit on this particular issue. Indeed, the Government Benches are almost full. It is remarkable. I congratulate them.

I also accept the points made by the noble Lord, Lord Cockfield, that the European Community cannot fix the amount of tax nor, at this stage, fix the base on which the tax is levied. What he said was interesting in more than one respect. He was absolutely right to say that people simply do not understand what is coming out of the European Community. There is so much gobbledegook in so many languages that even Members of Parliament do not understand what is being said, let alone the general electorate. That is simply not good enough. I was glad to hear from the noble Lord, Lord Henley, that the Government are to make some attempt to ensure that not only Members of Parliament but people generally understand what is being proposed and done in the European Community.

My noble friend Lord Peston took to task my noble friend Lord Bruce about his contribution. He said that he did not know what GNP had to do with the matter. I shall tell him. The Court of Auditors drew attention to the problem in 1993. The 1993 Court of Auditors' report found that Germany had not included the former East Germany in its calculations of its GNP and that some countries were still using 1970s data. The Court of Auditors described some of the information provided to the Commission by member states as "unreliable". In those circumstances, I believe that the points raised by my noble friend Lord Bruce were very relevant and of use to the Committee.

My noble friend also asked what on earth VAT on fuel had to do with the Commission—or the Council of Ministers, because that is the body that makes the final decisions and one has to accept that. The fact of the matter is that the proposal to put VAT on fuel is included in the sixth directive. So it is already a directive of the EC that VAT should be levied on domestic fuel, as well as on a range of other items. The question is when it comes into operation, not whether it does so.

Lord Peston

Perhaps I may interrupt my noble friend. As he said, we are all trying to learn from this debate. Is he saying that the Chancellor of the Exchequer did not have a choice about levying VAT on domestic fuel? Is he also saying that when his right honourable friend, in the very near future, becomes Chancellor of the Exchequer, he will not have an opportunity to take such decisions? I find that very difficult to follow. Is he telling me that there is no choice?

Lord Bruce of Donington

His field of action was very limited. After all, the Chancellor of the Exchequer had to raise some £3 billion net out of the Consolidated Fund. Indeed, he had to impose a three-line Whip in order to secure the Government's agreement to that £3 billion and threaten resignation if it were not found. In searching around for money to enable him to honour the obligation to pay that £3 billion net to the Commission, he was circumscribed. In fact, he alighted, quite reasonably from his point of view, on the measure already taken by the previous Chancellor of the Exchequer, his right honourable friend the Member for Kingston-upon-Thames.

Lord Stoddart of Swindon

In answer to my noble friend on the Front Bench, I did not say in my speech that the Chancellor of the Exchequer had to levy 17½ per cent., or whatever, on fuel. I said that the threat was hanging over our heads. That threat is there all the time through the sixth directive, which was agreed by the British Government; and indeed, as I understand it, must be imposed or made effective by 1996. No doubt I shall be corrected if that is wrong. Nevertheless, that threat is there all the time. At one time or another the European Commission will say: "Come along, Britain, you are dragging your feet. There are all these things to which we have agreed to extend VAT. It is about time you implemented them".

The noble Lord, Lord Henley, referred again to unanimity being required before EC decisions are made. The problem is that British governments, British Ministers and Chancellors of the Exchequer, can go to Europe and make decisions without first obtaining the consent of Parliament. They can make decisions on expenditure and on taxation. As I said earlier, when it comes to the push and Parliament is asked to ratify what those Ministers have done, Parliament is told, "We made an international agreement and therefore you will let us down if you do not do what we say and ratify the agreement we have already made". That is the problem which we must address and which the Government will increasingly need to consider as the dissidents grow greater in influence and more in number.

With those words, I shall not press the amendment. I accede to the request of the noble Lord, Lord Henley, and beg leave to withdraw it.

Amendment, by leave, withdrawn.

Clause 1 agreed to.

6.15 p.m.

Lord Beloff

moved Amendment No. 4: After Clause 1, insert the following new clause: (". Each year Her Majesty's Government shall make a report to Parliament which shall include—

  1. (a) Her Majesty's Government's estimate of the amount of money from the Budget of the European Communities which is lost to fraud, irregularity and financial mismanagement in the previous year;
  2. (b) details of Her Majesty's Government's efforts to combat fraud, irregularity and financial mismanagement both within the United Kingdom and in the institutions of the European Communities;
  3. (c) details of the efforts of the European Commission and the European Parliament to combat fraud, irregularity and financial mismanagement;
  4. (d) details of the efforts made by other Member States in combating fraud, irregularity and financial mismanagement.").
The noble Lord said: If this were a real Committee stage, I should be saying that the Government will accept the amendment because it merely puts into statutory form what they assure us is already their practice. Indeed, in the course of yesterday's debate, the Minister explained the very active role Her Majesty's Government are playing in the pursuit of fraud and mismanagement. However, as this is not a real Committee stage—as was pointed out, it is an occasion for discussion rather than legislation—I simply take the opportunity of asking the Chamber to turn for a little while to the subject of fraud and mismanagement, which was discussed at intervals yesterday.

I do not share the optimism of my noble friend Lord Boyd-Carpenter that by discussing these matters we contribute greatly to general enlightenment. I found no report of yesterday's proceedings in the press, in spite of the fact that they were graced by the contributions of no fewer than five former commissioners.

Lord Cockfield

In fact, there was a report in the Financial Times.

Lord Beloff

I do not have time to read the specialist press; I read only general newspapers and books. However much we think that we may have enlightened the elite readership of the Financial Times, that is unlikely to make a huge impact on the electorate. But it was informative for your Lordships, largely because of the contributions of the former commissioners, of whom no fewer than three are now in their places.

Lord Graham of Edmonton


Lord Beloff

I apologise, four. There was also the presence of the noble Lord, Lord Jenkins of Hillhead, who did not intervene in the debate. Perhaps he repents his earlier life in Brussels. At any rate, we received no guidance one way or the other from that brooding presence.

When we came to discuss fraud and the commissioners, what struck me was their eagerness to disclaim responsibility for what the Community actually does. In their sensitivity they felt that when anything was said about the Community then it must to some extent be a criticism of the Commission. It reminded me of other kinds of prima donnas and I was thinking that a possible collective word for former commissioners would be a "sensitivity" of commissioners.

In some respects, the former commissioners remind me also of a class of persons much in the public eye at the moment; namely, the Prison Service. When there is an escape, a riot or something of that kind, what do we hear from the Director of the Prison Service and his acolytes? They all say, "Oh, no, it was not me; it was those Ministers". That is what the commissioners tell us about fraud. Anything that is lacking is due to the failure of the Ministers. That may or may not be true. But it is an interesting fact upon which these commissioners, who come from different political parties, appear to agree.

The other main point, made particularly by my noble friend Lord Cockfield and generally accepted in the Chamber, was that the bulk of fraud takes place not in Brussels itself, but in the various member countries. He said that we must find a way of dealing with fraud and mismanagement in those member states, or many of them. My noble friend produced a possible solution which did great credit to his imagination, perhaps fertilised by constant reading of the Financial Times. Roughly, as I understood it—I believe I understood it—it was that if the expenditures undertaken under the Community umbrella were in part financed out of those countries' own taxation—that is to say, if it were not just our money being spent in Spain but Spanish money, also—then they would perhaps be keener on making sure that the money was properly spent.

That sounds plausible. It sounded so plausible that even my noble friend Lord Tebbit—who I regret cannot be with us today—was attracted by the proposition. But when one comes to think of it, it does not really work for one perfectly obvious reason. It was frequently said yesterday, and rightly, that the expenditure that countries make on their contributions to the European Community is relatively small compared with total public expenditure. By the same token, it is true also, though not quite to the same extent, that receipts from the Community are, in most countries, even those who are net recipients, a relatively small part of the general money available to their governments.

When we consider what is happening in the way of financial mismanagement and fraud, we obtain some guidance from the fact that other governments do not themselves already deal satisfactorily with what is going on in their own countries. The degree of fraud perpetrated in Spain by Ministers or persons close to Ministers was recently referred to by His Majesty the King of Spain as calling into question the ability of Spain to retain the democracy it recovered after the death of Franco. In France the number of Ministers under arrest or threatened with arrest is reaching the point where it may be cheaper to hold Cabinet meetings in gaol. When one comes to Italy it looks as though the impact made on the public mind by the revelations of fraud and corruption is such that, to put it in a nutshell, we are seeing the reversal of the Risorgimento. We are seeing the break up of the Italian Republic.

I do not go into minor delinquencies. If the Greeks wish to spend their own money on furnishing Mr. Papandreou with a new palace and three swimming pools, that is their decision. But if we are asked to be in partnership with a number of countries which, quite irrespective of what they do with the money we raise from our taxpayers, are not at the moment capable of dealing with the money they raise from their own taxpayers, does that not cast a very considerable doubt on this whole idea of progressing towards economic and monetary union, on which the twin ornaments of the economic profession and the Labour Front Bench seem so keen? There is only one way in which this could be approached even moderately reasonably, which would be to say, "Okay, we throw in the sponge. We will accept a single currency, which will be the deutschmark; we will accept the Bundesbank as Europe's rulers; and, by and large, we hope that we can accommodate ourselves to that kind of thing". But that is not desired by any country and perhaps least of all, as I think the noble Lord, Lord Dahrendorf, would agree, by Germany itself.

The noble Lord, Lord Dahrendorf, pointed out yesterday how the misgivings, the discontents, the dissents, or whatever one likes to call them, in this country with regard to the financial aspect of the way in which the Community is being run are increasingly paralleled in continental Europe. One has to face the fact that this is only one example—the example of an attitude towards fraud and financial mismanagement—of what divides countries and makes some societies very different from others. To try to unite them in some federal system, with a single currency and a single bank which go with it, would involve a federal system or even something rather more centralised than a federal system.

Earl Russell

The noble Lord has just said that a single language goes with a single currency. Would he care to repeat that opinion in Caernarvon?

Lord Beloff

I did not use the word "language". I am afraid the noble Earl—I do not blame him—was not listening to me very carefully. In this House we are not only free in what we can say: we are also free in how far we listen.

Perhaps I may come back to my central point. I was struck yesterday by something quite different which came from the speech of the noble Lord, Lord Tebbit. He pointed out that our Minister of Agriculture was unable to stop the trade in live animals across the Channel because, under the Community's rules, he had no power to do so. Then it struck me how interesting it was that in this country the sufferings of animals figure largely in the public consciousness. As someone living in the county of Sussex, which is now being flooded with policemen at our expense in order to protect these shipments, I am aware of the degree to which animal welfare is a subject in this country. But it is not among most of our continental partners. There is a difference. It is a profound, if one likes, philosophical difference.

Wherever we go—fraud is one way in and animal welfare is another: one can think of half a dozen more but they were illustrated yesterday—we are brought to the conclusion that the most important task at the moment is to find ways in which the countries of Europe, different though they are, can co-operate. The noble Lord, Lord Eatwell, who lives in a world of abstractions, was suddenly confronted, as he thought, by some degree of what he called xenophobia in our discussions. There may be some xenophobia—not, I think, in the discussions of this House but in the country and in other European countries—but the xenophobia is created by the Community. It is because people feel that they are not being asked to be nice to foreigners or to co-operate with foreigners but are to be ruled by foreigners that there is this instinctive reaction.

This debate has given us the opportunity to look at this matter again. I hope there will be further opportunities. I beg to move.

Lord Bruce of Donington

The amendments moved by the noble Lord, Lord Beloff, draw attention not only to fraud but to irregularity in financial management, at whatever level. In the course of our discussions on Second Reading relating to fraud and to irregularity in financial management the Government have concentrated mainly on the fraud aspect, without any particular emphasis upon irregularity in financial management. Their case is substantially the same as that of the Commission itself. It is that the responsibility for fraud lies mainly with the member states. The value of this amendment is that over the whole sphere it draws attention not only to fraud but to irregularity in financial management. There can be no doubt but that irregularity and mismanagement are not necessarily principally concentrated in the member states but in the Commission itself. If the noble Lord reads pages 5 and 6 of the Court of Auditors' report for the financial year 1993 he will find that view abundantly justified. Because of time I shall give two extracts only from pages 5 and 6 of the Court of Auditors' report for 1993. The first states that, the development of Community activities has not been accompanied, either in the Commission or in the Member States, by a commensurate development of the necessary financial management and control systems". It goes on: Although the Commission has undoubtedly made efforts to correct the weaknesses in accounting and financial management systems to which successive reports of the Court have drawn attention, it has failed to secure … the proper level of financial management and control necessary in the complex environment of Community finances". If I may say so, this is one of the factors to which I have endeavoured over these weeks and months to draw your Lordships' attention.

At the bureaucratic level there is lack of control and bad financial management. There are persistent breaches of the Commission's own financial regulations and the Commission seeks to avoid responsibility for this by insisting, with the apparent approval of Her Majesty's Government and possibly also, for all I know, of Her Majesty's Opposition, that the principal responsibility lies in the hands of the member states. There will indeed have to be further investigations into this matter. I can assure Members of the Committee that there will be detailed investigations into when, doubtless through the usual channels, it will be convenient to discuss the Court of Auditors' report for 1993, which has only recently been delivered.

In the meantime I leave the Committee with a quotation from a report which appeared in the Daily Express on 12th November 1994. I would like some observations as to whether Her Majesty's Government know anything about it and, if they do, whether they place any credence in it at all. So far it has not been contradicted either by the Commission or the Government. It says: Several top Eurocrats face jail for involvement in frauds worth billions of pounds. EU officials revealed yesterday that there are nine separate investigations into corruption inside Commission headquarters, with the Italian Mafia believed to be involved. The EU has already completed one investigation into corruption-by an Italian who committed suicide when he learned he was about to be questioned. This week the EU opened a fraud hotline, with rewards for information which leads to fiddles being exposed". I do not place my own personal credence on that report. I would like to have greater verification than that, as the noble Lord well knows. But at this stage I ask whether the Government have heard anything about it and whether—following the usual press office facilities that exist within the noble Lord's department, a department which has tentacles throughout the Press Association and the newspapers of the world—any checks were made by the Treasury or by his department as to whether or not there is any truth in this. I have seen no rebuttal. In the meantime I trust that the Committee will accept the verdict of the latest Court of Auditors' report which has not been before either the other place or this House. It shows that there is widespread irregularity and lack of proper financial control within the Commission itself. I trust that, when the Government provide the various reports which they have promised and which substantially agree with what the noble Lord asks for in his amendment, they will include full details of anything that comes to light.

6.30 p.m.

The Earl of Onslow

This question of fraud is inevitable when we have something quite as silly as the common agricultural policy. Fraud is involved in Italy in getting subsidies for double or triple the number of olive trees which really exist. There is the export of more hard wheat from Italy than is actually produced there. There is the fraud as regards Greek tobacco which even the Albanians will not smoke. Admittedly the next fraud is peculiarly and blissfully an Irish one involving cows on a farm which straddled the border, the animals being moved back and forth across the border. The farmer was finally acquitted because defence counsel said, "How can you prove that the cows were exactly the same as those which went each way on several occasions?" That was a famous Irish fraud.

The CAP is the root cause not only of distortion of world trade, but of this fraud and fiddle. Until we get rid of it, with all its trade distortions, environmental disasters and subsidies to do things which we should not do, there will be no improvement. I plead guilty to putting my nose into the trough and getting set-aside payments. If somebody is stupid enough to put the trough there, my nose is going to go into it with the rest of them, and quick as a flash. But we must get rid of the common agricultural policy which is where the vast majority of the fraud occurs. The CAP also accounts for a large proportion of the European budget. It represents at a minimum 50 per cent. of its budget. Furthermore, in the social and cohesion funds, there is the drainage of the marshes at Missolonghi to increase Greek agricultural production. That has caused environmental damage. There is also the question of cutting down cork trees which was mentioned by the noble Lord, Lord Buxton, in the debate yesterday. We have not only the common agricultural policy which takes up far too much of the European budget and the possibilities for fraud which go with it, but we have other budgets under other financial headings for increases in agricultural production. Until these matters are put right fraud will not go away.

Lord Monson

I support this amendment. I wish to pick up what was said by the noble Lord, Lord Beloff, in his magnificent introduction as regards the attitude to fraud as distinct from specific acts of fraud. Time and time again those of us who are not actively involved read or hear what occurs when British Ministers, MPs, MEPs, commissioners or civil servants bring up the question of fraud in Brussels or Strasbourg. Their continental counterparts, or most of them, almost invariably yawn, fidget, twiddle their fingers, fill in crosswords or generally show by their body language that they are thoroughly bored with the whole business.

It is not that they are actively in favour of fraud, but simply that generally they do not consider it to be as iniquitous as we do on this side of the Channel and that too much Anglo-Saxon obsession with fraud diverts time and energy from the grandiose task of building a United States of Europe. That is why it is so important that Her Majesty's Government produce an annual report on fraud, whether by accepting the amendment on the Marshalled List or otherwise.

Lord Cockfield

If I may be so bold as to say so, the only difference which exists between myself and the four previous speakers is that they are so extraordinarily good at talking about the subject: I simply want to do something about it. My speech yesterday was directed to that end. If one is going to do something about it, one has to start by identifying where the fraud occurs and who is responsible for it. If one looks at every single case quoted by my noble friend Lord Onslow, in each case the money was expended by the government of a member state or their agencies.

I have with me, because I referred to it yesterday, an admirable booklet produced by the Intervention Board in Reading. This is a document of enormous clarity. It sets out very clearly indeed who pays the money and the progress. I suggest that one of the reasons why fraud, mismanagement, maladministration and all the other emotive terms which the noble Lord, Lord Bruce of Donington, can think of, is so much lower in the United Kingdom is because the situation is explained with great clarity by people like the Intervention Board in the United Kingdom. If one reads that document one can see exactly where the responsibility lies. It goes so far as saying that the responsibility for auditing the books rests not with the Commission in Brussels, but with the National Audit Office in London.

That is the position throughout. If the noble Lord, Lord Bruce of Donington, would care to update himself a little and move from 1993 to November 1994—I told this story yesterday—he would know that the president of the Court of the Auditors said that 80 per cent. of the money was disbursed by the member states. If 80 per cent. of the expenditure incurred properly or improperly is incurred in the member states by their governments and under their authority and with whatever controls or lack of them which exist in those member states, that is where the responsibility primarily lies.

You see it again if you read the conclusions of the Essen Summit—the meeting of the heads of government. They deal with fraud under pillar 3 of the Maastricht Treaty, and pillar 3 is inter-governmental co-operation between the member states. The Commission is marginalised under pillar 3. Unless you start by finding out where the responsibility lies, you will never solve the problem. As I said some time ago in your Lordships' House, it is no good shooting the wrong man. You have to start by finding the right person and then proceed to shoot him. That is what I have been trying to do. I am sorry that my noble friend Lord Beloff is so scornful of the forces of the market-place. I know that he is not an economist and regards economists as being somewhat lowly down the intellectual pecking order. But I am saying that what motivates people's behaviour at the end of the day is who foots the bill. If they have to foot the bill themselves for the fraud, the irregularities and the maladministration which occur in their own member state, that is the best possible incentive you can give them to do something about it.

I am far more anxious than any noble Lord who has spoken so far that this problem should be dealt with and solved. I am anxious that it should be dealt with and solved because it is a blot on the face of the Community, and I support the Community, while so many of the people who talk about fraud do so from the perspective of knocking the Community. I am not referring to any particular person so I hope that there will not be any protest about that. There is not the slightest doubt that a great deal of the attention that is directed to the subject is in the context of criticising the Community. If you proceed down the road of ensuring that the member states have to bear the greater part of the burden—I suggest that they should pay 51 per cent. of the total amount that they claim—they will undoubtedly take a much stronger line on good administration in their own country. This is a problem that has to be dealt with, and any effective way of dealing with it I should be only too glad to support.

Lord Hamilton of Dalzell

I could suggest an even better solution than that presented by my noble friend Lord Cockfield, and that is that the individual countries should pay 100 per cent. The problem with all these matters is that once there are enormous sums of other people's money floating about people are bound to get at it. I know that my noble friend Lord Cockfield would say that the whole of the agricultural policy is designed by the Community to produce various results—more or less production and specific objectives. But I am a farmer, and when the booklet so admirably produced by MAFF comes through I read it carefully. There are a great many experts reading it all over the country. They say that that is where the money is. Therefore one does not farm with a view to producing anything in particular; there is a new crop in farming. It is called the European paper crop. We pay a great deal of attention to reaping vast amounts of money from it.

I see from the figures in the Bill that agricultural expenditure is calculated to rise by 8 per cent., 9 per cent. or whatever it is. How can one possibly tell what it will rise by? It will depend entirely upon how people play the game; what happens to the weather; and everything else. For the moment we are being paid increased subsidies when the price of grain, for instance, is way above its support levels. We cannot intercept the free market and adjust that matter. We will spend our time endlessly wasting money until we return the payment of subsidy to national interest, and then if governments get it wrong the electorate will vote them out and try a different government.

6.45 p.m.

Lord Stewartby

Perhaps I may offer one or two brief comments based on the torrid experience of having represented the UK in the Budget Council for a number of years in the 1980s. My strong impression at that time was that many Ministers representing those member states which were net beneficiaries of the Community budget were careless of how expenditure was to be applied so long as the appropriate portion of the total came the way of their country.

I endorse what the noble Lord, Lord Monson, said about will power in this whole area. Of course it is necessary, as my noble friend Lord Cockfield said, to pursue the issue through the member states where fraud and irregularities occur. But I doubt seriously whether the sanctions on those member states within the processes of the Community, and particularly with regard to the Community budget, are effective. One has only to look at the consequences of sanctions in any area to see whether they are effective, and clearly in this area they are not.

If restitution has to be paid, it is to be paid only if the irregularity or the fraud is discovered. All moneys which are applied wrongly in member states, but where the fraudulent or irregular application of those moneys never properly comes to light or cannot properly be substantiated, are in terms of transfers of resources still effectively to the advantage of those countries. Although their governments may in general terms be committed to the orderly conduct of their affairs, it is inevitable—it is only human nature—that if there are financial advantages for those countries to turn something of a blind eye or to be less than 100 per cent. enthusiastic in pursuing the areas of misappropriation, then that is likely to happen.

I suspect that the difference in attitude between member states, based on whether they are net beneficiaries or net contributors to the Community budget, probably lies at the heart of this great problem. So I hope that the Government can, through their representatives, particularly in the Budget Council, try to establish a specific axis with other member states which are net contributors—for all practical purposes in the past that has meant Germany, although I understand that if the amendments to the budget process go through other member states are likely to become net contributors—and that by concerted action by those who represent taxpayers who are parting with their money in favour of the citizens of other countries putting their case strongly, persistently and with determination we can achieve a different attitude among the recipients.

I well recall a number of Budget Councils where the UK was isolated, with the exception of Germany, in calling for restraint on expenditure. The obvious reason for that was that Germany and the UK were the two countries which had to pay most of the bills for the extra budget expenditure for which the other 10 member states were calling. The member states which are continuous net beneficiaries from the Community budget underestimate the resentment that can be caused in countries such as ours, where for so many years we have had to look at the issue the other way around. I hope and believe that a tougher attitude is developing in Germany. For a long time, it seemed willing to provide substantial resources because of the importance which, for strategic and other reasons, it attaches to the coherence of the Community. Perhaps, since the collapse of the Warsaw pact and the reunification of Germany, its emphasis has changed. If so, that is in Europe's interest. We, like Germany, are in the position of having to come to Parliament year after year and ask for expenditure to be sanctioned. We know that inevitably part of that will go to other member states, and that part of it will not properly be applied.

I hope that those who represent this country in the councils will be able to make common cause with others who are, or will be, the net contributors to that budget and will try to follow the purpose through as strongly as they can.

Lord Tugendhat

Like my noble friend Lord Stewartby, I have had experience of budget councils. Indeed, for some eight years I was budget Commissioner and am one of the two Commissioners who did not speak yesterday. I agree with my noble friend that standards of public life and financial probity vary substantially from one member state to another. However, I cannot help feeling that if one stands back a little from the debate, one might suppose that we are citizens of a country in which fraud and financial irregularity is completely unknown and a phenomenon to be found only on the other side of the Channel. That is not the case, as we know, in relation to income tax, social benefits, the workings of the CAP in this country and in relations with the Community, as we have found when court decisions have gone against us. I cannot help believing that a modicum of modesty about the righteousness of our position and the wrongness of other people's might be helpful on these occasions.

Although we have high standards of public life and financial probity, we are not alone in that. Denmark and Holland have standards that are equally high. Germany and a number of other countries also have high standards. If we are criticising other countries for having lower standards, it is tempting to believe that there is an element of nationalism and xenophobia, to which my noble friend Lord Beloff referred, in particular when one criticises them when they are trying to do something about it. I believe that the events in Italy—the extraordinary courage of the Italian magistrates facing dangers that in this country are known only in Northern Ireland—deserve praise rather than what has seemed to me from time to time to be supercilious contempt.

In large part, the same applies to what is happening in France. It is no part of my brief to defend the French way of doing things but I believe that a country which can bring its Ministers to book, which can prosecute Ministers who break the law and which can even put Ministers in prison, is a country which is doing something about the standards in public life and not one that is going rapidly down hill. I believe that recent events in France and Italy should give one some encouragement rather than the reverse. I am reminded of the problems that the Security Services used to run into when they uncovered Soviet spies working in MI5. They were always more criticised for uncovering them than they would have been had they let them remain in operation.

My next point is addressed primarily to my old sparring partner in the European Parliament, the noble Lord, Lord Bruce of Donington. He draws a great deal on the reports of the Court of Auditors and on other accusations that are made. It is worth pointing out—and I am sure that he will agree with me—that perhaps the principal source of information about fraud in the Community are the Community institutions. Again, one ought to draw some encouragement from the fact that the Community institutions take this issue so seriously that they have brought before the public the great body of evidence on which this debate has centred. The Court of Auditors has played an important part in that. As the noble Lord will recall, the Court of Auditors produces a report and the Commission produces a reply. In the interests of balance and fairness, it might from time to time be reasonable to quote not only the accusations of the Court of Auditors—accusations which I am sure are fully investigated. Our mutual friend, Mr. Daniel Strasser, with whom we used to have so many dealings together, is an illustrious member of the Court of Auditors. I believe that before throwing on to the table accusations that appear in the Daily Express or some other periodical, it would be worth considering the Commission's response.

I hope that in respect of my final point I might carry with me the noble Lord, Lord Bruce of Donington. Surely, one of the biggest failings of the European Parliament in recent years has been the failure to make sufficient use of the discharge; that is the point at which it goes over the way the money was spent. Making more use of the discharge would be one of the best possible ways of putting a check on the extent to which funds can be made available subsequently for misuse. It is in the power of the discharge that the European Parliament has the opportunity to make a considerable contribution to dealing with what is undoubtedly a serious problem. It is a problem that all of us ought to take seriously and it is one which the Community institutions do more than anyone else to bring to public attention.

7 p.m.

Lord Henley

I welcome my noble friend Lord Tugendhat to the debate. He is not the last of the former Commissioners to speak; there is one more member of that vast body of expertise to lend his weight to our deliberations.

I have considerable sympathy with the sentiments which motivated the tabling of the amendment. We have had a useful discussion but at the same time one ought to remember the wise words of my noble friend Lord Tugendhat in asking certain Members of the Committee to put these matters into perspective. It would be idle of me to repeat all that my noble friend Lady Chalker and I said yesterday about what the Government are doing in the fight against fraud and the changes that we have seen in the CAP. The fight will continue and Her Majesty's Government will be at the forefront of it.

As regards the amendment, I give the assurance that, through explanatory memoranda, debates and liaison with Select Committees, the Government always keep Parliament in close touch with developments on this front. However, I do not believe that there is any need for a section in the Act spelling out exactly how that should be done.

The Government do much to keep Parliament informed of all developments on fraud and financial mismanagement. Indeed, as I said in respect of an earlier amendment, one of the criticisms most often heard is that there are too many documents and reports and not too few. In 1994 approximately 700 explanatory memoranda were submitted, of which about 60 covered budgetary matters. I daresay that even the noble Lord, Lord Bruce of Donington, might be overwhelmed by such a large number of documents for his perusal.

Lord Bruce of Donington


Lord Henley

I live in hope! What is needed is that the various documents and reports available should be brought together in one document. As I said earlier, in another place the Paymaster General confirmed the Government's view that one of the essential tasks is to keep Parliament fully informed about what they are doing to counter fraud and mismanagement. That is why my right honourable friend gave the assurance that he did, which I repeated earlier to the Committee on the amendment moved by the noble Lord, Lord Stoddart of Swindon, to expand the Annual Statement on the Community Budget to include what is being done as regards budgetary discipline and mismanagement and to counter fraud.

In the light of the Government's commitment to improve the annual statement to cover the points which have been raised, I hope that Members of the Committee will accept that a legislative obligation to do that is unnecessary.

Perhaps I may deal with a couple of paragraphs in the amendment moved by the noble Lord, Lord Beloff. With regard to subsection (a), the noble Lord asks that an annual estimate should be given of the amount of money lost to fraud. I repeat that the level of fraud and waste is a matter of great anxiety to the Government, as it is to all Members of the Committee. But I believe that all would agree that the level of fraud and irregularity, whether it is fraud against those funds, fraud at home against the social security budget or tax fraud, is something which, by its nature, is incalculable. We cannot know to what extent findings are representative of the whole picture. Contrary to many press reports, the European Court of Auditors does not give an estimate, despite the fact that it obviously has access to a great deal more information than the Government. However, although we shall expand the reports to which I referred earlier, I regret that it would not be possible for the Government to give an estimate which would be of any use whatever to your Lordships.

Secondly, subsection (d) of the amendment asks whether the annual statement could contain details of efforts made by other member states to counter fraud. Obviously the Government are very interested in what other member states are doing to combat fraud. Indeed, we were instrumental in achieving European Council conclusions at Essen which invited all member states to produce a report to the Council on just that. However, I do not believe that it would be appropriate for the Government to submit statutory reports to the United Kingdom Parliament on what other member states are doing. Following Essen, it is for the member states to produce those reports for the Council. Her Majesty's Government are not in a position to do so.

Perhaps I may deal briefly with the question of financial mismanagement and irregularity because I believe that we have focused to a greater extent on fraud than on those matters which were discussed when we debated these issues yesterday. We agree with the noble Lord, Lord Bruce of Donington, that financial mismanagement and irregularities are problems for the Community budget as well as the criminal fraud to which we have referred. I believe that our approach to fraud and mismanagement is parallel. I have already explained our approach to fraud. On mismanagement, the Edinburgh European Council spelt out that Community policies should be subject to periodic review and that individual projects should be subject to thorough appraisal before resources are committed to ensure that they yield economic benefits in keeping with the resources deployed. Since Edinburgh, the need for prior appraisal has been built into the cohesion and structural fund regulations and into the fourth framework programme for research and development. I assure the noble Lord that the Government will continue to press for all new policies to contain similar provisions. The Court of Auditors will play an important role in ensuring that the appraisals are carried out according to the appropriate standards.

As regards irregularities, Article 13 of the new budget discipline decision agreed on 31st October 1994 provides for the possibility of temporarily reducing or suspending monthly advances to cover CAP expenditure where irregularities are suspected or where there is a problem as regards the quality of data provided to the Commission by member states. I believe that those are positive steps which the Government will continue to pursue.

We shall continue to press also for further improvements. I assure my noble friend Lord Stewartby that we are receiving greater assistance from member states which are or are about to become net contributors and which have strong traditions of intolerance of fraud and waste. I assure my noble friend that we shall continue to work extremely closely with all those states which are or are about to become net contributors.

With regard to the Daily Express article of 12th November to which the noble Lord, Lord Bruce, referred, I assure him that we are aware of the investigations into the Italian official mentioned in that article. When we are aware of allegations against Community officials, we shall pursue those matters as is appropriate through the Council. In the light of earlier discussions this afternoon on the subject of the sub judice rule, it would not be wise for me to comment further on that matter at the moment.

In the light of what I said both on this amendment and on the earlier amendment in relation to the assurances that the Paymaster General and I have given as to the improved annual report which the Government will put before Parliament, I hope that my noble friend Lord Beloff will not press the amendment.

7 p.m.

Lord Beloff

We have had a jolly run round the course again. There have been some interesting contributions. The noble Lord, Lord Cockfield, repeated the suggestion that he made yesterday and gave the analysis which led him to it. My problem is that, if it is the governments of certain countries who are responsible, it is rather difficult to see how they can also be made the agents for curing the problem. The noble Lord's idea is that the answer would be to raise locally a proportion of the money. However, that presupposes that, if there were no transfers between member states, there would be no irregularity or fraud. That seems to me to be a very difficult proposition to sustain. But we can continue to disagree at the moment. None of our solutions looks likely to deal conclusively with what is bound to be a continuing problem.

It was valuable to have the intervention of yet another former Commissioner, but I believe that the noble Lord who accused me of superciliousness was quite wrong. I was not suggesting that Britain is uniquely virtuous or that other countries are uniquely vicious. I suggested merely that, in a continent in which countries differ so greatly in their fundamental attitudes to so many matters, to try to create a federal system in which all of them would participate freely is, at this stage, asking too much and that the attempt to impose such a system is one of the reasons for discontent.

I should not wish further to prolong the debate. No doubt we shall have many more debates and I gladly accede to the Minister's polite request and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 2 agreed to.

Lord Morris

moved Amendment No. 5: After Clause 2, insert the following new clause: (" . This Act shall not come into force until the final version of the Budget of the European Communities for 1995, as adopted by the European Parliament and the Budget Council, has been made available to Parliament."). The noble Lord said: I rise to move the above modest amendment, despite the fact that it is tabled in the name of the noble Lord, Lord Bruce of Donington. As Members of the Committee who heard discussions on previous amendments will be aware, there is every reason to have considerable concern for the welfare of the noble Lord's voice. In that spirit, I wish to assist him by moving the amendment.

Although the final version of the final budget of the European Community was adopted by the European Parliament on 15th December, according to the Library of the other place the text will not be available in this country until February. We thus have the astonishing position where Parliament—that is, the other place—is being asked to approve expenditure without knowing the details of its destination.

So far as I am aware, the own resources decision has not even been approved by the Dutch Parliament. Can my noble friend the Minister say how many countries have not yet given their approval to it; and, if not, why not? A summary is available of the final version including commitment appropriations of 80,892.87 million ecus and payment appropriations of 76.5 million ecus. That represents a 12 per cent. increase on the 1994 budget. However, it must be pointed out that that is for 15 nations and not 12.

Further, 400 million ecus will be given to help modernise the Portuguese textile industry. One would like to ask why? What about the Lancastrians? Moreover, 460 million ecus of aid have been allocated to the Mediterranean programme. That is not as much as was requested, but it has been described as, a step in the right direction". As to the latter payments, the question should first be asked why British taxpayers should have to pay for what is essentially a political programme to keep the French and Spanish happy in the face of the shift in the Community's centre of gravity north and east with the accession of Sweden, Finland and Austria and the expected entry of eastern Europe.

Secondly, it should be asked whether the Government feel that taxpayers' money will be well spent on Colonel Gaddafi and President Assad. Although there has been an aid programme to North Africa since the early 1970s, the new programme goes far beyond that, and furthermore takes on new countries such as Libya.

The first instalment of 460 million ecus will undoubtedly escalate to the 4.3 billion requested by the Commission—with, of course, French and Spanish prompting. It seems absurd to pay such sums when we are still unsure where the money to the "poor four" goes. That is just another illustration of the ancient principle that there should be no taxation without representation. I believe that this modest little amendment would go a good way in the right direction towards helping to solve the problem. I beg to move.

7.15 p.m.

Lord Bruce of Donington

I should like to express my support for the amendment moved by the noble Lord, Lord Morris. I am sure that Members of the Committee will agree that it is unfortunate that the draft budget as established by the Council for the year 1995 has not been available to Parliament. Indeed, it is only in a few months' time that the preliminary draft budget for 1996—in May to be precise—will be made available to the European Parliament and presumably to Her Majesty's Government. It is most unfortunate that we do not receive such documents on time.

I willingly agree with the remarks that fell from the lips of the noble Lord, Lord Tugendhat, with whom I was very pleased to co-operate when he was Budget Commissioner and I was a rapporteur for the European Parliament's Budget Committee. I believe that the noble Lord would probably accept from me that, before I make my remarks on the reports of the Court of Auditors, I invariably examine the Commission's replies and then attempt some evaluation. Most of the replies from the Commission to the documents are to the effect that since the report remedial action has been taken. However, that is a little mysterious because the same problem arises all over again in the next year. Nevertheless, I hope that the noble Lord will accept from me —as, indeed, I accepted from him when he was a very illustrious Commissioner—that I speak with the same good faith as he was good enough to address to the European Parliament while serving there.

I am not saying that the production of the 1995 draft budget would have illuminated Members of the Committee very much. It is a document about three inches thick with nearly 1,000 pages, most of which are unintelligible except to those who are fairly skilled in the interpretation of the various regulations to which it refers and who are able to understand the complex language involved; for example, the difference between commitment appropriations, undifferentiated commitments, commitments of payment and so on. It is a most complex document; but, nevertheless, it is susceptible enough, after fairly continuous study, to enable one to know what it is all about. Indeed, I can assure the Committee that it is sufficient for me to be dead accurate in the observations that I have made about Title B1-17 on the tobacco appropriations that were made for 1994 and anticipated for 1995.

Once again we have a problem. We have arrived at a situation where the ceilings of expenditure are ultimately decided by unanimity. The budget decisions which are required to come within the limits, and which do in fact come within those limits by quite a fair margin—for example, the odd 50 million or so—are made by qualified majority voting. In other words, although Her Majesty's Government give unanimous approval to the ceiling, they have no control as to how those amounts are expended because the allocations in the budget are made by qualified majority voting. One has only to look at some of the recipient countries to see what I mean. However, I speak with respect for those nationalities. I am not xenophobic in that sense. I refer to those countries with the utmost respect for their inhabitants, their rulers, their advisers and everyone else.

However, if one looks at what happens to money in the budget devoted not merely to the CAP but also to the structural funds and sees the allocations to Italy, Greece, Spain, Portugal and, indeed, our fellows across the Irish Channel, the mind sometimes boggles as to how those sums have been arrived at and what real approval the United Kingdom would have given had the budget itself been subject to unanimity as distinct from qualified majority voting.

That is all I have to say on the budget for the time being. I terminate my remarks on that aspect in the full and certain knowledge that, with the indulgence of the Committee, I shall be here once again when the preliminary draft budget for 1996 comes to this place.

Lord Henley

Both noble Lords have spoken briefly to the amendment. I hope that they will allow me to respond even more briefly. Parliament has had an explanatory memorandum accompanying the Council's second reading of the 1995 budget. That second reading occurred on 16th November. Parliament also received an explanatory memorandum on the Commission's second letter of amendment which took account of enlargement to 15 member states, and was agreed by the Council on 8th December. After the Council's second reading, the procedure is that the budget goes to the European Parliament for adoption. The final version of the budget as adopted is never published, I regret, until late January or early February. I am afraid that the 1995 budget is no exception.

I believe it would be inappropriate to hold up the coming into force of this Bill until the final version of the 1995 budget has been published. Provisions made in the 1995 budget can be altered only by way of supplementary and amending budget. Whatever supplementary and amending budget was proposed, should such supplementary and amending budget be proposed, a further explanatory memorandum would be submitted for the noble Lord's elucidation, and/or others. I shall certainly ensure, as far as I am able, that the final version of the 1995 budget is available to the Chamber absolutely as soon as it is published. Then I will await with interest the questions, an estimation, and whatever, from the noble Lord, Lord Bruce.

If this new clause were carried, and if the other place were of the same view, the United Kingdom would be unable to report adoption of the Council Decision until the final version of the budget had been made available. I believe that that delay is both unnecessary and undesirable and would in fact achieve absolutely nothing. I hope therefore that my noble friend and the noble Lord, Lord Bruce, will feel able on this occasion to withdraw their amendment.

Lord Bruce of Donington

I shall respond to that final point that the noble Lord has made. The noble Lord will doubtless be aware that another place, even though it had not seen the documents, was constrained to note the contents of the preliminary draft budget—the first draft budget as established by the Council—and explanatory memorandum. It was given one hour's debate on 28th November with 20 Members present and very little evidence that any Member of another place had examined the budget in detail, which is perhaps the justification for the interest, fortunately, which this Chamber has given to the budget.

Lord Henley

I obviously cannot speak for another place, but I am sure that if the noble Lord wishes to find means of debating these matters in this Chamber, with his usual ingenuity he will do so. That is a matter for the noble Lord.

Lord Morris

I must thank my noble friend for that answer and for giving me a tour d'horizon of the procedures for the examination of these matters by the Council of Ministers and indeed by the European Parliament. I do not know whether it is coincidence but I was interested to hear that the Council of Ministers completed the examination of the budget on 8th December which happened to be the Feast of the Holy Innocents. That may be a total coincidence and nothing else. However, I do not wish to make myself even more unpopular by pressing this amendment. I think that in the circumstances I had better withdraw it. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Bruce of Donington

moved Amendment No. 6: After Clause 2, insert the following new clause: (" . This Act shall come into force only when each House of Parliament has come to a resolution on a motion tabled by a Minister of the Crown as to whether the United Kingdom Government has taken sufficient steps to eliminate wasteful and fraudulent expenditure within the General budget of the European Community as identified by the Court of Auditors."). The noble Lord said: If I may, I shall deal with this amendment very shortly indeed, partly because of the time limitations which I intimated to the usual channels and partly because, in a way, it would not be appropriate for me to introduce the new clause in the manner in which I should have preferred to have introduced it. The new clause states: This Act shall come into force only when each House of Parliament has come to a resolution on a motion tabled by a Minister of the Crown as to whether the United Kingdom Government has taken sufficient steps to eliminate wasteful and fraudulent expenditure within the General budget of the European Community as identified by the Court of Auditors". I have some rather important information to give to the Committee which does not enable me to comply with the terms of the new clause itself because my own amendment stipulates, as identified by the Court of Auditors". It has come to my attention that the audit of the Court of Auditors does not extend over the whole extent of European Community expenditure. That is a fact that I have been able to verify for the year 1993 by an examination in detail of the Court of Auditors' report. I am informed—I have given, the Government notice of the facts as I have discovered them—that the Court of Auditors does not audit the internal expenditure of any of the institutions. It only audits the operational expenditure. I must apologise to the Committee for not being aware of that before. I ought to have picked it up a long time ago on the basis of evidence already available to me.

However, the fact of the matter is that there is a cosy deal between the European Parliament, the European Commission and the European Council on the basis of, "I'll scratch your back if you'll scratch mine", and it has become an apparent convention that the Court of Auditors does not intrude into a detailed audit of the institutions' own expenditure. This I regard as something very important indeed to which I sincerely trust Her Majesty's Government will pay immediate attention and produce some immediate assurances, because the luxury expenditure of these institutions on new parliaments, on some of their so-called information campaigns, and some of their internal grants to the individual party organisations comprised within the European Parliament has to be seen to be believed. Provided that I get the normal customary, and perhaps on this occasion even short response from the Government, it would be my intention after the Government's reply, subject to any other Member wishing to speak, to withdraw the amendment in due course. I beg to move.

Lord Henley

In due course I hope to respond to that specific point raised by the noble Lord. I thank him for his usual courtesy in giving me some degree of notice, and I hope that to some extent I understood him when we discussed this earlier. I hope therefore that my response will be sufficient. Obviously, if it is not, it might be most useful to suggest that we come back to it on another occasion when we can consider the matter, having carefully read what the noble Lord had to say this afternoon, and when the noble Lord has had a look at what I am about to say. Then we could take the whole matter further.

As regards the amendment, I am grateful that the noble Lord has given an assurance that what I believe to be the last substantive amendment will not be pressed to a Division. In due course we can therefore move on after what I believe has been three or four hours of relatively useful debate, and return this Bill to another place.

Turning to the noble Lord's specific point as to whether the Court of Auditors is in breach of the treaty as it does not audit internal administrative spending, under Article 188C of the treaty, the Court of Auditors is required to examine the accounts of all revenue and expenditure of the Community. The Court does audit all Community expenditure and revenue, and that includes both the management of Community resources in member states where the work is carried out in liaison with national audit bodies such as the National Audit Office in the United Kingdom, and expenditure related to the Community institutions—the Commission, the Council, the European Parliament and the Court of Justice. The Court of Auditors itself is subject to external audit.

The Court of Auditors' report on the 1993 EC budget includes references to expenditure administered by the Commission. Chapter 16 deals with travel expenses paid by the institutions. Chapter 19 deals with the Commission's management of data protection resources. The Court of Auditors' report on the 1992 budget includes references to expenditure administered by the Commission. Chapter 15 deals with the European Parliament's budgetary and general accounts with particular reference to the use of consultancy services and an inventory of movable property. Chapter 16 dealt with the Council's administrative expenditure, with particular reference to inventory records and the checking and authorisation of commitments. Chapter 17 dealt with the Commission's move from the Berlaymont building. Therefore, I do not consider the Court of Auditors to be in breach of its obligations to audit all Community expenditure and revenue.

Nevertheless, having said that, I shall look very carefully at what the noble Lord had to say and take further advice on these matters, I hope that he will also look carefully at what I have said this afternoon, and I suggest that we take the matter up on another occasion.

7.30 p.m.

Lord Bruce of Donington

I am most grateful to the noble Lord for his assurance. I can assure him that the matters that he has discussed in relation to the Court of Auditors' report for 1992 and 1991 are not unknown to me, but they cover specific operations of the various bodies concerned. I do not think that he made any reference to the internal accounts of either the European Parliament or the Council. Nevertheless, I agree that we ought to discuss the matter more fully on a later occasion. I thank Members of the Committee for their participation in this debate. I believe that the Committee stage of the Bill was abundantly justified on information grounds only. Such detail could not have been dealt with solely on a Second Reading. Expressing my thanks to all concerned, exactly on the dot that I promised, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 7 not moved.]

House resumed: Bill reported without amendment.

Then, Standing Order No. 44 having been dispensed with (pursuant to Resolution of 15th December): Report received.

Lord Henley

My Lords, I beg to move that the Bill be now read a third time.

This may be the appropriate moment for me to say a few words. We have had two interesting days of useful debate on the Bill. The points that have been raised are very relevant. Certainly her Majesty's Government will bear them in mind for the future.

Much has been said about fraud and financial mismanagement and irregularity in the Community. Yet again, I give the assurance that Her Majesty's Government will continue to take these matters very seriously and will continue to play a leading role in seeking improvements. In addition, the work of your Lordships' Select Committee in this respect has been extremely valuable. I have no doubt that it will continue to play an active role in investigating this important issue.

I understand that on Bills of this type feelings can occasionally run very high and people hold very strong opinions on the matters which are before us. I should like to offer my thanks to the House on this occasion for the generally good-natured manner in which we have conducted our debates and the very positive approach which all Members of the House who have taken part in the Committee stage have taken in regard to assisting Her Majesty's Government in passing this important piece of legislation to meet the commitments we made at Edinburgh—a successful deal negotiated by my right honourable friend. I should like to thank all Members of the House for assisting us in getting this vital piece of legislation through. Furthermore, I should like to thank the House for the manner in which the debate has been conducted. I beg to move.

Moved, That the Bill be now read a third time.—(Lord Henley.)

On Question, Bill read a third time.

Lord Henley

My Lords, I beg to move that the Bill do now pass.

Moved, that the Bill do now pass.—(Lord Henley.)

Lord Stoddart of Swindon

My Lords, I am sorry—I am being told by the Leader of my party to "come on". Indeed, I shall, and very quickly. I had meant to say these few words at Third Reading but I was beaten to the punch by the Chairman of Committees.

This has been a worthwhile debate. We have heard excellent speeches and an excellent maiden speech. I should like to thank the Government and the usual channels for making it possible for us to have this debate. I should also like to thank all those who have taken part for their courtesy and the way that they dealt with the debate. In particular, I should like to thank the noble Baroness and the noble Lord, Lord Henley, for their courtesy and for the genuine attempt that they made to answer the points which were raised.

I believe that this has been a worthwhile couple of days, and I hope that most of the Members of the House who have taken part, if not all, agree that that was so.

On Question, Bill passed.

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