EC Accounts: Court of Auditors' Findings (Hansard, 6 February 1996)

§ The Minister of State, Department of Social Security (Lord Mackay of Ardbrecknish)
My Lords, the United Kingdom welcomes the publication of the European Court of Auditors' first statement of assurance, a UK initiative secured at Maastricht in 1992. The court's statement will be one of the documents which the Council will take into account in deciding on the Council's recommendation to the European Parliament on the discharge to be given to the Commission in respect of its implementation of the 1994 Community budget.

Lord Bruce of Donington
My Lords, I thank the noble Lord for that reply. Is he aware that his rather non-committal Answer gives no cause for comfort to those who have taken an interest in a matter which affects every British taxpayer? Is he aware that the report regarding reliability of the accounts and the regularity of the transactions lying behind them is not a matter which concerns the domestic affairs of individual states but the actions of the institutions and in particular 120 the Commission? Is the Minister aware that the document is a thorough indictment of the irregularity with which large numbers of transactions are carried out within the European institutions? Will he take a far more robust attitude in the Council of Ministers towards the discharge of the budget than his answers have done so far?

§ Lord Mackay of Ardbrecknish
My Lords, I am sorry that the noble Lord thinks my answers sound complacent. I can assure him that the United Kingdom takes a robust view. As I mentioned in my original Answer, at Maastricht we were much in favour of the kind of outcome which led the Court of Auditors to produce this report. The noble Lord should not perhaps be too extravagant in his condemnation. He will note that the report, after showing the concerns, says at Chapter 4.2: The obverse of these statements is that Court's audit indicates that at least four fifths of EC payments should he without serious substantial error with regard to the legality and regularity of the underlying transactions". Therefore, more than 80 per cent. has been given without error. Many of the other questions the court raised are not to do with honesty or dishonesty but with the way in which the procedures are carried out and recorded.

§ Lord Clark of Kempston
My Lords, does my noble friend agree that efficiency as regards the accountability of the European budget would be greatly increased if the auditors in Europe were to copy our National Audit Office? Not only does it audit the public accounts; it also pays special attention to value for money. If value for money was introduced into the European budget, it would surely help all taxpayers throughout the Community.

§ Lord Mackay of Ardbrecknish
My Lords, my noble friend makes a valid point about the National Audit Office. One aspect of its work is to look for value for money. The idea behind the statement of assurance, which is the subject of the Question, is along the same lines as the opinions on departmental accounts given in this country by the NAO.

§ Baroness Elles
My Lords, the Select Committee on fraud in the Community recommended strongly that the European Parliament budget control committee should have enough powers and the necessary documents and evidence to complete its task fully and properly, as it would wish. Will the Minister assure the House that the committee will be given those powers to enable it to decide whether or not to give a discharge?

§ Lord Mackay of Ardbrecknish
My Lords, the report before us is not specifically concerned with fraud although it may identify situations where there may have been fraud. However, I can assure my noble friend that we in the United Kingdom are aware of the need to ensure that the amount of fraud in the European Community is reduced to the absolute minimum. One of our problems is that it is for each member state to 121 control the situation in its own country and to make sure that there is no fraudulent abuse of European moneys within its own borders.

§ The Earl of Onslow
My Lords, will my noble friend confirm that he stated that 20 per cent. of the budget is either fraudulent or "iffy"? If that is what he said—I thought that he said that 80 per cent. was clear; so it follows that 20 per cent. was not—it seems a totally and utterly disgraceful state of affairs.

§ Lord Mackay of Ardbrecknish
My Lords, my noble friend did not listen to the whole of my answer. I indicated to my noble friend Lady Elles that the report was not concerned with fraud; quite the reverse. It is far more concerned with the checks and balances in both the revenue and the expenditure systems. I recommend that my noble friend reads the report. The general conclusions in paragraph 3.1 state: The Court's examination of the revenue entered in the accounts in respect of traditional own resources did not reveal any significant errors. In respect to the expenditure"— this is where the point about the 80 per cent. comes in— there are too many errors in the transactions underlying the payments entered in the accounts…to be able to give a positive global assurance as to their legality/regularity". Many of the points raised are to do with the way things were reported and signed off and the timescale in which they were reported. Those problems have rightly been drawn to the attention of the Commission and of member states to ensure that those aspects of the administration are correct.

Lord Bruce of Donington
My Lords, will the Minister confirm that he has admitted to the House that one-fifth of the expenditure transactions referred to in the report are irregular, illegal or lack proper regularity within the terms of the Act? He recommended that his noble friends read the document; perhaps we may have the assurance that he himself will read an additional report, No. C/27, dated 31st January. That refers specifically to the European Parliament and the irregularities are extremely detailed. Would it not be unfortunate if the Minister were to give the impression that the United Kingdom did not intend to pursue matters with the utmost rigour at the core of Europe?

§ Lord Mackay of Ardbrecknish
My Lords, I thought I had given the noble Lord the assurance that we would pursue matters with the utmost rigour. The 14 per cent. of total payments, for example, on which the court could not obtain assurances include items in the United Kingdom such as the data in the prescribed form for the ewe premium scheme in Scotland. It was stated that the court did not have the data because they were not available in the form desired by the required date. I was asked earlier about the National Audit Office. In 1994–95, in its audit of Scottish agricultural spending, it checked 170 payments under the guarantee scheme. That is far more checks than the court would make, and no material errors were revealed in payments to farmers. That is an example of where we have checked and the audit office has put a question mark on 122 it because of timescales. We have checked in greater detail, and there is no reason for concern. That is something the noble Lord should bear in mind.