EU Financial Management: Scrutiny (Hansard, 17 December 1997)

§ Lord McIntosh of Haringey
My Lords, improving financial management of the Community budget is a 623 priority area for the Government, as we made clear in our manifesto. The European Court of Auditors' report is a powerful tool in the fight to improve financial management and reduce fraud. The Government will use the opportunities which the UK presidency of the European Union will provide to carry forward this agenda. In particular, the Government will preside over the annual budget discharge procedure. That will give us the opportunity to ensure that discussion of the report in Council focuses on key issues and on achieving real improvements. In addition, the Government will continue to support the Commission's SEM (sound and efficient management) 2000 initiative on improving financial management. This has already produced a real output in the form of clarifications of what constitutes eligible expenditure.

Lord Bruce of Donington
My Lords, your Lordships will be aware that Article 188c of the Maastricht Treaty gave the Court of Auditors responsibility for the first time to report, among other things, on the legality and propriety of various items of expenditure in the Community budget. For the past two years—the coming year will be the third year—the Court of Auditors declined to provide that certificate, even though the original requirement for its provision was claimed as being part of the game, set and match win we achieved in Maastricht.
What are the Government going to do about that? The amount at issue is estimated by the Court of Auditors to be £2.81 billion—I repeat, "billion"—of which the United Kingdom's share would be £340 million. That is not peanuts. There is no point in the Government expostulating about this. What are they going to do about it? We are a member of the European Council which is a superior body to the Council of Ministers and can in fact do what it wishes. What is the noble Lord going to do?

§ Lord McIntosh of Haringey
My Lords, in The Hunting of the Snark the Bellman had the principle that, What I tell you three times is true". When my noble friend asks me the same question three times, it does not make it any more relevant and does not disqualify what I have already said. Not only Members of your Lordships' House but every schoolboy and schoolgirl knows that Article 188c of the Maastricht Treaty has the effect described by my noble friend.
I described in my original Answer the action which the Government intend to take in their role as UK president. That relates not only to fraud, which is one part of the problems which the Court of Auditors identified, but also to the other substantive errors which usually refer to differences of opinion between the Court and the Commission in relation to the interpretation of the rules on eligibility. Both of those issues will be attacked vigorously during the UK presidency. The Economic Secretary to the Treasury has already visited 624 the Court of Auditors to discuss what we are going to do. As far as I am aware, that is the first time in living memory that that has happened.

§ Lord Thomson of Monifieth
My Lords, I fully support the noble Lord, Lord Bruce, in his desire to eliminate fraud in European Union affairs. He asks what should be done. Would not the better and more effective answer be to give greater power to the various authorities within the European Union to make it more of a federal authority dealing with these matters over and above the national governments which conceal many of the frauds?

§ Lord McIntosh of Haringey
My Lords, that is an invitation to a much wider debate than I am prepared to undertake today. A large part of the 5.4 per cent.—£3 billion—to which my noble friend referred relates to failings in administration of the common agricultural policy. It is that in particular with which we are keen to deal. That is what the Agenda 2000 programme, which we shall be vigorously supporting, aims to attack.

§ Lord Stoddart of Swindon
My Lords, is my noble friend aware that a federal organisation would not make things better? It would make them worse because they would be far more difficult to control. Is he also aware that I am extremely encouraged by what he said in regard to the Government's attitude towards fraud. After all, we are the second largest contributor. Can he say what the Government will do to make sure that the Mafia does not move further into the financial affairs of the EC, particularly in relation to the common agricultural policy?

§ Lord McIntosh of Haringey
My Lords, I was right, I think, to refuse to go into the issue of a federal Europe in response to the noble Lord, Lord Thomson of Monifieth. As far as concerns the Mafia, I assume that my noble friend is referring to criminal elements more widely. A great change is taking place in the common agricultural policy. There is less reliance now on support for goods in transit and on export refunds, and more reliance, quite properly, on payments directly to farms. That means that some of the areas where criminal elements had an opportunity to pillage the common agricultural funds no longer exist.