HL Deb 16 March 1999 vol 598 cc628-39

4.19 p.m.

The Lord Privy Seal (Baroness Jay of Paddington)

My Lords, with the permission of the House, I shall now repeat a Statement being made in another place by my right honourable friend the Prime Minister. The Statement is as follows:

"Madam Speaker, I should like to make a Statement today on the report of the Committee of Independent Experts and the resignation last night of Jacques Santer and his 19 colleagues in European Commission.

"The Committee of Independent Experts set up last January on a Motion from the Socialist Group of the European Parliament to investigate allegations of fraud and mismanagement, reported yesterday. It is a damning report. It catalogues in key areas a culture of complacency and lack of accountability, and in some cases nepotism, that is unacceptable. The report could not be more clear-cut. It has revealed systemic failings in the Commission which have been tolerated for far too long.

"It was absolutely right that the Commission resigned en masse. The President of the Commission should leave as soon as reasonably and practically possible and a new president should take his place. The Commission should stay only in a caretaker role until a new Commission is appointed.

"There is no criticism of the two British commissioners. Indeed, they played a key role in bringing this issue to a head and I believe that they should carry on.

"Above all, the appointment of a new president and Commission should be the opportunity to push forward root and branch reform of the Commission, its mandate and its method of operation.

"I will, of course, discuss these issues fully with Chancellor Schroeder, the EU President, when I see him later today.

"The new President of the Commission must be a political heavyweight, capable of providing leadership and authority to the Commission.

"Jacques Santer is by no means solely responsible for this situation. Indeed, to be fair to him, he has instituted many changes of a worthwhile nature. Many of the issues revealed by the report pre-date his appointment.

"But, I will he blunt. We cannot have the next president decided in the same way as the last, debating the narrow interests of one country or another. The top jobs, not just in the Commission, but throughout the European institutions, should go to the top people. Merit and merit alone should decide.

"We need the best person for the job of president. We, heads of government, should make it clear that the Commission President operates under a mandate for reform and is a thorough-going reformer.

"I would like heads of government, in the manner we proposed last year at the conclusion of our presidency, to give the new Commission, with due involvement by the European Parliament, a specific statement of what we believe the aims and mission of the new Commission should be—a new contract between the Commission and the Council.

"It should set a new, clear course for a Europe of reform and change. The changes suggested yesterday by the committee of inquiry are just the first step. In the short term, the reform must include at least the following:

"A complete overhaul of the approval and auditing procedure for financial control; a new system for financial management and spending programmes; an entirely new procedure for the awarding of contracts for the provision of services, with a new management system to oversee it; reworking of the whole of the disciplinary procedure so that staff of the Commission know exactly what is expected of them and what will happen if they fall short of those expectations; and a new system of accountability in the bureaucracy of the Commission so that each individual holding a position of responsibility is fully accountable for the budget and the measures that he or she manages.

"In addition, we also need an entirely new framework for fighting fraud and financial irregularities. We have long been advocates of the appointment of an independent fraud investigation office which has full access to documents and officials and the powers it needs. That appointment should now be made.

"The committee of independent inquiry will report again soon with further recommendations on reform. We should implement them.

"In the longer term, we should put in place, as we argued for at Amsterdam, during our presidency and ever since, a new structure for the Commission; a better process of decision-making; and a system of accountability that recognises the importance of connecting the people of Europe more closely to the decisions that affect them.

"The inquiry's report has revealed a sad catalogue of negligence and mismanagement. There will, no doubt, be those who see this as just another chance to bash Europe. Intelligently seen, this is in fact an opportunity to make changes, which many of us believe and have argued are long overdue. It is our responsibility now to use this crisis to ensure that the standards of management and public administration in the European institutions are as high as we expect them to be in national and, indeed, in regional governments in Europe. Let us seize that opportunity and use it well".

My Lords, that concludes the Statement.

4.23 p.m.

Lord Strathclyde

My Lords, I thank the noble Baroness for repeating the Statement that has been made in another place. In reading the Statement, the noble Baroness made a number of points which I should like to deal with in turn. However, does she agree that this House will view this Statement and the events surrounding it with immense gravity? When so many programmes and projects handled by the Commission now seem to be riddled with incompetence and waste, does she also agree that this is no time to be pushing forward policies which will lead to our nation being run more and more by Europe?

Can the noble Baroness tell the House how seriously the Government now assess the level of fraud in the Commission and the European Union to be? In other words, what is the current estimated cost to the British taxpayer? Will the noble Baroness also acknowledge today that the findings of the auditors completely vindicate the repeated warnings of the noble Lord, Lord Bruce of Donington, about the prevalence of fraud in the Commission? Is it not sad how often his wise words have fallen on deaf ears on the Front Bench opposite?

Never again must this national Parliament be left in the dark about any step which will lead to the commitment of more resources to Europe. Does the noble Baroness recall that, after the Noordwijk Summit last autumn, my noble friend Lord Cranborne sought a Statement on the summit outcomes, which included agreement to major increases in EU infrastructure spending? Unfortunately, a Statement was not made to the House at the time because of the reluctance of the Prime Minister to report to Parliament. Does the noble Baroness agree that all discussions among the 15 heads of government about the Commission or the funds under its control should in future be reported to the House, whether those summits are formal or informal?

Will the noble Baroness assure the House that the Government will agree to no increase in the funding of programmes controlled by the Commission until our national Parliament can be assured that the stables are swept well and truly clean? Will she give urgent consideration to an emergency debate in this House on the implications of this crisis? While on this subject, is the noble Baroness yet in a position to say when this House will have the debate on the National Changeover Plan for the euro that she promised on 23rd February? Surely one or other of these debates should take place before the Easter Recess.

Does the noble Baroness accept that there is nothing new in the central core of these allegations? Action should have been taken long before to bring the Commission to heel. While I welcome the aspirations of the Prime Minister, your Lordships will recall the events in January this year when a Motion to censure the Commission on precisely these charges was voted down in the European Parliament on the votes of the Socialist Group, led by a Labour Member of the European Parliament. That Motion was originally tabled by the Socialist Group, but it then changed its position and did not censure the Commission. Will the noble Baroness inform the House who was responsible for the reprieve given to the Commission in January? What were the contacts between Ms. Pauline Green and the offices of the Prime Minister, or other Ministers, about the vote in January?

Regrettably, also in January, when the Conservatives and the 150 other MEPs in the European Parliament voted for the resignation of Madame Cresson, the Socialist Group supported her continuance in office. Will the noble Baroness confirm that it is now the Government's view that Madame Cresson should not be reappointed? Last night, the Prime Minister's spokesman was able to re-endorse Sir Leon Brittan and Mr. Kinnock immediately. Should we now take it that they have no confidence in any of the other Commissioners?

The most essential step now is that confidence in EU institutions and in the handling of such large sums of money should be restored. When will the Government be more specific about their precise proposals? Does the noble Baroness agree that the Commission now needs to become far more open and accountable and that clear lines of responsibility should be established? Further, does she agree that there should be a new code of conduct on the appointment of senior EU officials; that Commissioners should declare their private interests and connections on a public register; and that the number of European directorates and departments should be reduced? Will the Prime Minister ensure that these items, and others, are on the agenda for the Heads of Government meeting next week?

The Prime Minister has spoken of his desire to be seen as positive in Europe. Good. That is all very well. Indeed, we all want Europe to succeed. However, we need to start digging beneath the fine words and flabby generalities and ask: where is this Government's policy specifically leading us? They have signed up to the social chapter that is loading costs on our business and they have borne down on our beef industry through a ban on beef-on-the-bone. They have allowed our fisheries interests to be overridden. They talk of long-term reform of the CAP but have achieved nothing. Now we are told they are to commit tens of millions of pounds to a changeover plan for the euro. All these policies point to more control for Brussels and its institutions over our national life and less influence for our national Parliament.

In his desire to cosy up to the European Union, has the Prime Minister not been more than a little naïve in moving so far, so fast to turn more authority over to Brussels? Does this crisis not demonstrate that the existing institutions of the EU should not be trusted with more responsibility? Dare I say that our national interest would have been a lot better served if the noble Baroness and her friends in government had spent a little less time on the so-called reform of your Lordships' House, which is working well, and on upheavals in our system of justice, which is generally admirable? Would we not have been better served if they had devoted a little more of their time to reform of EU bodies whose role they have enhanced so unthinkingly and whose virtues they have accepted so uncritically? Is it not time for less rhetoric and more realism in this Government's policy on Europe?

Is it really the time now to invite the Commission to do more and to control more and more of our national life? Is it rather not the time for Europe to do less, but to do it better?

4.31 p.m.

Lord Rodgers of Quarry Bank

My Lords, speaking from these Benches I have no need to ask the kind of debating questions which the condition of the Conservative Party obliged the noble Lord, Lord Strathclyde, to raise. I noted that the Minister on this occasion spoke for four minutes and the noble Lord, Lord Strathclyde, spoke for seven. I intend to be much closer to the Minister than to the noble Lord in two respects.

On these Benches we welcome the repetition of the Statement made promptly in another place. It is difficult to take exception to what the Prime Minister said. The Statement is admirably short and to the point. We on these Benches will watch to make sure that the Government continue to put their full weight behind the Statement and the reforms which the Prime Minister says he has in mind and that this is indeed the spirit which will inspire the discussions with other heads of government which are now bound to take place.

There is a case for a short pause now to assess exactly what is happening in Brussels. Last night the Commission seemed to have resigned and that was wholly appropriate. One assumed it had resigned because it believed that what the report said required resignation. However, the President of the Commission has apparently said today that the report is false, unbalanced and unfair, which makes the Commission's decision difficult to understand. These matters have to be sorted out.

I hope that my next comments will chime with the feelings of your Lordships on all Benches. Whether one is in favour of the European Union and its development, or whether on the whole one is hostile to its future prospects, we must all wish to see this crisis resolved. Only those who wish to withdraw from the European Union can hope that positive results do not come out of what has happened.

The outcome is to the credit of the European Parliament. We should note that. The prospect is that it will lead to greater accountability on the part of the Commission, and we must welcome that. It may also result in far better day-to-day management which is something noble Lords on all sides of the House have pursued. The Prime Minister referred to root and branch reform of institutions. I am sure that he is right to take that view.

I ask the noble Baroness the following short questions. What happens now? Who makes the next moves? It is far from clear, either in what the Prime Minister said or from what is coming out of Brussels, what happens now. Is it likely that Sir Leon Brittan may become the acting President of the Commission? We on these Benches would look favourably on that. He has served this country and the European Union well. My next question follows from my first question. Institutionally, what are the rules within the Commission and within the Union which govern an unprecedented occasion of this kind?

4.34 p.m.

Baroness Jay of Paddington

My Lords, I am grateful to both noble Lords who have broadly welcomed the position that my right honourable friend the Prime Minister has taken in his swift response to the crisis in Brussels, rightly described by the noble Lord, Lord Strathclyde, as grave. I am sure the tone of the Statement reflects the gravity with which the Government view the activities of the Commission and the situation that has occurred in Brussels over the past 24 hours.

The noble Lord, Lord Strathclyde, rightly drew attention to the role of my noble friend Lord Bruce of Donington in raising some of these issues, as he has, of course, done over many years. The House should not take the view that somehow all of this has happened recently. In fact the report of the wise men covers a period of four-and-a-half years, long before my right honourable friend took responsibility. I remind your Lordships of the comments of the previous Prime Minister, the right honourable gentleman, Mr. Major, when M. Santer was appointed; namely, that he was a wise choice and was the right man in the right place at the right time. There is nothing to be gained in any of us trying to ascribe responsibility on a party political basis for presiding over a period of fraud and difficulty.

It is, of course, right to take this matter extremely seriously. I emphasise that again to the noble Lord, Lord Strathclyde, and to everyone in the House. It is the Government's intention to do that. The noble Lord, Lord Rodgers of Quarry Bank, asked about the next steps. It is fortunate that the summit will take place in Berlin next week. I believe that my right honourable friend the Prime Minister will meet within an hour the President of the European Union, Chancellor Schroeder, to discuss these events as a preliminary to the meeting in Berlin next week.

There was a question about whether or not our commissioners would stay in post. Of course the UK Government are responsible for nominating their own commissioners. As the Statement says, the Government have confidence in our own commissioners although we are aware that they take collective responsibility. It was their collective responsibility which led them to resign with their colleagues in Brussels. The noble Lord, Lord Strathclyde, referred to Madame Cresson. That is, of course, a matter initially for the French Government, but I believe the British Government would be surprised if she were reappointed. However, that would, of course, be a matter for the heads of state meeting next week.

The noble Lord, Lord Strathclyde, asked whether there was any estimate of the size of the fraud by commissioners. I emphasise to the House that there was no suggestion in the report of the wise men that commissioners had been responsible for fraud. They had certainly been responsible for mismanagement; indeed, the word "nepotism" was used. The level of possible financial fraud among the officials of the Commission and within the organisation is a matter which I imagine will be looked at closely in the further investigations of the group of wise men, who, as I said in repeating the Statement, will take their investigations further.

Both noble Lords asked whether there would be some suspension in the immediate term of the agenda on Europe. As noble Lords will be aware, the Commission's report on Agenda 2000 which is to be considered at the Berlin summit next week, is of enormous importance, and is one which I am sure no one in your Lordships' House would want to see derailed. But, of course, these initial problems with the Commission will have to be addressed and will obviously be matters of great importance in those discussions. The noble Lord, Lord Strathclyde, asked whether the Government would be looking to a more open and accountable Commission. The answer to that must surely be yes. Indeed, that was reflected in the terms of the Statement and in the provisions for reform which my right honourable friend described as being essential. Of course it is important that the Commission should be both open and accountable. It should have more rigorous systems of management and accountability throughout its structures, not simply among its senior people and senior management.

As always when we discuss these matters in your Lordships' House there is perhaps a basic division of opinion about whether the European institutions are, in principle, worthwhile. I would simply say that the Government's view is that it is in the best interests of this country to stay in Europe, to stay wall the European Commission, but to work as vigorously and as importantly as we can to ensure that we lead a reformed Union. After today, I think that will find an echo throughout Europe.

4.40 p.m.

Lord Shore of Stepney

My Lords, I am sure my noble friend will accept that she should add quite a large number of items to the short list of defects which the Commission has to remedy. A root and branch reform is needed. What worries me-- I am sure it worries my noble friend from her responses already—is that there is no one to ensure that major reforms and changes take place. What also worries me is that for four years the Commission's own Court of Auditors has failed to certify the accounts and the European Parliament has sat on its hands. Are we really to rely upon its new endeavours or simply wait for another whistle-blower like the brave young man who exposed what has been going on? Can we not find some ways of returning and repatriating powers already handed over to the Commission to our own Parliament where they can be properly supervised?

Baroness Jay of Paddington

My Lords, it may not meet my noble friend's requirements for this Parliament to supervise those accounts and the auditing processes within the Commission, but I am sure he will be pleased to hear of the proposal put forward by the Chancellor of the Exchequer at the beginning of this year for an independent person to head the internal organisation of the Commission's fraud arrangements. I suppose one could call him an independent fraud-buster. He would be someone very senior. He would have powers independent of the Commission and would report directly to the Council of Ministers. That initiative was supported yesterday by ECOFIN and my right honourable friend the Prime Minister is confident that it will now go ahead.

The Earl of Onslow

My Lords, perhaps the Minister will answer the following question. An Augean stable has been disclosed—an Augean stable which runs a common agricultural policy which we know to be fatuous and a fisheries policy which we know depletes the North Sea of fish. All these matters are agreed by the Government. If the Augean stable is not cleansed; if the common agriculture policy is not completely changed; and if the fisheries policy is not made completely sound, will we still go on belonging to an institution which runs a rotten and Augean policy? Is there any situation in which the Government will say "Up with this we will not put" or will they go along with anything?

Baroness Jay of Paddington

My Lords, in his usual robust fashion the noble Earl identified the division of principle to which I referred in my initial response to the two Front Bench contributions. It is absolutely clear that there needs to be a systemic review, revision and reform of what is happening. That is something which my right honourable friend the Prime Minister, who is not known for shirking radical reform, will, I am sure, take forward in line with his colleagues. As I said in my initial response to the two Front Bench contributions, the Government's position is that it is in the interests of this country to stay in Europe. We believe that being pro-Europe is being pro-reform in Europe.

Lord Marsh

My Lords, does the noble Baroness accept that if there had been a problem on this basis with a British public company its entire board would have had some very serious questions to answer from the Department of Trade and Industry and that on some aspects criminal charges might have been considered? Does she accept also that this is not something which was suddenly discovered? We have joked with the noble Lord, Lord Bruce of Donington, but this has been commonly discussed in every business newspaper in Europe over a period of years. How can the Minister justify, against the background of collective responsibility, an immediate reassurance that two of the members of that body are immediately eligible for reappointment?

Baroness Jay of Paddington

My Lords, all that my right honourable friend has done in supporting the two British commissioners is to identify the fact that they were in no way, either explicitly or implicitly, implicated in the report of the organisation set up to investigate the matter. My right honourable friend the former Commissioner for Transport, Mr. Kinnock, explicitly expressed today in on-the-record statements that he saw it as part of his training—presumably in British politics—to accept collective responsibility for what had been uncovered and to move on that basis.

I draw the attention of the House to the actions that the Government have taken since May 1997 to combat fraud and irregularities in the European Commission. I have mentioned already, in response to my noble friend Lord Shore, the proposal of my right honourable friend the Chancellor of the Exchequer on the question of the independent fraud-buster. We also took steps to secure a legal base in the Amsterdam Treaty to combat fraud. We have taken steps in the context of the agriculture structural reforms to impose tougher penalties on member states which misuse Community funds. We have seconded our own expert staff to the Commission's financial control. We have taken a series of practical steps which underline our seriousness in responding to the gravity of the situation which, as the noble Lord rightly identifies, has gone on for a long time.

Lord Bruce of Donington

My Lords, I have had the honour of serving in your Lordships' House for 25 years. I am bound to say that the results of a report that I have not yet read in detail comprise the most shocking revelations about public life that I have ever heard during my entire political life. They are not to be brushed aside lightly. They are matters of the utmost importance in which no one concerned—whether at governmental level, Commission level, Council level or even (dare I say it?) in this place and in another place—is free from blame. I sincerely hope that we shall have an opportunity to debate the report in detail.

There are lessons in it for all of us. There are lessons in it for every democrat, not only in the United Kingdom but in Europe as a whole. I sincerely hope that, before finally replying to the various responses to the Statement, the Government will give the House an assurance that a full opportunity—not time-limited to two-and-a-half hours—will be given to discuss the contents of the report and its implications for the United Kingdom.

I have only two questions to ask. First, will the Government give the House an assurance that, through the Council of Ministers, the European Council or acting as an independent member state, protection will be given forthwith to the very courageous servant of the European Commission, M. Paul van Buitenen, who blew the whistle on the whole affair and who was the subject of immediate threats thereafter at 'the hands of the Commission itself and at the hands of its servants? Can the Minister assure the House that the Government will proceed vigorously in that matter? Can my noble friend give an assurance that in future some regard may be had to the actions that are supposed to be taken under the Treaty of Maastricht, where it was laid down that the Court of Auditors should provide a statement certifying the reliability of the accounts of the Commission?

After four years of ignored requests that a discharge at any rate be discussed at Council level and action taken thereon, can we have an assurance that, in future, such matters will be acted on explicitly and quickly? Will the Government bear in mind one of the most damning parts of the report by the independent committee? With the leave of the House I shall read it to your Lordships. It goes to the root of the whole business. It says: The responsibility of individual Commissioners, or of the Commission as a body, cannot be a vague idea, a concept which in practice proves unrealistic … It is becoming difficult to find anyone who has even the slightest sense of responsibility". That thought might remain in all our minds.

Baroness Ramsay of Cartvale

My Lords, perhaps I may quickly draw the attention of the House to the necessity of keeping interventions as brief as possible so that as many noble Lords as possible can intervene.

Baroness Jay of Paddington

My Lords, I am grateful to my noble friend. I say without hesitation that I am sure the whole House joins me in recognising the extraordinary assiduousness with which he has pursued this subject over many years. It is right that we should pay tribute to the work that my noble friend has done. I hope that he will accept, as was mentioned in the Statement, the seriousness with which the Government take these overall suggestions and recommendations and the way in which we intend to lead the debate in seeing that they are implemented in the most rigorous way.

My noble friend asked specific questions about the member of the Commission staff who was the initial whistle-blower. I understand that his case for employment is now under appeal and is therefore subject to relative understandings about an industrial tribunal. I am sure that the matter will be examined by the requisite authorities. Whether it is an appropriate matter for discussion by the Council of Ministers will depend on legal status.

My noble friend also asked me about the oversight of auditing and accounts management within the European Commission. I hope that he was assured by my remarks about the way in which my right honourable friend the Prime Minister intends to pursue greater clarity and strictures on that financial audit and management and that this will now be taken forward. Perhaps I may briefly quote the conclusion of the Statement, which I hope will reassure him: It is our responsibility now to use this crisis to ensure that standards of management and public administration in the European institutions are as high as we expect them to be in national … government(s)". I am sure my noble friend will accept that my right honourable friend and his colleagues will pursue that course with vigour.

Lord Hooson

My Lords, will the Leader of the House tell us when printed copies of the report will be available for Members of this House to read?

Baroness Jay of Paddington

My Lords, I am informed that they are available.

Lord Renton

My Lords, will the Government bear in mind that the Treaty of Rome should now be completely re-negotiated so that, instead of having a Commission that aims at economic and financial cohesion and harmonisation of laws, we have an alliance of independent states in a free trade area, giving each other mutual help when necessary but remaining independent instead of being governed from Brussels?

Baroness Jay of Paddington

My Lords, I do not know whether the noble Lord will accept in answer to that point the line in the Statement which refers to the need to look in the longer term for an entirely new structure for the Commission and a better process for decision-making.

Lord Clinton-Davis

My Lords, I have a slight interest to declare. I was a member of the European Commission. While it was wholly unacceptable and unwise for Mr. Santer to say what he did today while accepting that members had to resign, is it not also very difficult to take from the Leader of the Opposition assertions that problems which proved completely elusive to the previous government over a period of 18 years should have been resolved by this Government in two years? Is it not also a fact that, in 1987, at the initiative of the noble Lord, Lord Cockfield, the then Commission put forward a proposition to deal with independent investigations into fraud in the member states and elsewhere which was rejected by the then government? Is this situation veering just a little on the hypocritical?

Baroness Jay of Paddington

My Lords, I am not sure whether noble Lords would be happy if I were to say "yes" to the whole of my noble friend's statement, particularly the last sentence, but in general I entirely support his remarks.

Lord Inglewood

My Lords, I hope that the noble Baroness may be able to help me on a matter that puzzles me slightly about this episode. My understanding is that, at the January Session of the European Parliament, almost all the British Labour MEPs did not vote to dismiss the Commission. Since then, it has been stated in the report of the Conunittee of Independent Inquiry that the document, to paraphrase paragraph 9.1.2, does not contain any significant new evidence beyond that which is contained in the van Buitenen allegations and that which was discussed before Parliament in January. How, then, has there been a change of attitude in favour of supporting the resignation of the Commission?

Baroness Jay of Paddington

My Lords, the committee that was set up to examine these matters consisted of independent experts within the Commission. As I understand it, there were, for example, some allegations made by the initial whistle-blower about individual commissioners which were simply not borne out. Some of those were strongly borne out by the report of the so-called wise men, but others were not.

Lord Richard

My Lords, can we be quite clear as to the Government's position? I suppose I should declare, as my noble friend did, a past interest as a former member of the European Commission. To mix a metaphor, is this not a Pandora's Box which has now been opened and the can of worms has now come out? Does my noble friend agree that there is nothing wrong with the basic institutional structure of the European Union? Does she also agree that it is no part of the policy of Her Majesty's Government to change the basic institutional structure of the European Union? Will she finally agree that what the report has revealed is a degree of maladministration inside the Commission which is capable of being rectified and ought to be rectified quickly?

Baroness Jay of Paddington

My Lords, I do not wish to add to the size of what my noble friend rightly described as the Pandora's Box or the can of worms. However, I say to him—and I regret that I did not mention this in response to my noble friend Lord Bruce of Donington—that any debate on this subject, of whatever length, will be a matter for the usual channels. I am sure that he will take that matter up. I suspect that the point raised by my noble friend Lord Richard will need to be addressed in that context. However, I draw his attention to what was said in the Prime Minister's Statement and which I repeated to the noble Lord, Lord Renton. In the longer term we should put in place, as we argued at Amsterdam during our presidency and have done ever since, a new structure for the Commission and a better process for decision-making.