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House of Lords

Monday, 20th November 1995.

The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.

Prayers--Read by the Lord Bishop of Chelmsford.

EC Budget: Court of Auditors' Report

Lord Bruce of Donington asked Her Majesty's Government:

    What steps they propose to take during the Council of Ministers' consideration of the 1996 European Community Budget to stem what has been described in the Court of Auditors' Report for 1994 as the waste, inadequate control and financial mismanagement of funds provided by the members of the European Union to the European Commission for institutional and administrative expense and for redistribution to member states for Community purposes.

The Minister of State, Department of Social Security (Lord Mackay of Ardbrecknish): My Lords, the Budget Council on 17th November welcomed the publication of the Court of Auditors' first statement of assurance and annual report. When those reports are considered in detail the United Kingdom will stress the importance of keeping up the momentum in the fight against fraud, waste and financial mismanagement. The next step will be a discussion at the ECOFIN Council on 27th November and at the Madrid European Council next month of the reports submitted by member states on their national arrangements for combating fraud and waste.

Lord Bruce of Donington: My Lords, I thank the Minister for that reply. Can he say whether the Government are aware that, so long as qualified majority voting applies under Article 203 of the Treaty of Rome, there can be no effective intervention by Her Majesty's Government in Europe's financial affairs? Those affairs are determined in practice by the Franco-German alliance in collaboration with the Commission. They ensure that large dollops of money are shoved throughout the Community, but in particular to the Mediterranean states, in pursuit of the objectives of that alliance.

Lord Mackay of Ardbrecknish: My Lords, I am not nearly as pessimistic about this matter as the noble Lord, Lord Bruce of Donington. I remind him of what happened at Maastricht when we secured a full institutional status for the European Court of Auditors--the body which issued the report about which the noble Lord asks. We secured the statement of assurance, which is a general audit of the Community's finances, and at the Essen Council last December my right honourable friend the Prime Minister insisted that each

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member state should report on action taken to counter fraud against the EC budget. Those reports will be presented at the Madrid Council next month.

Lord Peston: My Lords, we have cantered over this course several times in recent months. The Minister will no doubt agree that we have always accepted that the prime responsibility for issues of fraud lies with individual member states. Can the Minister say whether there are examples of fraud which fall within the ambit of this Government which we ought to pursue but are not pursuing? Alternatively, can he say how strongly we are pursuing fraud cases? Those of us who read the press do not find many examples of the British Government discovering such cases.

Lord Mackay of Ardbrecknish: My Lords, we, like other member states, are the principal people who spend the European Budget on behalf of the Community. Our system of accounting--the Public Accounts Committee and so forth--is a strong one, though we are not self-satisfied with it. However, problems have been detected in the UK. We detect a high number of irregularities, but for small amounts. For example, the 1994 fraud report indicated that the UK notified 15 per cent. of the total CAP irregularity cases. However, those represented only 3 per cent. by value, whereas the Community average is higher than that.

Lord Peston: My Lords, perhaps I may pursue my point. I thank the Minister for that answer, which was extremely interesting. However, can he say what happens to all those cases of minor fraud? Are vast numbers of farmers on their way to prison at the present time? More seriously, what is going on? The farmers are fined and then what happens?

Lord Mackay of Ardbrecknish: My Lords, I need notice before I can go into the kind of detail about which the noble Lord asks. In those cases the spending is disallowed. The last year for which we had figures was 1991. At that time around 0.13 per cent. of the UK CAP spending was disallowed, whereas the Community average was 4.63 per cent. I do not believe too many farmers land in gaol, but there have been some high profile cases over the years which have been taken to court.

Lord Campbell of Alloway: My Lords, on the subject of fraud about which the noble Lord, Lord Peston, spoke, what is to happen in relation to the billions of pounds lost through fraud as regards the agricultural policy?

Lord Mackay of Ardbrecknish: My Lords, as I mentioned, we tried and succeeded at Maastricht to firm up Community procedures. The member states will be presenting a report at the Madrid Council. We shall be working to ensure that member states face up to their responsibility and that there is a full programme of further work. One of the reasons why the common agricultural policy figures so much in these matters is that agricultural spending accounts for over half the

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budget. When one looks at mismanagement it appears to fall heavily on the CAP, but in fact that forms half the budget.

Lord Thomson of Monifieth: My Lords, does the Minister agree that the report of the Court of Auditors shows that the level of fraud and waste in the Community is disgraceful? Is he aware that I paid a rare visit to Brussels the other day where I met the European Parliament and members of the European Commission? I gained the impression that for the first time serious efforts were being made not only by the European Commission, but also by the European Parliament, to come to grips with the problem and that one of the major influences in compelling them to do that was the report on these matters from your Lordships' Select Committee.

Lord Mackay of Ardbrecknish: My Lords, I did not know that the noble Lord paid a visit to Brussels recently, but I am glad to hear it. The UK Government welcome the report of the Court of Auditors. We welcome also what we believe to be a more constructive and determined attitude by the new Commission since it took office in January 1995. With more determination from that source and a lot of determination from the Council of Ministers driven by the UK Government and UK Ministers, we can make progress.

Lord Boardman: My Lords, can my noble friend confirm that the reports on fraud within the Community from Select Committees of this House are quite excellent both at disclosing many of the sources of fraud and making recommendations and that those reports are being pressed on the Council of Ministers, the Commission and everyone else in the Community who can help?

Lord Mackay of Ardbrecknish: My Lords, I am happy to take this opportunity to congratulate the various committees of the European Communities Committee on their reports, including those on fraud and how we might tighten up on it. I think I am right in saying that my right honourable friend the Chancellor of the Exchequer appeared before the committee when it was taking evidence. We take these reports very seriously indeed, and, as my noble friend knows, and as other noble Lords involved in the committees know, so do many people across the European Community. I very much hope that other countries will begin to take these matters as seriously as we do.

Lord Murray of Epping Forest: My Lords, will the Government support measures to strengthen the ability of the Commission itself, both by the employment of inspectors and by the delegation of authority, to monitor the activities of national governments in order to tackle at that level the major source of fraud?

Lord Mackay of Ardbrecknish: My Lords, as I said, we welcome what appears to be a more constructive view of the new Commission on these matters. One of the things it can do is to help member states by making

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sure that any regulations brought forward are clear, clearly defined, well regulated and have within them the ability and wherewithal to prevent fraud.

Lord Cledwyn of Penrhos: My Lords, it is generally accepted that the European Communities Committee does a first-class job. Do the other countries of the Community have similar committees?

Lord Mackay of Ardbrecknish: My Lords, as I do not think any of them has a similar House to your Lordships' House, probably the short answer to that question is no.

Commonwealth Day

2.45 p.m.

Lord Molloy asked Her Majesty's Government:

    Whether they will consider instituting an annual British Commonwealth Day.

The Minister of State, Foreign and Commonwealth Office (Baroness Chalker of Wallasey): My Lords, Commonwealth Day, which falls on the second Monday of March each year, is marked throughout the Commonwealth. In Britain it is marked by a multi-faith service at Westminster Abbey in the presence of Her Majesty the Queen.

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