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Page 1, line 13, at end insert ("other than the following paragraphs (which provide for the application of qualified majority voting in the areas cited)--
(A) Article 109q of the Treaty establishing the European Community set out in paragraph 19 of Article 2 (employment guidelines);
(B) Article 109r of the Treaty establishing the European Community set out in paragraph 19 of Article 2 (incentive measures for employment);
(C) Article 116 of the Treaty establishing the European Community set out in paragraph 21 of Article 2 (customs cooperation);
(D) Article 118(2) of the Treaty establishing the European Community set out in paragraph 22 of Article 2 (social exclusion);
(E) Article 119(3) of the Treaty establishing the European Community set out in paragraph 22 of Article 2 (equality provisions);
(F) Article 129(4) of the Treaty establishing the European Community set out in paragraph 26 of Article 2 (public health);
(G) Article 130i(1) of the Treaty establishing the European Community set out in paragraph 32 of Article 2 (framework programme for research);
(H) Article 130o of the Treaty establishing the European Community set out in paragraph 33 of Article 2 (joint undertakings for research, technological development and demonstration programmes);
(I) Article 191a(2) of the Treaty establishing the European Community set out in paragraph 45 of Article 2 (transparency);
(J) Article 209a(4) of the Treaty establishing the European Community set out in paragraph 52 of Article 2 (anti-fraud measures);
(K) Article 213a(1) of the Treaty establishing the European Community set out in paragraph 53 of Article 2 (statistics);
(L) Article 213b(2) of the Treaty establishing the European Community set out in paragraph 54 of Article 2 (independent advisory body on data protection);
(M) Article 227(2) of the Treaty establishing the European Community set out in paragraph 55 of Article 2 (measures for

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French overseas departments and the Azores, Madeira and the Canary Islands); and
(N) Article 45(2) of the Treaty establishing the European Community set out in paragraph 27 of Article 6 (compensatory aid for imports of raw materials);").

The noble Lord said: I wish to make particular reference to paragraph (J) which refers to,


    "Article 209a(4) of the Treaty establishing the European Community set out in paragraph 52 of Article 2 (anti-fraud measures)".

That particular item is on page 41 of the document we are discussing. The Committee will see that it seeks to lay down, possibly with greater precision than before, the responsibility of the Community as a whole, the member states, the Commission and the Council in regard to the institution of effective anti-fraud measures.

I do not believe that anyone can query the necessity for such a clause being inserted into the treaty. Article 209a sets out the responsibilities which were seen at the time as being a desirable code and, indeed, desirable laws to which all parties should conform.

Members of the Committee will recall that in recent years there have been a number of inquiries in this House, headed by the distinguished chartered accountant Lord Benson, who spent years investigating the subject because he was convinced, as indeed was I, serving in a much more subordinate capacity, that fraud and irregularity were assuming such proportions in the Community as to imperil from time to time such reputation for integrity that it had.

For my part--and I believe that this was true also of the late Lord Benson--there could be little complaint about the way in which successive British governments tried genuinely to combat fraud against Community funds in this country. There were minor brushes from time to time in which I participated. It was pointed out to the government of the day that it was not exactly helpful, as regards checking on the absence of fraud and irregularity in relation to import duties, to cut the size of HM Customs and Excise whose responsibility it was to monitor the various transactions inside and outside the country.

Nevertheless, there can be little doubt, looking at the matter from the United Kingdom's standpoint, as one of the principal member states and, indeed, the third highest net contributor to the Community's funds, that on the whole the United Kingdom made some genuine effort. That could not be said of all member states. Without any hesitation or fear of contradiction, I mention in particular the case of Greece whose tobacco transactions and receipts from the Community, to which the noble Lord, Lord Boyd-Carpenter, referred from time to time, tended to be both fraudulent and irregular.

That left the responsibility of the institutions themselves; that is, the various agencies operating under the direct control of the Community or being part of it, the Commission and, indeed, the Council of Ministers. It is to those aspects of the matter that I now wish to turn.

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First, I deal with the question of fraud generally and irregularity in the handling of Community funds. Frauds against the Community and the irregularities associated with disbursements, receipts and accountability have been widely highlighted in the press over the years so as not to require repetition, although I shall venture to mention some cases. For that purpose, I prefer not to use my own words which may be rather more incisive than those of the academically qualified. I use those of our own Comptroller and Auditor General of the United Kingdom.

So acute was the problem of fraud that it was raised and highlighted within the negotiations on the Maastricht Treaty. Members of the Committee will remember our former Prime Minister, the right honourable gentleman the Member for Huntingdon, coming back from Maastricht claiming a very great triumph in that he had urged and had eventually obtained agreement to an amendment to what was Article 189, now Article 248, which is at page 210 of the document to which I referred. He secured the insertion in the obligations of the Court of Auditors of the following:


    "The Court of Auditors shall examine whether all revenue has been received and all expenditure incurred in a lawful and regular manner and whether the financial management has been sound. In doing so it shall report in particular on any cases of irregularity. The Court of Auditors shall provide the European Parliament and the Council with a statement of assurance as to the reliability and legality and regularity of the underlying transactions, which shall be published in the official journal of the European Community."

That was claimed as a considerable victory. I am sure that the Committee will remember the claims made by John Major in that connection. It may surprise Members of the Committee to learn that little action has been taken.

Lord Wallace of Saltaire: I am sorry to interrupt the noble Lord but I thought that he was speaking to Amendment No. 24. The bulk of his argument seems to be concerned with Amendment No. 56, which comes later. Will the noble Lord confirm that he is speaking to Amendment No. 24, not Amendment No. 56?

Lord Bruce of Donington: I am referring to paragraph 52 of Article 209a(4) of the treaty.

I do not propose to give my account of what has happened but will report the considered verdict of the Comptroller and Auditor General on the annual report of the European Court of Auditors 1996--I shall refer to the date aspect later. The Comptroller's report was published four or five days ago and came into my possession last Friday morning. He stated that,


    "it is a matter of serious concern that for the third year in succession the Court have declined to provide a positive assurance on the Community's payments because of the large number of errors identified".

He adds that,


    "the number of exceptions to the Court's assurance on the reliability of the accounts is also a matter of concern, indicating that the Commission have some way to go before they attain the quality of financial reporting expected of public sector financial statements, such as government accounts in the United Kingdom; and the Commission should produce clear and simplified financial statements of the Community Budget with more accessible

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    financial information, prepared in accordance with generally accepted principles in so far as appropriate. The Statement of Assurance could also be published with the financial statements of the Community Budget. Making these two changes would be in line with the recommendation in February 1996 of the Committee of Public Accounts."

Then, our own Comptroller and Auditor General continues--and I am not embellishing any of the errors that he reveals--with these words:


    "In relation to the Common Agricultural Policy ... the Council did not act on the Commission's proposals to eliminate the over-compensation of farmers arising from unexpected movements in world market prices."

He adds that,


    "the high level of error found in payments from the Structural Funds was unacceptable. For instance, 31 out of 69 Social Fund Payments had errors with a measurable financial impact."

The Comptroller and Auditor General states at page 13 that,


    "the Court estimated that farmers were overcompensated under the arable aid programme by some £2.2 billion ... in 1995-96, and that producers had been overcompensated by at least £0.6 billion ... under beef and veal premium schemes over a four year period ...; the extensive use by the Community financial system of advances which were accounted for as actual expenditure."

I could go on about the number of fully grounded complaints. Members of the Committee can read the Comptroller and Auditor General's report any time you like. It continues that,


    "cash at bank, recorded in the balance sheet as £8.6 billion ... was not accurately reflected in the accounts".

For example, advances to non-European countries of £3.1 billion were omitted. The total value of advances and payments on account which were recorded as budgetary payments but which had not yet been definitely accounted for was at least £14 billion. I could go on but I do not intend to do so. Those observations are sufficiently grave to enable the Committee to form a judgment. The report sums up:


    "The Court estimated that for some 4.3 per cent. of Community payments it was impossible to obtain sufficient evidence to reach a firm opinion as to the correct use of Community funds."

That is not good enough. I am confining my criticisms to the Council of Ministers for the time being--and to the extent that my own country is involved because it is a member of the Council of Ministers and in particular of ECOFIN.

4.15 p.m.

Lord Wallace of Saltaire: The noble Lord has been speaking for 15 minutes on the subject of Amendment No. 56, not Amendment No. 24. I have trouble following the relevance of his remarks to Amendment No. 24. The Committee will not make progress unless it sticks to the relevant amendment under discussion. Some of us will be here when Amendment No. 56 is reached--I trust that noble Lord will be here. We shall make much better progress if we deal with each amendment in turn.


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