THURSDAY 22 JULY 1999

MS PATRICIA HEWITT, DAWN PRIMAROLO, MR PAUL MCINTYRE and MR PETER CURWEN

  220. Serbia itself may become an important recipient of this aid if the little matter of its leadership gets sorted out.
  (Ms Hewitt) Precisely so.

  Chairman: Any further questions from my colleagues?

  221. I want to turn to the subject of fraud and financial management and the decision to set up OLAF, I think it is called now in the jargon, as a replacement to UCLAF, is that right?
  (Ms Hewitt) Yes.

  222. What is the difference?
  (Ms Hewitt) The new anti fraud office is a great improvement on the old situation and the final form of the office that has been agreed is in line with the initiative the Chancellor took at the January ECOFIN. The office was established on 1 June. It will have a strong and independent director who will be appointed after consultation with the Council and the European Parliament. He will have statutory protection from dismissal. He will be debarred from either taking or seeking instruction from any government or Community institution. He will be able to take action against the Commission before the European Court of Justice if there is any threat to his independence. He will be able to open investigations on his own initiative, have immediate and unannounced access to buildings and documents. He will be able to draw up reports including recommendations for follow up and the institutions will then have to report on whether they have indeed followed up those recommendations. He will report regularly to the Council and to the Parliament. There is a supervisory committee to reinforce his independence with members appointed by common accord between the Council, the Commission and the Parliament. We agreed those members at ECOFIN on 12 July and I am delighted to say that they include a British member, Raymond Kendall, who has held a senior post at Interpol and brings invaluable expertise to that post. This package represents a considerable strengthening of the Commission's original proposals which we did not regard as adequate.

  223. You describe the office as independent, in fact it is inside the Commission, it is not independent.
  (Ms Hewitt) We believe that it needs to be inside the Commission.

  224. But it is not independent.
  (Ms Hewitt) That is not correct. I have explained all safeguards for its independence in that lengthy list that I have just given you. The Commission has responsibility under the Treaty of Rome for budget execution. That responsibility must include instituting effective fraud prevention procedures, just as we would expect Government Departments in the United Kingdom to have in place systems to prevent fraud but also to follow up allegations of fraud and take disciplinary action where appropriate. I think it is also important because a fraud office of this kind needs to understand the organisation that it is investigating and in that sense it needs to be an insider with access to information about what is going on. I would say that in fact the earlier unit, UCLAF, the anti-fraud unit, was in fact investigating all of the fraud allegations mentioned in the wise men's report. The problem was they had no responsibility for recommending follow up and no mechanism to ensure that any course of action was taken as a result of their investigations.

  225. But it is still a Commission body.
  (Ms Hewitt) It is a body within the Commission, and rightly so, but the director's independence, and thus the independence of the office, is safeguarded in the way that I have outlined.

  226. The decision setting it up, COM(99)225, says that the office is only entrusted with investigations by the Commission.
  (Ms Hewitt) But it also has the right to open investigations on its own initiative. It is not confined to investigating matters that the Commission directs it to investigate.

  227. Would it be able to go further than fraud, into value for money or the working practices of the Commission for example?
  (Ms Hewitt) It is an anti-fraud office. The broader issue of reform of the Commission is now the responsibility, I am delighted to say, of the new Vice-President for Reform, Neil Kinnock, who has some rather valuable experience in these matters. As President Prodi said in his speech just a couple of days ago Vice-President Kinnock will be coming forward very early in the new year with a substantial reform programme but President Prodi has already put in place with the new Commission some immediate improvements, for instance streamlining the bureaucracy of the Commission, ensuring the Commissioners are located with their own departments, tackling this problem of the cabinet, the private offices of the Commissioners, and so on. There will be a detailed blueprint for that broader reform in early 2000.

  228. That will include working practices, will it?
  (Ms Hewitt) Working practices are extremely high on the agenda of the new Vice-President.

  Chairman: Thank you very much.

  229. I wonder if I could just ask one very quick question. The protection and safeguards you have outlined for the director of the new anti-fraud office, which seem to me to be extremely substantial and impressive, how far do they extend to the staff that work with him?
  (Ms Hewitt) I would have to check the exact legal position but since the staff will be working for the director I think the essence here is to protect the function by protecting the director.

  Chairman: Thank you very much.