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Mr. Whittingdale: I think that the Minister said in her opening remarks that she supported the establishment of an independent unit to investigate fraud in Community institutions. Is she aware that Bernard Friedmann, the outgoing president of the Court of Auditors, has suggested that it would be impossible to set up an independent institution without a change to the treaty? He has argued that instead of creating a new institution, we should give UCLAF independence and wider powers. What is her view of that suggestion? Ms Hewitt: The Council of Ministers has a working group that is looking at that issue. There will be an orientation debate at ECOFIN in March and there is a proposal on the table on which the Commission is carrying out further work alongside that being done by the group of experts. The objective is clear: the head of the anti-fraud unit must be given statutory independence and protection against dismissal. That is a key point. The head of the unit and his staff must have access to the people and the papers of Community institutions whenever and wherever they need it during investigations. They must also have the responsibility to report on the progress of investigations both to the Council and to the European Parliament. That would allow those two bodies to satisfy themselves that appropriate action was being taken to follow up any investigation. We will need to see what progress has been made by the March orientation debate. I hope that we will then be able to act on the basis of a strengthened Commission proposal. Mr. Lepper: Some hon. Members present may represent constituencies that are already eligible for European structural funds. My constituency hopes to have such eligibility to assist with a variety of the problems that it faces. We all want to be confident about the financial management of those funds. Will the Minister tell us what the Government, in conjunction with the Commission, are doing about the financial management of European structural funds? Ms Hewitt: The level of errors in the structural fund expenditure is unacceptably high. There is no doubt that some errors involve fraud. However, they also often involve genuine mistakes and irregularities that are the result of regulations that are far too complex, and make it difficult to know whether one has met the conditions for structural fund expenditure. We are therefore trying to simplify the structural fund regulations by working with the Commission, other member states and other bodies. I referred earlier to regulation 2064/97, which concerns the structural funds and requires a minimum level of financial control over structural fund expenditure within member states. That is a helpful and constructive way forward. We are also pressing for other mechanisms within the structural fund regulations. One such mechanism would ensure that if no spending was made in a budget head in a certain period that programme would automatically lapse. No expenditure could be made further down the line as that has been the source of irregularities in the past. Mr. Wilkinson: As the Minister will know, any body that receives public funds for example national and local government, public limited companies, private companies and charities is accountable in law for their disbursement and us. Why does the Minister take such a different view towards the European Union? Why is there a climate of condoning and acquiescing in activities that, in other spheres, would lead to those responsible for misappropriation or fraud being taken to court? Why should a distinction be drawn? Is it because the sums of money are so great or because it is a remote institution? Is it because the European Union has to be justified whatever the cost? Ms Hewitt: The hon. Gentleman seems to be saying that the distinction between a criminal offence involving a deliberate intention to defraud somebody in this case the Community and a genuine mistake, and the distinction between those and mere bad policy and wasted money, does not matter. He suggests that they should all be treated as criminal fraud. That is an extraordinary suggestion and I hope that I have misunderstood the hon. Gentleman. I stress again that we do not tolerate fraud, irregularities or waste. Within the United Kingdom and in the Council of Ministers, and in co-operation with the Commission and other member states, we are taking strong action to tighten controls in Community institutions and member states to ensure that the unacceptable level of fraud, irregularities and waste is addressed. Dr. Palmer: We have heard from several Conservative members that they believe that it is permissible to refuse to make legally required payments in order to achieve a political objective. That is also the view of the Socialist Workers party. Does the Minister agree that Britain has to stay within the law, and is she worried about the spread of Trotskyism on the Opposition Benches? The Chairman: I knew that this would be a wide-ranging debate. Ms Hewitt: I shall not be tempted down that particular path, Mr. Stevenson although my hon. Friend has made an important point. We will continue to uphold the rule of law in the European Union as well as in the United Kingdom. I hope that that course will commend itself to all parties in the House. Mr. Cash: The Minister will be aware of the issue of the clearance of accounts for the European agricultural guidance and guarantee fund. Checks carried out in 1996, which appear to be the most recent, involved 36 paying agencies that covered more than 80 per cent. of expenditure. That is a vast sum, bearing in mind the fact that an enormous proportion of Community expenditure is on agriculture. The checks revealed weaknesses that should have prevented the granting of full accreditation, which is, however, still in place. That information is taken from a report from the Ministry of Agriculture, Fisheries and Food. Will the Minister tell the Committee what action has been taken since 1996 to tighten the procedures? Ms Hewitt: I am sure that the hon. Gentleman is aware that expenditure on the common agricultural policy, although still large, is a declining proportion now slightly less than half of total European Union expenditure. We continue to try to strengthen financial controls in the existing programmes and to achieve fundamental reform of the CAP so that the sources of the problems to which the hon. Gentleman refers are reduced in future. I shall reply to his detailed points in my response to the debate. The Chairman: That brings us to the end of the time allotted for questions. Before I call the Minister to move the motion, I should inform the Committee that I have selected the amendment in the names of the Leader of the Opposition and his hon. Friends. Motion made and Question proposed, That the Committee takes note of European Union Documents OJ No. C349, European Court Auditors Annual Report on the financial year 1997, Nos. 14031/98 draft Council Regulation establishing a European Fraud Investigation Office, and 10786/98, Special Report No. 9/98 of the European Court of Auditors concerning the protection of the financial interests of the European Union in the field of VAT on intra-Community trade; and supports the Government's continuing efforts to promote and support measures to improve financial management and fight fraud against the EU Budget. [Mr. Hewitt.]
11.30 amMr. John Whittingdale (Maldon and East Chelmsford): I beg to move, as an amendment to the motion, to leave out from `trade;' to end and add `notes that again, the European Court of Auditors has declined to provide assurance that the transactions underlying the payments for the financial year are legal and regular; regrets the failure of the UK Presidency to achieve any concrete measures to tackle fraud and mismanagement in the EU budget; congratulates Mr. Paul Van Buitenen on his courageous action in exposing the incompetence and unwillingness of the European Commission to tackle fraud and demands Mr. Van Buitenen's immediate reinstatement; condemns the actions of Labour MEPs, urged on by the British Government, in seeking to protect the Commission from censure; and calls on the Government to ensure that genuine and effective measures to tackle fraud in all of the institutions of the European Union are taken as a matter of urgency.'. I shall start on a more conciliatory note and thank the Minister and her officials for their efficiency in ensuring that we have all the relevant documents in time for the debate. It is especially important when there are so many documents to peruse. I noted the Minister's comment that the Court of Auditors report is slightly smaller than usual. I do not think that it is any less dense. I know that you, Mr. Stevenson, like me a veteran of these Committees, are aware that the Government have not always supplied all the documents in good time. Looking through the auditors' report and the associated documents, I find a depressing familiarity about their contents. Once again they set out a catalogue of waste, lack of proper accounting procedures, mismanagement and fraud. For the fourth successive time, as my hon. Friends have said, the court has been unable to provide an assurance about the legality and regularity of the accounts of the general budget. Many of the criticisms in the report are almost identical to those made in every previous report. Yet still the necessary action to deal with those criticisms has not been taken. I have no doubt that some will argue that the proportion of the budget that is not properly accounted for is comparatively small. Some have said that it compares favourably with, for instance, our own social security expenditure. However, it is worth pointing out that social security is the item of the expenditure most susceptible to fraud, whereas the previous estimate of 5 per cent. applies across the European budget. That represents more than £3 billion. Given that the United Kingdom's gross contribution to the budget in the year in question was more than £6 billion some £17 million every day we have a greater incentive than most to demand that action is taken. Unlike the previous occasions when we have had these debates, this time the Court of Auditors and many in the European Parliament have finally lost patience. It is no longer sufficient to deplore the findings in the report and to promise to do better next time. I shall say something shortly about what has happened since the report was published, but I want to concentrate for a moment on its contents. The list of failings that the report identifies is extensive. Of the specific programmes examined, the same weaknesses are identified time and again: lack of adequate resources or needs assessment, inadequate regard to context and local conditions, unmanageable numbers of projects, over-centralisation, poor performance by contractors and local authorities, weak co-ordination, lack of management culture, poor monitoring and evaluation and lack of communication between the Commission and member states. More generally, in its statement of assurance, the court reports that the accounts are not accurate, and contain overstatement and understatement of expenditure commitments; that commitments have been made that lack legal basis or breach the limits set by budgetary authorities; and that the
Once again, individual examples of abuse and mismanagement leave the European Union open to ridicule. Cases are cited of aid payments to fishermen for boats that had already been sunk; payments to encourage fishermen to operate outside EU waters, when 90 per cent. of recipients had already taken their boats to other waters; over-payments of subsidies to Italian farmers who exaggerated the amount of land in use by 20 per cent.; and massive subsidies to olive oil growers, despite there being no register of the number of olive oil trees. In the past, we have heard tales of lorries going back and forth across the Irish border containing tape recorders making a baa-ing noise, to enable farmers to claim for non-existent sheep. Such abuse brings the European Union into total contempt. It is, perhaps, not surprising that the retiring president of the Court of Auditors, Mr. Bernhard Friedmann, to whom I have already referred, said that if fraud in the Community continues, it could bring down the entire European Union. The National Audit Office report on the Court of Auditors 1996 report rightly says that the United Kingdom presidency of the European Union during the first half of 1998
Indeed, the hon. Lady's predecessor said that fighting fraud would be the key priority of our presidency, and the hon. Lady has gone on to say much the same thing this morning. However, following the Cardiff summit, no mention was made of concrete action in the relevant section of the presidency conclusions. In the 1999 draft budget, the total percentage of all budget lines devoted to fighting fraud shows a reduction of 16 per cent. The United Kingdom presidency was a wasted opportunity to take serious action to tackle the problem. I accept that most expenditure is the responsibility of member states rather than the Commission, and that the prime responsibility lies with member states to implement anti-fraud programmes. However, that does not excuse the Commission, as we know that some of the biggest scandals lie in the heart of the Commission itself. It took an official of the Commission, Mr. Paul Van Buitenen, to expose
Having repeatedly tried to no avail to draw attention to abuses taking place in the Leonardo da Vinci programme, for which he was an auditor, he conducted his owninvestigation into other programmes that were being subjected to audit. He says:
On 30 November, Mr. Van Buitenen presented his findings to the Secretary-General of the Commission. The only response that he received was a promise to forward his findings to precisely the same bodies that were supposed to handle such cases. At the same time, the Secretary-General of the Commission also told him that he would be subject to disciplinary procedure if he passed the information to the European Parliament, and that, as chairman of the disciplinary committee, he would recommend Mr. Van Buitenen's dismissal from the Commission's services.
Despite those threats, Mr. Van Buitenen felt that it was his duty to pass a full copy of his report to the leaders of the political groups in the Parliament. His report contains a catalogue of corruption, nepotism and cover-up in a number of programmes run by the Commission. His reward was to be suspended from his post. The Minister referred earlier to the importance of establishing a key figure in the Commission with wide-ranging powers to investigate fraud. I suggest that Mr. Van Buitenen would be a very good candidate.
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| ©Parliamentary copyright 1999 | Prepared 24 February 1999 |
