European Union Accounts

– in the House of Lords at 3:00 pm on 10th December 2003.

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Photo of Baroness Blatch Baroness Blatch Conservative 3:00 pm, 10th December 2003

asked Her Majesty's Government:

What action they are taking on behalf of the United Kingdom about the Court of Auditors' refusal to sign off the European Union Accounts for the ninth successive year.

Photo of Lord McIntosh of Haringey Lord McIntosh of Haringey Parliamentary Under-Secretary, Department for Culture, Media & Sport, Parliamentary Under-Secretary (Department for Culture, Media and Sport) (Media and Heritage)

My Lords, the UK Government have been working closely with the European Commission and other member states on a radical reform of the EU's financial management. Indeed, in its annual report, the Court of Auditors describes the reforms as "ambitious and fundamental". But that does not mean that everything has been done that should or could be done. The Government are studying the court's report in detail and will consider what further action might now be needed.

Photo of Baroness Blatch Baroness Blatch Conservative

My Lords, why do the Government not consider the situation an absolute scandal? If this had been a private company, no doubt by now it would be out of business and, probably, the directors even imprisoned. What is the Government's response to the Chief Internal Auditor, Jules Muis, who appeared on the "Today" programme yesterday? He said:

"We as an internal audit service have been advocating that there should be a new instrument . . . called an assurance statement by the member states so that there are proper systems in place that will ensure that the money is being used for purposes intended".

Photo of Lord McIntosh of Haringey Lord McIntosh of Haringey Parliamentary Under-Secretary, Department for Culture, Media & Sport, Parliamentary Under-Secretary (Department for Culture, Media and Sport) (Media and Heritage)

My Lords, I, too, read the transcript of Mr Muis's interview. I agree with very much of what he said. Indeed, we could be pursuing the matters to which he refers. The noble Baroness, Lady Blatch, will recognise that 80 per cent of the irregularities identified by the Court of Auditors take place in the member states rather than in the Commission. I remind the House that Mr Muis said that Neil Kinnock, the Commissioner in charge of reform, was making a serious attempt to tackle the cultural problems that exist in the Commission.

Photo of Baroness Noakes Baroness Noakes Conservative

My Lords, is the Minister satisfied that the UK is above reproach for its financial management and financial controls; that is, procedures in relation to EU funds?

Photo of Lord McIntosh of Haringey Lord McIntosh of Haringey Parliamentary Under-Secretary, Department for Culture, Media & Sport, Parliamentary Under-Secretary (Department for Culture, Media and Sport) (Media and Heritage)

My Lords, if 80 per cent of what is going wrong in terms of irregularities in Europe take place in member states, it is unlikely that the United Kingdom is totally free from all irregularities. I say that as a statistical statement rather than from any knowledge of detailed irregularities. At the same time, there are different kinds of irregularities. A great number that can be controlled are those involving over-claims for subsidies, in particular, under the common agricultural policy. On the whole, the United Kingdom has a good record in that respect.

Photo of Lord Renton of Mount Harry Lord Renton of Mount Harry Conservative

My Lords, does the noble Lord remember that in the past the European Court of Auditors has been subject to a great deal of criticism? Not long ago, Sub-Committee A of your Lordships' European Union Select Committee recommended that membership of the Court of Auditors should consist of professional and, preferably, independent accountants, rather than having one former politician put on the Court by each of the member states. Does the noble Lord know whether any progress has been made in that regard?

Photo of Lord McIntosh of Haringey Lord McIntosh of Haringey Parliamentary Under-Secretary, Department for Culture, Media & Sport, Parliamentary Under-Secretary (Department for Culture, Media and Sport) (Media and Heritage)

My Lords, I am not aware that that recommendation has received any acceptance among other member states. It would require a fairly dramatic change of view in order to achieve that, although I have some sympathy with it.

Photo of Lord Willoughby de Broke Lord Willoughby de Broke Conservative

My Lords, following on from the point made by my noble friend Lady Blatch, are members of the Commission subject to the same legal constraints as directors of public companies? In other words, if they are seen to be acting in any way fraudulently, would they have their collar felt?

Photo of Lord McIntosh of Haringey Lord McIntosh of Haringey Parliamentary Under-Secretary, Department for Culture, Media & Sport, Parliamentary Under-Secretary (Department for Culture, Media and Sport) (Media and Heritage)

My Lords, they are accountable to those who put them there, which is not the same as being accountable to shareholders—nor can it be.

Photo of Lord Phillips of Sudbury Lord Phillips of Sudbury Liberal Democrat

My Lords, can the Minister assure the House that the Government are doing everything they can to ensure that the institutions of the EU are being run with proberty and honesty? Is it not the case that there appears to be developing a differential observance of EU law by different member states? Might that not lead to a downward spiral of state adhesion to the legalities of the Union—in effect, the lowest common denominator?

Photo of Lord McIntosh of Haringey Lord McIntosh of Haringey Parliamentary Under-Secretary, Department for Culture, Media & Sport, Parliamentary Under-Secretary (Department for Culture, Media and Sport) (Media and Heritage)

My Lords, on the contrary. The accounts to which the original Question refers are the accounts for the year 2002. As of 1st January 2003, new financial regulations have been put in force with the strong support, encouragement and urging of the United Kingdom Government. They involve a completely new budget and accounting rulebook, which is the first updating of the rulebook since, I believe, 1977. The United Kingdom has taken a lead in the matter; indeed, it addresses the issues about which the noble Lord, Lord Phillips, is concerned.

Photo of Lord Howell of Guildford Lord Howell of Guildford Shadow Minister (Foreign and Commonwealth Affairs)

My Lords, our consumer prices index relies on the new formula for European statistics which, presumably, is put together by Eurostat. Are we worried that the finances of Eurostat appear to be in complete chaos and under severe investigation?

Photo of Lord McIntosh of Haringey Lord McIntosh of Haringey Parliamentary Under-Secretary, Department for Culture, Media & Sport, Parliamentary Under-Secretary (Department for Culture, Media and Sport) (Media and Heritage)

My Lords, first, I deny that the finances of Eurostat are in complete chaos. There have been particular allegations of irregularity that have been dealt with. Eurostat is under investigation and the people who were considered to be responsible have been removed. Secondly, the consumer prices index, to which the noble Lord, Lord Howell, refers, has been accepted by other member states for some considerable time. It is entirely proper that in the pre-Budget report—which I notice the Opposition did not wish to debate in this House; I cannot think why—that is properly explained. We would have had an opportunity to debate it, which we have been denied by the Opposition.

Photo of Lord Stoddart of Swindon Lord Stoddart of Swindon Independent Labour

My Lords, can the noble Lord give a latest and best estimate of the amount of fraud that has taken place annually? Bearing in mind that he said that 80 per cent of the fraud takes place in individual states, could he say which states are responsible, so that we should know exactly where the biggest problem lies?

Photo of Lord McIntosh of Haringey Lord McIntosh of Haringey Parliamentary Under-Secretary, Department for Culture, Media & Sport, Parliamentary Under-Secretary (Department for Culture, Media and Sport) (Media and Heritage)

My Lords, the noble Lord, Lord Stoddart, was not listening carefully enough. I did not use the word, "fraud". I said, "irregularities". A very high proportion of what has been identified by the European Court of Auditors as being wrong is genuine mistakes; that is, irregularities that take place and can be, and are, corrected. They are not fraud. There has never been any allegation that these irregularities are fraud.

Photo of Lord Stoddart of Swindon Lord Stoddart of Swindon Independent Labour

My Lords, could the noble Lord answer my question? What is the best estimate of the extent and the amount of that fraud?

Photo of Lord McIntosh of Haringey Lord McIntosh of Haringey Parliamentary Under-Secretary, Department for Culture, Media & Sport, Parliamentary Under-Secretary (Department for Culture, Media and Sport) (Media and Heritage)

My Lords, I have just denied that the figures that I quoted are of fraud. I said that they are irregularities. I cannot answer on terms that do not accord with the facts.

Photo of Baroness Blatch Baroness Blatch Conservative

My Lords, does the Minister accept that there is an air of intimidation among the workforce in the European Union? If we take the Chief Internal Auditor's word for it, the workforce is judged more on the degree to which it does not rock the boat than on whether people expose what is occurring. For nine years, the accounts have not been written off. The air of complacency is palpable.

Photo of Lord McIntosh of Haringey Lord McIntosh of Haringey Parliamentary Under-Secretary, Department for Culture, Media & Sport, Parliamentary Under-Secretary (Department for Culture, Media and Sport) (Media and Heritage)

My Lords, I have some sympathy with what Mr Muis said in his interview. Indeed, he said what the noble Baroness, Lady Blatch, alleged. That is true in a great number of large organisations. The means of dealing with that is not to attack the individuals concerned, but to put in proper controls. That is exactly what Commissioner Kinnock, Commissioner Schreyer and the Commission generally have been doing.

Photo of Lord Grocott Lord Grocott Chief Whip (House of Lords), HM Household, Captain of the Honourable Corps of Gentlemen-at-Arms (HM Household) (Chief Whip, House of Lords)

My Lords, it is time for the next Question and two interventions are probably above par for the course.