EU: Financial Management and Fraud (EUC Report)

My Lords, in his opening remarks, the noble Lord, Lord Radice, thanked a number of those who have played a big part in the production of the report. I hope, as a member of that committee, that I might be allowed to add to that list. As chairman of the committee, he led us from the front with considerable panache and style. I certainly very much enjoyed working with him on it, as, I am sure, did other members of the committee. The extent and significance of the document must be clear to anyone listening to the debate, from the way in which he has described its principal contents. That is underscored by the fact that it has been quoted in a number of influential forums across Europe since its publication. Unlike the noble Lord, who covered almost the entire report, I shall focus on two separate parts of it. First, it is probably uncontroversial to say that the European Union is still a controversial topic in British political life. As the noble Lord pointed out, perhaps one of the most important reasons for this controversy is that it is felt by some—that feeling is certainly expressed by some—that financial corruption in the Union is, in essence, endemic. At the risk of stating the absolutely obvious, if that is true, it is an extremely serious allegation and about as serious a criticism of the European Union as it is possible to make. The report quite clearly shows two things. First—this is hardly surprising if one considers the experience of the member states—not everything is right in the garden. Because of that, a series of measures, a number of which are touched on in the report, is needed to improve the financial efficacy of the system that we know as the European Union. At the same time, however, it is equally true that there is no widespread, endemic corruption and bureaucracy. Indeed, as one of the witnesses said, it is really no better or worse than it is in the member states. This latter point is very important politically, because it is important to establish beyond serious argument that the United Kingdom has not hitched its wagon to something that is mired in the Augean stable of corruption, filth and depravity. That, in turn, is important, because it indicates the way in which we, in our country, should be trying to achieve reform. We are not trying to destroy the European Union: we in Britain should be trying to change it by moving it in the direction in which we want to go, as the leader of my party, the right honourable Member for Witney, is reported in the papers as having said in the past couple of days. I move from that general point to the role of the member states in the spending of European Union money, because, as the noble Lord, Lord Radice, said and as the report points out, something like 80 per cent of all European expenditure is disbursed in the member states by member state Governments, or by lower tiers of government or agencies in federal countries. As we discovered, in practice these are often de facto beyond the reach of European scrutiny, and often de jure, so far as I can see. If you think about it, this is a very serious shortcoming, which is why the report is quite clear that a way should be found in the member states for their national supreme audit institutions, and their parliaments, to take a serious part in the oversight of the disbursement and spending of European money within their own jurisdictions. As the noble Lord said, we were very interested by the evidence that was submitted to us of what is happening in Holland. Obviously I then welcome the thrust of the United Kingdom Government’s response to the report: namely, that they intended to travel down the same road. If one thinks about it, it is startling that member states have hidden for so long behind their particular form of the doctrine of national sovereignty and subsidiarity, more or less completely to avoid addressing these issues. It seems particularly strange to me because, if I gave some money to a friend of mine to do something with it for me, there would be no suggestion other than that we had joint responsibility for it: it was my money, and he was responsible for it. As the noble Lord, Lord Radice, said, we came to a decision in the report about how a system of national statements of assurance might work. In fact, I went slightly further in my own mind, and tried to put my proposal to the committee. I was told that, as there was absolutely no evidence to support anything that I was proposing, it could not go into the report. That was fair enough. But I have been wondering, and I still wonder, whether, when the Commission prepares the accounts of the Union, it cannot with the benefit of computer technology break down into27 separate sections, member state by member state, the detail of the expenditure in each of the countries. After all, it should know. If that could be done, it would be possible for the supreme audit institutions of the member states to use the Commission’s account as the basis of the investigations that they would carry out in their own countries. That would be a good idea if one could do it, because it is a way of tying the Commission into the member states. Currently, the Commission looks at much of the expenditure from a perspective that is decoupled from the processes outside its immediate horizon. If this could be done, perhaps in a way that was a slight variation of what I have described, the Commission’s role in the process of disbursement would be more closely tied to the audit institutions in the member states. As the noble Lord, Lord Radice, intimated in his remarks, it is important that from here on both the European Union, particularly in the form of the Commission, and the member states accept that they have political and legal joint accountability, and, jointly and severally, are responsible for the money that they spend on the behalf of all of us, through their systems of administration. If we can embed that into the way in which the European Union actually works, we will take a major step towards dealing not only with the myths but with some of the real abuses of the system today.