EU: Financial Management and Fraud (EUC Report)

My Lords, I accept that, but it is still a great pity that he is not here in person. I shall go on about the tribulations of Mrs Andreasen. Her case for wrongful dismissal is dragging interminably through the Luxembourg court and she, for all these pains, is unable to find another job. No one wants to irritate the corrupt and powerful beast in Brussels, do they? In voicing this support for Mrs Andreasen, perhaps I may also ask the chairman of the sub-committee, the noble Lord, Lord Radice, why her supplementary memorandum, submitted in correction of the misleading and damaging evidence given by the noble Lord, Lord Kinnock, was not printed with the report? If it is true that a Clerk lost her e-mail, sent in before the end of July and after the evidence of the noble Lord, Lord Kinnock, on 25 July, why could it not have been included with the evidence instead of being referred to in a footnote on page 113? If the footnote could be printed, why not the memo? Why was it made available only in hard copy upon application to the Clerk? Why was it not even available on e-mail? I shall put a copy of the memorandum in question in the Library of the House and will assume, unless I am contradicted, that anyone who wants a copy can get one electronically from cookaj@parliament.uk—who, incidentally, is not the Clerk who lost the original. This is a very important document. Not only does it put Mrs Andreasen’s side of the case made so improperly against her; but, in doing so, it corrects many of the wider misapprehensions of the committee, which it has set down in its report. If I may, I shall also give a copy to the Minister after the debate. And so to the malodorous meat of the report itself. As I am not a chartered accountant, I have been guided in what I am about to say by some eminent practitioners in the field, principally Mr Andrew Hamilton FCA, who heads up his own successful practice in Edinburgh, and Mr Hugh Williams FCA, who has also published widely and is a senior partner of an award-winning firm in Plymouth. They have advised me to concentrate in the time available on one particular accounting matter in order to demonstrate the seriousness of the situation in Brussels and thus the inadequacy of the committee’s report. So I will pass in unaccustomed and frustrated silence over the lack of respect for standard accounting principles such as double-entry bookkeeping and accrual accounting; the lack of security in the accounting system; poor internal controls with no one taking responsibility for sound financial management, with the chief accounting officer not even signing off the accounts; failings with the budgets; risks with advance payments; and the whole system wide open to fraud. No, I will resist all that and concentrate instead on the small matter of what has happened to €28 billion. I am indebted to Mr Hamilton for raising this interesting question after he manfully struggled through the 139 pages of the Commission’s annual accounts for 2005 together with the accompanying 228 pages of the Court of Auditors’ negative report. The experience made him an immediate and avid devotee of Marta Andreasen, of course, and his discoveries brought him to the attention of that great Euro-sceptic luminary, Mr Christopher Booker of the Sunday Telegraph. On 28 January this year Mr Booker duly wrote in his column about Mr Hamilton’s analysis: "““Although the Commission’s operating revenue for 2005 was given, with implausible precision, as €107,890,098,965.56, it was impossible to discover where most of this money had come from or gone to, because the accounts do not use the double-entry system used by every corner shop. They are just a maze of meaningless figures. For instance, a figure for the EU’s ‘long-term and short-term pre-financing’ suddenly goes up from zero to €28 billion without explanation””." This version of events was too much for Mr Brian Gray, the successor to Mrs Andreasen and the Commission’s present chief accounting officer. Incidentally, he moved up from being the head of the Commission’s two biggest spending departments, agriculture and regional aid. Mr Gray fired back a letter to the Sunday Telegraph on 4 February thus: "““Long and short term pre-financing have not ‘shot up’ from zero to €28 billion. Since 2005 the EU’s balance sheet has had a different format to take account of the move from cash-based to accrual-based accounting standards, in line with the way British authorities now record their own financial situation””." Mr Hamilton, Mr Williams and their accounting fraternity generally just could not believe this. Together with 12 other high-powered accountants and lawyers, they replied to Mr Gray as follows in the Sunday Telegraph of 11 February: "““As experienced chartered accountants and lawyers, we are amazed by the letter from Mr Brian Gray, the European Commission’s chief accountant, defending the EU’s accounting system. On ""what planet is he living when he claims that for the past 12 years the EU’s accounts have been given a clean bill of health? What does he not understand about the 2005 Court of Auditors’ 228-page audit report which explains in minute detail all the errors, mistakes and irregularities of which the Commission are guilty?""““On the matter of the €28 billion omitted from the 2004 accounts, Mr Gray attributes this to a change of accounting policy (from cash to accruals). Begging his pardon, but he is either incompetent or disingenuous. The €28 billion pre-financing sum should have been recorded as a €28 billion asset in the 2004 Commission accounts regardless of which accounting system was in operation. The very fact that it was not recorded as a cash-related asset in the 2004 accounts gives the lie to Mr Gray’s claim that, ‘The EU’s general accounts have always been double-entry’. Small wonder that the Court of Auditors continues to have no faith in the EC accounts””." As I said, this was signed by 14 eminent chartered accountants and lawyers, and we have heard nothing more from Mr Gray. The questions my accountant friends would like me to put through the Government to the Commission are these. The UK sends many billions of pounds every year to Brussels, so I would have thought that the Government are entitled to some form of answer, particularly when the Commission’s 2004 balance sheet has been understated by some 25 per cent. It has nothing to do with a change in accounting policy, but is just a typical example of the EU’s complete disregard for financial probity. The first question is this. Why was the €28 billion pre-financing figure not recorded as an asset in the Commission’s 2004 accounts? After all, it was cash. Secondly, in the absence of a double-entry system to record pre-financing charges, how do we know that the figure is €28 billion and not, shall we say, 28 cents? Thirdly, is it true that the pre-financing figures are collected by means of a spreadsheet for completion by the member states themselves, and if so, who checks the figures? Fourthly, are these figures reconciled by the Commission to their own accounting records, and if not, why not? Fifthly, why has Mr Brian Gray, the Commission’s chief accountant, said publicly thatthe €28 billion pre-financing figure was excluded from the Commission’s 2004 accounts because it was not cash? Surely if anyone should know that pre-financing charges are de facto cash, it should be the chief accountant. I am sorry to direct these questions to the Minister, who cannot be held responsible for this report, but he is a member of a Government who continue to support our subservience to Brussels through our membership of the European Union—very expensive subservience, too. I conclude with one suggestion for Her Majesty’s Government. Surely it must by now be obvious that the Commission and other EU institutions are not going to do anything to sort out the ongoing accounting shambles and vulnerability to fraud. They have been promising to do so for a long time, but nothing has been done. I remember Mr Kenneth Clarke, when Chancellor of the Exchequer some 14 years ago, coming before your Lordships’ Select Committee, upon which I then sat, and assuring us that all these problems—which were the same then as now—would be sorted out by a new miracle figure, a Mr Schmidhuber. But, of course, they were not. The will simply is not there; it is all too comfortable. We should also not forget that, despite the Eurocrats’ best attempts thorough multi-million euro propaganda campaigns in schools and across the continent of Europe, there is still no European demos, and there will not be for any time to come. Thus there can be no European democracy to hold the freeloaders to account, and so the system rolls on regardless. But people do not feel strongly enough to protest, and anyway they have no influence in appointing or dismissing the principal villains, who are the Commission. My suggestion is simply that the Government should insist that one of the larger firms of international chartered accountants should be given the task of sorting the whole thing out. Of course the Commission would refuse such an idea, but if the Government got together with one or two other member states that were large donors to the EU and refused to send any more money until such a firm had been appointed, I fancy that would have the desired effect. I look forward to the Minister’s reaction to this idea.