EU: Financial Management and Fraud (EUC Report)

My Lords, I pay tribute to the expertise that the noble Lord, Lord Tomlinson, has developed over many years, which comes from being an MEP with a good deal of detailed knowledge of these matters. In pursuing domestic politics, too, he developed increasing knowledge of these matters. He has made some sensible suggestions, particularly in the latter part of his speech, which I hope will be replied to, provisionally or putatively at least, by the Minister tonight. This EU report again highlights the importance of the House of Lords system of detailed scrutiny of EEC legislation. I am glad to see the noble Lord, Lord Grenfell, once again listening to the debate. The committee considers not only legislation but other instruments; communications are an important factor now as well. I congratulate the noble Lord, Lord Radice, and his colleagues on a very interesting report. It gave us a good deal of relief from all the stories one sees in the comics masquerading as newspapers in Britain about irregularities in the wicked city of Brussels. Those stories are shown to be grossly exaggerated both at the margin and in general. The report is both interesting and detailed. It is good to be able to reply to the debate as the noble Lord, Lord Radice, and I go back a long way. We are both keen Europeans and have been chairmen of the European Movement in Britain. Despite that role, we have always remained enthusiastic supporters of a proper examination of the measures needed to affect member states particularly in financial terms and the proper accounting procedures. However, in this case we return once again to an old theme which the Sun newspaper never likes to admit—that the basic problems are found mainly in the member states. That is overwhelmingly the case, and is bound to be, because the greater recipients of the main elements of the budget—agriculture and the structural funds—are handled directly by the member states. The main blame for any irregularities at the margin therefore does not lie with the so-called onerous—but in fact relatively modest—Brussels bureaucracy. We should also continually remind ourselves that, within the European budget, the receipts equal the payments. It is therefore much more virtuous than most member states’ budgets, which sometimes have a considerable debt element attached to them. I was also delighted that my two colleagues, the noble Lords, Lord Maclennan of Rogart and Lord Watson of Richmond, although not here tonight, were both member of the sub-committee and were sturdy fighters for the truth on Europe, rather than the Daily Mail inventions on Europe that we read constantly. The noble Lord, Lord Kerr—known as the scribe of the EU constitution—also was a member. They all made their contributions as well. I am glad, too, that the report goes into some of the endless myths about the Court of Auditors’ inability for so many years to certify the Union’s accounts in the form of the Commission’s spending budget. The committee, under the chairmanship of the noble Lord, Lord Radice, rightly rejected the fatuous stories of a culture of corruption at the heart of Brussels and referred to a number of serious technical and administrative problems which need attention to restore an often battered public confidence. It is unfairly battered, based not on facts but on the usual lies about the Union’s operations in our so-called newspapers, which are really entertainment magazines. The noble Lords, Lord Pearson and Lord Willoughby de Broke, are the only visible and tangible oasis of peace and calm in the current UKIP panoply, with the turmoil that we see in the European Parliament. I presume that they are taking time off from advising their party on how to deal with allegations of fraud by their MEPs, apparently including the purchase of motor cars. They threaten defections. An even worse nightmare, there is a rumour that Robert Kilroy-Silk might seek to rejoin them one day. I do not know how they would react to that. With the drastic reduction in their numbers in Strasbourg, the two noble Lords will presumably have considerable advice to give their colleagues when they next see them. But they will need to have read this report much more carefully and objectively than they have done. I very much regret the tendentious way in which they examine these matters and the cavalier answer of the noble Lord, Lord Willoughby. It is pretty generous of the Commission to continue to pay €260,000 per year to a lady whose background was questionable in many ways. We have gone into that long enough and I do not wish to go on too long in case someone is tempted to intervene. We have aired this subject already. I especially welcome the report’s conclusions, enunciated from paragraph 6 onwards, about improvements in the technical oversight configuration, focusing on the appropriate and pinpointed level of responsibility and control in the reforms brought in by the noble Lord, Lord Kinnock, as Commissioner. His evidence to the sub-committee was particularly helpful. The Treasury memorandum submitted at the start of evidence says it all: "““The audit methodology is very precise and so tends towards a negative assessment and secondly the quality of financial management is not consistently good enough. This is ashared responsibility between the Commission and the member states””." However, it goes on to say that, "““most of the budget is managed satisfactorily””." In fact, as Commissioner Kallas pointed out in a striking evidence statement, the UK presidency period included progress on the integrated internal control framework, with the action plan preceding the much tighter control matrix for finances agreed in the 2007-13 financial framework. At long last the member states are painfully—perhaps slowly, but definitely—committed to furnishing annual audit figure summaries for the structural funds and the farming funds which, aswe have noted, represent the vast bulk of Union’s outlays. In the evidence, some of the comments brought out the point that people in the private company sector often grossly exaggerate the veracity of private auditing procedures and what private firms of accountants certify. They also usually exaggerate the weaknesses in the EU systems because they dislike the Union or remain culturally biased against it. I therefore especially thank the committee for its suggestions in paragraphs 146 to 148 and for the fascinating admission provided in paragraph 149. Attempting total audit rather than the audit of individual departments is unwise for governments as well as for the court asking the Commission for such. The crucial request in the report for a list of member states revealing poor financial management of EU funds—subject to the achievement of accurate objective data, not an easy matter in itself—will assist an accurate cost-benefit analysis of each country’s membership. It will counteract the negative conclusions we receive almost daily from the Euro-phobes in this country. I noticed that Ed Balls was firmly supportive of the work being done in Brussels on these various themes, as the noble Lord, Lord Radice, mentioned. Noble Lords will recall that when Ed Balls spoke to the annual conference of the Institute of Chartered Accountants last year, he praised this report, which had just been published, for its suggestions and promised that the new system for a statement of assurance on the national use of EU funds in the UK would be audited by our National Audit Office, as the noble Lord, Lord Radice, said.