European Union (Amendment) Bill

moved Amendment No. 79: 79: Clause 2, page 1, line 12, after ““excluding”” insert— ““(i) Article 2, paragraph 230, amending Article 246 TEC (TFEU), relating to the Court of Auditors, and (ii) ”” The noble Lord said: This group of amendments is probing in nature. It tries to tease out the Government’s attitude to the unfortunate situation with the accounts of the European Union and what they think of the role and composition of the Court of Auditors. In November last year, the EU audit committee refused to sign off the EU accounts for the 13th year in succession. Its 2006 report issued a qualified opinion on EU expenditure, saying that, "““errors of legality and regularity still persist in the majority of EU expenditure due to weaknesses in internal control systems both at the Commission and in Member States””." Please note the words, "““the majority of EU expenditure””." The areas of expenditure on which the court has given an adverse opinion account for something like 57 per cent of the EU budget—nearly €50 billion. As I think we are still the second biggest contributor to the EU budget, that means that something like €5 billion or €6 billion of the British taxpayer’s contribution is open to fraud. Just to put a little flesh on that, I should say that agriculture is one of the areas most prone to this abuse. The EU spent €50 billion funding agriculture in 2006 but, according to the Court of Auditors, €15 billion was not subject to proper checks. The court found that one-quarter of the payments tested at final beneficiary level revealed overpayments. Nearly a quarter of olive growers in Italy, Spain and Greece have declared at least 5 per cent more olive trees than they owned, in some cases netting significant EU funds. Greece, in particular, came in for severe criticism. Again according to Court of Auditors, something like €850 million was paid to Greek farmers under what it called ““unsatisfactory control conditions””. It also found that 50 per cent of Greek sultana producers should not have qualified for the payments that they received at all. There were high levels of error in the rural development budgets which are supposed to deal with environmental matters. They were aimed mostly at developments for farmers. In seven of the eight cases that the European Court of Auditors investigated, the farmers had not met the necessary commitments to qualify for these grants. The court also criticised the Commission's oversight of national agencies, such as the Rural Payments Agency, that make the payments to farmers. The noble Lord, Lord Bach, who is not in his place at the moment, will recall that example rather painfully. It further found that 1998, 10 years ago, was the last time the Commission updated its records on how much money member states owed the EU budget. The report stated: "““These involve significant sums of money being repaid to the Community budget … It should be emphasised that these recoveries to the Community budget are funded by national taxpayers, rather than the beneficiaries who have received Community funds irregularly””." Structural funding was another example. The court noticed little improvement in the €32 billion budget and said that the situation remained similar to previous years—that is, entirely unsatisfactory. Of the projects that the court audited, only 31 per cent were found free from error. It warned that there was a high risk that the project costs were overstated and that there were large numbers of claims for ineligible expenditure. The report states that there is generally a lack of evidence to support the calculation of overheads or the staff costs involved. As well as criticising the member states on the control of these funds, the court also criticised the Commission’s supervision of how the funding was spent. It said that, "““the Court again found a material level of error in the legality and regularity of the underlying transactions, mainly due to reimbursements to beneficiaries who had overstated the costs for projects””." There are a number of really worrying developments there. It is not as if it was just one or two years; this is the 13th year in which the accounts have failed to be passed. The Commission has always tried to say that it is not its problem but is due to the member states not being able to control the budgets or the money that it gives them. It has always said that the responsibility for the fraud is at national level and not with itself. The Court of Auditors comes down quite severely on the Commission on this point. It criticises the Commission for attempting to spin its findings and blame member states. Article 274 of the Maastricht treaty reminds us of the situation. It is the Commission's direct responsibility to uphold a ““sound financial management””. The European Court repeats that by saying: "““Regardless of the method of implementation applied, the Commission bears the ultimate responsibility for the legality and regularity of the transactions underlying the accounts of the European Communities (Article 274 of the Treaty)””." The Commission tried to put a positive spin on the report by saying that, "““in significant parts of the EU budget, the Directors-General give a more positive account of the legality and regularity of EU spending than is consistent with the Court’s audit””." Coming from one of the European Union’s own bodies, that is quite a damning verdict. I believe that Europe's taxpayers deserve better. I now turn to the useful report of the European Union Select Committee of 2006. I am very pleased to see the noble Lords, Lord Grenfell and Lord Radice, in the Committee. Of the two reports, I refer to the second one—the committee’s response to the government response to its recommendations; that is, the Government and other bodies mentioned. I want to see whether there is any improvement following the suggestions and recommendations made in this useful report. It made some good recommendations, as did the noble Lord, Lord Tomlinson, who sadly is not in his usual place this afternoon. He is a swivel-eyed Europhile, keeping an eye on swivel-eyed Europhobes. He is normally only too pleased to do that. For example—this issue is covered in one of the amendments I am speaking to—he suggested: "=““We must look once again at the structure of the Court of Auditors itself. With a Court of Auditors for six member states, having one from each member state was okay. It still worked when it was nine, and 10, 12 and 15; but to have a member of the Court of Auditors from each member state in a court of 25, and then 27, each with their own cabinet, creates a top-heavy structure. I hope that Sub-Committee A can at some time return to its excellent work in looking at the Court of Auditors and come up with new ideas on the structure for the audit court itself.”” [Official Report, 5/3/07; col. 93]" I note that in the treaty there is still a provision for one member of the Court of Auditors from every member state. I do not know whether there is any further thought on that or whether that is slightly arcane and rather like moving the deck chairs around on the ““Titanic””—however many members the Court of Auditors has does not seem to make much difference to the EU accounts. I want to raise three more points with the Minister, although I do not expect her to answer them this afternoon. She has an enormous brief which she carries out—if I may say so without sounding too smarmy—with great charm and patience. My raise my first point by noting that the committee said: "““We support calls for the European Court of Auditors to produce a list of those Member States demonstrating poor management of European funds””." The Government replied to that by saying: "““The Government would welcome this recommendation””." Has this happened? Is there a list of member states demonstrating poor management of European funds? If there is such a list, is the United Kingdom on it? The second recommendation in this report is: "““We are strongly in favour of a national Statement of Assurance on the monies disbursed in each Member State.””" It goes on to say that the Dutch do this and that we should follow that. The Government reply to that recommendation was: "““The Government agrees and announced on 20 November its intention to provide an annual consolidated statement of the UK’s use of EU funds, which would then be audited to international standards by the National Audit Office. Both the consolidated statement and audit opinion would be presented to Parliament and made available to the European Court of Auditors and European Commission””." Again, has this happened? I have not seen such a report presented to Parliament but I stand corrected if it has. Finally, the committee recommended very sensibly that, "““we consider that there is a clear role for national parliaments: not least because in the UK, for example, there is considerable misunderstanding of the real position””." It goes on to say that there is misreporting in the newspapers about the whole thing and that the problem is not really with the accounts but with the way it is reported in the Murdoch-ite press so beloved by the Liberal Democrats. The committee said: "““The Government welcomes this recommendation. It is important to discuss these issues in Parliament””." Again, has this happened or is it going to happen? I repeat that I do not expect the Minister to reply in detail to these questions this afternoon but perhaps if she cannot do that she could write to me and put a copy of that letter in the House. Is this not still a rather unsatisfactory position? We have had 13 years of qualified accounts and there does not seem to be any real progress on this. We are told it does not really matter, that it is just a formality and that the EU accounts are absolutely satisfactory but that is not the case. It is a huge amount of money and it is not satisfactorily accounted for by the EU’s own Court of Auditors. I wonder whether the Government have any ideas on how to improve this situation. Perhaps an international firm of accountants could be asked to run an eye over the EU accounts to see what the problem is or perhaps methodological means should be used. Perhaps, in the future, Europe Day could be not 9 May but the day when the European Union accounts are finally approved by the Court of Auditors. I beg to move.