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EU: Financial Management

Volume 726: debated on Wednesday 6 April 2011


Asked By

To ask Her Majesty’s Government what representations they will make to the Council of Ministers to give consideration to the joint declaration by the Netherlands, Sweden and the United Kingdom regarding the financial management of European Union funds, made at the Economic and Financial Council on 15 February, before the European Union Budget for 2010 is discharged.

My Lords, the failure to achieve a positive opinion from the European Court of Auditors on the EU accounts is unacceptable. The Government are working to resolve this and have been clear that they want to see simpler rules surrounding EU programmes to facilitate proper scrutiny of EU spending. The Government continue to build on the February joint declaration. This includes negotiations on the financial regulation and the principles governing EU budget implementation.

I thank the noble Lord for that constructive response not only about representations that will be made to the Council of Ministers for approval of the joint declaration, but also about the initiative to set up negotiations, without which no new effective regime could be established. I add shortly that, having read the reports of yesterday—if you can understand them at all—it is apparent that a referendum is in no way related to this matter because, whether you call it a power, a competence or whatever, nothing is being taken away from us; it is in fact just given to us and to others.

I have two short questions. What practical steps will be taken to address the management of EU funds which relate to the EU budget and to make them transparent? Could the Government—of course we cannot deal with this issue at Question Time—arrange for a debate in which these matters may be considered by your Lordships?

My Lords, I am very grateful to my noble friend for recognising the practical steps that the Government are taking to get round this issue. I very much respect his many years of involvement in European issues. We are working very practically. Only next week, my honourable friend the Economic Secretary is meeting the three Commissioners who have responsibilities for the budget and the audit of the budget. She plans to meet the Court of Auditors and she has met the one and only state Minister who is solely responsible for the management of EU funds. We are very much on the case in making sure that EU funds are handled in a much simpler and transparent way in the future so that control can be improved.

On the question about a debate, I shall take that suggestion on board. In another place, I believe they have a debate in committee which normally takes place in January or February before ECOFIN considers the annual discharge. We shall consider that suggestion.

In his first answer to the noble Lord, Lord Campbell of Alloway, the Minister referred to the development of the process of financial regulation. As that term usually applies to regulation in the private sector, I was a little unfamiliar with its use in respect of the public sector. Can he explain what practical measures of financial regulation are relevant in this case?

My Lords, I am not responsible for some of the curious terminology which the EU uses, but I believe that financial regulation is the term it uses in this context. The relevant issue about which the Government are concerned is reducing the administrative burden on how expenditure is handled, particularly at member state level. We are worried about some specific questions: the proposal, for example, that loans might be used by the Commission to purchase EU buildings, which is something that the Government oppose; and the question of introducing a concept of tolerable risk of error within the accounting framework, which we oppose. I said before but I will say again that we want to push for much greater transparency in how assigned revenue is used. A host of issues come under that heading, but I cannot be responsible for the terminology.

My Lords, the UK Government had support solely from the Netherlands and Sweden for the declaration submitted to the relevant meeting in February. What was the reaction of the other 24 member states at that meeting? What are the Government doing not just, as it were, to lobby the Commission but to persuade other member states that what seems a sensible series of reforms should get wider support?

I am grateful to my noble friend, because he gives me an opportunity to refer to the joint letter in December, very much led by my right honourable friend the Prime Minister, to which Germany, France, Finland and the Netherlands were also signatories. That talks about the need progressively to tighten up on and limit the growth of payments into the EU budget in 2012-13 and makes important observations about the necessity for growth in the EU budget through the next financial perspective to be limited. That is a forward-looking set of proposals to which a significant number of member states are already committed.

Has the noble Lord read the Court of Auditors report, which demonstrates that: there is a welcome downward trend in infringements; 99.9 per cent of the infringements are of an administrative nature; 80 per cent of the spending is by European member states; and the most guilty member state is the United Kingdom itself? That can be examined in the Comptroller's recent evidence to the Treasury Committee.

My Lords, it is the 16th consecutive year in which the Court of Auditors has been unable to give a clean opinion on the legality and regularity of the underlying transactions in the EU's expenditure, and that is an unacceptable state of affairs.