Court of Auditors 2009 Report

Kerry McCarthy Excerpts

Wednesday 2nd February 2011 Commons Chamber

[Kerry McCarthy (Bristol East) (Lab)]

I, too, welcome the fact that this debate is taking place on the Floor of the House rather than in European Committee B, as it has in previous years. It is somewhat ironic that although having it here enables many more Members to take part, it means that we have only an hour and a half to discuss the matter rather than the two and a half hours allowed in Committee.

The Minister was thorough in her explanation of the Government’s stance and very generous in taking interventions from Back Benchers. I am aware that at least half a dozen Back Benchers want to take part in the debate and that we are already 40 minutes into a 90-minute debate, so I shall be quite brief. Also, the Minister answered quite a few of the questions that I wanted to ask. There is always a problem in dealing with Court of Auditors reports because of the time lag involved. We are now debating the 2009 report in 2011, so it is useful that we have heard about what has happened in the intervening period.

It is, of course, disappointing that for the 16th year in succession, the Court of Auditors has been unable to provide a positive statement of assurance on payments from the EU budget because of weaknesses that it has identified in the procedures for financial control and management. In fact, it is not just disappointing; as the Minister said, it is entirely unacceptable that we are yet again in that position.

I welcome the fact that for the third year in a row, the Court has given an unqualified positive statement of assurance concerning the reliability of the EU accounts. It is important to stress that that has happened, but it is by no means satisfactory that the Court is not prepared to sign off on the payments, which means that considerable sums are not going where they should and money is being paid out wrongly, whether through fraud—as the Minister said, that is at quite a low level but is still a matter for concern—or through error. It is important that we continue to address the issue.

The direction of travel is correct. In the 2003 budget, only 6% of payments were identified as being free from error, which improved to 47% in 2008. I understand that the figure is now around the 60% mark or more. That progress is far too slow and it is vital for progress to be made more rapidly, because apart from anything else, the failure to sign off the accounts year after year understandably undermines public confidence in the EU and public support for EU membership. Naturally, people want to know that the EU is spending money wisely and well, particularly in difficult economic times when there is belt tightening and concern about how money is spent in this country.

We need more transparency and accountability in EU spending. Crucial to that, as the Minister said, is simplifying the procedures and processes of the allocation of EU money. The Court of Auditors has identified complex rules and regulations and complicated or unclear eligibility criteria as key factors in the high level of error, particularly in respect of structural and cohesion funds. Dealing with that as an ongoing, iterative process must be a priority, and I welcome the fact that the Minister is making those points in an ongoing dialogue with people in the EU, including the Commissioner for financial management, and not simply making them on this annual occasion.

The Commission should try to ensure that future programmes are designed to allow more effective control and monitoring; that should not be an afterthought or something to be looked at when the programme is up and running and the time for scrutiny is upon us. There is also a need to consult member states more, because often it is implementation at member state level rather than at Commission level that leaves something to be desired. Member states must have effective monitoring and management arrangements too. In particular, they should ensure that their compliance systems for spending cohesion funds are every bit as rigorous as their compliance systems on other matters.

The UK took the initiative to enhance its reporting through the annual consolidated statement on the use of EU funds in the UK, which is audited by the National Audit Office and presented to Parliament. The Minister advised the House earlier that only four other member states have adopted that model. I would be grateful if the UK Government continued to press other EU Governments to adopt a similar model and to introduce that element of transparency and accountability to their processes.

Are the Government generally optimistic about future improvements in financial management? I appreciate that it is difficult to forecast such things, but when does the Minister believe we are likely to see a positive statement of assurance? Is next year a realistic goal to work towards, or are we still some way off meeting that objective? Can progress be monitored better within year, and can ongoing improvements be made, so that we do not have to wait for the annual report from the European Court of Auditors, when we are inevitably disappointed by the lack of progress?

I am very much aware of the time, but I should like to make a few comments on specific concerns in the report, in particular in respect of agriculture and cohesion funds. In agriculture, the court says that the single payment scheme and single area payment scheme, including specifically problems with ineligible land and over-declarations of land, are the most urgent issues. The court also identified the need to avoid, in co-operation with national authorities, the payment of ineligible grants for fisheries projects. Has the Minister discussed that with her colleagues in the Department for Environment, Food and Rural Affairs? Are they pursuing the matter at European level? If so, can she advise the House on what progress has been made?

Cohesion funds, which have already been flagged up as a great concern, account for 30% of EU expenditure, so we are talking about very significant sums of money. Uniquely, the rate of material error is above 5%, even if it declined from 11% last year. We are travelling in the right direction, but that rate is still clearly unacceptable.

I note that the auditors recommend that the Commission encourage the more rigorous application of corrective mechanisms by national authorities, to ensure that member states do not substitute ineligible expenditure with new expenditure. Will the Minister advise us on what progress is being made to ensure that the control system for the 2007-2013 programming period will be effective? What is being done about the application of procurement rules in member states, which is also identified as a key concern?

The Minister said that a scorecard of recovery orders would be useful. It is worrying that the overall rate of recovery from beneficiaries who receive EU cohesion funds incorrectly has fallen. It is clearly unacceptable. Does the Minister have any idea why the recovery rate is moving in the wrong direction, and may I urge her to flag that up as something that needs to be addressed as a matter of urgency?

I repeat the point that I made earlier. This needs to be an ongoing and iterative process, and we need to keep a very close eye on it. There is consensus across the House on the need to push this up the policy agenda and I am glad that the Minister is doing what she can to push other EU Governments to address the issue. We will do what we can to support her in those efforts.