Protection of the EU’s Financial Interests

Roger Mullin Excerpts

Monday 8th February 2016 General Committees

[Mr Gauke]

In terms of the UK’s action in this area, we have in place comprehensive procedures to ensure that EU funds comply with UK and EU rules, including a role in programme audits and preventive anti-fraud measures. The hon. Gentleman raises concerns about particular areas. Structural funds, for example, which are a sizeable part of the EU budget, have to be focused upon. The Commission set up a high level group on European structural investment funds simplification last year, whose work is ongoing. Although the agenda is in its early stages, the UK continues to engage actively by advising on simplified costs and financial instruments.

In agreeing the terms of the 2014 to 2020 structural funds regulations, the UK actively pushed for and achieved greater use of simplified costs, reductions in document retention periods, and lighter and more automated annual reporting. In terms of good practices, DCLG’s work in improving public procurement procedures was highlighted in an ECA special report last year. The Department has set up an internal network to review public procurement issues, including the issue of guidance, case studies and reviews of public procurement checks and audits.

As I have said, the UK takes this matter very seriously. Although the Commission has ultimate responsibility for implementation and management of the EU budget, we have a role in taking responsibility to push for reforms.

[Roger Mullin (Kirkcaldy and Cowdenbeath) (SNP)]

It is a pleasure to serve under your chairmanship, Sir Edward. May I say I admire how you have generated such a beautiful gender balance on the bench beside you?

I have two questions, if I may. My first is for the Minister of State. I am interested in this issue because I have spent much of my life in parts of the developing world and on aid projects. I have a very precise question, but, by way of a short preamble, I have a lot of sympathy with those who are at times critical of agencies that operate internationally. At one stage in my life I was in Yemen to look at a college built with World Bank money and with United Nations Food and Agriculture Organisation development. My terms of reference were simple: we have built this building, now tell us what to do with it. It was not necessarily the best project that had been set up. The Minister mentioned the recent report, published on the EU website, on the amount of money wasted. He said that in his and the Government’s view, the report was “very good”. Will he explain precisely what “very good” is?

[Mr Swayne]

I was referring to the multilateral aid review that we carry out periodically. The last update was in 2011. We assess the effectiveness of all the multilateral organisations through which we operate as a prelude to deciding on what terms we are prepared to continue using them as development partners. The EU institutions are part of that review. Specifically, we judged their financial controls and their effectiveness in deploying the finance that they are given to deliver projects on the ground to be very good. I said that to counter the criticism set out a couple of weeks ago that they are too slow and that it will be 27.5 years before they can deploy the finance that they have been given. That is a snapshot, or the use of a management tool to draw a wholly inappropriate conclusion.

[Roger Mullin]

My supplementary to the Financial Secretary is also about the international aspects of fraud. Many projects funded through the European Union require multinational partnerships. I am aware that some fraud has occurred in more than one member state. Does he have a general view of how the UK compares with other EU member states on multinational projects?

[Mr Gauke]

There is a general view that the UK is strongly determined to address fraud. We have a strong record of budgetary discipline in the EU and with multinational projects, and we have demonstrated that we take fraud very seriously.

From the documents before us, it is hard to draw comparisons between the UK and other member states. There is no directly comparable error rate for the UK’s management of EU funds against which the ECA’s error rate for the EU budget can be measured. To our knowledge, there are no national accounts of major economies, including the UK’s, that can be meaningfully compared with the ECA’s audit of EU accounts. Only a few countries—the UK is one—produce whole of Government accounts. It is hard to compare precisely our record with those of other member states or countries outside the EU. The UK remains determined to root out fraud, wherever it might be.

--- Later in debate ---

[Roger Mullin]

Of course it is a terrible problem—absurd, in many ways—that for 21 years a budget of this scale has not been signed off. A major concern on which people have concentrated in this debate so far has been fraud. One thing that we know about fraud is that often it can be underestimated, particularly in situations of great complexity involving many partners. That is the situation that we face, so we must take it seriously, but if I knew what the solution was, I would have mentioned it long before now, because this is a difficult matter.

One of the things I agreed very much with in the Financial Secretary’s opening remarks was when he hinted that we needed to move much more towards being concerned about outcomes. As we know, many types of European projects involve a fascination with measuring every input—in education projects, for example, every partner often has to record every single teacher and every single hour worked every day on a particular project. More and more, as that builds up in many projects, with many partners, over many years, that can create circumstances in which those who are less scrupulous than others might find an easy way to massage how they record inputs, showing much less concern for moving projects further towards achieving the necessary outcomes. I am not sure of the solution, but the Financial Secretary was wise to say in his opening comments that the Government want to see more pressure towards concern about the impact and outcomes of such projects.

I also share some of the scepticism expressed by my hon. Friend the Member for Luton North—I hope he does not mind me calling him an hon. Friend—about practices in different countries. I hinted at that in my question earlier. Certainly people involved in education projects in the past have come to me and said that whereas in the UK a pretty conscientious approach is taken, they sometimes find that their partners in other countries have perhaps felt slightly less burdened by the need to dot every i and cross every t. Parts of the communities that we represent feel that at times our scrupulousness is not necessarily matched by that of other beneficiaries of EU funding. We do not know the comparative data, but it might be worthwhile raising with the European Union how we satisfy Governments about so many countries and so many participants.

I thank the Minister and the shadow Minister for their helpful and frank responses to the questions. With those few remarks, I will leave it there.