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JOINT COMMITTEE ON EUROPEAN AFFAIRS díospóireacht -
Tuesday, 30 Nov 2010

2009 EU Budget Report: Discussion with Court of Auditors

Apologies have been received from Deputy Brendan Howlin and Mr. Brian Crowley, MEP. Are there any other apologies?

I must leave to substitute as Chair for the Oireachtas Joint Committee on Justice, Defence and Women's Rights which will commence shortly.

We have other members coming in to fill the Deputy's space and I thank him.

No. 1 is the work of the European Court of Auditors and its annual report on the 2009 EU budget. I welcome Mr. Eoin O'Shea, a member of the Court of Auditors and Mr. Patrick Weldon to the meeting. The subject does not received sufficient attention. The Court of Auditors has not received sufficient attention in the Houses of the Oireachtas and it is good to see the delegation here. It is interesting that the report has generated a great deal of attention in recent times. This is the first time we have had a member of the court before the committee.

Under section 17(2)(l) of the Defamation Act 2009 - I am not suggesting for a moment that the witnesses are about to defame anybody or be defamed - the witnesses are protected by absolute privilege in respect of the evidence they give this committee. If they are directed by the committee to cease giving evidence on a particular matter and they continue to do so, they are entitled thereafter only to qualified privilege in respect of their evidence. The witnesses are directed that only evidence connected with the subject matter of these proceedings is to be given, and they are asked to respect the parliamentary practice to the effect that where possible, they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable. I request that all present submerge their mobile phones in a suitable location so that they do not interrupt the broadcasting system.

Mr. Eoin O’Shea

It is a great honour for the Court of Auditors and for myself to be present here to present the court's annual report to this committee. The Lisbon treaty brought about a change in the way in which the court publishes its annual report, which is now sent to national parliaments throughout the European Union at the same time as it goes to the European Parliament and Council. This is appropriate because all the money the European Union receives comes from member states, and member states spend 86% of all European Union money - all agricultural subsidies, structural funds and so on are spent by the member states directly.

The treaty does not state how the Court of Auditors should interact with national parliaments, but I have had an opportunity to read a document prepared by a sub-committee of this committee which envisages an annual briefing by a member of the European Commission. The Court of Auditors has no difficulty with providing a similar briefing every year and I hope, Chairman, that today will be the first of these.

The Court of Auditors is 35 years old. It was created as an institution of the European Union, on the same level as the Commission and the European Court of Justice, in 1993. That reflects the importance the European Union placed on oversight and control at the time. The first president of the Court of Auditors was an Irishman, Mr. Michael Murphy, an official in the Department of Finance, and later members were colleagues of the Chairman, Mr. Richie Ryan, Mr. Barry Desmond and Ms Máire Geoghegan-Quinn. I joined the court in April and was sworn into the job in July. I will be finishing the term Máire Geoghegan-Quinn had left when she went to the European Commission.

The court publishes a number of reports every year. The main one is the annual report, which I am presenting today, but we also do about 20 special reports. The court does not just audit numbers; it also audits policies throughout the European Union. Two special reports published recently related to Ireland. The first was a report on the reform of the European sugar market, and the second was a report on the application of the Leader funding approach throughout the European Union. We also provide opinions on European law. The court has a group of 27 members, one from each member state. Most of our work is done in chambers. I am a member of chamber 4, which deals with banking and borrowing, research, agencies and administration. The most relevant of these to Ireland is probably banking, given the developments of recent weeks.

I will briefly go through the figures from the annual report before detailing some of the things the court said. The basic principle in European Union budgeting is the matching principle. Expenditure must match income every year because the European Union does not borrow to make ends meet. The spending is decided and then a mechanism is used to match revenue with spending. There are three sources of revenue for the European Union. When someone imports goods from outside the community he or she must pay a customs duty, and all of these duties go to the European Union, apart from about 25% to cover collection costs. A small amount of the European Union's VAT take goes to the European Union; in Ireland's case it is about 0.33%. The balancing amount to match the remaining revenue with expenditure is given in the form of a cheque from each member state to the European Union based on the size of each country's national income. Ireland pays, in total, about €1.5 billion per year, while Germany and France pay about €20 billion each. It is a reasonably transparent system; the bigger the country and the more income people earn, the more it must pay.

Most European Union spending - about 48% - is still concentrated in agriculture and fisheries, while about 30% consists of cohesion funding - that is, Structural Funds, infrastructure, job creation and development. Research and external assistance each take up 6% to 7%, while administration comprises about 8% of the budget. In 2009, Ireland received €1,940 million from the budget and contributed €1,533 million, leaving it a net beneficiary by about €407 million. About 86% of Ireland's receipts relate to agriculture, so the current discussions under way on the Common Agricultural Policy will play a major role in influencing Ireland's status as either a net beneficiary or a net contributor in the years after 2014. The European Union also provides many things for which no contribution is needed, such as the single market and the stability that a unified political system brings to each member state.

In our annual report, the court gives two opinions on the European Union's accounts. The first is the same type of opinion that every auditor gives on sets of company accounts throughout the world - that is, on the reliability of the book-keeping. The court found that the European Union's book-keeping is reliable. We stated that the accounts were prepared without material error and gave a true and fair view of the state of affairs. It is a myth that the Court of Auditors does not sign off on the European Union's accounts, but it is true that this year and for the last three years, it has been a clean opinion.

As well as the opinion on the reliability of the book-keeping, the court also gives an opinion on the number of errors it uncovers in EU spending. The EU spending rules are obviously complex and the court samples all of the spending to see how the rules are kept. This year we found that material errors had been made in the spending rules in the areas of agriculture, cohesion, research and external action. The errors were small; in agriculture, about 2%, and in cohesion, about 3%. In general, over the years, we have noticed a decline in the amounts involved in spending errors.

The types of spending error in agriculture include over-declaration of land; a person receives a payment based on the number of hectares he or she owns, and if that is over-declared, there is an over-payment. We have also found cases in some of the accession countries in which State land was declared as agricultural land for the purpose of receiving payments under the special area payment scheme that is in place in those countries. A similar case would be Ireland declaring the Phoenix Park as agricultural land for the purpose of the system. The reason this arises is that in some of the accession countries there is no tradition of farming, whereas the system applied in Ireland is backed by a historical system under which we can be sure farmers are actually farming land. The major errors in cohesion and structural funding are errors of public procurement. Approximately 75% of all errors are related to that, through failure to follow tendering procedures, and so on.

One of the biggest threats to European Union financing is inappropriate spending. If European citizens do not have confidence that the money they give to the European Union is being spent correctly they may be less willing to provide such funds. There is also the ever present problem of fraud. This is most acute wherever organised crime is involved throughout the European Union, as occurs in many countries. Organised crime tries to steal every penny it can get of European funding. There are two elements that facilitate that, the one being a country's direct access to decision makers, the other an unerring ability to procure fraudulently the necessary documentation to perpetrate the fraud in question.

The report is very good for Ireland. We mention many negative spending references but none relate to Ireland. That was seen in the recently published Leader report which defined some 20 examples of negative spending, none of which related to Ireland. Ireland was praised very much by the court for its implementation of the Leader approach and its spending of Leader money. The court had some criticism of Ireland's systems in regard to the collection of customs duty. It pointed out that Ireland has the highest number of VAT reservations in the European Union. A VAT reservation is where a difference arises between the European Union and a member state in the implementation of the VAT directives. This is not a particular criticism of Ireland in regard to VAT and a number of the VAT reservations were solved after the year's end.

In summary, I will be happy to continue the co-operation between the Court of Auditors and this committee and the wider House. It is very important that the Court of Auditors should be as democratic as possible and be involved with as many democratically elected people in Europe, the European Parliament and throughout the member states as it can. I am happy to continue to attend the committee if that is what the Chairman and his colleagues wish.

Thank you, Mr. O'Shea. We are delighted to have you here. The issues Mr. O'Shea touched upon affect not only Ireland but the European Union as a whole and it is interesting that the policy of the European Union is reflected in the work he does. I realise he is not reporting now on the matter of the sugar industry but he may be able to shed some light on some aspects of it. For example, one thing commentators, of whom we hear so much, will say is that agriculture is doing reasonably well at present. It is - but relative to other sectors. That is the point that must be remembered at this time. During the boom times agriculture was the poor relation but now it has come into its own by virtue of the economic decline. A situation has come about where the most likely avenue of recovery will be through this sector which is extremely self-sufficient and export oriented. That point has been emphasised repeatedly recently, particularly by Commissioner Barnier, who went out of his way to state that we should capitalise on innovation and technology as a means of enhancing the potential in the agricultural sector. Unlike many other people the Commissioner does not believe Europe should ease itself out of the agricultural and food producing sectors but is strongly of the view that food producing is a natural element throughout the European Union and has the ability to provide much more food than it does at present.

The committee has come across a related element in the past. On the one hand, we have a natural aspiration and the means of achieving it in a considerable way under a particular heading. However, for a reason unknown to us we find, for example, in the context of the WTO that a different policy may prevail and it may be in the interests of certain countries within the EU to promote other elements of industry and the economy to the exclusion of what is most readily available. We are now of the opinion that fishing and agriculture are two areas with a great deal of potential that will provide a considerable response to the economic situation in the future.

On the sugar industry, some members of the committee and others outside it were appalled by what happened at the time in the industry and we spoke about it. We believed sugar was an indigenous industry that was well and truly established. We did not accept the notion put forward in some quarters that the product would become cheaper and more readily available to the consumer. We were right. We were also told closure here would help the poor in Africa and various other parts of the world. We know now that was not true either because the producers in Africa are now in a worse position, competitively, than they were before. That was all wrong. We were annoyed and dismayed that something like that should have happened in spite of the fact that there was a fairly considerable body of opposition from within the national Parliament. However, the closure proceeded. In the future we must be more demonstrative in our views because it is no longer enough merely to express them. We must be clearly demonstrative and in the course of such demonstration we must be careful to illustrate to the decision makers at the time, whoever they may be, that such action might not be in the best interests, first, of the country and second, of the European Union. I speak from past experience in this area and the views of the committee were expressed on the matter. The fact remains that what is in the EU's interest in this area is also in our interest as a country. This is particularly the case in an area which is naturally part of our economy.

I welcome both guests to our meeting this afternoon and thank them for their presentation which I found most interesting. I have a number of questions on the report which was presented to us and would like to have a response from the delegates. The first question relates to the information on cohesion funding. On page 11 there is a paragraph about eligibility errors that result in the main from misapplication of rules on public procurement. The report makes the point that in 2009 an estimated 36% of all payments contained an error. As bad as that is, it was an improvement on the figure for 2007 which described error of the order of 54%. That seems amazingly high. I would like to hear the delegates' perspective on the amounts of money at issue. What is being done to tackle the situation and bring down the figure?

I have a broad question on the report on the sugar industry and I know many colleagues will have a further interest in this. How was such a report triggered? How did a particular sector of the economy or a particular decision trigger this kind of detailed investigation? What is the delegates' relationship with national parliaments and the European Parliament? The equivalent body in Ireland would be the Comptroller and Auditor General which has a type of relationship with the Committee of Public Accounts that allows matters to be raised in a public arena and followed up in public debate. Do the delegates have a similar relationship with the European Parliament or another body or committee of that parliament that allows such a dynamic to take place?

I thank Mr. O'Shea for his most interesting presentation. I had not understood everything that went on. Is there a belief that it is "fair game" to have a go at European money because it is not really our money? Is there a sense that because money is coming from a big pocket, those who attempt to cheat - I use the word "cheat" on purpose - including legitimate Governments may do so because it is regarded in some countries as fair game? I was surprised to read on page 8 of the report that the figure for the number of transactions audited with regard to eligible land was 27%. That is to say 27% of transactions were effected by error.

A figure of 27% seems like a huge figure. Perhaps that is based on my first query and people believe that one can cheat on that basis. I was pleased to learn no negative spending took place in respect of Ireland. I had not understood that some of our VAT goes to paying European expenses. We have 0% VAT on food. Does this present envy among others who are dissatisfied because we have 0% VAT on food, as does Britain, while most other countries impose a percentage of VAT on food? Does this mean we pay less into the European fund than we would otherwise?

I welcome the two speakers here today as well. This is an area we have read about and we have witnessed people being appointed to the Court of Auditors but I never fully understood the role. I wish to put some questions with regard to the most recent report on the sugar industry. What triggered that report? How did the court go about compiling the report? How long did it take? There are certain pockets in Ireland, including the areas of Carlow, Kildare and Cork, where the sugar industry was important not only to the workers but to the farmers as well. It was a beneficial and worthwhile area. It was a good revenue earner for them and they were very disappointed the way the whole industry fell asunder almost overnight. It appeared that at European level people were keen to facilitate the dismantling of the industry here. While the report came as no surprise to many people who were directly involved in the industry, they believed it came too late in the day. Payments were made but by then it would have proved difficult to reinstate what was there previously.

I welcome both of the speakers and thank them for their interesting presentation. This is the Lisbon Treaty at work and it is making a difference. The delegation focused on the spending side. Do they comment on the revenue side? In particular, does the court provide any oversight or recommendations on revenues that are not coming to the union because of fraudulent manufacture of cigarettes and the movement of such products across the Border? I am unsure whether Mr. O'Shea saw the "Prime Time Investigates" programme last night. I am from that part of the world and I am acutely aware of it. I deplore what goes on.

The Deputy said "that part of the world". Would he care to be more specific?

The County Louth and south Armagh Border area.

I was unsure to which type of industry the Deputy referred.

Is that specific enough? Mr. O'Shea spoke of organised crime taking advantage of revenue streams rather than preventing inward flows. However, I am sure it works on both sides of the accounting process. Will the delegation comment on the position with regard to providing VAT reductions in certain areas? This is something which has been raised here on everything from condoms to wind turbines throughout the years. A social and environmental case can be made for reductions to encourage particular behaviours. Does the court have an authoritative word on what a country can do with regard to providing VAT incentives?

We understood drawdowns could not happen with regard to FÁS in 2009 - although I will stand corrected on that - because of the court's work on that strand of funding from the Cohesion Fund. I am surprised this did not generate a black mark against us if it was in the court's ambit for 2009. The delegation members work in the chamber dealing with banking and borrowing. Does it have a function with regard to the behaviour of banks and inter-bank lending? Was an opinion given on the role such lending had in the Irish crisis?

My questions relate to the sugar industry. I hail from the town of Mallow. When the court's report was issued, it was met with utter devastation, disgust and complete surprise, even in view of what other Members have stated here today. The report, which is comprehensive, states "the audit found that in one MS [member state] the only producer, which before the sugar reform had undertaken a consolidation/rationalisation of its processing facilities and defined itself as one of Europe's most efficient producers, closed down its large, modern and potentially efficient sugar factory justifying their decision on the risk of the lower prices reducing the supply of sugar beet to an uneconomic level". I am unsure whether the following quote comes from Mr. O'Shea but as per the RTE news on the day of the publication of the report, a quote attributed to Mr. O'Shea stated that it is possible the Greencore plant would still be operating today if it were not for the sugar reforms introduced by the European Commission.

I seek a confirmation of what has been stated already in the report. Did this so-called reform of the sugar industry meet its targets? If it did not meet its targets is there a possibility, notwithstanding the fact that we are not to produce sugar in this country until 2017, that it can be revisited in light of the fact that the European Court of Auditor's report clearly states that the regime did not set out to do what it was supposed to do. The use of the word "reform" is thorny because it is a loaded term as well. It was not a reform and clearly it did not work. The growers and the workers who lost their jobs wish to know where now for the report? What is the import of it? Will it work its way into the ether? Are we left with the political entrails of it? Is there hope that we could glean from the report the potential to rekindle the industry?

I to refer to the summary in the report. Point II states the objectives of the reform were "to ensure the competitiveness of the EU sugar industry". That has not been achieved because we now have a cartel and 75 factories have closed with 20,000 jobs lost throughout the European Union. Will the delegation inform the committee how many we are left with? I believe there are only a handful operating within France, Germany and perhaps others countries. The French and Germans have now created a cartel in the production of sugar in the European Union. A layman's view is that if the European Court of Auditor's report is to mean anything there should be a reversal of this trend and peripheral countries such as Ireland should be able to get back into the market not only for sugar production for confectionary or other purposes but also for the production of ethanol to meet our bio-fuel obligations under EU legislation. I would like to get the opinion of the witnesses on the matter and I apologise if my question is not strictly relevant to the business before us.

To clarify my earlier comment, the report came as no surprise to the many people who believed we had closed down a viable industry.

I agree.

I welcome Mr. O'Shea and Mr. Weldon and wish them well in their positions. I have known Mr. O'Shea for a long time. The first sugar factor in this country was opened in County Galway in 1926. Galway was also the first county to suffer the loss of a factory, in 1983. How has the European position on the sugar industry changed since Greencore ceased processing operations? What was the most startling discovery made by Mr. O'Shea and Mr. Weldon since their appointment to the Court of Auditors? Based on the outturn for 2009, what benefits will Ireland derive from the EU in 2011 and 2012?

I was a member of the Joint Committee on Foreign Affairs when the sugar industry was closed in Ireland. NGOs which were sent to lobby members of that committee cited the benefits that would accrue to the poor in Africa and other developing countries as the reason for the closure. Some of us vehemently objected to these claims and pointed out the flaws in their argument. Somebody came to an incorrect conclusion. I am not suggesting that the witnesses have ever made an incorrect conclusion but it is a fact of life. I commend the Court of Auditors on the work it has done.

Mr. Eoin O’Shea

With regard to the Chairman's point that agriculture was doing well in the context of the CAP, the treaty requires us to develop common policies for agriculture. The report recently published by the Commission contained an estimate by the Food and Agriculture Organisation that demand for food will increase by 70% globally by 2050. The Deputy's point is well grounded, therefore.

If members agree, I will deal with the questions on the sugar industry together.

Mr. Eoin O’Shea

In regard to Senator Donohoe's question about cohesion funding, the court's method of estimating the error rate is reasonably straightforward. One might say 36% of the sample is affected by errors but only a small proportion of these would be quantitative, that is, related to the amount of money spent. Other errors might arise from documentation simply because the rules are very strict. The court's report focuses on the errors that can be quantified. The total error rate for cohesion funding was approximately 5% but, compared to the estimates we prepared last year, it is around 3%. This figure is slightly higher than the agriculture rate but we allow for a bigger error rate in cohesion funds because while the money for agriculture is spent throughout the EU, cohesion funding is concentrated in areas that are less wealthy and have relatively recently become part of the Union.

The court interacts with the European Parliament through the budgetary control committee. This committee comprises approximately 30 members, most of whom come from the bigger net contributors such as Germany and France, and our annual reports are presented to them in the first instance. The committee also questions Commissioners and hears evidence from members of the Court of Auditors on behalf of the Parliament. Furthermore, it conducts the hearings for prospective members of the court. When I appeared before the committee one month before my appointment, I spent one and a half hours answering its questions. The committee's work is equivalent to that of the Committee of Public Accounts but because the European Parliament is not divided between Government and Opposition, the objects of its criticism are usually external to the Parliament. As members can imagine, therefore, it operates according to a somewhat different dynamic.

Senator Quinn asked an interesting question. In a mature country like Ireland, we do not see European money as fair game. In many ways, we mind it better than other moneys because it is subject to external as well as internal audit. Misuse of European funds is regarded as bad for the reputation of a country.

The comment that 27% of eligible land is affected by error is related to Senator Donohoe's question in so far as some of the errors are technical in nature and not connected to the amount of money involved. The calculation of VAT collected from member states is very technical in nature. The VAT collected by each members state is calculated and the figures are harmonised to achieve a common percentage. For example, VAT charged on food is balanced between the zero rate charged in Ireland and the higher rates that apply elsewhere to arrive at the percentage that will be paid to the European Union. In any case, these technical aspects do not arise for Ireland because this country's VAT contribution to the EU is capped at a lower figure than would result from the calculations.

In regard to Senator Dearey's question on cigarette smuggling, I had an opportunity to watch last night's excellent "Prime Time Investigates" report. Cigarette smuggling causes problems throughout the European Union and reduces revenues from customs duties. This is the reason a number of those interviewed on the programme were representatives of the European anti-fraud office, OLAF, which is heavily involved, together with customs offices in member states, in trying to combat such fraud. It is a good source of criminal intelligence in working alongside Europol, the European criminal intelligence unit. OLAF is the European Union's fraud investigatory division. If I find cases of fraud in my audit work or if someone writes to me telling me about fraud, I will pass on the information to OLAF in order that it can investigate the matter. It conducts interviews and carries out searches and then prepares a file for the public prosecutor in the place in which the crime was committed. During the years it has achieved approximately 300 prison sentences, totalling approximately 875 years, many for smuggling. Europol is also very interested in this activity because it is a highly profitable industry and the profits are used to finance other crimes, particularly international crimes such as people smuggling, to which reference was also made in the excellent programme broadcast last night.

On the question of VAT and VAT reductions, VAT is a European tax which is collected locally. Most of it is retained locally, apart from 0.3% used centrally. The reason it is a European tax is it completely affects the operation of the Single Market such that an Irish person selling goods to Germany will not be disadvantaged by a particular rate applicable in that country. As for a reduction in the rate of VAT in a particular area, I am not in a reasonable position to help Senator Dearey because, although I am a tax consultant, his question relates to a particular product. For example, a different set of rules governs the different rates that might apply to a glass, a pitcher or a microphone. I would be obliged to have my books to hand on the one side and engage in a lot of analysis of a particular matter on the other side.

Mr. Eoin O’Shea

The European Union issues VAT reservations which record differences between what the Union thinks a VAT rate should be and what a government thinks. Ultimately, if the level of disagreement is so great, the matter can only be decided in court. However, it normally is a very private matter when VAT reservations are written down. There were 17 at the end of last year and I believe at least six have been resolved. Members may have seen reports in the newspapers recently about the European Commission taking the Government to court in respect of VAT on greyhounds and horses, but this is the type of issue that would have been mentioned in the court's report. However, as I stated, it is not a question of whether the Government or the European Union is right in this regard, rather it pertains to a difference of interpretation. It is a very complicated and complex matter that often must be resolved at court level simply to achieve certainty.

In respect of FÁS, I understand the issue has not yet been dealt with at Court of Auditors level. I understand the particular matters related to FÁS were stopped at European Commission level, which is the Commission's job as the primary control over spending. From the perspective of the court, we would look at the matter afterwards in that if spending was to be stopped, the money would still remain in an envelope and the member state might still have the ability to spend the funds. Obviously, certain matters have come out regarding the particular organisation which are being worked through. However, the particular issue in which the court might be interested - I am surmising - would be whether the funds were actually used to give people qualifications they could use in the marketplace to contribute to the local economy. Although other matters have come to light that might be more salacious, the court's focus would be on whether the money provided centrally for member states was used properly to provide training for people they could convert into jobs in developing the local economy.

Would the fact that, for instance, some private trainers have not issued qualification certificates be something about which the Court of Auditors would be concerned?

Mr. Eoin O’Shea

Yes, that would be a particular concern of the Court of Auditors because the effectiveness of European Union spending on training is highly important, particularly on foot of the financial crisis.

To respond to Senator Dearey's query on banking, the Court of Auditors does not look at matters related to individual banks because that does not affect the European Union's accounts or balance sheet. The court's involvement in and auditing of banking and lending pertain to the amounts of money the European Union lends to countries. For a number of years a facility has been in place called the balance of payments facility, whereby the Union lends money, in conjunction with the IMF, to non-eurozone member states. Three member states are availing of that facility, namely, Latvia, Hungary and Romania, to the tune of approximately €9.2 billion. The money is borrowed by the European Union and lent to these countries. Obviously, a new facility comprising a €60 billion fund has been discussed in recent times and will now fall into the court's portfolio. That is the job we do in terms of banking and I apologise if I gave a misleading impression to the Senator.

If it is all right with Deputy Sherlock, I will deal with the sugar industry report at the end. It might give him an opportunity to come back with questions.

Deputy Treacy has asked what has been remarkable and startling since I started the job. I read something recently about a country using Structural Funds to pay the appearance fee for a well known pop artist. It was for an amount of approximately €700,000.

It was a mobile structure.

Mr. Eoin O’Shea

Yes. It was remarkable, but it was caught.

I spoke about the influence of organised crime on European Union spending. I heard of a case in which a fake university was established to make applications for research grants, but that also was caught. The usage and redeclaration of state land for agricultural purposes is something with which we in Ireland would not have been familiar. Our understanding would have been that one had to be a farmer and engaged in agricultural activity and that one had to stop doing this in order to qualify for payments in the spirit of the Common Agricultural Policy. However, when some of the newer member states acceded to the European Union, they obviously did not have this farmer background and as such, were obliged to do things a little differently. I was amazed by the ingenuity brought into play to achieve that particular aim in drawing down money.

On Ireland's position as a net beneficiary, the answer to Deputy Treacy's question is that I do not know. In 2011 and 2012 I imagine Ireland will remain a net beneficiary because the spending programmes for agriculture and the Cohesion Fund, among others, are set in stone, more or less, until 2014. Consequently, I do not believe there will be much of a change in that regard between now and then. From 2014 onwards it may be a different story; it all depends on how the negotiations go on the Common Agricultural Policy which accounts for approximately 86% of the funds provided by the European Union for Ireland.

Are all EU payments still made in arrears, whereby each member state must have incurred the expenditure before the refund is made? Is this still the position in respect of all envelopes?

Mr. Eoin O’Shea

No, some funding, particularly in respect of the Cohesion Fund, takes the form of an advance payment. It might be the case that, on signature of a contract, certain moneys might be paid in advance.

What about the single farm payment?

Mr. Eoin O’Shea

I understand that it is made in arrears.

Mr. Eoin O’Shea

It is shown on the balance sheet.

There has been no change.

Mr. Eoin O’Shea

No.

The impression is that we get a dollop of money from Europe which we store somewhere or other and which we will eventually release. I have tired myself telling people that we must spend it to justify getting it. Is this still the position?

Mr. Eoin O’Shea

Yes. There is an impasse, in that MEPs and members of the Council have not yet agreed Europe's 2011 budget. In such circumstances, the 2010 budget would be used for 2011 and divided by 12. In January one would be allowed to spend one 12th of last year's budget, in February one would allowed to spend one 12th of last year's budget, etc. This system is projected to have an effect on the payment of quarterly amounts for agriculture. All parties are hopeful they will have the matter solved before Christmas.

We are hoping as well.

Mr. Eoin O’Shea

This has not occurred for 20 years. It is important for cash flow in member states, particularly at this time, that the matter be resolved.

I am happy to answer questions on the Court of Auditors' report on the sugar market. If Members want to ask a question of a member of the court, they should be able to call on their country's member to attend the Parliament and answer questions put to them.

Before we move on to the important debate on sugar, I will make a number of general points. I apologise for my late arrival. I am mystified by the report's conclusions. A consistent strain seems to be critical of the supervisory and control systems in particular. Is anyone paying attention to what the court is saying about these matters? The court concluded that the payments on agriculture and natural resources were affected by a material error. The court's assessment of the supervisory and control systems is that, in general, they were at most partially effective in ensuring the regularity of payments. The report then refers to external aid, development and enlargement, on which €6.6 billion was spent. Some €56.3 billion was spent on agriculture and natural resources. The report reads:

The supervisory and control systems of the various DGs are in general partially effective. The shortcomings in the various systems are reflected in the Court's recommendations.

Its conclusion on this section reads:

The Court concludes that payments for 2009 in External aid, development and enlargement were affected by material error. The Court also finds that the supervisory and control systems were partially effective in ensuring the regularity of payments.

This is the exact same problem. We are discussing a great deal of money. While I appreciate that the Court of Auditors is only pointing out the problem, where is the follow-up? As a national Parliament, how can we be sure that someone is listening to the court's comments and recommendations? From time to time and where external aid, development and enlargement are concerned, particularly in terms of the moneys provided for humanitarian aid, we receive reports of allegations of corruption in states to which aid is being sent. A wall comes down and we are told that there is no great evidence of corruption, but the reports are constant.

From the court's point of view, the regulatory and supervisory systems are not in place. We are discussing vast sums of money. Must people report back to the court that steps have been taken to satisfy its constructive criticism? It is more than just constructive criticism. This is European taxpayers' money. It is right that there is a consistent criticism in the court's report of the manner in which moneys are being dispersed. Before moving on to the sugar issue, will Mr. O'Shea comment on this matter?

Mr. Eoin O’Shea

Control systems are the most important element of our work. The court cannot sample every farm or contract. Forcing the European Commission to install proper control structures is the most useful work we can do. Deputies will remember that the Santer Commission fell at the end of the 1990s. Much of this had to do with reports emanating from the court and supervisory bodies. Ever since, the Commission and MEPs place a great deal of attention on the follow-up of the court's reports.

This year, the court noted that the number of spending errors is declining. This is to be welcomed. Last year, the rate of spending error in respect of agriculture was just under 2%. In our opinion, this is not a material spending error on agriculture. However, we found the rate was just over 2% this year. We use a sampling approach, so the materiality bar relates to the amount of auditing one does. If one doubles the amount of auditing, one might be able to say the error rate is 1%. The bar we aim for is less than 2%.

We have been critical of the supervisory and control systems. There is a follow-up, as our report goes to the European Parliament's Committee on Budgetary Control, which the Commissioner for Agriculture and Rural Development must attend to answer members' questions. Its approach is straightforward and unyielding where the spending of European money is concerned. There is definitely a political follow-up to our report. We also follow up in our annual and special reports year on year. For example, we might pick up on an issue in our annual report and follow it up through a longer report. We follow up our criticism every year. Doing so is important for auditors.

If the court is not satisfied that there is no proper follow-up or that it is slipshod, can the court not go directly to the European Council or Commission President Barroso? We should be learning lessons from our banking system. From time to time, auditors working with the banks were saying things that people at the top did not want to hear. Unfortunately, this is a trend right throughout society. If one is asked to do a job and one does it professionally yet people still ignore one, an auditor on whom we depend should have direct access. We are discussing whistleblower legislation. If the court goes up the chain but the chain does not react to its comments, is there a final person to whom the court can go or must it always go up the chain?

Alarm bells ring for me where humanitarian aid is concerned. The report reads: "DG ECHO should improve the documentation of assessments of proposals for humanitarian aid actions". I would imagine that would have been automatic. When the court makes comments in an auditor's report, they should be taken seriously. I would like to think the Court of Auditors has the proper support to see through to the end the job it is doing and make corrections. Corrections should not be made in bits and pieces; they should be made immediately. If money is being wasted or if inefficiency is evident, the European Court of Auditors should have strong powers to enable it to see to it that it stops. Any business that does not listen to its auditors will not remain too long in business and the same applies here.

Mr. Eoin O’Shea

Deputy Barrett makes an excellent point. The Court of Auditors has been a European institution since the Maastricht treaty on the same level as the Commission and Council. As a court, I and my colleagues have full and free access to all decision-makers, whether they be in the Commission, the Council or the European Parliament. We attend the European Parliament and give opinions. Parliamentarians ask us our opinion the same as the Committee of Public Accounts does of the Comptroller and Auditor General. We meet members of the budgetary control committee privately to bring particular concerns to their attention if we have them and if we know they are particularly interested in them. Every year, the full Commission meets the full Court of Auditors and there is a very free, open and frank exchange between the Court of Auditors and the decision-makers because we are on an equal footing.

I endorse what Deputy Barrett said.

The European Union is the largest contributor to overseas development aid and humanitarian assistance. Ireland is proud to be part of this. Are the witnesses satisfied from their auditing procedures that the aid gets to where it is destined without being manipulated by either professionals or others en route?

Mr. Eoin O’Shea

That is a very difficult question to answer and I am sure Deputy Treacy could answer it from his experience as well as from being involved in the disbursement of overseas aid. We do an estimate of an error rate and the error rate in this instance is between 2% and 5%. One could state the vast bulk of what we sample is not affected by error rates. Some of the funds spent by the European Union are given over to other bodies so our means of auditing this is not completely transparent. Some of the money given by the European Union to countries goes in the form of budget support. Instead of giving it to a particular programme the outcome of which can be audited to see how many people were immunised or have food in their bellies, the money is given as direct budget support and in reality the only control over this is whether the country exists.

We will now deal with the sugar issue; the sweetener.

Mr. Eoin O’Shea

I thank the Chairman and his colleagues for their questions on the report on the sugar market. The court was critical of the sugar reform process undertaken by the European Commission and the report makes this quite clear. The primary aim of the reform was to reduce unprofitable sugar production in the European market. The court found this was not the case; paragraph 30 of the report points out a particular matter relating to one member state, namely, Ireland to which Deputy Sherlock made a straightforward reference. As the Chairman stated, many people in the Houses and throughout Europe were critical of the particular reform proposal at the time. In some respects, although it does not give much comfort to those people, the report in some way vindicates the position they held at the time. I am stating this as a fact.

The reason the court produced the report, and the reason the court produces this type of report, is to influence decision-making in the future so that those making such decisions will know that somewhere down the line, one way or the other, somebody will provide oversight and produce a report which will be used as objective evidence by political elected representatives in member states and at European level and perhaps form the basis of criticism. The report has a critical function but also a helpful function.

Deputy Seán Power asked about how the report was triggered. Every year, the court produces approximately 20 reports and each area of the court will examine significant changes that took place in recent years. A report will be scheduled, the resources will be allocated and the report will be produced. This particular report involved 288 weeks of audit time in the court. It involved studying the reform not only in Ireland but throughout the European Union. It was a heavily involved report that took a long time to complete and involved much analysis.

The report was produced this year. I am not fully sure but I believe the reform process continued until 2007 or 2008. It continued for a number of years beyond the matters relating to Ireland, so it was closer to 2009 than to 2006 when the events took place in Mallow.

I will allow a number of supplementary questions so members will have another opportunity to speak.

Mr. Eoin O’Shea

I am happy to confirm that the quote read by Deputy Sherlock is accurate. Deputy Sherlock asked whether the sugar reform met its targets and I would have to answer that on many of the levels he brought to the attention of the committee it did not.

Mr. O'Shea stated the purpose of the Court of Auditors is to set down a marker now on what to do or what not to do in the future. There is a tacit expression in the report that the Commission - I do not want to speak in the vernacular - made a complete hames of this and that we decimated an industry overnight. We are now being told not to do it again and that this is not the way to do business. Do not get me wrong; I am not having a go at the witnesses and I understand from where they are coming on this. However, when global sugar prices are increasing and we can produce the product here it does not seem good enough to tell the citizens of this country that mistakes were made but to drive on and this is what not to do in the future. It is not good enough. Particularly for somebody in my party, which is overtly pro-European and outward looking, it feeds into a cynicism as to how the Commission works, particularly on how certain governments can control certain aspects of the regime while professing to be moving into an intra-institutional framework in terms of decision-making. It is still very much an intergovernmental framework and very much about the interest of the nation states. This clearly proves that the interests of France and Germany were tied up in ensuring that Irish sugar could no longer exist. The Court of Auditors is now vindicating this position in its report but there is not a blessed thing we can do about it. This is not good enough. I am not trying to shoot the messenger but if the powers of this Parliament have been increased under the Lisbon treaty there must be something we are able to do to change this type of decision-making because it is completely inadequate.

I thank Mr. O'Shea and Mr. Weldon for their presentation. Unfortunately, I had to watch some of it from my office as I was detained at another meeting. I wish to discuss the sugar issue. I share Deputy Sherlock's views in this regard. It is vital that the Court of Auditors does not see its role as being confined to producing critical reportsbecause it would be useless to the overall architecture of European institutions in the absence of a mechanism to address errors or decisions that impact negatively on member states. While audits, of necessity, involve examinations of events that have occurred, do the delegates believe the court could play a role in ongoing monitoring or consultations in order that its insights could be utilised when a country comes under pressure from the Commission? Where a national government believes it is not being given a fair crack of the whip, the court could act as intermediary.

As I missed part of the presentation, I do not know whether the delegates indicated where the blame should lie for the negative decision. Was it the fault of the European Commission or the Government or civil servants? Could Ireland have done something differently? No one from the Irish side went out to achieve a bad deal, but clearly the outcome has not been positive.

This is a straw in the wind in respect of how issues of this nature are addressed. From an Irish perspective, two critical issues arise in regard to the Single Market and the CAP. In the Single Market we are seeing a shift in production from Europe to China and low wage jurisdictions in South-East Asia. If this continues, it will damage the entire European economy and no area will be exempt from harm. The WTO has a policing role which seems to enforce the principle that services and manufacturing are better located in low wage economies. If this continues, the problems we face in Ireland and elsewhere in Europe will be magnified and only a couple of survivors will remain.

Members of the Oireachtas were overwhelmed by the body of evidence from allegedly authoritative sources. The presumption was that we did not have sufficient information to make a proper assessment. However, they are now shown to have been correct and the supposed experts who produced the policies were wrong.

I apologise for being late. Like my colleague from County Cork, I am specifically interested in the sugar industry. In the context of achieving value for money for the European taxpayer, I ask the delegates to outline the role of the Court of Auditors. Does it only act after the event?

Deputy Dooley asked about the deal. Reaching a deal was the objective of the Department and, regrettably, many of the farming organisations concerned. The main farming organisation was preoccupied with reaching a deal on compensation. Once we lost our focus on saving the industry, it became a question of how much we could put into the pockets of producers and the workers who were to lose their jobs. Once a farm organisation becomes more concerned about compensation rather than maintaining a viable business, it is on the slippery slope.

Does the court exercise oversight of events as they unfold, both in terms of the decisions taken and how they are implemented? Given that the industry went down the Swannee in 2005 and 2006, the horse bolted quite some time ago. In respect of the court's primary role as guardian of the taxpayers of Europe, the European Commission and farmers across the European Union are being asked to invest significant amounts in food safety at the same time as European markets are being opened to food produced to a lower standard. Effectively, these imports are undermining the investments individual producers and European taxpayers have made for many years to meet the highest standards of production. In a headlong rush to sweeten deals on technology, motor vehicles and financial services, agriculture is being sacrificed at the altar of global trade agreements. Pardon the pun on the sugar industry, but agriculture is always the sweetener in a deal.

I ask the delegates to respond to the specific question of Brazilian beef. There is more than ample evidence to suggest European producers would be in jail if their beef met the standards which apply in Brazil. How can we undermine the economic commitment made by the European Union and its taxpayers to meeting higher standards of production, while at the same time allowing these products onto our supermarket shelves? This is a case of history repeating itself with regard to the sugar industry. It is also happening in many other commodity areas. It is fundamentally illogical. The report is cold comfort; although it allows people to say "I told you so", the jobs are still gone and the industry will not be coming back any time soon, as we are locked out under the regulations until 2017.

Not for ethanol.

When that was raised in the heat of the debate in 2005 and 2006, we were told there was absolutely no alternative to dismantling the plant. We were told it could not be retained, which was a lie. There was a preoccupation with doing a deal, but the deal was about compensation rather than saving the industry.

Is it true that for €20 million less we could have kept the factory open in Mallow? We got €20 million to raze it to the ground. If that had been foregone, the factory could have remained standing and we could have moved into ethanol production. The opinion that the factory was destroyed for the sake of a €20 million compensation package has been doing the rounds locally for some years.

I am not a member of this committee so I ask the Chairman's indulgence. I welcome Mr. O'Shea, whom I have heard about, and wish him well. He has given us politicians from Cork East a lot of food for thought. We were very much walked over in this deal. The plant in Mallow was the base of the Irish sugar industry and had the most modern facility; in addition, the south-eastern part of the country has the best growing season. Thousands of farmers were left out of work, and the closure of the factory affected the whole structure of farming because sugar beet was a very important crop in our area due to the climate. We also lost 400 workers in Mallow.

Was the Deputy in the Department at that time?

No, I was not. I was fired out before that. The loss to the economy in the area was huge.

How did the EU Court of Auditors identify the points in its report after the closure of the industry? What subsidy was being paid to the Irish sugar beet industry? Was this part of the globalisation programme that came from the WTO trade talks in Cancún in 2001, where they were supposed to trade off arms but instead traded off food? Ireland produced approximately 200,000 tonnes of sugar each year, based on our quota. Some of this was industrial sugar, but more of it was refined sugar for baking and for domestic industry. Now our brands have been sold and all of our sugar is imported. We were hearing about how the Cairns group, which consists of countries from Latin America, Africa and the Asia-Pacific area, would grow all the sugar, and this has happened. Sugar was previously grown by small and marginalised countries such as St. Lucia and Antigua in the Caribbean, as well as places such as Jamaica, and they have also lost their industries. It has all gone to Brazil, Thailand, Australia and other big countries. The large sugar cane growers and the wealthy nations have benefited from this rather than the smaller nations. We are paying a price for this, and I fail to understand how it could have been allowed to happen. Compensation was the order of the day, and farmers were walked into that. If money is dangled in front of anyone, no matter who it is, he or she will usually capitulate.

I ask the witnesses to clarify the scenario from 2001 to the closure in 2006. Has the court investigated how this came about? Where did it find the report that told us we had made a mistake? What it says in the report is that we made a mistake, and I would like to clarify this. I have the greatest confidence in the Government and my Ministers and I am rather appalled that this has come out just now.

It was the policy makers who made the mistake. That is what it comes down to.

I endorse what my Cork colleagues have said. In particular, I agree wholeheartedly with what Deputy Creed said about compensation. There has been a culture of compensation in farming negotiations over the last 25 years, to the detriment of production. That is a sad fact. What happened in this case was that mouths were open for the biggest sugar lump available. Is it correct that the genesis of this proposal was a negotiated conclusion at the WTO trade talks that sugar production was to be reduced and sectoralised, to the detriment of some of the smaller producers? In comparison to 2006, how stands the volume production of sugar in the EU today? The witnesses may not have figures for 2010, so I ask for the 2009 figures. Where are we going in this regard?

We are not supplying the market any more. That is the bottom line. We are under-supplied in the European market, despite the promises that were made.

I apologise to the witnesses for the length of this discussion. The issue is an emotive one, as they can probably understand, not only for the committee but also for the whole House. The members have illustrated that.

Mr. Eoin O’Shea

Did Deputy Sherlock have any questions I have not answered?

We will hear the responses first, and if there are any outstanding we will decide what to do afterwards.

Mr. Eoin O’Shea

On the role of the European Court of Auditors, it is often the case that auditors must come afterwards to present the report because, beforehand, there is nothing to look at. We played an important role in the matter of the sugar industry in that our report has given rise to a considerable amount of debate and discussion, not only here in Ireland but also across the European Union. Tomorrow, the report is being presented to the budgetary control committee of the European Parliament, and I understand it may be presented to the agricultural committee. In those circumstances, the Commissioner for Agriculture and Rural Development may be asked to give a response. There are many political audiences for a report such as this when it gives its conclusions in such clear and unambiguous terms. The court has a specific role under the treaties: to provide impartial evidence based on research and then use this to assist Deputies, Senators and members of parliament throughout the European Union. If we as a court can give impartial information that is used in political decision making and criticism, we are doing our job in the interests of European citizens.

Deputy Dooley asked an important question about where the fault lies in the case of the sugar industry. The report is quite clear in stating that the fault lay with the policy itself, which was developed by the European Commission. There is no criticism of anyone else, particularly member state authorities, anywhere in the report. It is important, when a body such as the court provides a criticism, that the object of the criticism is clear so others can then criticise that objective criticism and the fault is allocated as it should be. Deputy Dooley asked me a particular question, and it must be said that in this case the fault lay with the Commission.

I have addressed Deputy Dooley's point about the role of the court. It is difficult for a court to have a role in events that are ongoing, because a policy may be the correct one. In the case of the sugar industry, if the original policy, as outlined in point 2 of my summary, had been followed through, I do not believe we would be discussing it here today. If unprofitable production had been taken out, rather than profitable production, we might not be here today to discuss it. The role of the court on a day-to-day basis, monitoring things as they go along-----

How was the decision made as between profitable and unprofitable production?

Who decided that? This relates to the two parallel graphs I highlighted. A decision was made that some countries were unprofitable. How was that conclusion reached because I cannot understand how there could be a major difference between this country and the UK?

Mr. Eoin O’Shea

The court examined the information available to the Commission when it produced its opinion. We would have gone to the Commission and examined the information available. A study was done I think in 2001 which produced the particular graph to which the Chairman referred. The court criticised the Commission for not updating that information.

On what page is the graph?

It is on page 22.

I apologise to the Chairman for intruding.

One table is on page ten and the other table is on page 22 of the report.

How was that arrived at? I do not want to have an agricultural debate but I would say Ireland, having high rainfall, and Greece, Italy and Portugal, having high sunshine, would have ideal growing conditions but they are in the low category. I know Mr. O'Shea is an agronomist or an agriculturist but does he have some back up there?

Mr. Eoin O’Shea

That material was produced by the European Commission and it was the information it had when the court asked it what it based its particular decision on.

The heading reads, "Breakdown of member states by their combined profitability on sugar production". We were told that because we had high rainfall, we did not have the yield where there was high sunshine. The Nordic countries were supposed to have higher levels of sunshine and better growing conditions than we had, with which we did not altogether agree. I do not understand why Greece, Italy and Portugal come into the same category as us.

Mr. Eoin O’Shea

Perhaps there might have been a small bit of extra criticism which might have been left out if the Deputy himself had been involved in the conduct of this audit.

What does Mr. O'Shea mean?

The sun shone in different places at different times and maybe it was not exposed.

Northern Italy around Milan - the Po Valley - would have the finest growing seasons in the world.

Mr. O'Shea does not disagree with Deputy O'Keeffe.

Mr. Eoin O’Shea

I do not disagree with Deputy O'Keeffe.

We will move on. Effectively, what was said was that the information was wrong and based on false premises. Action was subsequently taken which was hugely detrimental to an industry not only in this country but in a number of other countries.

The Deputy was quite right to list the low, medium and high levels of profitability. The high level of profitability was very interesting, in particular when one compares the climate in this country and with that in others. Belgium, Germany, France, the Netherlands, Austria, Poland, Sweden and the United Kingdom are in the high category which is rather unusual.

On the moot point that the information the decision was based on was possibly out of date, did the Commission have the correct information but use the wrong information? How could such a thing happen? What are the implications of that? Was more up to date information available which would have possibly given a different result?

Mr. Eoin O’Shea

I thank Deputy Stanton for that question. The implications for having incorrect or out of date information is that the decision-making is potentially flawed.

Does that mean from a legal point of view, the decision to give up our quota could be revisited?

Mr. Eoin O’Shea

I do not know.

I do not wish to be cheeky as I am not a member of this committee. However, we were told in the league of sugar beet growing countries that Ireland had the worst growing conditions followed by the UK, which had a slightly better climate than we had, France and the Nordic countries. I do not understand this. Ireland is at the low end and the UK is at the high end.

We are entitled to more compensation for being misled and getting a flawed report. I am not blaming Mr. O'Shea. He worked on information available to him like all auditors do.

It should be pointed out that no blame lies with the auditors. The auditors merely unearthed a mistake made. The questions that now arise are as follows. How was that mistake made? Who did it best serve? On what basis was the information provided and by whom to enable the various authorities to come to that conclusion?

That is the question I asked. Was the correct information to hand or not?

Mr. Eoin O’Shea

When the auditors audit a policy, they always ask the policy-makers what information they had to hand when they made the policy. That is made available and the court then looks at it. In this case, we criticised the Commission because the information was out of date, in particular in regard to Ireland because there had been consolidation in the market in the meantime. We criticised the Commission because the information was not updated.

Did the Commission not get full information from this State or did it have the information but use wrong information? If the Commission did not have the correct information to hand, from where would the information have come? Would it have come from the Government? Was it the case that it did not have that information to hand?

Mr. Eoin O’Shea

I think I understand Deputy Stanton's question but it is always up to the decision-maker to have the information at hand which he or she needs to make the decision. We would have looked at the information it had when the decision was made to produce the policy. As the Deputy will appreciate, Commission policies come out before anybody gets an opportunity to-----

This is important. How did the auditors adjudicate that the information received was incorrect? Did they do that through their own sources or was that knowledge imparted to them by a third party or another source after the fact? The policy was implemented and did what it set out to do.

The auditors are now saying the information was flawed. At what point did the auditors adjudicate the information was flawed? From what source did they get that information? Did it come from a member state or the Commission? I presume the Commission was acting on information supplied by the member states. That is what we are trying to establish. As far as we are concerned, that is the kernel of the issue.

To be fair to the Court of Auditors, this is not something it can resolve. The problem was created by whoever made the decisions and members have made that point. However, it is important from the committee's point of view, that information is made available to members as to how these various decisions were arrived at. How many years out of date was the information, for example? Was it two years, four years or ten years out of date? It sounds as if it was ten years out of date but it could have been more than that.

It arose in the WTO-----

We are at a crucial stage of this interaction. Could I ask that Mr. O'Shea is given a chance to respond?

If Mr. O'Shea has the information, it would be helpful.

Mr. Eoin O’Shea

I thank Deputy Sherlock. We would have received the information the Commission had at the particular time. This was a very wide-ranging audit so afterwards there would have been many visits to many member states. Through those visits and interactions with member states we would have been in a position at that stage to evaluate whether the evidence the Commission used to make its decision was sufficient and appropriate at the time.

Does that mean that the Minister or Department here-----

The delegation is basing this on Commission information, data or statistics. That is a racing certainty. However, what Commission data was used? Where did the Commission ascertain its data on growing, numbers and funding? It had to do this through the Department of Agriculture, Fisheries and Food in this country, directly from farm sources or other sources.

Or from Greencore.

Or from Greencore. There must have been an information flow between the agricultural or beet growing sector here and the Commission for the court to adjudicate on the Commission data.

Mr. Eoin O’Shea

I thank the Deputy for his question. The information the Commission had is clearly stated in our report.

With respect, Mr. O'Shea is kicking to touch on this one. At issue is transparency in the European Union. At the outset of the report I took the view Mr. O'Shea was a man who has just authored a report which clearly shows inadequacies in how the regime worked and the court's report is remarkably tacit. Let us start drilling down. I note the gentleman beside Mr. O'Shea, who has not made any contribution, whispered something into his ear. We wish to establish the situation. From which sources did the court get the-----

Hold on one moment.

This is supposed to be a transparent process.

No. The Deputy should have some respect for the Chair. Hold on one moment.

If one authors a report-----

I support Deputy Sherlock. This is an emotional issue in our constituency.

Hold on one second. The Court of Auditors did not make the decision. The Court of Auditors reported-----

We respect that.

The Deputy will let me finish. The Court of Auditors has reported and vindicated the views expressed by many people in the House at the time these decisions were pending and before they became policy. Drilling down into the European Court of Auditors will not necessarily get the Deputy the information he seeks. The only thing the Deputy can get from the European Court of Auditors is the information it received. The court sought the information.

On a point of order, Chairman-----

No, the Deputy's point of order does not arise. I am speaking and you should have a little consideration. I am trying to divert you to the area from which the information can and will come.

Wait a second, for God's sake. The reality is the information in respect of policy changes is elsewhere. I dealt with it at the time and I know where some of the bodies are buried. The WTO is one and the Commission is the other. A dovetailing of policies resulted in an objective of the European Commission to reduce the agricultural budget and relocate the growing of a product elsewhere, which was done. The information on which the decision was made was incorrect and outdated. I am unsure whether the delegation can tell us if it was five, ten, 15 or 20 years out of date but it appears to have been a great deal out of date from examining the graph we saw today. We have allowed a wide-ranging debate on this issue, more so than ever before.

This is a committee.

It is an important subject on which, incidentally, I took a strong view at the time, as did other Members. I emphasise that we will not get to the information we require because our source today does not have it. However, other sources exist and I will try to accommodate those who are members of the committee and others. We will try to get the information from the sources that have it.

I asked a question.

On a point of order-----

There is no point of order on this matter.

I asked Mr. O'Shea what role the WTO negotiations in Cancún in 2001 had on this process. Any auditor who writes a report must have supporting documentation. From where did the supporting documentation, on which the report under discussion now is based, come? To which documents did the European Court of Auditors have access?

Let us have the last questions. They should be short.

I thank the delegation for what they have told us thus far, which is useful. Mr. O'Shea referred to visiting member states. Will the delegation expand on this and outline how it comes into the equation? The moot point is the information used by the Commission was out of date. Clearly, the European Court of Auditors had other information on which it made that decision, assumption or conclusion. What information did the European Court of Auditors use to come to that conclusion? The delegation will correct me if I am wrong but my assumption is that the court discovered that more up-to-date information was available at the time the decision was taken. The committee seeks more detail about that information. Where was it? What was it? Where was it held? From where did the court get it? I am unsure whether the delegation can answer this final point: Why did the Commission not have access to that information when it made the decision?

It did. That is the problem. I call Deputies Sherlock and Treacy. Deputy Ned O'Keeffe has made his final contribution.

I have put two questions which await an answer.

We know that. We will be gone from here in five minutes because we must vacate the room.

I appreciate the Chairman's latitude on this matter. I am not trying to have a go at Mr. O'Shea or Mr. Weldon. We are simply trying to ascertain something. I am not an accountant or an auditor. However, I assume an auditor receives information from a particular source. Clearly, it was deemed that the source of information was flawed. Are we not entitled to ask what the source of information was? If it was from the Commission, from whom or which entity did the Commission get its information? Did the Department of Agriculture, Fisheries and Food, that is to say, the member state parcel together the position on the reform of the sugar regime, or was it from another source? We are entitled to ask this question because we are asking it on behalf of the growers, the workers who lost their jobs and their families. That is the bottom line. Everyone associated with the industry wishes to know on what basis the decision was made.

There are questions about the WTO and the current and previous positions vis-à-vis the sugar regime in Europe. Will the delegation confirm again what it stated earlier, that is, that no blame attaches to any member state, its Government or Ministers in this situation and that the fault lay with the Commission?

That is de facto what the man said earlier. The Deputy was not here for all of the debate. There is no point trying to create a political smokescreen to suit a situation which I have seen being constructed.

No, it was an intergovernmental decision. It was a Council of Ministers decision.

That was a conclusion on a proposal put forward as a result of a WTO conclusion.

It was a decision of the member states.

That is the end of the debate. We will have one final short answer, in the course of which the delegation may provide something of a hint about the reference to drilling down for information and the paddock in which we might drill next. That would be of interest.

What about the issue of the WTO and the backup evidence?

Mr. Eoin O’Shea

If members look at table 2, they will see the source at the bottom. It states the source is "The Commission (Unit C.5 of DG AGRI)". That seems to be the sum total of the information available to the Commission at the time it made its decision. Deputies O'Keeffe and Durkan have made reference to the various rankings of the various countries in the report. We have not made criticism of the various rankings but, obviously-----

It is important.

We are at the top, the UK is second. I do not understand how they arrived at that and I would like to have it investigated. I asked about the role of the WTO.

Mr. Eoin O’Shea

The role of the WTO seems to have been the genesis of why the decision to reform was taken.

When did it write it off the Irish industry and the European industry?

It was an integral part of the WTO and, unfortunately, we capitulated.

It signed off on the food and-----

That is correct.

I asked a number of questions and would appreciate a response.

We will finish in two minutes time, whether we like it or not, because we have to be gone out of here.

Mr. Eoin O’Shea

Sorry, Deputy Stanton.

The questions related to the origins of the decision and by whom the information was supplied.

Mr. Eoin O’Shea

The report itself does not drill down any further than what is presented, unfortunately. So-----

Has Mr. O'Shea made a comparison between the information on which the Commission made its decision and more up-to-date information? How does this more up-to-date information that I assume he is comparing it to, fit in? If it is out of date, obviously it is out of date on more up-to-date information. If I am wrong please correct me, but there must be some reason. How was the decision arrived at that it was out of date? There must be more up-to-date information available somewhere.

Mr. O'Shea did not make the decision.

I am aware of that but if he did actually come to a conclusion that the information was out of date, that would seem to indicate that there was more up-to-date information available at the time. I ask Mr. O'Shea to focus on that issue, please.

Mr. Eoin O’Shea

We criticise the Commission on a number of levels. Just because the information it used was out of date does not particularly mean there was more updated information available in a usable form. We criticised the earlier information because it did not take account of developments in the marketplace, particularly in Spain and Ireland. We criticised it also because there was no information available on the productivity of individual producers or factories within the Commission. Basically, that was the genesis because the main criticism the Court of Auditors has related to the shutting down of profitable rather than unprofitable production. The information available was incomplete and out of date and, furthermore, further work that should have been done on the collecting of information was not done by the Commission at the time it produced its policy.

Political considerations override the Commission's considerations.

I am sorry. We must bring the debate to a conclusion. I thank the delegates for appearing before the committee at short notice originally on the annual report, and not specifically on the sugar item. I encouraged the secretariat to encourage the delegation to speak a little on this subject because it is of fundamental importance and has considerable consequences for the country in general and confidence in the system and systems and the way they work.

The committee will endeavour to follow up the various points raised by the delegates. We have facilities available to us to enable us to do that. We will make the necessary inquiries and ensure that the questions raised by members of the committee and by members in attendance will be answered.

The joint committee adjourned at 4.25 p.m. until 11.30 a.m. on Thursday, 9 December 2010.
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