Who is right, HMG or the Commissioner?

There seems to be some problem about those powers to scrutinize member states' budgets that the Commission is claiming despite, as Lord Pearson of Rannoch pointed out yet again and to some murmured agreement in the House:

My Lords, is it not grotesque that an organisation that has not had its accounts signed off by its own internal auditors for 17 years-there being no external auditor-should be handed these powers, given that if it had been a private company in this country the directors would have been in prison every year for the past 17 years?

And yet there are noble peers like Lord Davies of Stamford who can come up with questions such as this:

My Lords, a few years ago was there not a proposal that the Commission be given a duty of auditing the national accounts of member states? That proposal was turned down at the time by the Council. Is it not the case that if it had not been turned down and had been accepted, we would have had an earlier insight into the problems of Greece, the Greeks would have been unable to falsify their accounts, and the grave problems we all now face might have been significantly reduced?

Is an organization who has not had its own accounts (or budget as it is grandly named) signed off by the Court of Auditors really a competent judge of what is and what is not adequate auditing?

All this was part of a short debate on Lord Willoughby de Broke's Starred Question last week:

To ask Her Majesty's Government what is their assessment of the proposal by the European Commissioner for Economic and Financial Affairs that the European Commission should have the power to scrutinise member states' budgets and impose such financial penalties as the Commission deems fit.

As ever Lord Sassoon waffled in response though appeared to agree with the idea that national budgets should be subject to discipline from the Commission whose own budget ... etc etc.

My Lords, the Government strongly support the recently agreed economic governance legislation to strengthen the stability and growth pact. This provides for stronger and more responsible economic governance across the European Union. Under the new legislation, a range of financial sanctions can be imposed by Council within the euro area where member states are deemed not to have taken adequate action. Sanctions are set out under Article 136, which applies to the euro area only.

Lord Willoughby then came back:

My Lords, I am grateful to the Minister for that reply. However, the statement by Commissioner Olli Rehn applies not just to the eurozone but to the whole of the EU, including this country. Therefore, will the Minister confirm that today's Autumn Statement by the Chancellor is nothing more than an aspiration-a wish list? Will he confirm to the House that this will have to be ticked off and agreed by the European Commission before it can take any effect?

The response was somewhat mystifying though the noble Minister did admit that Britain is not entirely free from the various eurozone-related rules:

My Lords, this country has always been party to the stability and growth pact, but as I am sure the noble Lord knows, under Protocol 15 the UK has an opt-out, which means that we have to endeavour to avoid excessive deficits but are not subject to any sanctions such as members of the euro area are. Furthermore, the UK secured particular treatment that ensures-has ensured and will ensure-that Parliament will always be allowed to scrutinise the UK's budget ahead of the European Commission.

It is, of course, reassuring to know that the House of Commons who had, in days gone by, fought for the right to control the finances of this country, will, for the time being, be allowed to scrutinise the UK's budget ahead of the European Commission. Allowed? By whom? As if I didn't know.

There is, however, a problem with the noble Minister's answer that he so blithely insisted on. Not so long ago, Commissioner Olli Rehn, he who is responsible for the EU's Economic and Financial Affairs, published an article in the Daily Telegraph, in which he reiterated his statement on the matter of the six new pieces of regulation that had been nodded through in order to "stabilize the eurozone" or some such strange notion. In this he made it clear that more than just the eurozone is intended.

When this legislation enters into force later this year, the EU will have in place a much stronger framework for preventing the economic mistakes that have cast a shadow over the recent past.

We will be able to scrutinise the Member States' public finances, in particular the level of debt, much more carefully and pre-emptively than ever before. This will include co-ordinated examination of economic policies and budgets in the first half of each year before their adoption by national parliaments in a process known as the European Semester. And budgets will have to be designed and presented according to a common framework, in line with best international standards, so that budget-making is more transparent both for citizens and policy-makers.

No mention of the UK's opt-out there or in this statement of November 8.

This is first and foremost about safeguarding financial stability in the euro area and in the EU by exerting preventive and effective surveillance, according to the rules we have democratically given ourselves.

Let me be very blunt on this: It's either the EU institutions, according to our own rules, procedures and democratic accountability, or the market forces that will do the job. For me, as a committed European and a committed democrat, the choices are clear.

So who is right? The Minister or the Commissioner?