Select Committee on Northern Ireland Affairs Appendices to the Minutes of Evidence


Further memorandum submitted by HM Treasury

  In your letter dated 30 June, you asked for some additional information relating to the Committee's inquiry into road fuel sales in Northern Ireland. We are grateful to you for extending the deadline for our response until today. I take the opportunity to provide in this letter some of the information which the Economic Secretary undertook to send when she gave evidence to the Committee on 23 June.

  Taking the points arising from the hearing first:

    —  Mr McGrady (Q283) commented that between 1990 and 1999 the excise duty on road fuels in the UK rose by 246 per cent. The Economic Secretary thought that figure to be rather high. According to Customs figures, the duty on unleaded petrol rose by 142 per cent and that on diesel by 164 per cent over that period.

    —  Mr Grogan (Q267) asked how the percentage of revenue losses from the smuggling of road fuels compared with that for alcohol and tobacco. The Economic Secretary gave the figure of £100 million for both smuggling and legitimate cross border shopping, which amounts to less than 0.5 per cent of the total yield. It is not possible to break this figure down into smuggling and cross border shopping. However, figures are available for smuggling for alcohol and tobacco. The percentages, which are not therefore direct comparisons, are beer 4 per cent; wine 3 per cent; spirits 1.5 per cent; hand rolling tobacco 75 per cent; and cigarettes 3 per cent. These are based on data contained in a technical report placed in the House of Commons Library on 19 November 1998.

    —  The Economic Secretary undertook, in reply to a question from Mr Hesford (Q280), to see whether we had any estimates of the impact of fuel smuggling on our Kyoto obligations. On a very broad brush basis we estimate that additional fuel consumption arising from cross border shopping and smuggling amounts to 0.03 per cent of total UK CO2 emissions, so the impact is very small if not negligible.

    —  The Minister also undertook to look, in conjunction with Lord Dubs (Q284, 286), at the Dutch scheme for subsidies to filling stations. This work is not yet complete, but I hope to be able to write to you again very shortly.

  Turning now to the points you raised in your letter:

    —  You asked whether it would be a criminal offence to use Irish rebated gas oil in circumstances in which it would be legal to use UK rebated gas oil. The duty on rebated gas oil in the UK is £0.0303 per litre. The rate in the Republic of Ireland is currently slightly higher than that at 0.0373 punts per litre. Any person wishing to bring Irish rebated gas oil into the UK would have to pay UK duty and mark it to UK standard by the addition of a red dye, except when it is contained in the standard tanks of a vehicle. Since rebated gas oil cannot be used in road vehicles, in practice the only way it can be imported legally without payment of UK duty is in small supplementary tanks used to run refrigerated units. "Green" diesel found in the UK other than in these tanks, which did not also contain the UK red dye indicating that UK duty had been paid, would be liable to seizure.

    —  The various statistics you requested for the last five years are given in the enclosed table.

    —  Your third question concerned marking of UK duty paid road fuels. We assume that you wish to know whether by marking UK duty paid petrol and diesel, Customs would be able to detect smuggled fuels more easily. Both primary and secondary legislation would be required, but we do not believe it would be contrary to Community legislation. Primary legislation would be needed to introduce a distinction between marked fuel which could be used on the road, and that which cannot. Currently no marked fuel can be used in road vehicles. Secondary legislation would also be needed to cover offences. The presence of the marker would then indicate that the product was UK duty paid, but its absence would not indicate it had been smuggled, except where it was found in bulk. We could not have an offence of running a vehicle on unmarked fuel, because it could have been bought legitimately in the Republic. This would limit the effectiveness of the measure. And there would be other practical difficulties. If the presence of the marker indicated UK duty paid status, then it would have to be proof against counterfeiting, and held in secure conditions to prevent theft. This would add greatly to the compliance costs for the oil companies, which would presumably be passed on to the consumer in higher prices, adding to the differential with prices in the Republic.

    —  You asked two questions about the French scheme for rebates for road hauliers. The procedure for Article 8(4) derogations is that application is made to the Commission, who will refer the request to other Member States if they are satisfied that it does not distort competition or the operation of the single market, and that it is compatible with Community policy on the protection of the environment. In that event, the request goes to Council as an "A" point, although there may be informal discussions prior to that to ascertain whether any Member State disagrees with the Commission's view. The UK did not object to the French request, agreeing that it was a matter for subsidiarity. Council approved the derogation earlier this year. However, it should be noted that this scheme applies throughout France: there is no precedent for such a scheme restricted to a particular region.

    —  Customs have no information about how foreign lorries are treated under the French scheme.

    —  On your sixth point, I understand the Economic Secretary's private Secretary has already written to you[4].

    —  Finally, you asked about the responsibilities of the Fiscal Liaison Officer in Dublin. The primary role of the Fiscal Liaison Officer is to facilitate mutual assistance and mutual legal assistance for the purposes of preventing, detecting, investigating and prosecuting trans national commercial fraud common to our interests. Direct operational assistance takes place between agencies to acquire information and intelligence for control, compliance and investigation purposes. Mutual legal assistance is a more formal process for obtaining sworn evidence admissible in court. The Fiscal Liaison Officer has been able to contribute to cross-border co-operation between Customs' Northern Ireland Collection and Irish Customs by helping to co-ordinate local and wider operational arrangements.

13 July 1999

YearCategory Quantity (Ltrs)

1994-95ROI Green Diesel (gas oil) 202
Red/Green mix7,336
1995-96ROI Green Diesel (gas oil) 23,165
Red/Green mix19,700
Smuggled DERV600
Laundered gas oil900
1996-97ROI Green Diesel (gas oil) 10,663
1997-98Red/Green mix 20,639
Smuggled DERV199,906
Laundered gas oil62,507
1998-99Red/Green mix 48,703
Smuggled DERV471,713
Laundered gas oil147,497

  In addition, there have been admissions to the smuggling of over 30 million litres of fuel covering the period 1 January 1998 to 30 June 1999. The admissions can be segregated as follows:
Unleaded Petrol23.7 million litres
DERV7 million litres
Leaded Petrol2.8 million litres

Total33.5 million litres

4   See the note added to Question 259 Back

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