Select Committee on Northern Ireland Affairs Minutes of Evidence

Examination of Witnesses (Questions 171 - 179)




  171.  We are delighted to welcome you and thank you very much indeed for coming to give oral evidence on top of the memoranda which you have already submitted to us. One preliminary word I perhaps ought to say to guide us for the afternoon, and that is that, although the Freight Transport Association did, in a subsequent letter to the original memorandum they sent in, raise the conditions which will pertain as a result of the most recent Budget and thus the Finance Bill, we are effectively concentrating in our inquiry on the smuggling issue. We appreciate that the changes in duty or tax can affect the smuggling issue but we do not want to talk about them generically. That is what our inquiry is about and I just wanted to put that on the record to start off with so that there was no misunderstanding.
  (Mr Armstrong)  That is understood, Chairman. Thank you for that.

  172.  We shall seek, if possible, to make the order of questions we ask you follow a reasonable logical order and, therefore, the questions may come from different corners of the room and not necessarily in a geographical order. It may well be that you would want, in addition to the material you sent us in advance, to say something to us at the start of the proceedings before we start asking questions, and let me express our appreciation that you agreed to give evidence together because in a sense we are going over essentially the same ground and that is extremely helpful from our point of view, but I will leave it to you to decide whether you do want to say anything before we embark on the questioning. What I will further say, however, is that if at any stage you want to gloss an answer you have already given, either now or during the course of the session today, in writing hereafter, please do not hesitate to do so, and we will reserve the right to ask any supplementary questions in writing if something occurs to us having had the chance of reading the transcript. Let me ask whether either organisation would like to say anything of a preliminary nature before we embark on asking you questions?
  (Mr Norris)  No, I think we outlined in our memorandum what our essential submission was and noting your reasonable advice that we should not discuss the recent Budget increases, I just merely reinforce the point that obviously the whole function of smuggling is that it is a function of differential fiscal treatment and has been since time immemorial, so that the same issues apply in this case essentially as apply in relation to cigarettes and alcohol in cross-Channel traffic, for example, between the South of England and France. So with that proviso, we will try and help Members with their questions, Chairman.

  173.  Very good. Let me ask a first question. I will confess that I tried this question on Customs and Excise and Customs and Excise were not particularly forthcoming in terms of their response. That is not in any way a reflection on Customs and Excise but it means that I do not ask you the question with unbounded optimism based on the answer I got earlier, but what is your assessment of the relative prevalence of the following products being used or offered as road fuel, either on their own or mixed with legitimate fuel: the first is red diesel, the second is green diesel, which is obviously rebated Republic of Ireland gas oil, the third is washed red diesel, the fourth is washed green diesel and the fifth is kerosene-adulterated diesel? I do not know how you decided between you as to who is going to answer first and that we will leave in your hands.
  (Mr Norris)  Chairman, I should say that two of my colleagues are intimately involved as operators in Northern Ireland. Ms Smith is the Managing Director of a substantial haulage company in the North; Mr Archer is a member of the FTA and is a Director of the equivalent to the Milk Marketing Board, as you probably know, and I suspect they are in a better position to judge that question.

  174.  That is helpful advice. Let me ask if either of them would like to comment on the question I have just asked?
  (Mr Archer)  Chairman, we obviously do not have definitive figures and even wearing my FTA hat we just do not have access to the level of red diesel and green diesel that is being used as road fuel vis-á-vis Northern Ireland non-rebated fuel. I would suspect there is slightly less being used as of late because of the disparity in prices between the North and the South and the very large extent of cross-border shopping that takes place. You always run the risk, of course, of being apprehended if you are using illegal fuels, so it is difficult for me to quantify this. We hear at ground level that, yes, there are operators who will use red diesel or green diesel because the level of detection is not going to be very high, but I am not in a position, and I am sure my colleagues are not in a position, to quantify that. Going down through the various categories, it is the same answer in many ways because we just do not know the extent of the use of washed fuels, but certainly you see in Northern Ireland, particularly in the West of the Province now, quite a lot of spurious fuelling points quite openly advertised. I saw one yesterday outside Cookstown selling diesel at 54p per litre compared with a normal retail price of about 70-71p. That is either smuggled fuel or that is washed fuel. I obviously did not buy any so I am not sure which category it falls into, but there are a lot of these fuelling points which are Portakabins and sheds and what have you, dotted around, particularly in the West of the Province. So my answer to the question is yes, I think those categories are there. I am sorry, I am not in a position to quantify it.
  (Mr Norris)  Chairman, we enquired as an Association of as many members as we could, trying to answer precisely these questions and, not unreasonably, a great many of our members are reluctant to give names and specific details. Our impression is that there is perhaps less kerosene-adulterated fuel around than is occasionally talked about. It is a spectacular notion that you run the machine on a mixture of kerosene and lubricating oil. You can, of course in the short term but there are enormous effects on your engine of doing that for any length of time. So whilst man's innovation knows no bounds, I suspect that that one is not as prevalent as is sometimes suggested. But it ought to be pointed out that there is such a large amount of legitimate shopping these days that there is this idea that sometimes the purely illegal fuel is in a sense now taking second place to the perfectly legitimate notion of simply shopping south of the border because that itself yields a huge benefit. Why, one might ask, take the risk of illegality, which is, I think, what Mr Archer was pointing out, when to run legally by shopping south of the border yields such an enormous benefit?
  (Mr Armstrong)  Could I comment on that. It appears to me that, although we have no specific figures, there has never been any evidence amongst our membership that the use of these illegal fuels was any higher in Northern Ireland than it was in the other parts of the United Kingdom. Indeed, I think the incentive in Northern Ireland is now less than it is in other parts of the United Kingdom because it is easier to obtain cheaper fuel south of the border.
  (Mr Archer)  If I could fill in some sort of detail on price differentials; because I am representing the haulage industry here we can take VAT out of the equation as it is reclaimed. A company such as I work for, and Val Smith works for, will buy fuel legitimately in Northern Ireland, and at around 58-59p per litre plus VAT. We can buy fuel legitimately in the Republic of Ireland at the current exchange rate of £IR1.17 to the pound Sterling, this equates to 32p per litre. So if you can buy fuel legitimately south of the border at 32p per litre why run the risk on red or green diesel at 16-18p per litre?
  (Ms Smith)  Mr Chairman, there are tanker loads of diesel crossing the border from the South into the North daily and delivering to the people's yards. Those who want it, they will deliver it, so you do not even need to go across the border now.
  (Mr Norris)  And it follows that you do not need to buy adulterated fuel or marked fuel to obtain these massive savings. Just to pick up on what Bob Armstrong said, Chairman, my Association has very clear evidence that the problem of the misuse of marked fuel, which was itself a wartime phenomenon, is marked throughout the whole of the United Kingdom. There is a great deal of abuse of red diesel generally which Customs and Excise tend to under-estimate - I do not know, perhaps as a justification for not putting more enforcement resources in—but our view is that there is far more widespread abuse than is given public credit for.

Mr Salter

  175.  I take the point you raised earlier about how some of these problems could be produced from tax harmonisation but getting tax harmonisation through any parliament is not always easy, as you will be aware, and it is outside the scope of our inquiry. Can you, for the record, define the roles of the Road Haulage Association and the Freight Transport Association for us? Who do you represent and what do you do?
  (Mr Armstrong)  I speak for the Freight Transport Association. We represent users of transport by all modes—road, rail, sea and air—and those companies principally who operate their own fleets; in other words, they are own account operators. So our members tend to be manufacturers or retailers who are self-providers of road transport services and users of rail freight, air freight, sea freight and so on. We also have a small number of haulage companies, small in terms of proportion of the total membership. About 80-85 per cent. of our members are manufacturers, retailers, users of road transport.

  176.  And the RHA?
  (Mr Norris)  As Bob suggests, the FTA represents what are known as the own-account operators, in other words, people who use their own fleets for their own purposes of manufacture and distribution, and we represent what are called the hire and reward operators, that is, those who actually sell the business of haulage. We represent just under 300 companies in Northern Ireland and the fleet size is of the order of several thousand vehicles, and probably around 10,000 people directly employed in our member companies.

  177.  So the companies that employ tanker drivers or run tankers will be members of the RHA?
  (Mr Norris)  Not necessarily. The tanker could be directly owned by one of the fuel companies or, indeed, by Milk Marque, or it could be run by one of my members to carry goods for a third party, of whatever description. More often, as it happens, tankers tend to be directly owned by companies because the tanker business tends to be restricted to a single product.

  178.  But the point I wish to pursue is building on Val Smith's comment, which is that tankers of illegal fuel oils are crossing the border daily, hourly, if some of the video evidence we have seen is to be believed. There is, therefore, some distinct possibility that some of your members are actually involved in the smuggling. Would you care to comment on that?
  (Ms Smith)  I think you would find that the majority of tankers that cross the border cross from the South into the North and we as an organisation are Northern Ireland and United Kingdom-based. There is a road haulage association in Southern Ireland, which is separate from our own, so we would not have that information, but you would appreciate that in the fuel oil industry there are people who run tankers who deliver to smaller filling stations, home heating oils, etc. who may not be in the FTA or the RHA.
  (Mr Archer)  Mr Chairman, adding to Mr Salter's point, I think it is highly unlikely that illegal operators are going to be members of either the FTA or the RHA.
  (Mr Norris)  There is no requirement on an operator to be a member of either.

  179.  If I may pursue that point, again some of the evidence that we have seen earlier has shown tanker drivers from the North of Ireland—the flip-side of your point, Ms Smith—running to the South and then picking up a very lucrative load and running back North. I just wanted to put it to you that you should not close your eyes to the possibility that perhaps some of your members are involved in this and perhaps we all have a responsibility to ensure that illegal smuggling is clamped down on and that is also a responsibility both for us as a Select Committee, for us as a government and perhaps also for representative organisations like yourselves?
  (Ms Smith)  I do not think anyone would disagree with you. No-one wants to operate illegally and no-one wants to have someone who is operating illegally as a member of their organisation. But I think what we also have to look at is that because of the diesel crisis in the North and South, because of the disparity of prices, a lot of hauliers feel they are being forced to operate illegally to be able to stay in business because of the competition.

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