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1.41 pm

Mr. Jim Cousins (Newcastle upon Tyne, Central): I do not envy my hon. Friend the Paymaster General in having to address this issue. The Government's inheritance from the previous Administration on the issue was woeful. That was made clear to the Treasury Sub-Committee in the evidence presented to us in our examination of Customs and Excise. It is quite clear that Customs and Excise have long been badly led and managed, badly resourced and badly organised. It is also clear that there are not sufficient resources for it to do the job that it wants to do and should do.

Nevertheless, I acknowledge the heroic work with VAT and excise duty, being done by many people in the front line of Customs and Excise. The House should pay tribute to the excellent work being done daily by them in a desperate and heroic attempt to stem a tidal wave of abuse that they are not properly equipped and organised to deal with. The House should try to address that issue in this debate.

We must deal with some very serious abuses affecting our communities and striking at the heart of public confidence in some key aspects of the machinery of government. If we cannot stem the rising tide of tobacco and alcohol smuggling, the very integrity of Government policy will be put at risk. Thousands of legitimate jobs and businesses are being put at risk by those growing abuses. We should not overlook the similar problem in the collection of value added tax. VAT evasion and growth in the informal economy also are endangering legitimate jobs and businesses. The Sub-Committee has attempted to address that overall issue.

The Sub-Committee clearly formed the view that the abuses that I have described are real and increasing, and that they are probably more extensive than Customs and

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Excise were at that time prepared to tell us. I think that the Sub-Committee's instinct on that matter has been proved by subsequent events to be entirely correct.

Secondly, the Treasury Sub-Committee realised that wholly new demands were being placed upon Customs and Excise, particularly around the growth of electronic commerce and the problems of identifying businesses and tracking commercial activity for the purposes of excise and VAT control and enforcement.

Thirdly, the report drew attention to some massive and quite deep-rooted organisational failures and inefficiencies and the lack of resources available to Customs and Excise either to deal with the growing number of abuses or to confront the need to expand their efforts and organisation to deal with new areas of commerce and the new demands.

Since the Treasury Sub-Committee reported, at least four major inquiries have either reported with reference to Customs and Excise or are about to do so. They include Lord Grabiner's report on the informal economy, particularly VAT abuse, and the report of his honour Gerald Butler on his inquiry into the case of Regina v. Doran, the so-called "Operation Steeler" case, which threw considerable doubt on the internal effectiveness and good order of Customs and Excise as an investigating and prosecuting organisation. The Government responded to the Butler inquiry by setting up a further inquiry, led by the Attorney-General, into whether Customs and Excise should properly retain their powers of prosecution.

There was also--this makes life particularly difficult for my right hon. Friend the Paymaster General this afternoon--the inquiry that she launched only last Friday as a result of information that was brought to her by the new chair of the Customs and Excise board into excise evasion, this time in respect of alcohol. This afternoon's debate provides an opportunity for my right hon. Friend to set out her objectives and those of the Government in that inquiry. I am sure that she will do that.

Although one must always show proper courtesy, respect and restraint on these occasions, I very much welcome the indication that the new chair of the Customs and Excise board will be more proactive than several members of the Sub-Committee felt that the previous leadership of the Customs and Excise board had been. That is an excellent sign, albeit that it puts my hon. Friend the Paymaster General in a difficult position this afternoon. The House will rightly expect to know a great deal more about her intentions. Much of the debate should be taken up by my hon. Friend explaining to the House how she intends to address the problems.

A number of other points should also be mentioned. First, we should consider the large scale of the abuses in respect of tobacco and alcohol. The hon. Member for West Worcestershire (Sir M. Spicer) referred to the fact that in its evidence to the Select Committee, the Tobacco Manufacturers Association, which obviously has an interest in the matter, asked for a reduction in tobacco duties as a method of controlling the abuse. I do not share that view, but the association showed evidence to the Committee that almost one in three of packets and cartons of cigarettes sold in this country were either smuggled in or re-imported after having been disguised as exports. The association attributed a total revenue loss of some £3 billion to smuggling on that scale.

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The scale of the abuses is recognised in some of the court cases. A gentleman in Essex was fined £10 million by a court after being found guilty of smuggling offences, which shows that the scale of abuse is considerable. Legitimate traders are extremely concerned about the scale of abuse. I have been given a dossier of evidence by a firm which runs a cash and carry business in Essex, which reveals an extensive correspondence between the firm and the south London and Thames branch of Customs and Excise in an attempt to address obvious abuses that have come to the firm's attention, but without success.

It is a cause of concern that the ability to tackle the growing scale of abuse appears non-existent. That is partly because of the considerable cuts in staff numbers that were made by the previous Government. They reduced numbers and also disrupted some of the lines of command and control that would have been useful to contain the growing abuses. However, it is fair to point out that the latest annual report from Customs and Excise shows that the number of man-years available in the south-east--which is in the front line of our defence against excise duty abuses--in 1999-2000 was less than in the previous year. That is a matter for concern.

The Government intend to recruit almost 1,000 additional officers for Customs and Excise, but it is important that my hon. Friend the Paymaster General sets out how that will take place and on what scale. What resources and organisation will be provided to support those additional members of staff?

The Paymaster General (Dawn Primarolo): I do not intend to intervene through the debate but will give a reply at the end. However, on the specific points that my hon. Friend raises about the south-east, he will know that we now deploy staff in teams according to risk, and we move the teams around considerably. However, I understand that that is not happening in the south-east. My hon. Friend raises an important point that I may not be able to deal with in detail later. I have heard his comments and I will try to address them when I reply. I shall try to address all the specific points that hon. Members raise.

Mr. Cousins: I am grateful to my hon. Friend for saying that. I draw to her attention the fact that I had hoped to be able to say--based on the annual report from Customs and Excise--that the unsatisfactory position in the south-east in 1999-2000 would be corrected in 2000-01. Conservative Members will understand that Labour Members constantly hope for such relief, but I was not able to find it when I read the Customs and Excise report. I was filled with gloom to discover that a change in regional boundaries meant that the figures for the south-east for 2000-2001 were not available. That does not reinforce confidence among people whose businesses and jobs are at risk in the area.

One of the Committee's conclusions was that there are deficiencies in the internal organisation of Customs and Excise. Although the possibility of closer working, or even merger, with the Inland Revenue has been suggested, the people responsible for value added tax do not work sufficiently closely with the people in the excise section. In addition, the respective Inland Revenue and Customs and Excise computer systems do not talk to each other, even though huge resources have been applied to them.

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The internal information arrangements in Customs and Excise involve a computer system called PRISE, which the previous chairman of the Customs and Excise board assured the Committee was not relevant to increasing the efficiency of excise enforcement. Other internal information systems include CRIP, the compliance risk information project, and the analytical centres project. Considerable sums of money have been spent on both, but the Committee was unable to satisfy itself about who in Customs and Excise had access to them.

The overall picture is an extremely unhappy one. The Government must rectify that, urgently.

The Government have pledged £209 million in additional resources for Customs and Excise, and have focused particularly on the £23 million being made available for new scanners. They will greatly improve the speed, efficiency and effectiveness of excise evasion detection, and I hope that my hon. Friend the Paymaster General will clarify whether that £23 million is included in the total of £209 million, or is additional to it.

However, the first of those scanners will not become operational until November. Originally, they were being installed to deal with excise duty problems but now--after the almost incredible horror of the incident in which so many unfortunate Chinese people were trapped in a container--it is clear that they will also have to bear the burden of immigration detection. The additional resources will therefore have to cope with demands way in excess of what was forecast when they were first allocated.

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