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Dawn Primarolo indicated dissent.
Mr. Davey: The Paymaster General shakes her head, but we have known that this has been a problem since the day that the Government took office, and we had hoped that we would have got further down the track than we have.
That brings me to the report in yesterday's Financial Times in which, as the right hon. Member for North Durham (Mr. Radice) has said, there is news that alcohol smuggling is significantly more extensive than Customs and Excise had previously thought. When we debated the subject in the Committee on the Finance Bill and when we had evidence from Customs and Excise, we heard that the real problem was tobacco smuggling, not alcohol smuggling, but the new evidence would suggest that alcohol smuggling is on a par with tobacco smuggling. If that is the case, that again raises questions about the competence of officials within Customs and Excise, because they had not detected the scale of the problem earlier; their capacity to tackle the problem is seriously called into question.
I know that other right hon. and hon. Members want to speak on those issues. I just want to finish on the figure on the Order Paper for the estimates that we are debating. I apologise to the Minister if my lack of research has not produced the answer for me, so that I may have to wait until I read this debate in Hansard to find out the answer--or she may find that she has to write to me. I am slightly puzzled by what is on the Order Paper. We are being asked to support the granting of £482,077,000 to Customs and Excise and various other people,
- and payments in respect of Shipbuilder's Relief and the Customs and Excise National Museum.
I know that estimates have received cursory attention over the years and that they are not taken terribly seriously, but it would be nice if the Government at least made an attempt to assist the House so that, when we looked at the Order Paper and the departmental report, we were able to work out what was going on. If those of us who take an interest in the subject cannot easily work out what is happening, what hope is there for casual observers or our colleagues who are not so interested in or anoraky about the subject of Government expenditure? How are they able to understand what the Government are trying to do with their expenditure? If there is an easy explanation for the difference, I shall be grateful to hear it. However, I hope that, in future, the Government will make their requests for Supply rather clearer.
2.31 pm
Liz Blackman (Erewash): The wide-ranging inquiry that the Sub-Committee carried out was very interesting. It covered merger and closer working, the smuggling of alcohol and tobacco, and compliance. The subjects are inextricably linked to a degree, but, having given the matter a great deal of thought, I decided that, like other hon. Members, I would focus the main part of my speech on tobacco and alcohol smuggling.
Tobacco and alcohol smuggling damage our society from top to bottom in many different ways. It makes it difficult to secure the right level of Government revenue, can result in violence, poses a health threat and causes unemployment. We also have to pay out substantial sums for the detection, prosecution and punishment of offenders.
What tipped the balance in favour of my decision to speak on this issue was a visit that I made to my local off-licence last week where I slightly inflated the profits that it made on wine. Its owner collared me and spent a long time explaining how much he had lost in the past eight years. He said that his profits were less now than they were eight years ago and he put that down predominantly to alcohol smuggling. He was being undercut by alcohol that had been smuggled into this country and which was being sold in other off-licences in the city where I live.
The man to whom I spoke is honest, above board, pays his taxes and works hard. His off-licence is in a relatively affluent area where people have money to spend, but he was seriously worried by the damage that smuggling has caused to his small business. I imagine that the impact of smuggling is being replicated across the United Kingdom. Therefore, I decided to focus my remarks on smuggling.
As hon. Members have already said, the scale of smuggling is immense, but it is very difficult to quantify. A rough estimate is that £2.5 billion was lost to the Exchequer in 1999 as a result of tobacco smuggling alone. We were told that that figure was 10 times more than the one for alcohol, but I doubt whether that is the differential between the two. The scale of the problem should not be underestimated, and we do not do that. In fact, I imagine that it is very difficult to assess its true scale.
I am encouraged by the fact that there have been record levels of success in the detection of smuggled goods, but it is difficult to say whether the increased detection is a sign that we are beginning to crack the problems or the result of greater smuggling activity and an ever increasing culture of smuggling. We must bear that point in mind.
The Sub-Committee considered the way in which Customs and Excise measured its performance. We discovered that its previous measures of performance did not fully gauge the impact of its efforts on overall smuggling volumes. In fact, many of the performance indicators were a moveable feast, because a number of variables changed so that it was not possible to make any comparison between one year and the next. Therefore, it was very difficult to assess whether Customs and Excise was doing well, or doing better.
For example, in 1995-96, Customs and Excise announced that it had exceeded its target of securing 900 vehicles used to carry smuggled goods. However, that target did not appear again. In 1997-98, the number of detections made of smuggled goods yielding excise revenue of more than £10,000 was reported as a target and, in 1998-99, the number of major smuggling organisations dismantled or disrupted was used an indicator. Clarity and stable targets are necessary.
I am delighted that Customs and Excise is to have a public service agreement--PSA--target focusing on the penetration of smuggled tobacco into the UK. That target
has been set higher in the first instance, which suggests that the amount of smuggled tobacco is predicted to increase in 2001-02 before it then begins to decrease. One could be cynical and ask whether we will win the battle, but I guess that the answer is, "Yes, we will." My confidence is not without foundation; substantial resources are being put in and there has been a shake-up in management structure and practices. Therefore, I explain the rise and fall in the target in those terms. Targets have been set for the number of tobacco smuggling gangs disrupted each year and for asset seizures. If those targets remain in place, we shall be able to compare how Customs and Excise is doing over the years.On tobacco smuggling, I support the Sub-Committee's recommendation that the Government should continue to protect the revenue obtained from tobacco duty. We have health objectives and we should not give in to criminal activity. Therefore, I was disappointed with the Opposition when, during consideration of the Finance Bill, they suggested that that duty should be reduced. That argument is disingenuous, particularly in the light of the evidence that the Sub-Committee took. Canada was cited as an example of a country where excise duty on tobacco had been reduced and smuggling had decreased as a result. In fact, one consequence was a switch to the smuggling of alcohol and Canada lost revenue.
Another argument is that we harmonise tobacco duty with that in other European Union countries. However, duty-free tobacco from outside the EU is the problem. Italy and Spain, which have lower duties on tobacco products, still face a huge problem with tobacco smuggling. The only way that we could level the playing field is to get rid of the excise duty, but we, like many other countries, predicate our public expenditure on that revenue stream. We also have other objectives when we raise tobacco duty.
Moving on to resources, I echo my hon. Friend the Member for Newcastle upon Tyne, Central (Mr. Cousins), who said that the Opposition have selective amnesia on the Cinderella service that we inherited in 1997. Massive staff cuts had taken place and one of the first things done by my hon. Friend the Member for Coventry, North-West (Mr. Robinson), the then Paymaster General, was to stop 300 anti-smuggling officers being let go, as had been planned by the previous Administration--and, I understand, to prevent the loss of 1,100 VAT officers from the fundamental expenditure review.
Nevertheless, the Treasury Committee was concerned that there was evidence of staff being switched to deal with more disruptive activity, but at a cost to other areas. Customs officials who came to my constituency office said that they felt that staff were being switched to more pressing areas, which left their flanks exposed. I am pleased that there is now a commitment of £209 million and nearly 1,000 new staff. I am aware that those figures are indicative, and depend on the outcome of the spending review. Will my hon. Friend the Paymaster General tell us, without giving anything away, how confident she is that that staffing level will come through? The appointment of 300 anti-smuggling officers has already been given the go-ahead. How are staff recruitment and training proceeding?
I shall deal briefly with the £23 million for X-ray scanners. It would be interesting to know whether that money has come from the capital modernisation fund or
is new money contained in the extra £209 million. Those scanners are welcome and were chosen because of their effectiveness in other countries, where they have an extremely good track record. They will not be in place until November, when all the logistical and technical issues--such as installing them, training officers to operate them, how to select goods coming through and working out how to interpret the data coming across the channel--will have been resolved. There are logistical problems, but I am sure that the scanners will not arrive at ports without any of that preparation being done. I am, therefore, interested to hear my hon. Friend the Paymaster General's response to the issues raised by my hon. Friend the Member for Newcastle upon Tyne, Central.I have a couple of questions on the marking of tobacco products. I very much welcome the pack mark scheme. The Treasury Sub-Committee, however, recommended a date mark, as we thought that that was a good way of countering forestalling. My understanding is that that has been rejected, and I should be interested to know why as I am sure that the idea of countering forestalling has not been rejected. However, if the date mark scheme has not been rejected, has it been accepted and is it going ahead? Similarly, in their response, the Government said that they would consider the Committee's remarks on health warnings on packs and would come back with information. Will my hon. Friend the Paymaster General comment on that?
When the Treasury Sub-Committee spoke to the head of Customs and Excise, he recognised that, although closer working by the Department was moving forward, perhaps much more needed to be done on internal linkages within the Department, as opposed to closer working with the Revenue. Customs and Excise has anti-smuggling teams and back cash teams which monitor retail matters, and also has shadow economy teams and excise verification teams. We were told that the operational policy directive was taking a holistic approach, but the way in which the different elements work with one another in the service is a management issue that needs to be further resolved. I welcome the appointment of the new head of Customs and Excise, as well as what he has already done. However, could we have information on whether he is making the matter a priority in his shake-up of the service?
The Treasury Committee clearly flagged up concerns about the control system for holding and moving excise goods, which is Europe-wide and paper based, thus providing ample opportunity for abuse, diversion fraud and freight train smuggling. An example of those controls not being in place is the gap in the revenue collection on alcohol, which has been mentioned by several hon. Members and is being investigated. There are now EU agreements to improve and modernise systems, but that is a fairly long-term project. There are on-going improvements to the early warning system, which will continue to be made as a matter of urgency. How are they progressing?
I was going to go into detail about concerns relating to a story that has recently hit the headlines on the gap of between £1 billion and £2 billion which resulted from fraudulent non-payment for wines and spirits between 1995 and 1998. However, I shall say only that I am pleased that that will now be the subject of an independent inquiry. I agree with the article which said that as well as
the judicial element, there must be strong commercial input in looking at the problem and serious re-examination of control and information systems.I shall touch on the issue of compliance. If the problem of non-compliance is simply about the complexity of having to comply, that is a concern for Government, as it encourages people into non-compliance. Of course, if someone sets out to be non-compliant, that is another issue. However, when systems are complex, telephone hotlines are not available, leaflets are inaccessible and explanations are not given, it is much more difficult for businesses to comply. It is revealing that, in the last 10 to 20 years, there have not been any studies on Customs and Excise compliance costs, although a survey is now planned. The Treasury Committee recommended that the Government should look at a targeted approach to delivering reduced costs, which is now going ahead. Indeed, it needs to go ahead with speed, as that is a move towards helping businesses to be compliant.
The huge challenge that the Government face in attacking and reducing smuggling includes tackling within Customs and Excise the serious problems associated with investigating and successfully prosecuting smugglers. I welcome the Butler report on that, and it is healthy that those problems are being faced. I hope that subsequent to the inquiry on the matter, recommendations will come before the House.
I welcome also the Cabinet Office report, "The Proceeds of Crime", which is another piece of the jigsaw in tackling the problem of bringing to book people who are making a considerable amount of money and causing a great deal of misery to our society. For those Members who have not read it, I can say that the report is still at the consultation stage, but it proposes that we extend civil forfeiture powers to strengthen the existing powers of seizure under the Drug Trafficking Act 1994. That would include not only cash linked to drugs crime, but other means of payment such as travellers cheques and bearer bonds. The report also recommends the setting up of a national confiscation agency to work with Customs and other law enforcers on cases that are not pursued by the civil route.
I am sure that there will be a great deal of debate about that in the House, if and when the proposals are included in legislation. However, the following figures are shocking: from 1987 to 1996, only 157 drug trafficking orders for over £100,000 were made, but there were 45,000 convictions. There is a gap between making the punishment fit the crime and what has been happening.
I end where I started, by saying that I am very supportive of all the measures being taken by the Government on this ever increasing problem, which has an impact on many different issues, including unemployment, which I have mentioned. Not least is the impact of cheap alcohol and tobacco on children.
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