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Several hon. Members rose--

Mr. Deputy Speaker (Mr. Michael Lord): Order. Before I call the next hon. Member to speak, I remind the House that several hon. Members are trying to catch my eye. Not much time is left and, unless contributions are considerably shorter, some of them will be disappointed.

3.6 pm

Mr. David Kidney (Stafford): The contribution of the right hon. Member for Cities of London and Westminster (Mr. Brooke) is all the more welcome because he is not a member of the Select Committee on the Treasury. Because some hon. Members who want to speak are also not members, I shall keep my remarks brief. I want to discuss closer working, smuggling and the Doran case.

I recognise the contribution that the tens of thousands of staff make to the work of Customs and Excise every day. I am sure that they seek satisfaction in doing their job well and in the knowledge that they are doing some public good by collecting moneys that will be spent on this country's defence, effective public services and keeping out illegal products and substances that we would prefer not to be here.

I have often noticed how comfortable politicians are in talking about structures. That is a dangerous thing for us to do; the important matters are the processes involved and the results. The proper taxes must be collected effectively and as politely as possible from honest and hard-working people. Those who have to pay their taxes must find the service that they receive polite and efficient, and they must be regarded as individual personalities, not as numbers or organisations. It is important to focus on that in any debate on how our tax collectors work, so it is legitimate to ask why two organisations collect our taxes and why there cannot be one.

I should like to defend the Treasury Sub-Committee from any suggestion that we became obsessed with structure and forgot to consider the delivery of the service, first by reminding hon. Members that the investigation into Customs and Excise followed a similar investigation a year before into the Inland Revenue, so we have thoroughly considered both tax collection organisations. Secondly, as the hon. Member for West Worcestershire (Sir M. Spicer) said, we closely considered the experience of Canada, which has merged all its tax collection functions into one organisation, not to try to save money--the evidence showed that no money was saved--but to get the service right, to collect the right amount of tax in a way that is acceptable to the public and to be

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customer friendly in carrying out such duties, thereby reducing the burden on those who have to pay their taxes, especially the costs to businesses, which, of course, have other priorities.

The Government response to the report states that closer working is a good way in which to ensure that the service provided by our tax collecting organisations is effective, and to achieve the desired results. We on the Treasury Sub-Committee found that in the 1990s, the organisations may have said that, but they did not practise it. The absence of a closer working director until last year has already been mentioned. Equally, there was no system to monitor and evaluate closer working.

I had the impression that the Paymaster General had come to the system years after it had been set up and found that she could not provide a proper assessment or evaluation of it because the systems had not been in place to provide her with the information needed to make that assessment. In the Government's response to the report, she tells us that the intention is now to ensure that the system has proper aims, such as closer working, and proper monitoring and evaluation in future.

Nevertheless, I still believe that closer working will not deliver on the agenda that we have all talked about today. I still believe that it is unambitious, and anyone who reads Lord Grabiner's report will see that we need a closer working programme much wider than the one in place. In April, the Committee received a letter saying that criteria for closer working would be established, but we are still waiting to hear what they are, and I am not even sure about what is happening with the budget for closer working. The Committee has just received a letter from the Treasury that talks about transferring closer working budget money from Customs and Excise to the Inland Revenue, but it is not at all clear why the Government are playing fast and loose with that money, which is supposedly important.

Whether or not a merger ever happens, we could look further at steps along the way to closer working, such as more co-locating of closer working teams, a small amount of which takes place. Why do we need two separate boards for the two organisations? Why could there not be one board for Customs and Excise and the Inland Revenue, even if they continue as two organisations for tax collecting purposes? Again, the Government have travelled along that road a little by having directors from each board serve on the other.

It is important to remember the distinction between the different kinds of smuggling, which no one has drawn in the debate. Different things are smuggled--ranging from human beings to tobacco, alcohol and drugs--and there are different smuggling operations. A lot of people listening to the debate may simply have in mind the so-called white van trade in which people from this country visit another European Union country with lower tax rates, fill up the van with stuff that they claim is for their personal use, transport it home and sell it commercially much more cheaply than the local off-licence can sell such goods to its customers, thereby doing the off-licence out of business and possibly its livelihood.

The white van operation is not attractive or desirable, but it is not the most prominent kind of smuggling. Much more significant is so-called diversion fraud, which was

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touched on in a report in yesterday's Financial Times. Goods leave this country, supposedly for export--therefore, no duty is payable--but, instead of going out to the claimed destination, they are diverted back to this country's markets to be sold without duty ever being paid. As we read in the report, and as has been mentioned by many hon. Members, billions of pounds can be lost. Also, goods in container lorries are smuggled into European Union countries from third countries such as Russia and China, where no duty or small amounts of duty, are paid, and sold without EU duty being paid.

Like many hon. Members who have spoken, I disagree with the idea that cutting duties would reduce smuggling. Most smuggling involves organised criminals--people who pay no duty at all--so unless we reduce duties to zero or close to it, we shall never be able to remove the motive to continue that business. We should therefore consider only the white van trade and whether harmonising duties in this country with those in other EU states is desirable. That would be an interesting debate.

I refer to the submission made to the Cabinet Office by the Public and Commercial Services union--the trade union that represents most Customs and Excise staff-- on how, for a small outlay, the Government could significantly improve the detection and prevention of illegal drugs imports to this country. I support that submission and hope that the Government are able to give it some attention in the spending review announcement that will be made soon.

I refer also to the case of Doran and the Government's response to the report by Judge Butler, which my hon. Friend the Member for Newcastle upon Tyne, Central (Mr. Cousins) has already mentioned. In that multi- million pound drug smuggling case, the alleged perpetrators were prosecuted by Customs and Excise. However, the case collapsed and the accused walked free from court. As a result of comments made by the trial judge, an investigation was set up as to what went wrong and why the case collapsed. This is a sorry tale of poor preparation of the prosecution case, the misuse and abuse of investigative powers and a lack of total frankness and disclosure by those involved on the prosecution side.

As a former solicitor, I was horrified to see that some of Judge Butler's recommendations are very basic. For example, he said that all cases must be

and that a barrister instructed by Customs

I could not imagine a barrister not receiving a formal set of instructions and a properly prepared set of papers, even in the slightest case I ever dealt with. I stress that this case involved a multi-million pound prosecution.

The report is worrying, so no wonder the Government have agreed to set up a further investigation as to whether Customs and Excise should lose its status as a prosecuting authority. However, I must point out that my hon. Friend the Member for Newcastle upon Tyne, Central was wrong to say that Customs and Excise did its best not to tell us about the Doran case. I asked questions about it when we had Customs and Excise staff in front of us, but our own Clerk was worried as to whether the sub judice rule still applied and stopped the line of questioning. Customs and Excise staff made the point that they detect and prosecute many cases each year involving smuggled goods of great

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value. Those prosecutions are usually successful and those who are successfully prosecuted receive severe sentences. The picture is not gloomy--indeed, it is usually one of success--but this case is worrying.

Mr. Cousins: Is my hon. Friend concerned, as I am, that the Doran case is not the only recent one to involve large sums of money and a Customs prosecution that collapsed? A similar case in Portsmouth and a trial in Middlesex Guildhall both had a similar result, so perhaps we should consider not simply the issues involved in the Operation Steeler case, but a more widespread and fundamental problem.

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