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Mrs. Ann Winterton: Will the Minister give way?
Dawn Primarolo: Yes, but let me say first that I wish only to put the record straight. I do not want to pick an argument with the hon. Lady or her hon. Friends. I think that everyone who has spoken is concerned about smuggling, whether it involves drugs, tobacco or anything else.
I will give way to the hon. Lady, because I referred to what she said.
Mrs. Ann Winterton: The Minister is very gracious.
I take the Minister's point, but the figures to which she refers were estimates for the period after the general election. When her Government ensured that those 300 officers would remain, what they did not do was increase resources. Savings had to be made elsewhere in the service.
Dawn Primarolo: The hon. Lady is not quite right. We had to save some of the money, because the Department
was within its budget, but movements occurred rapidly in the Treasury to deal with the pressure points, according to where we thought they were.Many hon. Members referred to the Financial Times report that asked whether £1 billion, £2 billion or some other sum was missing, or unaccounted for, in the context of excise control regimes. They also referred to the announcement that I made on Friday. The figure given in the Financial Times is incorrect. Let me tell the House, as clearly as I can, how this happened, how it came to my notice, and how I intend to proceed.
An interim report--an internal report by Customs and Excise--was ordered by the new chairman of Customs and Excise, and was received by me last Friday. It identified serious weaknesses in the Department's control of excise duty collections. The right hon. Member for Cities of London and Westminster repeated today the fears that he expressed when the rules were introduced, on the commencement of the single market. A particular problem relates to the mechanism for releasing spirits and wine that are subject to duty from bonded warehouses.
There have been numerous prosecutions, resulting in about 100 convictions in connection with one major group. Nevertheless, the report concluded that there had been significant revenue losses, which were deemed principally to have happened in the three years following 1995.
In 1998, changes were made to the regime, but it is not clear whether the arrangements are tight enough. I believe that hundreds of millions could potentially be lost. However, having been faced with something so serious, I believed--and I was supported by the chairman of Customs and Excise--that we should act immediately on receipt of the results of the internal inquiry. I decided that we should conduct an external investigation as quickly as possible.
The National Audit Office had been informed, and was already working with Customs and Excise in an attempt to quantify the losses and identify the weaknesses in the control system. I have given an indication--and I have notified Her Majesty's Opposition--of what I would expect the inquiry to cover. I would expect it to cover the policy, legislation, systems and resources within Customs and Excise relating to excise holding and movements, and to determine weaknesses and gaps, including those relating to the efficiency of the system of bonds and guarantees. I would also expect it to discuss how best to establish clear internal accountability for the securing and protecting of departmental revenues. In particular, I would expect it to ask whether there should be a single point of accountability in Customs and Excise for cash revenue management. Finally, I would expect the inquiry to consider how best to ensure that sufficient weight is given to protection of revenues as a key criterion in Customs and Excise handling of fraud investigations.
Any shortcomings in the system, and any information relating to resources--prosecutions are still taking place, as are Customs and Excise responses--will be referred to the investigation at the conclusion of the cases involved. I will ask the leader of the inquiry to keep me informed, and to tell me whether immediate steps are planned. I support the appointment of someone who will be able to deal with the systemic problems that may arise, take a commercial approach, and deal with the issues directly. I will, of course, keep members of the Select Committee informed.
Before turning to the issues of smuggling, merger and compliance, let me make a few general remarks about Customs and Excise. Although we all understand that the focus of today's debate is on particular areas of Customs and Excise, it is important--for the benefit of those who follow our proceedings, especially those working for the department concerned--to acknowledge what the department has done well. As I have said, it has collected more than 40 per cent. of central Government revenue, at a cost of about 1 per cent. Key agencies are reducing the bulk supply of drugs to the United Kingdom market, and tackling the major trafficking problems.
The Department is a major element in the Government's anti-drugs strategy. Its intelligence-led deployment of officers in the United Kingdom and abroad prevented some £1.24 billion worth of drugs from reaching the UK last year. It has also dismantled and disrupted trafficking organisations.
I do not want to undermine the credibility of the hon. Member for West Dorset among his hon. Friends, but, as he said, we are talking about a Department that deals with the protection of society--in the context of drugs and smuggling--with the collection of VAT, and with the whole excise duty regime.
As a Minister, I consider that what is crucial is that I understand what the Department does best, what it should do, what it may be doing that it should not do--what is inappropriately located there--and to build on that understanding. It is the policy objectives that I should pursue. I said to the Committee on the question of merger that I believed, as the Minister responsible, that the vast resources and time used to put Departments together was a diversion--if Members will excuse the pun--from the true objectives, which must be to ensure that the Department reaches its objectives.
I am not saying for a minute--no one could, at the end of the debate--that no things need correcting in the Department. We need to look seriously at that. The new chairman of Customs and Excise has come from the private sector. A third of those on the new board are new members. A third come from the private sector. The remaining third have experience in the Department. It must drive change forward.
I welcome the comments by members of the Select Committee on the Treasury that they intend to return to the issue and to look again at Customs. The exercise that they have conducted already has been extremely useful, even though I did not entirely agree with some of their conclusions. Nothing is ever closed. The constant striving to ensure that the Department does its work properly is crucial.
The Department faces huge challenges, particularly in relation to smuggling. Comments were made about the scanners, the increased resources and how we are tackling the problem. It is important to say that the pressures on the Department, and what it faces, are never more starkly seen than in Dover. There were 1.7 million freight movements through the port last year and that is increasing. It is a truly herculean task for Customs and Excise staff to keep a
balance between trade flowing swiftly through the port and countering smuggling. Organised criminal gangs now dominate the smuggling of drugs, spirits, cigarettes and, most tragically, as we are seeing, people.The 54 people from southern China who died in a container that was searched at Dover earlier this month were discovered by Customs officers. Hon. Members will perhaps be able to imagine the distress of those officers on discovering such a sad and tragic cargo. I have nothing but admiration for their professionalism in that front-line work, but the challenge to us with regard to smuggling is this. Hon. Members have sought to characterise it as a duty problem. As my hon. Friend the Member for Erewash and many others have pointed out, even without any duty at all, that activity would continue. If we dealt with duty, that would continue. We must deal with the criminals and what their activity does to our communities and to legitimate businesses. The job will continue to be more difficult.
Obviously, there is always confusion between what is called the white van trade--those who go opportunistically--and other smuggling. The first review that the Government undertook--the alcohol and tobacco fraud inquiry--gave more resources, provided more Customs officers and targeted specifically the white van trade, compared with the systematic and criminal importation of vast amounts of tobacco. That requires a different response. The £209 million will provide that.
The scanners are there. Some of them will be mobile, some will be static. We had to go through a process of ensuring that we handled the tenders correctly. We have to publish details of who contracts for them. That equipment is there primarily to find smuggled goods. The immigration service believes that there are more efficient ways of detecting the smuggling of people. None the less, there will need to be agreement because undoubtedly, at times, people will still be found. That is a subject for discussion between the Home Office and the Department.
On the wider questions of VAT compliance and what needs to be done, I take on board everything that the Committee has said. We are rooting out inefficiency, making the system efficient, minimising burdens on business and streamlining as much as possible how we operate as a Department to deliver the resources. All of that is under way. There are many examples--which I cannot now give, but I have a feeling that I will be in front of the Select Committee again on the subject anyway--of closer working and how it is developing and blossoming. It shows how we can bring the Departments together culturally and how we can ensure that we drive that forward.
I apologise that there are still questions of--
It being three hours after the commencement of proceedings on the motion, the debate was concluded, pursuant to Resolution [27 June].
Question deferred, pursuant to paragraphs (4) and (5) of Standing Order No. 54 (Consideration of estimates &c.).
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