Examination of Witnesses (Questions 30
THURSDAY 8 FEBRUARY 2001
20. Are you expecting any job losses as a result
(Dawn Primarolo) No. There are no job losses. There
is some reallocation. Obviously all of this has been negotiated
with the employees. The unions and all the employees in the organisation
have been fully consulted. I am not saying there are not some
people who will be asked to consider the option to maybe move
to another location from their present one, but that is very,
very small indeed. There are people whose jobs will change as
we shift our resources to more front line; that is the interface
on the business side between ourselves and the customer, the taxpayer.
21. Have you set new performance targets or
performance objectives for these new sections?
(Dawn Primarolo) Yes, we have. Obviously we have our
22. I am here talking more about ones that may
be generic within Customs and Excise.
(Dawn Primarolo) What we are doing at the same time,
and I think this came from the Committee as well, it ties in with
our Closer Working, is to set specific objectives in terms of
measuring improved customer service, improved compliance and better
facilitation. I think the Committee requested that there was an
annual report in looking, for instance, at the Closer Working,
in measuring that, and that it should be made annually to this
Committee. Yes, I am quite happy to do that. What we need to establish
is how we measure that. We have our standard measurements that
our PSA requires of ushow quickly we answer phones, how
quickly we do visits, etcbut we really want to focus much
more on the improvement of the quality of the service. This also
fits into the joint work that Customs and Revenue are doing on
the question of compliance costs, in measuring those and trying
to find ways of reducing compliance costs for our taxpayers.
23. The regional units, as we understand it,
are to be abolished. Does that mean that the co-ordination, if
you like, both of intelligence and deployment between these two
sections will all be done at headquarters?
(Dawn Primarolo) No. Somebody correct me if I get
this wrong. The operations of the offices are intended to ensure
that those offices can respond quickly, not only following what
is required by the department as our overall objectives but to
have more responsibility for delivery of those objectives and
to be able to fine tune them for particular need. There is always
cross-reference. What Mr Broadbent and his team have tried to
ensure in this reorganisation, and obviously it is early days
yet, are clear lines of accountability and who will be able to
be in contact with whom, rather than nobody having responsibility
until it gets to head office. That is being reversed now.
24. This may not be policy but do you accept
that the organisation of Customs and Excise in this way lends
itself to a future split in which the business services side of
Customs and Excise would effectively become part of the Inland
Revenue and the intelligence and investigation aspects of Customs
and Excise would become part of the Home Office services, the
development of the National Criminal Investigation Service and
so on? It does lend itself to that.
(Dawn Primarolo) That is not the motivation for the
reorganisation. We have been through this discussion before about
merger between Customs and Inland Revenue and my attitude to that,
which is I am not convinced that is the way forward. What it does
is clearly, clearly identify the two main functions: the protection
of society role, if I can call it that, which is within the enforcement;
and the business taxation which is in the other unit and makes
it much easier, I hope, for those two units to co-operate with
all the other organisations that they have to. One of the things
about Customs is that it is not just the Inland Revenue, important
as the Inland Revenue are of course, that they are working with
and co-operating with, it is a number of other Government departments,
for instance the Home Office, MAFF, the intelligence services,
DTI on trade facilitation. They have to have focused, clear relationships
with a number of different organisations and this restructuring
enables us to deliver that. If somebody takes the decision in
the future that is for them but that is not the purpose now of
the reorganisation, it is efficiency.
25. But you do accept that it does lend itself?
(Dawn Primarolo) I do accept that some people might
speculate it does, yes.
26. Right, that is fair enough. Coming to the
Closer Working programme itself, which is going to be an important
activity of the largest of the Customs and Excise two units, are
you satisfied that there is now a meaningful programme of Closer
Working which is targeted at producing measurable benefits? You
referred to the annual report that we have requested and you have
indicated your view about that. When could we anticipate that?
(Dawn Primarolo) In terms of the progress of Closer
Working, and I think that both Mr Montagu and Mr Broadbent covered
this in their separate appearances, I think it would be an understatement
to say that we have learned a great deal in the approach that
hitherto had been used in order to encourage it. We now have real
progress in a number of areas. I think that you have been informed,
but just to recap, that what we are going to do, for instance,
is have 14 of the largest businesses managed by joint teams, Customs
and Revenue in one team, and that will start on 1 April. We are
going to have 20 shadow economy teams and they will be operational,
in addition to the ones we already have, on 1 April. We are developing
a single unit on company voluntary arrangements, particularly
looking at insolvency, which is something we need to do some more
work on, and on joint debt recovery services, which has been of
some contention in Parliament in terms of when the two departments
engage in these activities. And, of course, a joint audit of our
computer services. As I said, it is about getting better value
for money, customer improvement, better compliance. Given that
we are to start that, locating the teams, teams put in place,
training completed, I think for the 20 shadow economy teams the
final location has been agreed and the facilities are being developed.
An annual report seems to me to be suitable in April 2002 because
that is when the teams will have been assessed. I cannot personally
see any problem. The Committee might prefer to have a sort of
half-way house of an update, say six months into the process,
with the formal report being done at the end of the first year.
I can do a note to the Committee if you do not already have the
information about where the locations of these different facilities
are going to be rather than go through all the locations now.
As I have said, I am happy to send a note or go through them now,
whichever you prefer.
27. Would it be possible for you to write to
me about that?
(Dawn Primarolo) Yes. I have got quite a lot of information
here, Sir Michael. It is things like where the audit computer
accounts will be based, where the risk analysis and intelligence
will be based, the actual locations. Rather than go through all
the towns and cities I am happy to do a note for you and get it
to you by Monday, if I can.
28. Could you update us on the strategy for
tackling tobacco smuggling that you launched last March?
(Dawn Primarolo) The vast majority of the Customs'
staff which were planned for introduction have now been recruited.
I think we are at 85 per cent of the staff. Three of the x-ray
scanners are now operating. There are two more being built for
delivery in April and orders are planned for a possible further
ten, but naturally we are assessing the scanners. The scanners
are mobile, we can move them if necessary. We have undertaken
the advertising campaign which is developing. In terms of the
results, in the first nine months of this year 2.1 billion illicit
cigarettes bound for the UK were actually seized. Our target for
the year was 2 billion I believe. Yes, 2 billion. We have severely
disrupted or broken up in those nine months 38 organised gangs,
very large criminal gangs. In the first nine months we have seized
6,658 vehiclesCustoms like to be precise about thiswhich
is up 65 per cent on the corresponding year. Our combined efforts
on intelligence gathering, disruption and seizure at ports and
then inland disruption and seizure, as well as the use of our
increased penalties, are very promising in these first nine months.
We are achieving the first set of targets in terms of disrupting
those who are organising it as well as seizing the goods. Clearly
this is a three year strategy and we need to look very closely
at our experience over these last nine months, and that is what
we are going through now, and the last three months of the year
when we have it, as to what that teaches us about what we need
to do to increase our activities to meet the challenging targets
of the next two years.
29. What elements of the strategy are proving
most productive? Are the scanners proving very useful in all of
(Dawn Primarolo) Absolutely. As you know, we are not
talking about what was commonly known as the "white van"
trade, although we have strategies to deal with that as well,
this is the systematic freighting in containers, often concealed,
of millions and millions of cigarettes at a time. Our intelligence
is informing which containers we suspect. It takes us, I think,
three minutes to scan one of these containers now, it used to
take us five hours with a larger number of Customs' officers to
physically search these vehicles. Obviously the scanners are proving
extremely useful. The disruption of the criminal chains by using
the intelligence combined with action on the ground is proving
very successful. Those are the main elements I think.
30. ASH pointed out in oral evidence that the
essence of this smuggling is taking cigarettes from the United
Kingdom and going through places like Andorra, Montenegro and
Latvia. This must be a very big element of their economy, is it
not possible to take steps at that end as well as at the United
Kingdom end to stop this?
(Dawn Primarolo) Indeed, and our intelligence work
outside of the UK is directed at that. You are quite right to
point out that these goods are coming back from wider fields,
the Balkans, the Far East, South Africa, certainly outside the
European Union. It is very important that we have that information.
Obviously as we are seizing the goods we are profiling the goods
that we seize. There is a significant presence of counterfeit
tobacco products. It is difficult to estimate exactly but somewhere
in the region of 20 to 30 per cent. The rest is predominantly
manufactured in the UK by British tobacco firms and, in fact,
three brands dominate what we seize. It is very important that
in working with the manufacturers we are able to trace whether
or not some of the exports actually end up having gone through
a chain. They do not go to one place and come straight back, they
go through a chain of different countries and then come back,
so appear to be sold perfectly legitimately, and that is what
happens subsequently. What Customs are working on is to find out
whether and how that could be fuelling the products that are being
smuggled back into the country and, therefore, what steps we would
need to take to deal with it. That is a very urgent piece of work
that we are currently undertaking.
31. Are you at all concerned that some of the
tobacco manufacturers themselves are facilitating tobacco smuggling,
either knowingly or otherwise?
(Dawn Primarolo) The tobacco manufacturers in the
UK continue to say publicly that they are just as concerned as
the Government about the level of smuggling of products into the
UK. So we have initiated steps to ensure that we are able to share
information that may be helpful in helping us trace goods that
are being rerouted back into the UK. Customs' teams have been
into the manufacturers and are challenging and are requesting
data on the export trade to see whether we can marry that up with
the intelligence that we are collecting through the seizure of
the goods. I think it is very important to say, nonetheless, that
the export of cigarettes from this country is a huge trade and
the overwhelming majority of that trade is perfectly legitimate
and ends in source. What we have noticed is that certainly there
appear to be exports to places where the domestic consumption
would not indicate that level of purchase, if I can put it that
32. Minister, Mr Broadbent told us that he felt
that there was "a very strong common vested interest"
between the tobacco manufacturers and Customs and Excise in tackling
the smuggling problem. Is that necessarily so?
(Dawn Primarolo) The tobacco manufacturers continue
to say that is their view, yes, and that it is not in their interests
to see the growth in the last few years that we have in this huge
tradewe are talking about one in five cigarettes before
the Government started its actionand they wish to co-operate
with us. So we now have a series of questions which we would expect
them to co-operate in answering so that we can ascertain whether
there is a link, and if there is what they, and us, need to do
33. Is it not strange that so many of the smuggled
cigarettes actually originate in the United Kingdom?
(Dawn Primarolo) I think in the United Kingdom it
is a huge industry in terms of production here. Of course, we
are talking about very substantial companies: Imperial, Gallaher,
BAT. These are world leaders, so it is not surprising that there
is a huge manufacturing base here in the UK and a lot of that
would be exported.
34. The campaign for Action on Smoking and Health
has suggested that there is almost an unhealthy closeness between
elements of Customs and Excise and the tobacco manufacturers.
Would you care to comment on that?
(Dawn Primarolo) I deeply regret that comment, it
is not true. I think Customs are proving quite clearly now that
cannot be true, once they have the specific resources and the
new strategy, by their ability to challenge and to deal with this
growing problem of the smuggling of cigarettes. I do not think
it is helpful that anybody should speculate or make allegations,
whoever they are, without the facts of the case, and there are
no facts to substantiate such a proposition.
35. What did the Butler report into the collapse
of the Regina v Doran case tell you about the workings of Customs
and Excise's legal team?
(Dawn Primarolo) It revealed the complexity of the
work undertaken by Customs and in particular when you have a department
that is putting together international intelligence collection
and is trying to stop goods arriving here in the UK in the first
place rather than wait for it to arrive here and seize it. My
understanding is that on all of the points, and there was a review
team to look particularly at the role of Customs having prosecution
powers and solicitors' offices inside Customs, that report has
now been reported to the Attorney General, because it was decided
that the Attorney General would be the best person to deal with
this. He will be making recommendations on that on behalf of the
Government. I think that the problem for Customs clearly is they
are very high profile cases, so when a case goes wrong it is big
news. When their success rate is scrutinised they have a very,
very good and high success rate, it is just that the nature of
these cases means if they go wrong they are rather large cases
that go wrong.
36. The Butler report was quite an indictment
of the legal team in this particular case. Were the findings of
the report surprising in the department?
(Dawn Primarolo) Personally I thought it was rather
mixed. It did say some rather good things about the department,
it said quite a few. Obviously it is important, it is nice to
have the good things said, but one has to focus on if there are
weaknesses and those need to be addressed. Customs are a robust
organisation in the sense if something is not being done correctly
then they will set about taking on the recommendations and dealing
with it. The review on whether or not the solicitors' offices
should remain in Customs and Excise, as I said, is a matter for
the Attorney General and not for me, and I think that is right
given some of the criticisms that have been made, and will be
reporting soon I understand.
37. You have already received the report that
you are referring to?
(Dawn Primarolo) Yes, we have, but the Attorney General
is in the lead on it, not us. The review team looking at what
should happen, on behalf of the Attorney General, obviously is
looking at both the reports.
38. When is it likely to be published?
(Dawn Primarolo) I really do not know that because
it is not in my gift.
39. There is no forecast?
(Dawn Primarolo) No. I do not think it is going to
be very long though.
(Mr Hanson) It should be ready soon.
(Dawn Primarolo) Yes, I understand it is going to
be quite soon. It is the Attorney General, we will just be notified
when he has made the decisions on the date.