Select Committee on Northern Ireland Affairs Minutes of Evidence

Examination of Witnesses (Questions 480-500)



Mr Pound

  480. Could you appear every week?
  (Mr Gerrard) On this occasion two individuals were arrested. Where we can find individuals and, by arresting and charging them and taking them out of the game, that has a real impact on the fraud, we look to pursue that. Also, I think, important is the element of not going after individuals but going after their money. We described in the operations in December what they were about, and I think going after the money is very important. The Proceeds of Crime Bill will be a very, very powerful tool for us.

  Mark Tami: You spoke earlier of clamping down on the retail side. I wonder what additional support and powers will you be giving Customs to actually tackle this, particularly bearing in mind, as was highlighted, the Misuse and Smuggling of Hydrocarbon Oils, which talks of around 400 to 450 filling stations in Northern Ireland being involved in this out of 700, which I think equates to perhaps not 70 per cent but to 65 per cent of actual stations in the province?

Mr Pound

  481. Those figures obviously pre-date this morning's operation!
  (John Healey) The question of new powers is important. We aim, beyond the new programme, to tackle rebated fuel fraud that I have mentioned, which is UK-wide, in the Northern Ireland context. We have not taken firm decisions yet on the sort of new powers and sanctions that may be required in order to clamp down in the way we want to. That is a proper part of the process that is taking place at the moment under the auspices of the Organised Crime Task Force. It is very much, I think, a matter for discussion between the agencies that have got a part to play in combined role enforcement, because I think it is through the analysis of their experience that we are going to be in a position to work out what, in that area, we still need to put in place to assist in doing the job we need them to do.

Mark Tami

  482. If these figures are right, and clearly I have no reason to think otherwise, there is a massive task there, is there not, for Customs to do? So, if not powers, what about extra resources in terms of staffing and in terms of general support?
  (John Healey) There is a massive task still. The retail outlets are the most important focus because they provide the mass market that gives the incentive and creates the profit either for laundered or smuggled fuel. As we tried to explain earlier on, I think, it is not simply a matter for Customs because Customs have a range of competences and responsibilities, but we can put alongside them the Inland Revenue, Trading Standards, local authorities, the Health and Safety Executive and the Environment Agency and start to equip ourselves by acting in that way with a method and an approach of nailing these people much more effectively. That may require additional powers and sanctions.

Mr Robinson

  483. I wonder if you could tell me what your best guess would be of the number of laundering plants in Northern Ireland?
  (Mr Gerrard) It is very difficult to know, by the very nature of the market. In 2000-01 we broke up 17. It would be a very brave man who said that we broke up every one; I am sure we did not, so I would suggest it is more than 17, but I cannot give you a figure on that. Our information is not that accurate, and it would be unusual if it was.

  484. Seventeen that you broke up. Have you any reason to believe that those who were responsible for them did not just go out and set up another one?
  (Mr Gerrard) As I explained to Reverend Smyth, where we can find the individuals who are behind this we will seek to prosecute. We have not prosecuted all the individuals for all 17 so there must be a chance that those individuals went on to do something else. Our aim will be to get after them straight away, to keep bearing down on them and keep causing them financial hardship by the seizure of their goods and the seizure of their equipment. When we do actually find them then we do prosecute.

  485. Can you give me a bit of a comparison between the punishment they are likely to get from their operation when caught and the profits they would bring in if they are not caught?
  (Mr Gerrard) There is a range of offences that we would seek to charge them with. If it was for the evasion of road fuel duty that would be seven years under the Customs and Excise Management Act 1979. If it was a money laundering offence the maximum penalty is 14 years and if it is an offence under common law of cheating the public purse then that is unlimited. What the actual sentence is, of course, as you know, is for the courts. They vary from suspended sentences through to full custodial sentences. I sense in the sentences we have seen in the recent six to nine months that those sentences are increasingly become tougher, with several years being given for large laundering offences. Individuals charged as part of operations we ran in December have not come to court but I would expect them to receive significant custodial sentences if they are found guilty.

  486. What could one expect for having one's vehicle seized for bringing in illegal fuel?
  (Mr Gerrard) If we caught someone smuggling fuel that vehicle would be seized and it would not be restored. A replacement for a new tanker is £50,000 I understand, so seizure of the vehicles can be very, very hard-hitting. We have seen it in other areas, particularly at Dover in relation to tobacco and alcohol smuggling, and it is also true in Northern Ireland. Vehicle seizure against certain criminality is very effective.

  487. Within the last fortnight the front page of our local newspaper ran a story about a crackdown, with stations being closed, vehicles being seized, and even those who had purchased fuel were having their vehicles confiscated, taken off, whatever. I have to say that was the first occasion when I started to get a feedback from up and down the country of people saying "Can this happen to me if I purchase illegal fuel?" What was the nature of the story? Was it an accurate story? Is it happening? What are your powers to take somebody's car off them if they have knowingly purchased illegal fuel?
  (Mr Gerrard) The operation you are referring to was a five-day operation, and we seized 107 vehicles.

  488. Is that people's motor cars or is that tankers etc?
  (Mr Gerrard) It was buses, taxis, tankers, HGV vehicles, private vehicles—it was a mixture. We lifted 40,000 litres of fuel, of which 16,000 was laundered and we also hit two filling stations. In terms of what our powers are, any vehicle transporting smuggled fuel is liable to seizure, and whether that vehicle is restored or not is at the discretion of the Commissioners of Customs and Excise. If an individual is found with red diesel, for example, or laundered fuel in their tanks, again that vehicle is liable to seizure, and restoration, again, is at the discretion of the Commissioners of Customs and Excise.

  489. If you went to a petrol station, whether it is through the marking or whatever the mechanism is, can you tell whether there is illegal fuel being sold there?
  (Mr Gerrard) If we were to call cold, as it were without prior intelligence, we could find out pretty quickly through our specialist testing units whether there is laundered fuel or whether there is red diesel or kerosene in there. With smuggled fuel it is more difficult. We do have certain techniques that we can use on the fuel and in terms of auditing techniques on the books. We can, in general, identify illicit fuel. Sometimes it is very quick and sometimes it can take a little longer.

  490. Can I ask the obvious question? I know that it must be very time-consuming, and, indeed, in terms of resources a very considerable requirement for an operation such as the one I have referred to, but if it produces the kind of outcome that that one did and if the figures that have been quoted here are accurate—two-thirds of petrol stations in Northern Ireland are, to some extent, guilty in this area—why on earth can we not have more of these operations?
  (Mr Gerrard) This was not the first operation we have run. We have increased our resources, as you know, from 25 to 163 and we have been seizing significant volumes of fuel. What we were targeting, particularly in the first 18 months, was large-scale commercial fraud. What this operation was about—and it is not the first one—is targeting retailers and private motorists.


  491. It may just be that we are not being entirely fair to you, because what has surprised us is the very low level of prosecutions. Is it unfair to say that (a) it is much easier and (b) it hits them harder if you take away their vehicles—the tankers and the rest of it—rather than prosecute them for a sentence which might not even begin to be custodial and which will take up many resources in taking the thing through the courts? Is that unfair?
  (Mr Gerrard) No.

  492. Do you say to yourself "Right, I have got £50,000 worth of tanker. That will do. On your way"?
  (Mr Gerrard) I think using different sanctions will hit different individuals. Seizing the vehicle of a criminal who is part of a fuel fraud may not have a huge impact on him but locking him away will. However, seizing the vehicle of a low-level smuggler where that is his only vehicle will have a massive impact and it will wipe out his smuggling business. I think the sanctions need to be used to the maximum effect on different levels of criminality. Sometimes a vehicle seizure will have that impact.

  493. In that case, I think it would be very interesting if you could let us have, in due course, a list of the seizures, the approximate value of the seizures and the number of people and firms/organisations you have taken them off, because that will give us a better picture of this lamentably low figure which is just simple prosecutions.
  (Mr Gerrard) I can certainly provide you with whatever information we have available. Whether it is available in that detail or not, I am not sure. What I would say, though, is that in 1999-2000 we seized 98 vehicles. The following year we seized 312. I would expect when the figures are confirmed for last year that we will see significantly more than that.

  Chairman: A breakdown of it would be very helpful, because the old banger we saw you seize at Belfast Docks did not make much difference to the price of fish, but I am sure you were doing other things as well.

Mr Robinson

  494. The 98 vehicles seized in 1999-2000 might be more significant than the 312 seized in 2000-01 if 300 of the 312 are clapped-out Volkswagen Beetles.
  (Mr Gerrard) You are absolutely right, but my impression is that of that 312, having seen a lot of the vehicles that were seized, an awful lot are HGVs, tankers and large commercial vehicles.
  (Jane Kennedy) Mr Chairman, one of the frustrations in this process is that, because of the multi-agency approach, we may well prosecute a fuel-launderer for something entirely different simply because we find a whole range of other criminal activity that they have been engaged in, be it VAT evasion or something else. Whatever we believe is going to be the most successful form of prosecution, that is what we will take forward to the court. So you would not necessarily see the correlation between prosecutions—successful or otherwise—and the impact upon the trade. If it was so easy we would be using it already.

  Chairman: No one is suggesting it is easy.

Mr Bailey

  495. Just pursuing this particular line of inquiry, when a tanker is seized what happens to it? Is it just crushed or is it re-sold as a second-hand tanker?
  (Mr Gerrard) It is a very important point. If the vehicle is not roadworthy—and we do find, unfortunately, plenty of vehicles which are not roadworthy—they are destroyed. If the vehicle is roadworthy we auction it, but we auction it not in the island of Ireland. Indeed, a lot of tankers are sold abroad.


  496. Who gets the proceeds?
  (Mr Gerrard) They are returned to the Exchequer, although there is not a huge amount of money made from the auctioning of seized goods.

Mr Bailey

  497. It is very interesting, because I would have thought that there was a potential avenue of investigation there. Oil tankers are not insignificant vehicles, and it must be possible to monitor the import of them (I do not know if there is any manufacturing of them on the island of Ireland). In effect, if there is an organisation that is importing a lot, because you know you are confiscating so many, at some stage there may be some sort of deficit that can help you and you can use that information to identify the organisation. I do not know enough about the trade to make any hard and fast points but I would have thought, by the very nature of the vehicles that they have to use, there was an opportunity which could be used, provided all the potential information sources were put together, to focus on the real operators of this trade.
  (Mr Gerrard) I think we do use all the information that is available to us. One point I would make is that over the last twelve months, because of our increased activity—our very visible increased activity—the amount of tankers that are being used has reduced because they are very visible and easy to pick out. We have seen an increased use of concealments. Some of them are sophisticated, some of them are not sophisticated, but we do see HGVs and curtain-sided lorries, etc, being used with tanks inside. So I think there are avenues to pursue in relation to tankers, but often we see more sophisticated concealments.
  (Jane Kennedy) Which actually increases the health and safety risk because there is no baffling inside the tank. If I can very quickly give you this anecdote as to how alert Customs and Excise have to be: sitting in South Armagh they were taking a rest from doing vehicle checks—like coiled springs, as you know our law enforcement officers always are—in a quiet backwater and a fire engine went past. The Customs officer said "That is interesting", went after the fire engine, pulled it over and found it was carrying smuggled fuel. What had attracted their attention was that it was a fire engine and emblazoned on the side of it was "Belfast International Airport, Aldergrove". The ingenuity of the people who were engaged in this—they were using a fire engine, filling up the water tank with diesel and using that to smuggle diesel across the border. That is just an example of how Customs really do have to be alert to all the tricks of the trade.

Mr McCabe

  498. I am interested by some of the comments about vehicle seizures and prosecutions, because one of the things we have been told is that the penalties and the level of sentencing for people who are involved in fuel fraud are actually so low that they do not act as any deterrent at all. In fact, I think one witness told the Committee that people involved in the retail trade who engaged in fuel fraud do not fear anything from the Customs and Excise or, indeed, some of the other statutory agencies. I have got here the figures that the Home Office gave us for England and Wales for the year 2000 and for Northern Ireland 1998, which I gather is the last year that they were available, and they do show that the average custodial sentence for evasion of duty etc in Northern Ireland was 18 months, but that applies to only one person, and in England and Wales it is about 11 and a half months. Do you think there is any validity in that criticism? If so, are there any plans to actually review the penalties and the sentencing and, perhaps, particularly in the Northern Ireland context in relation to the fuel related offences?
  (Mr Gerrard) In terms of Customs and Excise and vehicle seizures and penalties and seizures of equipment, etc, I think my own view is that we have powers and sanctions available to us. We need to make sure that we do use them robustly. The Committee made a recommendation the last time round that we should not be restoring vehicles—and indeed we do not now in Northern Ireland. In terms of sentences handed out by the court, those are obviously matters for the court. What I would suggest is that through the work of the Organised Crimes Task Force, in particular, as the appreciation of the damage that oils fraud does increasingly in Northern Ireland I think we are seeing an increased robustness from the court. There are only a couple of examples that I can point to. Again, these things take time to come through the court, but I do believe that there is an increasing willingness by the courts to use more robust sentences.

  499. You say you believe that there is more willingness in the courts, but I think, if I am right, what the Committee was told was that, as I say, custodial sentences are extremely rare and, if they are passed, extremely short, and the level of fines in relation to the potential profits are so insignificant that it is no deterrent at all.
  (Mr Gerrard) I think, historically, that may have been true. As I said, these things take time to come to court but one example I can point to is that on 9 February a County Armagh man was sentenced for fuel smuggling and he got two-and-a-half years. That is not an insignificant custodial sentence. As a law enforcement officer, if officers are going to prosecute we will want to see as large sentences as we can get, because we have taken that prosecution through. I do think it is the intention of the courts to take a tougher line on this, and that is because the appreciation of the damage that oils fraud does has increased over the last 18 months.

  500. Is there any likelihood that the sentencing issue will be looked at again?
  (Jane Kennedy) The appropriateness of the sentences is something that we keep under review and we would look at it on an on-going basis. One of the things I would expect to come out of the expert group is real, practical experience of making the law work and making the Criminal Justice system work, from a law enforcement point of view. I have to say, in my short time in chairing the Task Force complaints about severity of sentences have not been one of the causes of concern from the agencies involved; it tends to be practicalities of catching the individuals involved. Also, one of our objectives is, obviously, to catch and convict those who are breaking the law, but in terms of organised criminals and their networks and what they are engaged in, we count it as a success if we have gone so far as to disrupt their operation or to cause an organisation to have to disband because the law enforcement agencies have, either through an increased physical presence or through other activity, caused them not to be able to carry out the work they were doing. So we measure success in different ways. One of the things that we are trying to do this year in drawing up the targets for the agencies is precisely that—not just looking at who we manage to put behind bars, but how many of those networks we have managed to disrupt. Granted some, as Mr Robinson was saying, will re-form, and we are conscious of that. We are satisfied that we are impacting on some but we are not impacting on as many as we would like.
  (Miss O'Mara) Could I just pick up the point that Paul was making about general awareness and, possibly, an awareness in the courts? We are very conscious, as he says, that sentencing is a matter for the courts, but precisely because of this a number of my colleagues went and talked to the Judicial Studies Board about the work of the Task Force, in general terms raising their awareness—not speaking specifically about oils fraud but about a whole range of things that we are involved in and why we regard this as important, just as we are trying to work amongst the community generally, talking about "there is no such thing as victimless crime". We are trying all sorts of areas, and the courts, magistrates' courts and judges are another area.

  Chairman: First of all, can I thank you both for coming. Can I say how very helpful it has been to have two ministers from different departments—it is not common. We are very grateful to you, in particular, Minister and your predecessor, for agreeing so readily to do this because it is an area that goes across both departments and both sets of responsibilities. Can I perhaps reserve my parting shot for you, Mr Healey. The moral of the story is this: when you spend money on enforcement you make a profit and by increasing the resources you increase your take. We have heard in evidence that it costs you somewhere in the region of £5 to £7 million a year to police this and a 7 per cent increase in the legitimate deliveries of fuel, which you are rightly welcoming, brings you in between £20 and £25 million. So your investment is already showing a very good return. If I can point to the assets recovery, which is something that is coming in the future when we get the legislation—which again is very welcome and robust legislation—if it is not matched with the resources to take robust actions, because the Treasury does not provide those resources, it will be a lame duck. If you look at the Irish example, which has a recovery bureau, it is already showing the Irish Exchequer a most enormous profit. I know you have fixed spending rules and you have spending rounds and all the rest of it, but I do beg you to remember that when you spend a little extra on this we, the taxpayer, get a lot back. That is something which I hope you will bear in mind and I hope that you will allow, particularly those in Northern Ireland, to cope with the rise in organised crime with the resources which, first of all, are necessary intrinsically and, secondly, will bring you the Treasury a greater profit. If I can leave you with that message as you start your job it is something we will, I hope, be reporting on shortly in terms of asset recovery and I must not pre-empt what the Committee is going to say about this.

Thank you both very much indeed.

previous page contents

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2002
Prepared 17 June 2002