Examination of Witnesses (Questions 60-79)
MR RICHARD BROADBENT AND MR MIKE WELLS
MONDAY 25 FEBRUARY 2002
60. It was a job advert in the Belfast Telegraph for Anti-Smuggling Assistant Officers.
(Mr Broadbent) It is quite possible we would have had a very large number of replies. I would be surprised if the post was not filled, but I do not know the circumstances of the case, I am afraid.
61. May I ask you about the situation overall in the United Kingdom? The Road Haulage Association considers that there is a significant and growing problem on the mainland and page 13 of the report, paragraph 2.2, also says, "Customs however believe that all smuggling to the mainland, including cross-Channel smuggling, is limited at present". How do you account for the fact that you and the Road Haulage Association have such a different view?
(Mr Broadbent) I cannot account for their views. Our views are based on two things: one is that if you do an analysis of the economics of smuggling, it is relatively less attractive than other forms of fraud. It does not mean to say it does not happen and it does not mean to say it is not a serious problem where it does happen, but this is an economic activity and my job is to recognise the hard facts of this and do this analysis and work out where the threats are greatest. The profits on smuggling fuel into this country, which is logistically quite difficult and relatively high risk, are quite low, relative for example to misusing red diesel. However, having done the analysis, we have also run a whole series of exercises, at least four in the last 18 months, and all the operational data from those exercises support that conclusion that smuggling is a relatively rare event. It does happen, when it does happen it is very serious, but it is relatively rare.
62. You say you do not understand the Road Haulage Association's figures.
(Mr Broadbent) I said that I cannot speak for them.
63. No, obviously you cannot speak for them, but have you gone to talk to them, to ask them?
(Mr Broadbent) We do talk frequently to the Road Haulage Association. I do not know when we last talked to the Road Haulage Association.
64. If they have this concern and you apparently do not, would it not make sense to find out why they seem to be more concerned than you?
(Mr Broadbent) We do talk to the Road Haulage Association.
65. But you cannot tell us why they are more concerned than you are. They are on the rock face, are they not? They are driving the trucks, they have their members going up and down every day and there are more of them than you. Intuitively one would expect that they would see more of what is going on than a group of law enforcers who are limited in number and who can only do spot checks and use intelligence and so on. One would have a hunch that they might be talking with a bit of knowledge, would you not?
(Mr Broadbent) We do talk to the Road Haulage Association, but by giving my analysis of the problem I do not mean to dismiss or denigrate somebody else's view, nor would I disagree that clearly there is some smuggling going on and whatever else happens, we must not take our eye off that particular ball. Unless one takes some judgements about priorities and risk analysis one does not get anything done.
66. In terms of the question of prosecutions which was raised earlier, apparently you have prosecuted 12 people and in paragraph 3.18 three of them were successfully prosecuted. What is that as a percentage of the total number of offenders? It says "Prosecution action was taken against less than one per cent of offenders who were detected". I suppose that is the answer to my question. Twelve prosecutions were brought and three led to custodial sentences.
(Mr Broadbent) Yes; I believe all the prosecutions were successful but only three led to custodial sentences.
67. What tonnage, what amount of fuel is one talking about in terms of offences you have found, whether there was a prosecution or not? What percentage of the total fuel was represented by that less than one per cent, if one were to take the 100 per cent of offenders you have sought and found, whether you have prosecuted them or not?
(Mr Broadbent) It would be very difficult for me to answer that question. I would have to go back to the individual cases and have a look. The criterion would probably be whether there was a pattern of activity: what is the possible totality of the scale of the pattern of activity; what evidence do we have available to evidence that pattern of activity. It would be quite difficult for me to give a total percentage of the problem represented by those 12 cases.
68. But it is pretty small compared with the total amount of fuel.
(Mr Broadbent) Yes.
69. The Northern Ireland Secretary was quite critical of Customs and Excise three years ago. Finding people who are happy with Customs and Excise is a difficult task one witness said. That was three years ago. Mr Palmer's letter states that people are still very unhappy about your level of activity, so it does not sound like a huge amount has changed in the last three years.
(Mr Broadbent) It is not for me to judge from external commentators. Quite a lot has changed over the last two or three years. One of the problems we face in the case of prosecutions is that you would expect the pattern of prosecutions to change with changing levels, changing patterns of fraud and this table relates to a period two years ago and the pattern is changing. It takes on average two years to bring a case, so you are not going to see the impact of that change in the actual numbers of prosecutions in the newspaper for a period of time. For example, I can tell you now that we have 27 cases, of which 21 relate to Great Britain, waiting to go to court and that involves 70 defendants. It is an enormous change to this pattern.
70. Licensing. You said the local authority is responsible for withdrawing the licence.
(Mr Broadbent) Yes; in Northern Ireland.
71. Have you had discussions with local authorities or with Government about asking them to action this?
(Mr Broadbent) We have been very active in a series of different fora, notably the Organised Crime Task Force and bilaterally with the authorities to talk to them about this problem. One of the things we are particularly keen to try to see is some joint visiting. We are trying to move an initiative where we actually do some joint visiting with other authorities. They have some issues of their own which I have to respect, to do with their ability to enforce, their ability to deliver. We are all trying to move in step on this but yes, we are making a series of proposals into more than one forum in Northern Ireland on these issues.
72. The last time or the last time but one when you came before us I asked you how many employees of Customs and Excise were the subject of criminal investigation by the police and you said you thought it was about seven. When I subsequently put a Parliamentary Question down, the answer came back 16. I wondering whether you could be clear. I hope it is the case that there are no people employed by Customs and Excise who are the subject of criminal investigation in relation to hydrocarbon oil.
(Mr Broadbent) I think you asked me that specific question in relation to Excise fraud the last time. I said I believed the answer was nought but I would write to you, which I then did the next day. I believe the answer to be nought but I will write to you very quickly to confirm that. I do like to check the figures, particularly on a matter as serious as prosecutions.
73. You are not aware of any criminal acts by
(Mr Broadbent) There are no cases on my desk of which I am aware. It is a large organisation and if there was a misunderstanding about the totality of criminal investigations, I certainly apologise for that, although it may have been a confusion between cases and individuals because one case can sometimes involve more than one individual.
74. As far as hydrocarbon oils are concerned
(Mr Broadbent) As far as I am aware there are no current criminal actions pending against Customs employees and I shall write to you to confirm that or otherwise.
75. If you were to employ one extra member of staff on detection duties and trying to catch fraud where it occurs, would that be cost effective? Would you in fact get in more duty than the cost of one extra employee? What is the marginal effect on the amounts at present?
(Mr Broadbent) We are trying to create strategies for all our regimes. The aim of those strategies is to try to produce a measurable effect on outcomes. One of the reasons why decisions can only be taken in the course of the Budget and the spending review is that those strategies do have resourcing implications. It follows from that that we do believe that there are things we can do which if properly resourced will increase the revenue flow. I hesitate to say it is adding one person to do a job but I understand the question. It is proper first of all for us to make sure that all our current resources are being properly used, it is secondly proper for this Committee as well as for the Government to say we must tell you what outcome we are going to achieve and how we are going to achieve it. It is putting together those strategies which we are now currently engaged on, but there are resource implications and by inference, if we implement the strategies additional resourcing would be required, but if the strategies are successful, for example there has been some evidence in the case of tobacco that tobacco revenues are now higher than a year ago, then we would expect revenues to go up.
76. In terms of the spending review you would expect to be able to hand the Chancellor a present rather than have to take some extra money from him.
(Mr Broadbent) My discussions with the Chancellor about the spending review are private but as the PBR says, we are putting forward strategies and there are resource implications and the strategies would be designed to improve the revenue flow.
77. Figure 8 on page 13 seems to indicate that the average value of cases detected in Northern Ireland is some £8,000+. Unless I have misread the system, if you were to find such a fraudster acting you would be able to impose a fixed penalty of £250. On the face of it that seems a very small proportion of the average value of the fraud. If you got away with one fraud in six, you would still be making a hefty profit on it. Is that correct? Have I understood the system?
(Mr Broadbent) What we do in smuggling cases is invariably confiscate all the vehicles and all the equipment, all the plant, all the duty load.
78. And keep it?
(Mr Broadbent) And keep all that because it is a smuggling offence and for smuggling we have a policy, which is supported by the tribunals as proportionate, of confiscation the first time. We cannot confiscate for misuse the first time. In addition to that we would levy the fines, we would levy duty on the load, so if it were a 25,000-litre tanker we would levy duty on the whole tanker and if we thought it was part of a pattern of activity we might raise an assessment for back duty and for VAT as well. We do try to impose the maximum penalty; case by case it will vary a lot.
79. In smuggling you would tend to get back how much per case?
(Mr Broadbent) I hesitate to generalise because some cases can simply involve somebody with a couple of tanks in the back of their van and some will be complete tankers of 25,000 litres. We will confiscate any vehicle used for smuggling, so that will set a threshold for the level. Last year in Northern Ireland we confiscated slightly over 300 vehicles and all of those will have been for smuggling offences.
1 Note by witness: I can confirm that none of our officers is subject to any criminal investigation. Back