Examination of Witnesses (Questions 220-239)
MR RICHARD BROADBENT AND MR MIKE WELLS
MONDAY 25 FEBRUARY 2002
220. If you combine it with the existing provision, does that make it more useful or less useful in total?
(Mr Broadbent) We are satisfied that it will be as effective.
221. That is hardly a ringing endorsement.
(Mr Broadbent) No, I do not think it is.
222. So this change you are making is really to no benefit.
(Mr Broadbent) The Euro marker in itself will not be a big step forward in trying to tackle fraud.
223. At least it will all be the same colour, it will be harmonised.
(Mr Broadbent) It will be the same colour across Europe and as long as we keep our own marker in there as well, we are satisfied.
224. Coming back to this question of organised crime, can you give me an indication of the percentage of fraud in GB by abuse of red diesel is attributable to organised crime as distinct from others?
(Mr Broadbent) It is very difficult. In value terms it is always the case that the small individual misuser, of whom there are large numbers of individual cases, tends in value terms to be less of the problem.
(Mr Wells) One thing we could say is the proportion of what we find which relates to laundering plants of which in the current year we have found 19 in Great Britain. Those laundering plants could produce up to five million litres per annum which gives you some indication as to the scale just of those which tends to suggest that scale of production might be of a level you might describe as organised rather than the casual misuser of red diesel.
225. I appreciate that it is organised rather than disorganised, but that was not quite what I meant. What I meant was: is there any evidence that the people involved in this are also involved in drugs, alcohol fraud, general honest decent burglary, that sort of thing as well, or are they different people?
(Mr Broadbent) We almost invariably find in this field as in other fields that at the point where a fraudulent type of activity becomes more commercial, more organised, you find criminals involved in it who are engaged in other criminal activities as well.
226. But you have no idea of the balance between the two.
(Mr Broadbent) It is a difficult judgement to make.
227. It certainly is, but if your policing is meant to be intelligence led, you do not seem to have much knowledge in this field, do you?
(Mr Broadbent) If you try to make some judgement as to the level of crime which reflects pure criminal attack on the system rather than large legitimate users just misusing it, the answer would be the majority. There is a difference between the two. It is one thing for somebody to misuse it who is basically legitimate and for an attack to be made on the tax.
228. I certainly hope that you know more than you are telling us, otherwise I would be even more depressed, I must confess. May I ask about deterrence? I saw that somebody was prosecuted recently for a laundering plant who got three years nine months, which means they will be out in less than two years. They turned over £1 million or so. That is not bad going. Were they pursued for seizure of assets at all? Is it normally your procedure to follow that up?
(Mr Broadbent) It is now almost invariably our standard procedure to pursue people for assets.
229. How successful have you been?
(Mr Broadbent) They are all still going through the courts. What we try to do is freeze assets and then it is the courts who have to confiscate. We are still waiting for these to go through.
230. So none is the answer.
(Mr Broadbent) I am afraid I shall have to come back to you on the level of confiscation orders. I shall provide you with some information on that.
231. The fact that you have no idea about it does not indicate that this is being pursued as vigorously as it might be. If we are talking about deterrence, then it would seem to me that pursuing the proceeds of crime would be fairly significant.
(Mr Broadbent) It is absolutely critical and it is one of the biggest changes we have introduced in the last two years that every investigation which is now undertakenevery investigationfrom the outset has to open a heading called "What Are You Doing About the Money?". It sounds like a small thing but it has a big impact and over the organisation as a whole we are now seizing a multiple of financial assets. I can let you have a figure for oils in particular.
232. That would be helpful. May I clarify a figure I thought I heard you say earlier on and that was that it takes 165 man days for a prosecution?
(Mr Broadbent) Yes.
233. May I ask the National Audit Office how that compares with other people's records for the efficiency or effectiveness of prosecutions?
(Sir John Bourn) It is generally in line with what other organisations face. It does indicate what an uphill struggle it is to get cases to court and succeed in them.
234. Maybe we should have a report on whether or not we can cut it down from 165. I am glad that is agreed. I want to pick up one thing about Northern Ireland. Am I right in assuming in all of this that this whole racket is run by para-militaries, essentially Republican ones, if not run by them, then at least they are levying taxation of some sort upon it because it presumably could not exist without their knowledge and consent.
(Mr Broadbent) There is certainly para-military involvement in oils fraud in Northern Ireland.
235. I was a bit more explicit than that. I was asking whether they are the people who are running it.
(Mr Broadbent) There is certainly a material involvement. I certainly do not believe that they are the only people involved.
236. Do I take it then from what you were saying earlier that you are deterred by the threat of civil unrest and by violence against your staff from taking action on this? That is what is putting you off. You would take much more vigorous action on some of these illegal petrol stations were it not for the ability of those involved to organise civil disturbances.
(Mr Broadbent) In the last 18 months we visited 600 filling stations in Northern Ireland. We have levied assessments of over £750,000, we have seized two million litres of fuel and I say that because it is not right to say that we do not do anything, we are doing quite a considerable amount of work. What I did say was that it is important we recognise how much we can do by ourselves alone and get that in perspective, or else I simply send my officers into untenable situations. Secondly, in trying to encourage the multi-agency approach, which undoubtedly is the key to the whole of this, we have to move in step with the judgements of all the agencies concerned, many of whom may be less willing than we are to go into these situations.
237. I understand that. May I ask a final point on the complicity of both the Irish Government and the oil majors in this smuggling? The diesel must be coming from somewhere. Presumably it must be being sold to petrol stations in the Irish Republic by the oil majors who must recognise that a small town near the border with 200 people is hardly likely to use half a billion litres of fuel a year and that they are therefore helping with that process by making their product available in volumes which they must know is going to result in smuggling and evasion of duty. Presumably, similarly, the Irish Government must be aware of all this as well, since they are presumably making quite substantial amounts of money out of this because they are selling fuel to Northern Ireland and obtaining revenue which otherwise would remain in Northern Ireland. Can you clarify for me what action you have been taking, both in regard to trying to get the co-operation of the Irish Government and with the oil majors with whom you must have a relationship in the United Kingdom but who seem to be robbing you blind on the other side of the Irish Sea?
(Mr Broadbent) We work very closely, particularly in the last couple of years, with both the oil majors and the Republic of Ireland Government. At an operational level, I should say that we have a very high degree of co-operation in cross-border work with the Irish authorities and that has been quite material, including in some recent operations. During one in December for example we raided a number of addresses in Armagh and at the same time some action took place south of the border, including the seizure of financial assets. That was not something we could have done by ourselves. I should like to say that the operational co-operation is good. Clearly it is not for me to make any comment about the Irish Government's tax policies, but they are benefiting from higher demands for their dutied products because there is a lot of cross-border shopping at least, if not a lot of fraud as well. I cannot make any comment about that. It is not illegal, it is a situation which if we were not an island would be very common. I believe that the oil majors are very aware of the situation and although one might think that they were indifferent to their supply, they are rightly concerned about it, because they do see their long-term interests lying in an orderly legal market. They want to have retail distribution outlets which are stable, they want to be part of a legal market and although yes, whether they supply the oil one side or the other of the border you may think they get their margin and in one sense they do, they understand that it is not in their long-term interests to have an illegal market.
238. You said that the oil companies are concerned about this. How exactly has this concern manifested itself? I remember the parallel with the tobacco companies which were involved in helping smuggling by selling just the other side of the border. They expressed great shock and horror as well that this was going on, yet they continued to do it because they were selling product.
(Mr Broadbent) The oil majors quite rightly put us under a lot of pressure to do better because they want to see their deliveries in Northern Ireland going up; indeed they are very pleased to see deliveries have started going up. The oil industry, unlike the tobacco industry, is more vertically integrated. The oil majors own more of the outlets, whereas tobacco manufacturers own very few tobacconists and that possibly gives them a different incentive.
239. Thank you very much for that interesting discussion on Northern Ireland. I have a couple of questions which colleagues would like to have asked. Can we have a letter splitting out fraud from the legitimate cross-border shopping in Northern IrelandFigure 2 on page 3and in Great Britain generally? Is that all right?
(Mr Broadbent) We cannot do it because we cannot split the figures for Northern Ireland, as I was trying to explain. We just do not have the data. We do not have the cross-border traffic surveys, we do not have survey data. I have given you my own personal judgement.
2 Ev 25, Appendix 1. Back