Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 240-259)



  240. For the year 2000 we had 2,500 tip-offs of which 15 per cent were investigated, ie 375, of which two led to prosecutions. The figure you gave for fraud between the UK and the EU was one case of fraud in the year 2000 compared with 408 in the European Union and yet there were 375 criminal investigations. I cannot stack up how this follows through given your definition of fraud, which is something intentional.
  (Mr McNeill) I think given the complexity of the figures, would it be helpful if we were to supply them to the Committee in tabular form with the details.

  241. It is not the figures I am confused about.
  (Mr McNeill) I can read them out again, Chairman.

  242. Are my figures not right? 2,500 tip-offs, of which 15 per cent led to criminal investigation equals 375. In the year 2000 there were two prosecutions and the figures you gave the Committee for fraud compared with irregularity between the UK and EU is one case of fraud in the UK compared with 408 in the EU.[16]

  (Mr McNeill) No, I am sorry, I said it represented 15 per cent of the criminal investigations undertaken, not that 15 per cent of the calls resulted in criminal investigations. I think my understanding of the situation is we received 2,500 calls and of the number of criminal investigations undertaken by counter-fraud compliance units, 15 per cent was the last year figure to the best of my understanding and that is what then was investigated. How many prosecutions those result in I will have to get back to you on.

  243. Of the 2,500 tip-offs, how many led to criminal investigations?
  (Mr McNeill) I do not have that figure. All I know is that of the total number of investigations it represents 15 per cent. If you look at criminal investigations in the year 2000 it was 137.

  244. Where is this 15 per cent coming from?
  (Mr McNeill) Fifteen per cent of those arose from initial consideration of the 2,500 calls on the help line. As I have mentioned, a significant percentage of the calls relate to black milk, milk quota issues which were easily rectified once one identified where the lorry came from. That is an inspection issue, not a criminal investigation.

  245. Right. 137 criminal investigations, you are saying only two of those were intentional?
  (Mr MacKinnon) No, I do not think we are saying that. I think what we are saying is that in two cases we got enough evidence to take the cases into court. Many of the others would have led to recovery action being taken against the individuals. Some will have led to other action being taken, probably warning letters and so forth. I cannot break them all down but all of them will have been investigated as cases where the investigators thought that there was a strong possibility that at the end of it they would get a prosecution. In not all those cases was it possible.

  246. You feel you have got enough evidence to reclaim back money paid to people but not enough money to prosecute. It just seems odd that you have got enough evidence for one but not for the other.
  (Mr MacKinnon) We have a very strong hand where recovery is concerned because these are repeat customers and if we are satisfied—

  247. Are you recovering money unjustly?
  (Mr Bender) As I am sure the Committee knows, Government departments need to follow the Attorney-General's guidelines in deciding whether it is in the public interest to prosecute and in gathering different levels of proof required for criminal/civil proceedings. So there is a lower threshold of activity and, if you like, definition of public interest in recovering as opposed to prosecuting. I know this is an issue the Committee have cross-examined predecessors on as to whether enough prosecutions happen. As I say, all Departments need to follow the Law officers' guidelines on whether it is in the public interest to proceed with prosecution.

  Mr Gibb: It seems to me, the impression I get from being on this Committee is that both your department and the Social Security Department are very slack in prosecuting people who are stealing my money as a taxpayer and the people I represent in Bognor Regis and Littlehampton who pay money in good faith and people are deliberately—137 cases here—taking away that money against the law and not being prosecuted. It seems totally wrong. I just think that you ought to take into account the deterrent effect of prosecutions and take these people to court. I think it is very, very wrong. I will leave it there.

Jon Trickett

  248. We are coming to the end of this and it has been quite a long afternoon so perhaps I will ask some tidying up questions and not take the full 15 minutes. Before I do that, I just find one thing very, very curious about the regime which ran at the time. I represent an area which used to produce coal. Now at the moment there are some subsidies left to the few remaining collieries. They do not get their money because they have got assembly belts and miners, they get the subsidy because they produce so many million tonnes of coal, and coal has to be the product of the assistance regime which is being provided by the EU. In this case there is no coal, is there? You actually had a regime which did not require the coal to be produced, did it? There did not have to be a product of this process?
  (Mr MacKinnon) No. I probably cannot answer policy wise for the European Union Common Agricultural Policy. My role was implementing it. The linseed aid, for instance, the Arable Aid Payments Scheme, was compensation for a quite sharp reduction in institutional prices within the EU so it was paid on the area of land actually sown to crops.

  249. Is not the real systemic problem the fact that there was no need to demonstrate that any product had come off the land?
  (Mr MacKinnon) In the flax aid case, the European Union did learn the lesson and in 1997 it made it a condition of getting the flax aid, which was also an area aid, that there was indeed flax produced and that flax was processed. The attractions of flax were that it was a non food crop, food production was in surplus, it was a very expensive surplus to store or refund for export. If you had a novel new market opening up, such as flax, we had novel uses such as body panels in cars being made from this flax and so forth, then that was an area which would not contribute to the surpluses and, therefore, to the cost to the Community budget.

  250. The fact of the matter is to use the word systemic is a very interesting one and certainly a useful one. The system of agricultural subsidy, in fact, was a racket from start to finish in the sense that all you had to do was demonstrate you had sown a field. You had to make a declaration that the area had been sown and harvested. In fact you were not required, were you, to demonstrate, you as a farmer and even the contractors, that anything that had been taken off the field was of any human value whatsoever? There were tens of millions of pounds over donkey's years going into these communities, literally to produce nothing.
  (Mr MacKinnon) No.

  251. The reason why you were not interested in what was in the barn after the alleged fires was because the system did not require anything to be in the barn for the man to get the money.
  (Mr MacKinnon) I think the assumption underlying the regulation as it was in 1994 to 1996 was that the contractor, the processor, would have an interest in getting flax off the field. The processor would have invested heavily in his plant, the equipment to process the flax. He would have had his own customers to whom he was supplying the processed flax and the assumption in designing the scheme was that that contractor would police it, make sure that the flax was grown on the field and delivered to him. In practice, as we see in the Bowden case, and have seen in other cases since, that has not worried the processor over much. I cannot explain why that is but that is so.

  Jon Trickett: I suspect collusion. We might come back to that if the Chairman will allow me to continue.

  The Committee suspended from 18.11 to 18.19 for a division in the House

  Chairman: Mr Trickett, do you wish to continue?

  252. Okay. I was going to ask some other questions but I think I have made my point and the department to some extent agrees with the point I was making. It does beg the question actually whether it would have been better to get rid of the inspectors and the fraud unit as well so they just hand the money out to the farmers. The fact of the matter is they were being paid not to produce anything in effect since no checks were done as to whether they would have been produced or not. That in itself begs the question, I think we have discovered there were 400 inspectors but I do not think we know the size of the Anti-Fraud Unit?
  (Mr MacKinnon) 60 people in total.

  253. Was that the case over that period of time, that kind of number?
  (Mr MacKinnon) It would have been about that sort of number made up of a unit of field investigators, about a third of it, an intelligence unit which is handling data coming in from the free fraud line, from within the organisation, information from there and from any other source and processing that information. Then there is a team within the Anti-Fraud Unit which is engaged in what are known as scrutiny visits to claimants which is a bit like the inspector's role but looks much wider across a period of time and a period of activity and looks in depth at the business and will spend rather more time at it.

  254. Sixty people to produce 130-odd criminal cases, two of which go to prosecution in a year, does not strike me as a very high level of output at all.
  (Mr MacKinnon) Well, of course, they are clearing down a whole number of reports as well which do not become criminal investigations. I think we have seen in the Bowden case what is involved in actually bringing one of these cases to court. Prosecutions are labour intensive things.[17]

  255. Another department told us, I think, 165 days per prosecution or something. It is still a remarkably low level of productivity. I just want to ask something else. We know for the 25,000, I will not say separate people, it may be the same person making 25,000 different tip-offs, there are 400 inspectors and 60 crack flying squad type people. How many cases do they tackle a year in relation to the 25,000? The 25,000 is up to Joe Public, the benign characteristics of the people out there in rural communities and elsewhere. How many other cases are we generating with our specialists and our crack squad?
  (Mr MacKinnon) I think the figure was 2,500, not 25,000.

  256. Sorry, yes, it was.
  (Mr MacKinnon) That is about a quarter of the referrals, if you like, which go into—

  257. So there are 10,000 a year?
  (Mr MacKinnon) Something of that nature.

  258. Of which we get one or two prosecutions a year?
  (Mr MacKinnon) That is the order of it. Those prosecutions are the year in which the prosecutions commenced but they may be from investigations which started earlier. Bowden, for instance, started in 1996-97 and was prosecuted in 2000.

  259. Let me just ask you this: are there prosecuting people or specialists within your department as part of the 60 or are they additional to the 60? I just need a yes or no answer.
  (Mr MacKinnon) Sorry?

16   Ref footnote to Q 14; Ev 26, Appendix 1; and Ev 30, Appendix 1, Annex A. Back

17   Ev 26, Appendix 1; and Ev 30, Appendix 1, Annex A. Back

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