Examination of Witnesses (Questions 20-39)
MR TERRY BYRNE, MR IAN MACKAY AND MR STEVE BRASSINGTON
MONDAY 22 APRIL 2002
20. The PCS Union considers that 500 additional Customs officers can help to increase the yield in duty and disruption to smugglers. What you are telling us is that 500 extra officers are needed in England and Wales, not in Scotland.
(Mr Byrne) No. That is the PCS view.
21. Do you agree with that figure or not?
(Mr Byrne) No, I do not agree with the figure and it would be inappropriate for me to agree with the figure. Resourcing issues are things which we discuss with ministers, first of all. What happened last week was that, allied to the Chancellor's Budget speech, something in the region of £40 million for the first year has been allocated. That came after, so I do not know about the PCS's proposals. They would not have known of that. Whether they anticipated the Chancellor's speech I do not know but again SR2002 is something which none of us on the official side would anticipate. I do not agree or disagree with the PCS view. I would not put that kind of quantification on it. However, I look back to two years ago when the government gave us nearly 1,000 staff.
22. That was a UK figure.
(Mr Byrne) Yes. The point you made, Mr Sarwar, was would I do that in England and Wales. I suppose we would determine where we were going to put it as and when I knew what the resource was. It probably does not let too much of a cat out of the bag to say that I probably would not put very much of it in Wales, because again there is limited smuggling through that route. There is a limited issue of course with the Irish. However, a fundamental change which was announced by the government in the pre-Budget report last autumn was about tackling fraud. It is now not a guess and a finger in the air and 500 staff. With the announcements which the Chancellor made in the Budget and the paper and pre-Budget report, that identifies a problem. One of the problems is road fuel. For the first time, starting two and a half years ago with the tobacco strategy, we stopped just talking about outputs. Give us more resources and we will give you more arrests. That is okay but the Department has been pushed into accepting, quite rightly, a much more challenging measure of its performance. What is the overall outcome going to be? Not more arrests, not a few more seizures. What is going to happen to the size of the problem? With road fuel, we think we have been reasonably quick in identifying that there is potentially a very real problem. It is bigger than the fraud that we first expected. With tobacco, by the time we identified and acknowledged that it was a big problem, it was a hell of a problem. With oils, the percentage is relatively low but, because of the amount of duty collected on oils, just one per cent increase in the fraudulent level is £125 million that the government loses. In relation to road fuel, we have said, "Here is the size of the problem. If you want us to tackle it in an effective way, stop the growth and reduce the level of fraud", in the same way which we fortunately did successfully with tobacco. This is what we need to do. Some of it comes with a bill. Some of it means a change in the law or the regulatory regime. There is not a single solution to any of these problems.
23. I am struck by the fact that you keep talking about the oils, the cigarettes and the tobacco. I have never yet had a constituent come to one of my constituency surgeries and say they are concerned about the smuggling of these items. What my constituents are concerned about is the smuggling of drugs and the importation of illegal drugs into the country. I am tempted to say something slightly sarky like exactly what parts of our spiralling drugs problem is it that makes you think we do not need another 500 officers, but you keep saying that you assess the risk. How do you assess the risk if you do not have the officers on the ground to do it? I have spoken to police officers in my constituency who are experienced not just in the northern isles but throughout the highlands and islands and the remoter parts. They tell me that they find packages washed up on beaches which clearly contain drugs which have perished in the sea or whatever. They tell me that they see evidence of other uses of the coastline for the importation of drugs. You do not seem to be concerned about that. Why not?
(Mr Byrne) That misstates my position. Your series of questions begs a series of answers. I would be deeply unhappy if all of your constituents were not in the least bit concerned about tobacco smuggling, alcohol and excise. Maybe they do not raise them with you but a lot of responsible people across the country do raise them and are not happy about the Robin Hood area. If you are a consumer of duty free cigarettes, not caring if a local shop is being driven out of business, not caring that billions are lost to the revenue for the building of hospitals and the like, maybe that is an attitude which you will defend. It is not one I find terribly acceptable. On the drugs issue, Customs puts more effort into tackling drugs than any other agency in the UK, barring the 52 constabularies and that is merely a matter of size. The issue you want to talk to me about today is what we will do in Scotland about that. Over the last two years, no significant seizures of heroin have been made except maybe for personal use but it has been very small and has made no difference to the availability of heroin on the streets of Scotland or anywhere else. In cocaine, last year, nine kilos. If we did nothing about that nine kilos, it would make no difference to the availability of cocaine on the streets of Glasgow. We can all drag up anecdotes about failures or about Customs not finding this on the frontier. The issue is what do we do that is effective and sensible. The real contribution Customs can make in tackling class A drugs is much more about stopping multi-tonne loads getting out of Colombia, coming across the high seas through Dover. The same with heroin. What can we do in Afghanistan to build a lawful infrastructure there? There are issues about us doing things at our frontier. If there was any sensible, realistic possibility of staffing the coastline of Scotland with blue uniformed Customs officers to find these packages being washed up, no doubt somebody would have thought of doing that well before now. The truth is that that has never proven to be any effective measure against drugs. We have tried that. You asked about the level of Customs detection resources over the last 20 years. I think they have gone down. Ian Mackay, who is closer to the Scottish position, seems to think they have been reasonably the same. However, when these were in place, including things like Panther, the local vessel network, they have never made a significant detection and what we would describe as a cold pull. The only successful detectionand I was personally involvedof multi-tonne, serious commercial shipments was intelligence led. That was because we were able to put the right number of Customs officers through intelligence on the right piece of the coastline at the right time. Anybody who knows the career I have had, spending most of my time tackling drugs, who is suggesting that I would speak in any way flippantly or with disregard for the drugs problem simply does not understand my position.
24. What assessment have you made of the deterrent effect on vessels like that?
(Mr Byrne) The deterrent effect of Panther is proving a total negative. It has never made a commercial seizure in all the time it was there. Some might argue that it is because it is there that nothing happens. Tell that to the policemen on the streets of Glasgow who are finding heroin, cocaine and cannabis. That is not a deterrent effect. The deterrent effect that convinces me to deploy my resources is demonstrable impact. I can employ as many officers as you can shake a stick at to find nothing but to declare that they are finding nothing because they are there. Therefore, nothing is happening. If the evidence on the street proved that, I would be the first to say that there is some logic in it, but it does not. For 30 years, we have proven that static controls at the frontier have not been effective. Coming to the assessment of the deterrent effect, what is the demonstrable impact of the use for the resource? I believe that is the responsible approach. Taxpayers are entitled for me to deploy the resources in a way which has a demonstrable impact on the problem. That is why there is a multi agency effort to tackle class A drugs. In Scotland, the biggest impact upon class A drugs is through the Scottish Drug Enforcement Agency, to which we are a contributor, because your supply problem is from Merseyside, Birmingham, Newcastle and London.
25. I do not doubt that you are keen to address this problem but I am somewhat concerned at some of the things you have said. Having dealt with the DEA quite a bit over the last few months, what you are saying about where drugs are now coming from is not what they are telling me. They tell me that the drugs are now coming in from places like Aberdeen, Dundee, Edinburgh and Glasgow because they have worked so hard trying to stop them in other cities. Have you spoken to the DEA lately and drawn up some kind of strategy with them because what you are saying is not what they are telling me. If they are right and they have not told you and you have not spoken to them, we need a strategy that involves Customs and Excise and the DEA. If they are coming in as they are telling me and you have not found any, or caught anyone, there is something not happening which should be happening.
(Mr Byrne) What you say astonishes me. Jim Orr, the head of the SDEA, is a frequent contact of mine. He is a member of the Consolidated Inter-agency Drugs Action Group, CIDA. He sits on that and represents the SDEA. He knows of the combined strategy. There was a meeting recently addressed by the National Criminal Intelligence Service who made exactly the point that the main supply problems are those things which I identified. The SDEA is now about to put two officers into Merseyside because they recognise that that is the problem. That is not to say that no drugs ever come through Aberdeen or Glasgow Airport. We found two or three commercial shipments of cocaine in the last year. Our understanding is very much that the SDEA recognises that the primary problem is secondary supply from England, much of it through its south coast ports.
(Mr Mackay) I sit on the Scottish Advisory Committee for Drugs Misuse. I am also a member of the Scottish Drugs Enforcement Forum and I was at that earlier this year. That forum agrees the resources for the SDEA as part of the Scottish Executive package. Jim Orr gave a full presentation to that and there was not an inkling of that in it. I see Jim in both those fora about once every two months and that has never once been said to me.
(Mr Byrne) If there were anything to change our profiles of that nature, we would be only too delighted to receive it.
26. You are meeting them?
(Mr Byrne) We are part and parcel of the SDEA.
27. Outside the forum, which is basically just meetings for the chattering classes, are you meeting them at individual levels to talk about drugs?
(Mr Byrne) We have officers in the SDEA. Every day, they are participants in that.
28. Could you supply us with some of the numbers over the years that you said were pretty static on detection and staffing numbers?
(Mr Mackay) Terry said over 20 years. I am sorry; if I missed the question. I was talking about over the more recent past, five or six years. Obviously, in the past, we can go back to when there were ten collections in Scotland and so on. The numbers have reduced. The overall numbers over the past six years have reduced by 225 out of about 1,400 down to about 1,175. The majority of those, I would suggest to you, have come from the support staff because of the greater use of computers, technology and so on.
29. Could you tell us something about the benefits that have accrued to HMCE intelligence gathering operations in Scotland by the centralisation of the CCU work at the National Co-ordination Unit at Ipswich?
(Mr Byrne) I think there is a misunderstanding from what you said about the role of the former Collection and Co-ordination Unit and now the National Co-ordination Unit. The collection of intelligence is by intelligence officers who are out on the ground in a variety of functions. The National Co-ordination Unitformerly the Collection and Co-ordination Unitis there for a range of things that it receives and disseminates. It receives intelligence. It checks a variety of databases, usually things like vehicle checks, electoral role, departmental databases, to pass that information back to the people on the ground who are wanting the information. The change there was not about the gathering of intelligence. The role of the Co-ordination Unit has now been centralised because we have invested a good deal in IT which gives the people sitting there an opportunity far more quickly to interrogate a range of databases, some of which we are only allowed to interrogate if we do them through very narrow gateways under controlled circumstances, to keep a check, as we are required to under the Police Act and the Regulations of Investigatory Powers Act on the types of checks that we are doing and to use modern technology. Once you get into the use of modern technology, you can centralise. We have all made telephone calls to what seems to be a local number and been connected to somewhere far further away. Also, I am afraid, with the cost of installing the technology, if you are going to go for the more sophisticated equipment, you simply cannot distribute it around a variety of sites. At the moment, I cannot judge the value of the National Co-ordination Unit because it is not up and running properly. It goes live in about two weeks' time.
30. Can you tell us what will happen to the 17 staff employed at Inchinnan when that happens?
(Mr Byrne) I thought it was 15 or 16. They are all being redeployed within the Department. There is no compulsory redundancy. The Department has chosen to resite some work for 14 posts to Paisley. I think I am right that the overall reduction in that element of the intelligence resource is one post.
31. I can see the logic of centralising the Co-ordination Unit facilities, to centralise the analysis of the information but surely you also need people on the ground to gather the information? On the one hand, you are withdrawing from a presence on the ground in not just the remote areas of Scotland but in some of the major cities. If we have more centralisation to Edinburgh, Glasgow or wherever, you will not get information coming in from the grass roots which you can then co-ordinate to provide useful information. I am a bit concerned about this picture I am getting of everything being centralised, not just in terms of the analysis but centralisation of the gathering of information as well.
(Mr Byrne) The intelligence resource for 2002/3 which is decided by my director of intelligence is an overall reduction of one post out of about 58 from 2001/2 to 2002/3. That is before any allocation as a result of last week. That means the removal, I believe I am correct in saying, of the centralisation of six posts totally out of Aberdeen, Inverness and Dundee. The intelligence managers did an awful lot of work before they decided that. Removing from remote areas is a very difficult thing to do but they had a look at the productivity of what was going on in the intelligence area. They did more analysis of that than the productivity, the detection and investigation areas. I think Scotland had something like four per cent of the Department's fraud intelligence resource. It was wholly nońproductive and that is the bit which Andrew Parker, the Director of Intelligence, has decided to redeploy. It is being redeployed into the central belt in Scotland, into much upskilled analysis, operational and potentially strategic analysis. A number of people that we have called intelligence officers have done nothing more than very low level checks. They have not added greatly to the knowledge of the detecting staff. Part of drawing resources together is to enable them to be better skilled, to focus on the intelligence development. If it had worked successfully as a great big fishing net and an awful lot of good quality intelligence and information was coming in through that, there would be something to be deeply concerned about. Those areas where staff have been removed from have been identified over a lengthy period as low productivity.
32. What percentage of the overall total of illicit tobacco available in Scotland is estimated to come directly from overseas sources? What are the main points of access?
(Mr Byrne) Class A or all drugs?
(Mr Byrne) As far as we know, there is no diversion of UK produced tobacco onto the market. All of the illicit product in the UK has come from smuggling. Around 20 per cent still we think comes from boot leggers, the white van trade, which comes across principally through Dover and Ramsgate. We have hit that pretty hard and reasonably successfully. The rest is broken down into about five or six per cent of the whole, people who will go to the Canary Islands, air couriers, or further afield and come back with a suitcase full of cigarettes. That comprises about five to six per cent of the market. Three-quarters of the problem is by reasonably well organised, serious criminals who are bringing in container loads. They used to be bringing in about eight million at a time. Because of the tobacco strategy, they are now bringing in one million at a time through eight containers because it is less painful when we catch one of them. Where do they come from? Clearly, the white van trade is principally from the European Union, Luxembourg, France and Belgium. By far the bigger problem is from eastern Europe, the Far East, parts of Africa and parts of the far end of the Mediterranean but an awful lot of that is previously exported UK tobacco.
34. In 2000, 18 per cent of cigarettes smoked in the UK were smuggled. What is the percentage now? The Paymaster General initially had some initiatives launched in 2000 as well called "Tackling Tobacco Smuggling". Has this helped? What is the percentage now?
(Mr Byrne) I am certainly not complacent or arrogant about it. It is probably the one telling success by the Department in recent times. We set out a strategy at the back end of 1999 and early 2000 which said, "This is the rate of growth." It was not just the fact that smuggled cigarettes were 18 per cent of the problem. It was the rapid growth from about three years previously when it was almost nil. We said at that time, for a certain investmentit turned out to be £209 million over three yearswe would slow the growth in the first year to 21 per cent and we hit that target. The Chancellor and the chief secretary announced that at the back end of last year. It was the first time in my time in the Department, nearly 40 years, that we had achieved a real outcome. We could see that it was not just about additional seizures. We kept it at 21 per cent. For the year which has just finished, we would slow the growth so that it only went up by one per cent. The target for the year just finished is 22 per cent. I do not know the answer to that at the moment. There is a series of variables in there which we are not the masters of: the level of consumption; the level of cross-border shopping. It will be much later in the year before we are in a position to confirm this. Early indications are that we have been successful again.
35. I can understand my colleague's view that people in other constituencies are more concerned about hard drugs because they affect their social life, law and order and 90 per cent of the law and order situation is drugs related. Small businesses suffer a lot because of the smuggling of cigarettes, alcohol and oil. How much will smuggling into the United Kingdom and Scotland cost the Exchequer?
(Mr Byrne) Assuming that it is around 22 per cent or so this year, it could be nearly £4 billion, depending upon whether one takes into account recent planned Budget increases in due course. That is a rough figure. I think it is slightly less than that.
36. You mentioned that you have managed to slow the growth but at the end of the day the amount of illegal imports is still increasing. Given the level of taxation which is imposed by the Exchequer which, for political reasons and because we want to try to improve people's health, we are trying to make more expensive in real terms, I take it you would anticipate the problem is likely to remain at least the same if not increase as the years go on. How do you consider whether the existing measures are going to effectively stifle that market, if at all, or whether we have lost that battle? Perhaps I could have your comments about the fact that British tobacco manufacturers export an unusually large amount of cigarettes to somewhere like Andorra where, if every citizen smoked the same number of cigarettes, they would be smoking about 80 a day. That seems to be one of the channels for illicit tobacco back into the United Kingdom. Does the Department consider there is a need for further measures to be taken in regard to the exports out of the country to other countries?
(Mr Byrne) I do not accept that the tobacco problem is going to get worse and worse. Without the intervention which we agreed with the government it is pretty clear that the figures are showing that market penetration by smuggled cigarettes now would have been at least 25 or 26 per cent last year and we held it to 21 per cent. The continuing and cumulative impact of those activities is going to keep us roughly to that same level. It could be one or two per cent higher but we believe that the dynamics of the market were going to take it to well above 30 per cent by now. The next stage will be whether, over this coming year, we do stabilise it and start to bring it down. The intention isand it depends upon the SR2002 decisions of courseto turn the corner and start to bring it down in the next two or three years with existing activity. It was meant to be cumulative. The £209 million investment is only just coming on stream in full, bringing scanners into place, for example. I do not accept that the tobacco problem is lost. It is one real example that, if you get in just in time as opposed to just too late, it is possible to change that problem. I do not give up on that. What was the second part of your question?
37. The second part was on tobacco manufacturers exporting their products to places like Andorra and in turn that is seen as a way where cigarettes are purchased there without tax and taken back illicitly into this country. The amount of exports by British manufacturers into countries like Andorra is fantastically high.
(Mr Byrne) Andorra was a problem. It was stopped principally because the Spanish and French stopped the tobacco from coming out of there and it was no longer a problem. You could equally make the point you are making about exports to Lithuania, Latvia and, in one case recently, Afghanistan. I am not sure they will have had time to have been smoking with their problems but Dubai and CyprusI could name a dozen more cases. We are engaged in pretty vigorous discussions with tobacco manufacturers, about their oversight of their export trade. That has been going on for quite some period of time. Their cooperation is variable, but you are right. A significant part of the solution is about the oversight of exports from the UK in the first place.
38. Can I turn back to the question of the smuggling of oil? What is the extent of the problem in Scotland?
(Mr Byrne) The smuggling of oil on the UK mainland as a whole and in Scotland in particular is not a major problem. Smuggling is a major problem in Northern Ireland because they have the land boundary and it is easy to drive across and drive back again. When you have to run a tanker across a sea crossing, there are logistical problems. It is not as profitable. There are concerns about some tankers coming from Northern Ireland and that is what we are addressing. It is not a major part of the problem. The major part of the problem is the misuse of rebated fuels, either gas or red, laundering, taking it out or unmarked heating oils which can be used, although they have to be mixed, otherwise they damage the engine. We estimate the market problem at the moment across the UKand we cannot distinguish between the Scottish bit analyticallyat around four per cent of the market, a relatively efficient tax but considerably higher fraud than we perceived it to have been. In Scotland, the results of our detection staff are commendable and perhaps indicative of the real problem. The detection staff here are as successful, I think slightly more successful on average, than their counterparts across the rest of the country. The problem on the misuse of road fuel seems to start roughly in what we call the central area of England from Birmingham north.
39. Do you feel there are sufficient staff in place to deal with any possibility of the development in that area?
(Mr Byrne) Part of the Chancellor's announcement last week included a very significant sum to tackle road fuel. That is the number one thing which we are to increase our efforts on.
1 See Ev 13