Mr. Jack: On Second Reading, I raised with the Financial Secretary the line of figures in table A.1 on page 155 of the Red Book. I wonder whether he could share with the Committee some more detail as to how the calculations were done to increase the oil fraud strategy revenues to which he refers. This year, the figure is £100 million. It goes up to £290 million, and then a colossal £550 million. Could he explain how the build-up is accounted for?
Mr. Boateng: I shall happily do that, but first I shall address the points made by the hon. Member for Christchurch. I am grateful to the right hon. Member for Fylde for raising that issue again. He did raise it on the Floor of the House and I will deal with it in detail in a moment.
The Government are determined to introduce to distributors of rebated fuels a system of approval that I do not believe is disproportionately burdensome on the industry. The system will require distributors to tell us about the supplies that they make and to take reasonable steps to check that their supplies of rebated fuels are made only to customers who intend to put them to an approved use. Only those trading in these fuels will need to be approved, and end users of the oils will not be affected. The scheme will, therefore, radically improve our control over the distribution of rebated fuels and will provide a regular flow of information about their distribution and use, which will help Customs to improve its intelligence, its ability
Column Number: 064to identify potential misuse and its ability to target the use of anti-fraud resources effectively.
We consulted the industry closely on the introduction of the scheme. The hon. Member for Christchurch said ''You can target it, but you don't accept everything that it says.'' No, we do not accept everything that it says. We consulted it, and we met it some of the way. Some of what it had to say had force and we accepted the arguments; other arguments we could not accept. I have placed in the House copies of the regulatory impact assessment and a summary of the responses received to the consultation. I do not believe that, if the hon. Gentleman reflects on those, he will find our response wanting.
Is the estimated revenue yield from the strategy realistic? The answer is yes but I would say that, wouldn't I? The reason why I say that the estimate is based on sound analysis and cautious assumptions is that, in 2000, mainland diesel fraud accounted for 4 per cent. of the market and cost at least £450 million. We estimated that, with no action on our part, the fraud would double by 2005–06. That was the basis of the revenue projections in the pre-Budget report. The strategy announced in the Budget will radically enhance our capacity to control the oils distribution network, making it far harder for fraudsters to get hold of rebated fuels and misuse them. We estimate that this strategy will reduce the market share of illicit fuel to 2 per cent. by 2005–06. It is the impact of this estimate against the previous revenue base line that has been scored in the Budget projections. Hence the saving of £550 million by 2005.
Mr. Flight: Given the extent of red diesel fraud, is it mainly of a local nature or is there evidence of large-scale, organised crime behind it?
Mr. Boateng: There is large-scale, organised crime behind it in Northern Ireland. The links with terrorism are real, and we should not ignore them for one moment. There are also some indications that it is spreading to the mainland, so we must take the matter seriously.
There is a clear and pressing need to improve customs controls over the distribution of the network and to persuade distributors to exercise more control over who they supply the fuels to. As I say, we have consulted industry on the matter and we shall issue a discussion document on the details of the scheme, because it is in nobody's interests that it should not work effectively or should be so burdensome that the various stakeholders do not feel they have ownership of it. Customs will hold further meetings with representatives from the industry as we introduce the draft regulations. That will provide an opportunity to clarify the trade's requirements and the cost involved.
I hope that, with that assurance, right hon. and hon. Members on both sides of the Committee will feel that they can give the clause a fair wind.
Mr. Chope: I am grateful to the Financial Secretary for what he has said, but can he assure us that the proposals to penalise the distributors, which many people find particularly offensive because the distributors have no control over the use to which the fuel is put once it has been sold, and the penalty
Column Number: 065regime will also be the subject of a consultation document? Will the attitude of the Financial Secretary's Department be to deal with the matter with a light touch, rather than to make enemies of responsible small businesses?
Mr. Boateng: The Department's attitude is to deal with the matter effectively. The penalties will be proportionate to the extent of the negligence.
Column Number: 066
Question put and agreed to.
Clause 6 ordered to stand part of the Bill.
Further consideration adjourned.—[Mr. Sutcliffe.]
Adjourned accordingly at fifteen minutes past Six o'clock till Thursday 16 May at half-past Nine o'clock.
The following Members attended the Committee:
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