Select Committee on Environment, Food and Rural Affairs Minutes of Evidence

Examination of Witness (Questions 1-19)

Wednesday 7 May 2003

Mr Doug Henderson, Chief Executive, Fresh Produce Consortium, examined.

  Q1  Chairman: Mr Henderson, welcome to the Committee. You are representing the Fresh Produce Consortium. In your evidence, you say that the industry employs some 72,000 people on a temporary basis to meet seasonal demand of which about half is supplied by gang masters and you say that there is evidence that some providers of temporary labour and their subcontractors are operating outside the legislative framework, which is a fairly delicate way of putting it. You also say that the abuses, evasions and fraudulent activity are getting more widespread. Could you tell us how widespread is that problem and why you think it is getting worse?

  Mr Henderson: I can quote from a report that we commissioned from the Agricultural Investigation Team. That is a multi-departmental team involving the Benefits Agency, the police, Customs and Excise, local authorities and the Inland Revenue. They say, "I would suggest that up to 50% of the work done by gang labour in this area"—that is the east of England—"and probably other areas of the country is cash in hand with false IDs being supplied to the main contractors. The only real difference today is the volume of foreign labour involved, the interpretation of which brings with it new problems to the authority." There is a lot of work being done by both ourselves and the Agricultural Investigation Team into this problem. The general conclusion from all parties is that there is a very significant underworld where crime and criminals are flourishing. Our assessment is that the situation has been deteriorating over the last few years, when we have had the Agricultural Investigation Team in place.

  Q2  Chairman: Could you tell us what all this looks like from a position of somebody who is in one of these gangs and working under one of the gang masters? How do they get here and what sort of conditions are they operating under? How do they get paid? Where do they live? What does it look like from the Dickensian point of view?

  Mr Henderson: If I can describe the conditions in the east of England and if you could imagine a triangle between Peterborough and the west, Boston in the north east and Ely in the south east, there is a large triangle of what is essentially agricultural land. Part of the problem is that there is no public transport. There is poor provision of social housing and there has also been a very substantial development in the food industry in the area with a demand for unskilled labour. One of the consequences of this is that the unskilled labour has to be brought into the area from outside it. They either come from the surrounding towns, places like Sheffield and Mansfield, or else they are immigrants. The way the system works is that buses and vans are provided early in the morning to pick these people up. They are brought into the place of work which can be a very significant mileage from where they live. They are very dependent upon the organisers of the transport who are called gang masters. It is because of this dependence that abuses can take place. These are abuses not only of fraud such as the non-payment of value added tax, non-payment of tax and national insurance but also the people themselves are very vulnerable too. There are plenty of examples of under age workers and abuses against people.

  Q3  Chairman: But the people employing them must be aware of all this. They must see the workers.

  Mr Henderson: Yes. Some of the people who organise this temporary labour are legitimate people, who are running proper businesses but unfortunately it has been infused by a criminal element. We now have criminals who are involved in the organisation of labour. It is this criminal element that gives us the greatest cause for concern.

  Q4  Chairman: How do they make their money? Do they contract for a lump sum to the person they are working for and pass some of it through as wages? How does it work?

  Mr Henderson: There are a number of ways that they make money. They first of all contract on a daily basis with either farmers who require field workers or pack-houses who require packing labour. They will provide them with the workers on a daily basis and they submit an invoice for that work. The invoice includes VAT because it is a service. It also includes the cost of labour. They then can avoid paying the VAT and they can also avoid paying the tax that is due as well as the national insurance contributions. Quite apart from what appears on the surface to be their normal business margin, there is a huge opportunity for very substantial fraud and it is this opportunity for fraud that has encouraged the criminalisation of the activity.

  Q5  Diana Organ: You have just outlined for us a very disturbing picture of criminality, fraud, very vulnerable people being exploited. You represent the Fresh Produce Consortium, a trade association which includes wholesalers, retailers, supermarkets, importers and packers. We have two ways of dealing with this. Either we have government regulation and codes of practice and all sorts of registration; or why cannot your association go to the farmers and the producers that are using this exploited labour and say, "We are not buying from you. We are just not going to take the stuff from you this harvest unless you have regular labour that is paid a minimum wage, that is paying the NI, that is all above board"? Why can you not just do that and say, "We are not purchasing because it is a corrupt system and you are exploiting very vulnerable people"?

  Mr Henderson: First of all, may I say what we have done and then explain why it is not working. We have worked very closely with the government, particularly with DEFRA, but also with other government departments. We have developed a code of practice for temporary labour in pack- houses. This is an excellent document because it has had the benefit of being scrutinised by all the various government agencies. We introduced that and all the pack-houses who supply certainly the major retailers are using this code of practice. The problem is that, where we are dealing with criminals, they can find ways to get around the scrutiny that is put upon them. For example, a gang master can contract with a packer and be quite a legitimate business and be paying VAT, or ostensibly look as if he is paying VAT; but all the labour is in fact subcontracted. What is a legitimate business in the front becomes an illegitimate subcontractor where the fraud takes place. It is very difficult for businesses in the normal course of their activities to identify whether this fraudulent activity is taking place or not. If I may move on from the fraudulent activity and look at the position with regard to immigrants, particularly illegal immigrants, there we are faced with an extremely efficient and competent activity involved in the forging of documents, such as passports. Indeed, you do not even have to forge a UK passport to get a real one, but you can certainly forge the required documentation to get in and work in the country. The staff in the pack-houses are simply not equipped to be able to distinguish between what are genuine documents and what are forged documents. It is a highly specialised job and, with the volumes of people involved, unfortunately illegal immigrants continue to be employed. We are in a position where criminals have the better of not only ourselves but also the enforcement agencies such as the Agricultural Investigation Team. If I could quote once again from them, "Gang masters need control and only with the full backing of the government, the Fresh Produce Consortium, supermarkets and pack-houses can this be achieved. Guidance and advice have had little effect. Perhaps it is now time for legislation, some of which is already in place, to control illegal gang master activities." We have gone down the voluntary route for the last three or four years and we have used our very best endeavours to make the voluntary system work. Our conclusion is that, despite the work that we have done, we do need the backing of legislation to bring this problem under control.

  Q6  Diana Organ: The document that you refer to sounds very good and you say you have gone through the voluntary route but it is in your best interests, is it not, to almost turn a blind eye and have just a voluntary route and appear to be on the side of the angels but let it go on because of course you get a very cheap deal out of all of this.

  Mr Henderson: That is entirely wrong, has absolutely no foundation in fact and is not borne out by the evidence of what we have done in conjunction with the government to try and cope with this problem. We are very, very keen to encourage the government to pass legislation that will enable us to control this problem. As for getting a cheap deal, we do not get a cheap deal. The industry does not get a cheap deal out of this. Criminal gang masters make a lot of money but that is in their pockets; it is not in a reduced price to the pack-house that uses them.

  Q7  Alan Simpson: You mentioned that the firms involved were apparently registered for VAT but not necessarily remitting the necessary amounts to the Customs and Excise. You also suggested that NI is not being paid and maybe even tax is being deducted but not being remitted as well.

  Mr Henderson: That is correct.

  Q8  David Taylor: What links do your members have with Customs and Excise and the Inland Revenue? How frequent in your view are the normal checks that are made on firms of this transitory nature?

  Mr Henderson: Our contacts have been with the Agricultural Investigation Team which we have been very supportive of. They cooperate with the team which is based in Spalding. They have representatives from Customs and Excise as well as the Inland Revenue involved with the team, but our experience is that the resource is not great enough. The priority is not sufficiently high either in these individual departments. Part of the problem is, when you bring it all together, you get a picture of this very large, black economy. When you break it out and look at it from the viewpoint of the Inland Revenue, it is a very small priority or a low priority for the Inland Revenue. It is a low priority for Customs, the police and for the Benefits Agency. It is only when you aggregate it all together that you see what a dreadful situation actually exists.

  Q9  Mrs Shephard: Why is there such a shortfall in the supplies of labour who used to be employed by gang masters? In other words, perhaps people from the locality?

  Mr Henderson: In the east of England, there has been a very substantial growth in business activity, in adding value to horticultural products in that area. Not only that. It has become a major redistribution area for imported products as well. We have seen a large growth in employment in the area. Unfortunately, a lot of it tends to be in unskilled labour and it is this shortage of social housing and transport in these rural areas that creates the labour shortage in the area.

  Q10  Mrs Shephard: I must say I disagree with you about the shortage of social housing. I just do not think there are the local people to do it. They are doing other things.

  Mr Henderson: I would disagree with you because there is a demand for labour in the area. There is work. These people are coming from significant distances to get the work there and I am sure they could be encouraged to move into the area if there was housing for them.

  Q11  Mrs Shephard: Do you have any idea at all how many of the proportion of the numbers are represented by foreign workers? I am not talking about illegal immigrants at this moment but foreign workers. Do you have anecdotal evidence?

  Mr Henderson: None.

  Q12  Mrs Shephard: Does anyone?

  Mr Henderson: Not that I am aware of.

  Q13  Mrs Shephard: This is one of the big problems. Nobody has any idea, because essentially it is under cover, of the numbers of foreign workers, some of whom will be there legitimately because they are from the EU, some of whom are not there legitimately. In my own county, which is Norfolk, not 100 miles from the area you are describing, a number of those described as Portuguese are in fact Brazilian and may or may not be there legally. Who can tell? Are you and your members aware of the extent of the exploitation of these people? It is not just that some of them are being employed illegally but also what is happening to them in terms of housing, in terms of wages being shaved down to account for travelling costs and so on? Does it not make you feel uneasy?

  Mr Henderson: Of course it does. We prepared a briefing paper which came in with my written evidence and we had a meeting with Lord Whitty and Beverley Hughes some two or three weeks ago to discuss the situation and to encourage them to support us in going down the road of passing primary legislation to deal with this matter.

  Q14  Mrs Shephard: You have already said that you can give them no idea because you have no idea of the numbers involved.

  Mr Henderson: We can give you an idea of the numbers involved. As to the split between the UK and overseas people, that is more difficult.

  Q15  Mr Jack: Has the Fresh Produce Consortium, given its considerable interest and knowledge in this area, ever received any intimidatory threats from gang masters or employed people about your activities in this area?

  Mr Henderson: No, we have not. I certainly have not personally, but I am not in the front line of this. There are examples of intimidation against the people who employ gang masters. There is also evidence of intimidation of the workers who are within these gangs as well.

  Q16  Mr Jack: Have any employers of gang labour faced with the need for a crop to be harvested very rapidly and a big demand for labour, but who might have protested about the terms of the deal themselves, had any kind of intimidation from gang masters?

  Mr Henderson: Yes, there is evidence of this, particularly if gang masters are working with a particular company and are then told they are not going to be working for them and somebody else is going to be used. Intimidatory threats are made. As to how widespread this is, I do not know, but it certainly exists.

  Q17  Mr Jack: You said a moment ago that this was a low priority for a series of public agencies who have an enforcement role. How have you established that? Has it been because FPC members have said to the Benefits Agency, the Inland Revenue, the Commissioners of Customs and Excise, "Please investigate" and they have said, "No, we do not want to know"? How have you come to that conclusion?

  Mr Henderson: This is a multi-agency group, the Agricultural Investigation Team, and they have regular meetings. I was invited to attend one of their meetings in Cambridge and address them to provide them with the perspective from our side of the fence. In discussing with them the problems they had in enforcing existing legislation, part of the problem quite clearly was that they were not being given adequate resource to enforce existing legislation and that the reason they were not being given the resource was the low priority it had in each of these departments.

  Q18  Mr Jack: Did they say to you that if they had had the resources they could deal with the problems that you have identified within the existing legal framework?

  Mr Henderson: They would certainly be more effective but, as this report from the AIT said, their view was that we had got to the point where we required primary legislation. The reason this report was produced was that, at the end of the meeting, they were concerned that I would take it up with the respective ministers. I asked them to produce this report to support our case and that is exactly what we have done.

  Q19  Alan Simpson: You have moved the Committee fairly quickly away from the viability of voluntary agreements to the position that makes the case for a statutory, legal framework. That framework is presumably enough to define both criminality and liability. I would like to know in what way your own members feel they should be liable in any such framework.

  Mr Henderson: Our members or the people who contract with third party providers of temporary labour are not legally liable. They have a social and a moral responsibility but not a legal liability. In our industry, there is an increasing amount of importance given to socially responsible sourcing of our products. That is now a significant priority within our industry. That is why we have taken the stand we have on this issue.

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