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
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
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
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
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
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.