Memorandum submitted by Defra
THE ROLE
OF GANGMASTERS
1. Gangmasters have played a key role in
the supply of labour for over a century. They bring together and
supply a flexible workforce to meet the seasonal and market demands
of employers. Traditionally their activities have been most commonly
associated with the agricultural and horticultural industries
but in recent years they have become increasingly active in other
sectors where demand exists for seasonal and casual workers. These
include the construction, food processing, packing and manufacturing
industries.
2. The nature of gangmaster operations can
vary enormously. At one end of the spectrum exist small businesses
run as sole operators or partnerships and supplying a handful
of workers to local employers. Often these gangmasters operate
from a home address and the workers they supply may be personal
acquaintances. At the other end of the spectrum exist a few large
organisations who supply hundreds of workers on a daily basis
to a range of agricultural and non-agricultural employers. The
annual turnover of the largest organisations can be counted in
millions of pounds. Agricultural gangmasters differ from high-street
employment agencies in that they are not normally based at shop
premises but tend to operate by personal connections and word
of mouth.
DEMAND FOR
SEASONAL AND
CASUAL WORKERS
IN THE
AGRICULTURE AND
HORTICULTURE INDUSTRIES
3. The UK agriculture industry is a substantial
employer of seasonal and casual workers. Parts of the industry
are heavily dependent upon seasonal or casual workers for activities
such as sowing, planting, harvesting, sorting and packing. Seasonal
and casual workers fall into several categories. The principal
sources of workers are: workers recruited directly by the farmer;
workers supplied by gangmasters; UK and EU students; students
from outside the EU studying in the UK and with permission to
take part-time or vacation work; and non-EU nationals legally
employed through the Seasonal Agricultural Workers Scheme (SAWS)
or working holidaymaker arrangements.
4. The June 2002 census of agriculture and
horticulture in the UK shows that some 64,000 seasonal and casual
workers were employed in these industries when the census was
taken. This figure will rise significantly at peak periods such
as the harvest months of late summer. The census figure is therefore
generally thought to understate the total number of seasonal and
casual workers involved in this category of work. Since the 1950s
seasonal and casual workers have accounted for an increasing share
of the total number of workers employed in agriculture and horticulture
(excluding salaried managers together with farmers, partners,
directors and their spouses working in the holding). At the time
of the 2002—census casual and seasonal workers accounted
for approaching 35 per cent of the total.
ARTWORK TO FOLLOW
NOTES:
1. Before 1955 part time workers in Scotland,
England and Wales were included with casual workers on survey
returns.
2. In Northern Ireland, seasonal workers
are not separately identifiable until 1975. Before this date seasonal
workers have been included with part time regular workers.
5. Demand for seasonal and casual workers
is thought to be greatest in the horticultural sector. Several
parts of this sector need substantial numbers of seasonal and
casual workers at various times of the year to plant and pick
their produce. The relatively high demand for seasonal and casual
workers by horticulture is in part a consequence of the labour
intensive nature of the sector where many tasks are difficult
to mechanise. As a result these tasks must be undertaken manually.
In addition the short planting and picking seasons for many horticultural
crops means growers only require additional workers to undertake
these tasks for relatively short periods of the year. Variations
in the weather may accentuate the need for a flexible workforce
which can be supplied at short notice. Technological changes in
horticultural production and the demand by the supermarkets for
continuity of supply also contributes to an increased demand by
growers for seasonal and casual labour. This is most evident in
activities such as glasshouse production and the picking of soft
fruit.
6. Labour supplied by gangmasters to horticultural
businesses is mainly used for work in the field. This covers a
wide range of activities such as the planting, weeding and harvesting
of field vegetables and the covering and uncovering of crops with
polythene covers or fleeces. Workers are needed for much of the
year starting with picking of flowers in February and extending
well into October. There is also some demand for picking brassicas
in the winter months. The use of gang labour is also commonplace
in vegetable pack houses throughout the year as they provide pack
house owners with the flexibility to meet the demands of the supermarkets
for packed produce, both domestic and imported.
7. While demand in the arable and livestock
sectors is probably not as significant as in the horticultural
sector there are nevertheless some areas of production which are
significant employers of seasonal and casual workers. These include
the picking and grading of potatoes and the on-farm slaughtering,
plucking and evisceration of poultry in the weeks before Christmas.
AVAILABILITY OF
SEASONAL AND
CASUAL LABOUR
8. The level of UK unemployment has declined
significantly since the end of the last economic recession in
the early 1990s. In February 1993 the UK claimant count unemployment
rate was 9.9 per cent whereas the corresponding rate in February
2003 was 3.1 per cent. In some areas of the UK where demand for
seasonal and casual labour in agriculture and horticulture is
greatest, the levels of unemployment are at or significantly below
the national rate.
9. It is thought that declining levels of
unemployment are leading to a diminishing pool of UK-based seasonal
and casual labour upon which the industry can draw. As a result
a growing number of agricultural and horticultural employers are
experiencing increasing difficulty in recruiting sufficient numbers
of seasonal and casual workers, particularly at periods of peak
activity in the industry.
10. The difficulties stemming from high
levels of employment are accentuated by a decline in the supply
of traditional sources of seasonal and casual labour such as students
from the UK or other Member States. What is seen as hard work
for relatively low pay holds little appeal for many students when
more attractive and better paid employment opportunities exist.
Working holidaymakers are also a potential source of labour but
evidence suggests that most are inclined to live and take up casual
work in urban areas rather than in the countryside. As a result
of these trends in recent years the Seasonal Agricultural Workers
Scheme (SAWS) (see paragraph 71 below) has become an increasingly
important source of seasonal and casual workers for the agricultural
and horticultural industries.
PROBLEMS ASSOCIATED
WITH GANG
LABOUR
11. It is important to emphasise that there
is nothing inherently illegal in the activity undertaken by gangmasters.
A significant proportion of the demand for seasonal and casual
labour by the agricultural and horticultural industries has been
met in this way and there continue to exist perfectly respectable
gangmasters carrying on legitimate businesses within the law.
However from the evidence collected by the enforcement agencies
of Government Departments and the enforcement teams working under
"Operation Gangmaster" (see paragraph 45 below), it
is clear that some gangmasters are meeting shortages of seasonal
and casual labour in the agricultural and horticultural sectors
by supplying non-EU citizens working in the UK illegally and UK
nationals working illegally while in receipt of benefit.
12. Evidence also suggests that some gangmasters
are involved in other forms of illegal activity. These include
unlawful deductions from wages, non compliance with the Agricultural
Wages Order (which sets the Agricultural Minimum Wage) and the
National Minimum Wage, failing to collect or declare income tax
and National Insurance contributions, the use of bogus self-employment
status, failure to register or pay VAT and the violation of health
and safety regulations.
13. The illegal activities of some gangmasters
have been of concern to Government for some years. Encouraging
employers to adopt good employment practice, including fair pay,
good terms and conditions of employment and training, is a key
element of Government policy for the promotion of competition
across the economy. Illegal activity undermines this approach.
An inter-Departmental Working Party estimated in 1997 that some
20% of gangmasters were committing a wide range of offences. It
was this concern which led to the setting up of "Operation
Gangmaster" by the then MAFF in 1998. The main thrust of
"Operation Gangmaster"—which continues today—was
the co-ordination of enforcement effort by Government Departments,
combined with provision of information to employers and employees
about their obligations and rights under the law. "Operation
Gangmaster" was initially piloted in Lincolnshire and East
Anglia and then extended to other areas of the country. As a result
of this concerted enforcement effort some gangmasters have been
successfully prosecuted, while others are under investigation.
14. Recent anecdotal evidence suggests that,
despite "Operation Gangmaster", the problems are getting
worse. A working group of the key interested organisations, brought
together and chaired by the Ethical Trading Initiative, met in
September 2002 to consider this issue. As a result a group of
organisations representing farmers and growers, packhouses, retailers
and trade unions met Home Office and Defra Ministers to press
the case for Government to introduce legislation to provide for
the compulsory registration of gangmasters.
15. Although the evidence for the increasing
scale of the problem is anecdotal (this is an area where almost
by definition reliable statistics are not available), it is not
disputed, and it is consistent with concern being expressed to
Government on the issue of illegal working on a broader front.
Available evidence indicates that in addition to agriculture and
horticulture illegal migrant workers are employed in other types
of casual low-skilled jobs such as in the construction, cleaning,
clothing and hospitality industries. Illegal working is not, however,
exclusive to these areas and can also occur in more highly skilled
sectors of the economy such as Information Technology and banking.
16. The combination of reluctance on the
part of much of the resident labour force to undertake seasonal
work, and the increase over recent years in the number of people
attempting to reach the UK in order to escape instability, poverty
or oppression, has created opportunities for those prepared to
exploit people who are willing to work for low pay and not in
a position to complain to the authorities. People trafficking
is highly lucrative and there is an element of serious organised
crime involved in this issue, alongside perpetrators of offences
like tax and benefit fraud which have always been present to some
extent.
17. The implications of an increase in illegal
activity of the sort outlined above are:
— the human misery associated with
the exploitation involved at the worst end of the spectrum;
— significant revenue loss to Government;
— damage to legitimate labour providers
through undercutting of their businesses by those operating illegally;
— damage to the reputation of the whole
food chain.
CURRENT REGULATORY
FRAMEWORK
18. There is no single piece of legislation
relating to the operation of gangmasters. However the full range
of legislative controls that apply to all employers also applies
to gangmasters. The section below summarises the principal legislative
controls which apply to gangmaster activity;
Illegal Working
19. Section 8 of the Asylum and Immigration
Act 1996, makes it an offence for employers to knowingly or negligently
employ people who have no permission to work. The maximum penalty
that can be imposed on an employer if the offence is proved is
£5,000 for each illegal employee. Illegal working in this
context is working by people who are in the UK illegally, or by
those in the UK legally, who have no right to work here.
National Minimum Wage
20. On 1 April 1999 the Government introduced
the National Minimum Wage which applies to all workers. The detailed
provisions are set out in the National Minimum Wage Act 1998 and
the Regulations made under it. The National Minimum Wage is enforced
by Inland Revenue on behalf of the DTI. Casual workers, temporary
workers and agency workers are all covered by the national minimum
wage. The Revenue provides information, inspection and enforcement
services. It operates a national Helpline which deals with enquiries
about the minimum wage from workers, employers and third parties.
Revenue Compliance Officers investigate all complaints that the
minimum wage is not being paid as well as inspecting employers
who are thought to be at risk of not complying with the legislation.
A Compliance Officer can act on behalf of a worker where they
identify that a business is not paying the minimum wage by taking
the case to an employment tribunal or civil court. A worker has
the option to enforce their right to the minimum wage by taking
their case individually.
Agricultural Minimum Wage
21. There are in addition minimum rates
of pay and other terms and conditions of employment which apply
only to workers employed in agriculture. These are prescribed
in the Agricultural Wages Order which is made by the Agricultural
Wages Board under powers given to it under the Agricultural Wages
Act 1948. The Order sets different minimum rates of pay for different
categories of workers and it also sets a minimum rate for overtime
as well as for basic hours. The agricultural minimum wage is generally
higher than the National Minimum Wage and may not be lower. The
Agricultural Wages Order applies to work in a packhouse if the
worker is preparing and packing produce grown on the farm or enterprise
on which the packhouse is situated. It does not apply to similar
work where the produce has been bought in from other farms.
22. Since 1 April 1999 the enforcement provisions
in the National Minimum Wage legislation have been applied for
the enforcement of the agricultural minimum wage. However, it
is Defra and not the Inland Revenue which is responsible for carrying
out the enforcement work.
Other Employment Law
Deductions from pay
23. The right to make deductions from workers'
pay or receiving payments from them is restricted by the provisions
of the Employment Rights Act 1996. An employer cannot make a deduction
from an employee's pay unless the deduction is required by law
(such as tax, National Insurance, court orders); the deduction
is authorised by a term in the worker's contract; the worker has
agreed in writing, in advance, to the deduction being made; the
deduction is a repayment of overpaid wages or expenses; or the
deduction is required because the worker took part in industrial
action, such as a strike.
Employment Agencies
24. In a number of circumstances gangmasters
or other people who supply labour will fall within the scope of
the Employment Agencies Act 1973. This Act lays down minimum standards
of conduct to protect the labour user (such as a farmer) and the
gangworkers.
25. In most cases there is a requirement
under the Employment Agencies Act 1973, for both users and workers
to be notified by the agency of its terms in advance of the work
starting and for this to be confirmed in writing. Workers must
be given a written statement before they start work. It must state
the minimum rate of pay, any expenses payable, the kind of work
that they may be required to do and their employment status. Hirers
must be told whether or not the workers are self-employed and
what to do if a worker proves unsatisfactory.
Termination of Employment
26. If an employer employs a person continuously
for one month or more, the employer is required by the Employment
Rights Act 1996 to give that person at least one week's notice
of termination of employment. Depending on the terms of the contract,
notice can be worked or the employee may receive pay in lieu of
notice.
Written statement of employment particulars
27. A worker employed by an employer for
a month or more is entitled to receive a written statement giving
details of their employment. The written statement must cover
a number of matters including hours of work and rates of pay.
The statement must be provided not more than two months after
the person started work.
Working time and holidays
28. The working time regulations introduce
a number of basic rights and protections for workers. They include
a limit of an average 48 hours a week which a worker can be required
to work (workers can choose to work longer if they want to but
must sign a written agreement to this effect); a right to 11 hours
rest a day; a right to a day off each week; a right to an in work
rest break of 20 minutes if they work six hours or more and a
right to four weeks paid leave per year. Workers employed in agriculture
have a more generous holiday and rest break entitlement under
the Agricultural Wages Order.
Income Tax and National Insurance
29. Gangmasters are covered by the Taxes
Acts. Like all businesses they are required to notify the Inland
Revenue within a set timescale if they are liable to Income or
Corporation Tax and National Insurance Contributions and to make
a Return of income when called upon to do so. In addition if they
are employers (including agencies) they are required to deduct
Tax and National Insurance Contributions and in some circumstances
to pay Tax Credits and deduct student loan repayments.
30. It is not just the Exchequer that loses
out if these requirements are ignored. Failure to operate National
Insurance Contributions correctly may result in the worker being
denied income-related benefits and state pension.
31. The legislation provides for penalties
for failing to comply with these requirements and in the most
serious cases prosecution is considered.
Benefits
32. DWP normally take proceedings against
benefit fraud under one of two Acts, The Social Security Administration
Act 1992 (as amended by the Social Security Fraud Act 2001) and
the Theft Act 1968. In most cases action by DWP will be directed
at the employee as opposed to the employer. Action against the
latter will be taken in cases where the employer is fraudulently
claiming benefit on his own behalf or is in some way facilitating
the fraudulent claiming of benefit by a third party.
VAT
33. A business is required to register for
VAT if at the end of any month its taxable turnover in the last
12 months or less is above the VAT registration threshold or if
taxable turnover is expected to exceed the threshold in the next
30 days. The registration threshold was increased from £55,000
to £56,000 on 10 April 2003.
34. VAT fraud ensues when a gangmaster charges
a customer VAT on top of the cost of the labour he has supplied
but does not subsequently declare to Customs & Excise the
VAT he collected. Many gangmasters treat the VAT collected as
a source of income and will disappear when the fraud has been
committed. Action can be taken by Customs & Excise to recover
the outstanding VAT if the debtor can be identified and located.
In certain circumstances this may involve criminal prosecution.
Health & Safety
35. Both gangmasters and farmers are responsible
for the health and safety of the workers supplied by the gangmaster.
Their duties are laid down in the Health & Safety at Work
etc Act 1974 and subsidiary regulations.
IMPACT OF
ILLEGAL ACTIVITIES
36. Anecdotal evidence suggests that gangmasters
who act illegally impact on the food chain in the following ways.
Legitimate Gangmasters
37. The impact on legal gangmasters of activity
by their illegal counterparts is principally one of unfair competition.
Gangmasters who pay their workers at rates below the national
or agricultural minimum, or who collect VAT and income tax from
their clients and workers but do not declare it to the appropriate
authorities, are able to supply workers at rates which legitimate
gangmasters cannot match. As a result there is pressure on legitimate
gangmasters towards adopting illegal practices themselves in order
to compete and little evidence of most labour users being prepared
to pay a premium for "legitimate" gang labour.
38. Illegal activity also damages the reputation
of legitimate gangmasters by tarring all gangmasters with the
same brush. In the eyes of many the term "gangmaster"
is synonymous with sharp practice or criminality. The term has
Dickensian connotations, and in order to avoid these and provide
a more positive, modern, image some legitimate gangmasters prefer
to describe themselves as labour providers rather than gangmasters.
Farmers and Other Hirers
39. In the agricultural and horticultural
industries the principal hirers of gangworkers are farmers, growers
and packhouse operators. In most cases the labour supplied by
the gangmaster will work under the direction of the hirer but
be employed by the gangmaster. If this is the case it is the legal
responsibility of the gangmaster to establish whether the gang
labour supplied is not working illegally while in receipt of benefit
or is entitled to work in the UK.
40. For the reasons explained in the earlier
part of this Memorandum some farmers, growers and packhouse operators
have found it increasingly difficult in recent years to recruit
sufficient numbers of seasonal and casual labour for their needs.
As a result some have relied, both knowingly and unknowingly,
on illegal workers supplied by gangmasters to help meet the shortfall.
In this context it could be argued that illegal activity by gangmasters
has had a beneficial economic impact as it has helped farmers,
growers and packhouse operators to fulfil supply contracts which
might not have otherwise been met. This ignores the impact on
those being exploited and on the taxpayer. Illegal activity by
gangmasters can have a disruptive impact on hirers if it leads
to the interruption of planting, picking or packing by raids from
Government enforcement agencies.
Competitiveness and Viability of Certain Agricultural
Practices
41. It could be argued that success in
combating the illegal activities of certain gangmasters would
have a negative impact on the competitiveness of farming and horticulture
as more businesses would have to pay rates for gang labour consistent
with the agricultural and national minimum wages and payment of
tax. But dependence on illegal working and exploitation are not
a sustainable long term basis for building a competitive business.
The Government's vision for a competitive farming and food industry
is based on sustainable practices. A sustainable, competitive
industry is more likely to be built on improved productivity from
a more skilled and motivated workforce. A major determinant of
competitiveness for many UK farmers and growers is their costs
relative to those of their competitors in other EU member states.
But the problems associated with illegal working described above
and Government action to combat illegal working are not unique
to the UK. These are problems we share to greater or lesser extent
with other member states who have also experienced increased migrant
flows. The Government recognises that providing legal entry routes
for those who want to work here, to the benefit of the UK economy,
has to go hand in hand with combating illegal working (see paragraphs
64-75 below).
Supermarkets and Other Retailers
42. In recent years some of the major food
retailers have implemented socially responsible trading policies
which aim to promote social and ethical principles within their
commercial activities, including those of suppliers. These principles
cover a wide range of socio-economic issues including equal opportunities,
pay, health & safety, the protection of children and young
people and fair trading.
43. Gangmasters who act illegally when supplying
workers to a supplier of a retailer who has implemented socially
responsible trading policies threaten to undermine those policies.
Reports of illegal activity can dent the public reputation of
retailers who are trying to ensure that these policies are implemented
throughout their supply chain. Abuses could lead to the termination
of the supply agreement with the supplier who engaged the illegal
gangmaster.
44. Under the auspices of the Ethical Trading
Initiative several of the major food retailers have joined with
other food industry stakeholders to consider what can be done
to tackle the exploitation of seasonal and casual workers in the
UK (see paragraph 76 onwards).
GOVERNMENT ACTION
TO TACKLE
ILLEGAL ACTIVITY
BY GANGMASTERS
"Operation Gangmaster"
45. "Operation Gangmaster" was
launched in June 1998 by Lord Donoughue at the then MAFF as a
pilot initiative covering Lincolnshire and parts of East Anglia.
It involves the enforcement agencies of various Government Departments
working together combat illegal activity by agricultural gangmasters.
The Government Departments involved include the Home Office, Department
for Work and Pensions (DWP), Customs & Excise and Inland Revenue
as well as Defra.
46. "Operation Gangmaster" identified
a range of illegal activities including non-payment of income
tax, PAYE, National Insurance and VAT and the use of illegal workers,
including those on benefits and migrants without the right to
work in the UK.
47. Following the publication of Lord Grabiner's
report on the informal economy in March 2000 and subsequent implementation
of initiatives to tackle the hidden economy, from 2001 "Operation
Gangmaster" began to report to the Grabiner Working Group
along with other initiatives such as Joint Shadow Economy Teams,
Joint Fashion Industry Teams (investigating illegal activity in
the fashion industry) and Multi Agency Teams. The Working Group
reports to the Grabiner Steering Group which has been set up to
provide a strategic vision and focus for the implementation of
Lord Grabiner's recommendations and to monitor the delivery of
those recommendations.
48. It has also been agreed that the scope
of "Operation Gangmaster" should be widened to include
illegal activity by gangmasters in non-agricultural sectors of
the economy as it is found that gangmasters are increasingly active
in businesses outside agriculture and horticulture.
49. The lead and secretariat for Gangmaster
fora is provided by DWP. Within DWP this role is taken by the
Joint Working Unit (JWU) of the Counter Fraud Investigation Division
(CFID). The JWU brings together on a regional basis representatives
of the enforcement agencies of Government Departments for the
purpose of co-ordinating enforcement activity against gangmasters
who act illegally. Gangmaster fora have been set up in Scotland,
North East of England, Central England, Central Southern England
and South West England. Others are planned for Wales, Northern
Ireland and North West England. Departmental attendance at each
forum is dictated by the nature of the illegal activity targeted
but to date participating departments have included DWP, Inland
Revenue, Immigration Service, National Asylum Support Service,
Customs & Excise, Health & Safety Executive, Defra, Scottish
Executive and Social Services. Representatives from Uniformed
Branch/Special Branch and National Criminal Intelligence Service
have also attended.
50. Two major collaborative enforcement
operations have been launched since administrative control of
"Operation Gangmaster" was transferred to the JWU. Other
operations are being planned. In December of last year "Operation
Shark" targeted illegal activity in the Scottish fish processing
industry, including that related to the supply of labour by gangmasters
to fish processing factories. A report setting out the planning,
execution and outcome of "Operation Shark" is attached
in Annex A. The second operation is "Operation Twin Stem"
which is targeting illegal activity in the flower industry in
South West England. This initiative was being implemented at the
time of the preparation of this Memorandum. Additional information
about this operation is also in Annex A.
51. In addition to the implementation of
initiatives under "Operation Gangmaster", individual
departments are undertaking enforcement action against gangmasters
who act illegally as part of their wider duties of tackling non-compliant
behaviour by employers and the people they employ.
52. It is not always possible to quantify
precisely the enforcement activity taken against gangmasters,
as Government Departments use different means to record enforcement
activity and results, and sometimes it is not possible to distinguish
activity directed at gangmasters from that directed at other categories
of employer. Nonetheless results obtained from Customs and Excise
for the last financial year record that five gangmasters from
Lincolnshire were sentenced to prison for periods of between 15
months and three years for VAT arrears.
53. In addition DWP report that they have
adjusted the benefit of 948 claimants caught working illegally
while in receipt of benefit, recovered overpayments made to a
further 170 claimants and have taken criminal or civil sanctions
or issued official cautions against an additional 119 claimants.
The total value of the monetary adjustments and recoveries made
by DWP approaches £380,000.
54. The Inland Revenue is aware of the potentially
serious risk to revenue stemming from illegal activity by gangmasters
and it has been working to combat this for several years. Two
Inland Revenue regions have already formed specialist units to
tackle these risks. During 2002/3 these units settled 46 investigations
resulting in additional liabilities in excess of £4.3m being
identified. The Department is in the middle of a two-year project
to identify the full extent of the current problem so that informed
judgements can be made about how to tackle the risks on a national
basis.
55. The UK Immigration Service and National
Asylum Support Service has been active in tackling illegal working.
Many raids have been undertaken, either singularly or in co-operation
with other enforcement agencies, and numerous illegal workers
and failed asylum seekers have been detected.
56. To complement the launch of "Operation
Gangmaster" the then MAFF arranged a widespread distribution
of leaflets to employers and employees informing them of their
respective obligations and rights under all legislation applicable
to seasonal and casual work in agriculture and horticulture. A
second distribution of the leaflets, updated to reflect changes
in employment law since 1998, took place in 2000 and a further
updated version is in preparation.
57. The launch of "Operation Gangmaster"
was also accompanied by a launch by the National Farmers Union
(with the backing of the Fresh Produce Consortium and the British
Retail Consortium) of an industry code of practice on the employment
of seasonal and casual workers in agriculture and horticulture.
To complement the code the Fresh Produce Consortium launched in
2000 an Industry Guide on the employment of casual and seasonal
labour in packhouses. These gave farmers, growers and packhouse
operators guidance on the documentary checks they should make
to ensure that gangmasters who supply labour to them are doing
so in compliance with the law.
Overall Approach to Illegal Working
58. Tackling illegal working sits alongside
the policies of managed migration, measures to tackle organised
crime, wider labour market policies, and issues of social exclusion,
integration and citizenship. The Government has sought to take
a holistic approach, ensuring that its actions benefit individuals,
business and wider society.
59. There are many reasons why a person
might emigrate to look for work, and other reasons influencing
where that person may choose to go. A lack of opportunity in the
source country coupled with a buoyant labour market and the prospect
of economic gain in the destination country are key factors. The
UK has a strong economy and a lightly regulated regime for business.
These are strengths but they also offer a wealth of opportunities
for those looking for work, including those wanting to work illegally.
60. Managed migration can offer a number
of long term economic and social benefits. But while unscrupulous
employers believe that employing illegal migrants, rather than
domestic workers or legal migrants, offers benefits that far outweigh
the risks, they will continue to flout the law. And while these
illegal work opportunities continue to exist, the phenomenon of
people being smuggled and trafficked to this country and exploited
will continue.
61. There is no simple answer. Most immigrant
nations across the world have put in place measures designed to
prevent or limit illegal working. None has eliminated it. It is
important to learn from the experience of others while remaining
aware that each nation is unique.
Measures to tackle illegal working
62. The Government is implementing a range
of measures from the Secure Borders, Safe Haven White Paper and
Nationality, Immigration and Asylum (NIA) Act 2002 in order to
tackle illegal working. As part of on-going enforcement activity,
we have adopted a three-step approach to tackling illegal working
through:
(a) Strengthened enforcement arrangements
by:
— reducing scope for fraud by limiting
the range of ID acceptable for Section 8 (there are measures in
the NIA Act which will be fully implemented later this year);
— increasing the enforcement capacity
and capability of the Immigration Service and making tackling
illegal working a higher priority;
— using the NIA Act to put beyond
all doubt the powers of immigration officers to enter premises
and examine records in respect of possible Section 8 offences;
— legislating in the NIA Act to
increase the maximum prison sentences for those convicted of people
smuggling from 10 to 14 years and to punish those who benefit
from people smuggling;
— using the Proceeds of Crime legislation
to remove profits made through illegal working;
— improving the security of the
National Insurance Number system.
(b) Facilitated effective joint working across
Government by:
— examining the gateways for sharing
information between Government Departments in relation to illegal
working (eg there are measures in the NIA Act to exchange information
between the Immigration Service and the Inland Revenue);
— promoting joint working and sharing
of intelligence between enforcement agencies to tackle illegal
working such as through "Operation Gangmaster";
(c) Working with Business and Trades Unions
to improve compliance by:
— producing, promoting and publicising
new guidance to support compliance with the revised legislation;
— developing, through close consultation,
codes of practice specific to sectors of the economy where illegal
working is recognised as an issue. It is envisaged that this will
involve agriculture (see paragraph 76 onwards), construction,
catering and hospitality sectors, although this is not an exhaustive
list and other sectors are likely to emerge.
63. The Illegal Working Steering Group has
also recently been set up. It is made up of representatives from
business, trade unions, trade associations and other groups such
as the CRE, HSE and Small Business Service. The NFU and major
retailers are represented on this group.
Managed Migration
64. The Government's policy is to provide
a modern immigration system that manages migration flows to maximise
the benefits that migration brings to the economic prosperity
and social well-being of the UK as well as to the migrants themselves.
It is therefore important that there are avenues of entry that
provide a legal route for those with the skills required in the
UK.
65. The Government recognises that by opening
up ways for people to come and work here legally we are complementing
our efforts to tackle illegal working and abuse of the asylum
system.
66. Our asylum system is designed to protect
people fleeing from persecution and torture but too often it is
abused by those who simply want to live and work in the UK. Opening
up ways for people to come and work here legally—in ways
which help our economy—may help to reduce unfounded asylum
claims.
67. Migrants' home countries also benefit.
Migrants may return with improved finances, experience and language
and professional skills that will benefit source country economies.
There are also short-term benefits derived from the money that
migrants send home in remittances.
68. The government has introduced a number
of managed migration initiatives at both the high and low skilled
levels which aid its efforts in this area. These include;
(a) Highly Skilled Migrant Programme
69. This was launched in January 2002 as
an individual migration route for the most talented migrants.
So far one thousand successful applications have entered the UK
under the scheme.
70. Applicants are currently assessed on
four main criteria, educational background, work experience, past
earnings and achievement in chosen field. The programme was extended
indefinitely in January of this year and the entry criteria revised
to attract more highly skilled migrants from lower income countries.
(b) Seasonal Agricultural Workers Scheme
71. Under the Seasonal Agricultural Workers'
Scheme (SAWS) a certain number of students from non-EU countries
are allowed to work in the UK agricultural industry to help meet
its demand for labour at peak times, for example for picking and
packing fruit. The quota on the number of SAWS students up until
1996 was 5,500 and from 1997 until 2000 inclusive it stood at
10,000. In 2001 it was increased to 15,200. In 2002 it rose to
18,700, the first phase of a two-part increase that would have
seen the quota for this year rise again to 20,200.
72. Industry stakeholders were consulted
in 2002 to see how the scheme could better meet the needs of agricultural
and horticultural employers for seasonal workers. The outcomes
of the review were announced in November 2002 and included extending
the period during which the scheme operates to allow farmers access
to SAWS participants throughout the year, and permitting participants
to undertake any agricultural work provided it is demonstrated
to be both agricultural and seasonal in nature. The size of the
quota for 2003 has been increased to 25,000 places to reflect
this expansion of the scheme.
73. The review also recommended retaining
the use of Operators to administer the scheme on behalf of the
Home Office. A tendering exercise is currently taking place to
appoint Operators to administer the SAWS from January 2004.
74. In line with the review recommendations,
annual quotas will remain a feature of the scheme, reviewed annually
and based on bids submitted by the Operators. The overall annual
quota level will be decided after key stakeholders of the scheme
have made their assessment in relation to trends in agriculture
and the availability of seasonal workers in general.
(c) New Low Skilled Schemes for the
Hospitality and Food Processing Schemes
75. The Government announced on 7 October
that it is creating a new migration scheme to bring in temporary
low skilled workers for the hospitality and food processing sectors.
The details of this scheme, which will start shortly, are currently
being finalised following discussions with the industries. The
Government is considering expanding the scope of this migration
scheme in order to support employers in other sectors where there
are recruitment difficulties.
Defra working with the Ethical Trading Initiative
76. The Ethical Trading Initiative (ETI)
is an umbrella body which brings together UK retailers, trade
unions and NGOs with an interest in the labour conditions of workers
involved in the production of UK imports.
77. In spring 2002 the ETI organised two
seminars on the labour conditions of seasonal and foreign workers
involved in the UK food industry. In particular the seminars considered
the linked issues of the exploitation of workers, illegal working
and illegal activity by gangmasters. The seminars were attended
by representatives from a wide range of stakeholder organisations
with an interest in these issues including the supermarkets, suppliers
of fresh produce, trade unions and Government Departments (including
Defra and Home Office).
78. At the conclusion of the seminars it
was agreed to set up a small working group under the auspices
of the ETI to develop further proposals which could be used to
address these issues. This working group, which has now met twice,
comprises the ETI, NFU, TGWU, Fresh Produce Consortium and representatives
of the main supermarkets. Officials from Defra and the Home Office
attend in an advisory and observer capacity.
79. A delegation from the working group
met Beverley Hughes and Lord Whitty on 11 March 2003 to press
the case for primary legislation to establish a statutory registration
scheme for gangmasters.
80. Prior to the establishment of the ETI
working group some in the industry came forward with the idea
of a good practice blueprint for labour providers, which would
put the onus of checking and legal compliance on the gangmaster,
linked to a system of independent verification. This would make
it more practical for farmers and pack houses to check whether
a particular gangmaster was following accepted good practice and
for supermarkets to check that farmers and packhouses supplying
them with produce were using labour which met these standards.
One firm of Evesham based gangmasters, recognised in the industry
and in Government as being an example of good practice, has already
done some preliminary work in defining how this might work in
practice.
81. The Government has yet to take a considered
view on the question of legislation on compulsory registration
of gangmasters, but believes that there is merit in seeking to
draw up a Code of Good Practice for gangmasters. This could potentially
be put into practice on a voluntary basis relatively quickly.
Alternatively, it could form the basis of criteria for a registration
scheme if the Government were to propose new legislation. As a
result Defra Ministers agreed to the secondment of a member of
staff to work with the Evesham gangmaster for a period of six
months in order to develop these ideas with the industry. This
project has just got under way at the end of April and is due
to report to Ministers in November.
82. The objectives of the project are:
(i) to contribute to the production of a
Code of Good Practice for labour providers in the fresh produce
sector;
(ii) to contribute to setting up a system
of independent audit of compliance with the Code;
(iii) to contribute to securing buy-in from
key businesses in the fresh produce chain to (i) and (ii).
(iv) to contribute to identifying a "critical
mass" of labour provider businesses prepared to abide by
the Code and facilitate the setting up of an association of legitimate
labour providers.
83. In taking forward this work Defra is
seeking to work closely alongside those with practical experience
of working in the trade on a legitimate basis, building on the
work that has already been done and helping develop it into a
blueprint that can be supported and applied throughout the fresh
produce sector. The project will need to tap into the experience
of others in the fresh produce chain such as different gangmaster
businesses, packhouses and retailers, and Defra is working with
the ETI Working Group in taking this forward. Beverley Hughes
and Lord Whitty agreed in principle to a further meeting with
the ETI Working Group in the autumn to return to these issues
in the light of progress with this collaborative project.
April 2003
Annex A
"OPERATION SHARK"
Background
"Operation Shark" was a multi enforcement
agency operation designed to target fish processing sites in Scotland.
The idea for this initiative was conceived by the Joint Working
Unit of DWP in consultation with DWP Fraud Managers in Scotland
and the consideration of intelligence about illegal activity by
gangmasters provided by the Agricultural Investigation Team (AIT)
at Spalding.
Planning for "Operation Shark" was
launched at the Scottish Gangmaster Forum held in Glasgow on the
17 September 2002. Two further meetings were held to review the
intelligence gathered by the AIT, discuss the strategy for proceeding
with the exercise and identify a number of potential targets.
It was at this stage that the decision was taken to diversify
and not focus singularly on fish processing companies using gangmaster
labour. The decision was made in part from evidence gathered in
the preparation of "Operation Shark", partly from anecdotal
evidence that fraud was not confined to gangmaster activity and
partly to use the opportunity presented by "Operation Shark"
to gauge the scale of fraud in the industry.
During the first two weeks in December 2002
(this being the busiest period for the fish processing industry)
a number of companies were targeted at various locations in Scotland.
Unnotified visits were made to each of the companies
identified and details of workers obtained. In most instances
the companies were very co-operative, although the same could
not be said of the gangmasters hired by those companies.
Results
Some of the initial outcomes of "Operation
Gangmaster" are summarised below. It is hoped to quantify
them further in due course.
— "Operation Shark" has prompted
three fish processors to review their existing contracts with
gangmasters.
— Two gangmaster contracts have been
terminated.
— One gangmaster is complying with
Inland Revenue procedures to remove himself from the shadow economy.
— The main gangmaster supplying labour
to the principal target at Inverness has had his contract terminated.
— Numerous referrals have been made
to the UK Immigration Service in connection with foreign labour
provided by the gangmaster targeted. These included illegal immigrants
who disappeared from Inverness after the raids took place and
re-emerged in Kings Lynn. Some are Brazilians working illegally
in the UK under Italian papers.
— Intelligence gathered from the raids
established the existence of a fish processor based in Granton
on Spey which is allegedly not registered for VAT. Customs and
Excise are investigating this further.
— Inland Revenue are processing intelligence
obtained from the raids, including details passed by DWP regarding
"non-compliance" by the gangmaster supplying labour
to the main target in Inverness.
— The Health & Safety Executive
conducted an inspection of some of the main targets of "Operation
Shark". Two of the companies was served with an Enforcement
Notice.
— DWP have identified eight cases where
prosecution action might be taken. In addition 33 benefit recipients
have had their benefit adjusted while action is being taken to
recover overpayments from a further 41 recipients
— The Police (both Special Branch and
Uniform) also co-operated in the operation. This has resulted
in person(s) assisting them with their enquiries.
Summary
As the first ever multi agency exercise to be
mounted by a regional gangmaster forum under the umbrella of the
Joint Working Unit, DWP consider "Operation Shark" to
have been very successful.
Operation Shark achieved its primary goal of
disrupting gangmasters who are operating within the shadow economy.
The co-operation of Departmental enforcement agencies through
this initiative helped to reveal the true extent of illegal activity
and to enable it to be properly tackled. This effort has been
underpinned by the sharing and building of intelligence through
the maintenance of an "Operation Gangmaster" database
which allowed positive targets to be identified. "Operation
Shark" has in many ways laid the foundations for further
multi agency "Operation Gangmaster" exercises.
To maximise the long-term effects of "Operation
Shark", educational follow -up visits are planned both to
the companies visited by this initiative and to other fish processing
factories where intelligence gives cause for concern.
"OPERATION TWIN
STEM"
"Operation Twin Stem" was launched
in the South West of England in March 2003. The operation was
designed to target flower-picking and flower-packing work that
is known to make extensive use of temporary and casual labour
provided by gangmasters. The results of "Operation Twin Stem"
are currently being evaluated by DWP's Joint Working Unit and,
upon completion, a submission will be sent to DWP Ministers.
"Operation Twin Stem" is a multi agency
exercise involving Inland Revenue, Customs & Excise, UK Immigration
Service, Defra and Health & Safety Executive. The targets
had been identified by local intelligence supported by the "Operation
Gangmaster" database maintained by the Agricultural Investigation
Team at Spalding.
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