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


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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