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

Examination of Witnesses (Questions 340-359)

Wednesday 4 June 2003

Lord Whitty, and Mr Lindsay Harris

Q340  Mr Lepper: I am still toying with this idea of how we find out the size (and we are calling it a problem) of the situation, how we describe the situation, and the lack of any firm information, but Dr Frances, who we heard from earlier this afternoon, in her memorandum to us, you have said the situation changes from day-to-day and so it changes from year-to-year as well referred to an article in The Guardian on 26 August 1995, admittedly a while ago, about the work of the Agricultural Compliance Unit which had identified 5,500 gangmasters and managed, by investigating them, to recover £537 million in unpaid tax from them for the Treasury. I just wonder whether, for instance, and you may say it is not DEFRA's part of Operation Gangmaster to do this, whether there has been any urging from DEFRA to have a look at this work of the Agricultural Compliance Unit which presumably had some input from MAFF in the past ten years or so ago and at least used that as the basis for investigating the size of the problem. Some of those 5,500 have probably gone out of business by now, but many of them may still be there and we have heard in the Transport & General Workers' Union evidence last week about how some of these companies mutate and can be traced back, so I just wonder whether you have any comment on that.


Lord Whitty: I am not familiar with that particular case, I have to say, but it is one of several reports which have taken place on particular aspects of non-compliance. I think if it is the one that I am vaguely aware of, then that largely related to the tax situation. The Agricultural Compliance Unit incidentally is an Inland Revenue operation rather than, as you might say, a DEFRA/MAFF operation. That is not shirking any responsibility, but it clearly is looking at that particular angle of regulatory compliance.

Q341  Mr Lepper: I was just perhaps rather naively looking at how we find out how many of them there are about carrying out this work and it all seems to be a bit vague. So far as I know, no gangmasters responded to the invitation to submit evidence to this Committee. They had a perfect right, along with any other organisation, to come forward and we advertised the fact that we were going to carry out this inquiry. I do not know, but the Clerk may tell us that some did and we decided not to call them. Okay, so none of them came forward in that way. There does not seem to be much contact by official agencies which forms a coherent picture. I was just suggesting that here is a bit of evidence which is ten years old or eight years old or more now, but at least it might have been a starting point for getting a hold on this situation.


Lord Whitty: Yes, as far as I am aware, that 5,500 figure did not have attached to it a list of who those 5,500 people were even at that point. The most authoritative estimate was made in 1998 of about 2,000 gangmasters, not all of whom call themselves gangmasters of course, so we have this definitional problem. Our view is that certainly there may be more than that, there may be above 2,000, possibly even 3,000, but a lot of those will be pretty small, supplying labour to about one or two outlets on a relatively local basis. In terms of seriously big operators, probably we are talking about 250 or of that order, not 5,500 which is not a figure in current terms which I recognise.

Q342  Mr Mitchell: Well, I am surprised that DEFRA does not have a view on the causes of this phenomenon and how it can be regulated because, after all, they are responsible for it and their remit covers the quality of rural life and rural proofing and everything, and here we have a situation where the big farmers certainly in Lincolnshire have been firing all their workers and turning their humble cottages over into weekend dwellings for smart alecks from outside the area, most of whose kids are too snotty to pick potatoes or to go out, as we were forced to do, beating, in the hope that several of my school colleagues would be shot in the process. That has produced a total change where the rural areas now need casual labour and yet you have no view on how to provide it safely, how to facilitate it or how to regulate it.


Lord Whitty: I was not clear from your personal experience whether you were organised as a kid by a gangmaster or not to go out and pick potatoes, but there has always been casual labour in the agriculture sector and seasonal labour in the agriculture sector. It has been organised in slightly different ways, but there have always been gangmasters. In one sense it has not changed as dramatically as you are suggesting. What has changed is that the permanent workforce of farm labour, if you like, has reduced. The number of casual and seasonal workers relative to the total workforce has not changed that dramatically because the workforce is now, as you say, a lot of family and part-time workers who are not employed in the normal sense. It is also not true to say, and I do not think I said, that DEFRA does not have a view on this. I certainly did not intend to say that DEFRA does not have a view on this. It is part of the quality of rural life and part of the way in which the agriculture sector is seen by the rest of society. If it is seen to be one which depends, whether it likes it or not, on systems of labour supply which, put at its mildest, have nefarious fringes, that does not help the agriculture sector and it does not help the quality of rural life. That is why we think we should take measures to improve the quality of the system of supply of flexible labour. I do not deny, in fact I advocate that the supply of flexible labour in this sector is needed, but it needs to be done to certain standards. That is why we have launched this project for looking at good practice, whether we can do it on a voluntary basis, whether we can persuade enough of the gangmasters, certainly the larger ones, to participate in that process and sign up to those standards and to have some support for that system in the same way as we have tried to do with the construction trade for the main clients or the main contractors to have some responsibility for those they sub-contract to for meeting legal requirements, so for the supermarkets, the big processors as well as the farmers to have some responsibility for ensuring that they use certified gangmasters and other supply agents who have signed up to these principles. Whether we can do that on a voluntary basis, I do not yet know, and I, therefore, think that the question of whether more, to go back to the Chairman's very original question, regulation is needed if we are to raise the general standard is still an open one. I have a view, but I think that we need to work a little bit more with the voluntary dimension and see how far we can get.

Q343  Chairman: Lord Whitty, on the subject of joined-up government, who is in charge of Operation Gangmaster?


Lord Whitty: Operationally the DWP are the lead enforcement agency.

Q344  Chairman: Which minister do they report to?


Lord Whitty: Well, the DWP reports to DWP ministers. There is of course an overall approach to the issue of non-standard labour, if you like, which was the follow-up to the Grabiner Report which covers not only this aspect, but a large number of other aspects of casual and migrant labour and the grey labour market, if I can call it that, which is run by the Treasury, but Operation Gangmaster itself is led by the DWP with contributions from us, the Inland Revenue, et cetera.

Q345  Chairman: So there is not a minister to which Operation Gangmaster, as such, responds or replies? There is no single boss?


Lord Whitty: As with other situations where there is a lead department, that lead department refers to their minister, but other ministers also have some responsibility. I have responsibility for the Agricultural Wages Board dimension of it and for the general effects that malpractices in the labour market bring to the agricultural sector as a whole and, therefore, I have an interest for aspects, but there is not a single minister for all those aspects, though there is a single minister for the co-ordination and that is DWP.

Q346  Chairman: When I read of Operation Gangmaster, I had this slightly naive sort of view that there would be a team which had an office, it would have a budget, it would produce reports and it would have a minister and I find it has none of those things and I find that all slightly puzzling. Is it tackling illegal meat imports at airports as well? It strikes me as slightly odd. It has no offices, it has no individual budget, there are no figures on what it has done, it cannot produce any estimate of the scale of the problem and it does not report to a minister. You will understand that somebody not versed in the ways of government might find this just a slightly sort of curious impression of a really dedicated assault on the problem. It does not make the gangmasters lose sleep, I would not have thought, would you?


Lord Whitty: I think that the gangmasters may lose sleep over dimensions of the focus of enforcement activity. If not, they should be, those who are not observing the taxation requirements and so on. I think as with other multi-faceted dimensions of government, and you mentioned, for example, another controversial area we have discussed which is the imports of meat, we did look at the structure of joined-up government there and we did conclude at least in part that it needed to be joined up more than it was, which is why some of the functions which we and the local authorities previously had have now been given to Customs & Excise, but that is not a 100% situation. Other authorities have part responsibilities for different parts of the import situation, the port authorities, the FSA, and DEFRA still retain some responsibilities, so there may be a case for looking at this, but it is always going to be the case that there are different parts of government who have particular responsibilities in relation to gangmasters. After all, we are not asking gangmasters to behave any different from anybody else. We are asking them to pay their tax, treat their workers in accordance with the law and to be reasonably transparent in their operations. We expect every employer to do that.

Q347  Chairman: But, with all due respect, you do not have an Operation Estate Agent, you do not have an Operation Employment Exchange. These people are merely operating under the normal laws of the land and, therefore, they do not call for any special treatment, so why do we have an Operation Gangmaster at all? Why set up this edifice?


Lord Whitty: Because some of them do not and the nature of the way the labour is supplied, it is quite difficult to identify them as compared to somebody who is a shopkeeper or a factory owner.

Q348  Mr Mitchell: But in that situation of divided responsibility, how do you measure the success of Operation Gangmaster and who measures it?


Lord Whitty: I think there are some difficulties about Operation Gangmaster. Operation Gangmaster, as I say, was proposed by MAFF and there was some degree of co-ordination before foot and mouth broke out and the assessment of its success, objective success, has only really been done in one region prior to the outbreak of foot and mouth. We really are only in a situation where DWP have only taken it on board for just over one year now and we have had one year of effective operation under that structure, so we have not yet got to a situation where we can say where there has been a success of it. However, I do understand that there is to be report on what has been achieved under the auspices of the Grabiner Committee at the end of this financial year, in other words, when the new structure has been operating for two years. At present, we do not have a report which says, "Operation Gangmaster has resulted in X number of convictions, X amount of tax recovered", et cetera, except to a limited extent in the eastern region.

Q349  Mr Mitchell: It is not like our reports from the Resource Centre which have bullet point one, bullet point two, bullet point three, but who sets the objectives and if the targets and objectives have been set, have they been met?


Lord Whitty: Not in that sense, no, they have not been set. If you set targets—

Q350  Mr Mitchell: Each department involved brings its own objectives.


Lord Whitty: Yes, but they will not have set their objectives in terms of Operation Gangmaster. Customs & Excise have a view on recovered VAT, the Inland Revenue will have a view on how much unpaid tax they can uncover and they will have various targets, but the gangmasters are only part of that target, so there is not a list of what we would expect Operation Gangmaster to deliver in terms of recovered tax, unpaid wages, et cetera, or the identification of illegal immigrants in that sense because Operation Gangmaster was an attempt to change the ethos of the situation by ensuring that the enforcement authorities acted together and, therefore, there was pressure on the sector to improve its act across the board. Now, that is what this assessment at the end of this current financial year will say, if we have actually achieved that. If we have, there will be some degree to which what we have done in part will be measurable by the amount of tax recovered, but the main point of Operation Gangmaster is to induce changed behaviour so that in future the gangmasters or those of the gangmasters who do not meet the minimum requirements will be operating in a different way. If anything, you would expect that if the system was operating effectively, then the tax would have been paid and you would not actually recover any tax in the long run. I think we are a long way off that position at the moment, and success may be quite difficult to define, but we will be reviewing that at the end of this year and that by the DWP, but reporting to the Grabiner Committee.

Q351  Mr Mitchell: Who publishes the figures and who is responsible for putting them out? There is some interesting information in your Annex A about the Brazilians disappearing in Inverness and turning up in Kings Lynn posing as Italians. I think that is very interesting, but, quite frankly, I have seen more about Operation Shark, which is what is covered in your annex, in Private Eye relating to salmon farmers in Scotland than I have seen in any official publications. Why is that?


Lord Whitty: I am not sure I can answer that question. Clearly the figures in relation to the recovery of tax appear, but they are aggregated in various Inland Revenue reports. Now, we have picked out that co-ordinated approach in relation to Operation Shark because it had a good example that co-ordination on the ground can actually yield specific results. Part of the assessment which is going on over this two-year period I am referring to will be to pick out other such results and there will be a report at the end of that, but there is not a comprehensive government report in the same way that there would be for a government department.

Q352  Mr Mitchell: Well, should there not be? It is fascinating stuff.


Lord Whitty: Well, if our projects relating to good practice were to get off the ground, then clearly we would want to be able to report how many companies had signed up to it, what proportion of the estimated workforce was covered and what had been achieved.

Q353  Mr Mitchell: But if you publish it, it also puts the frighteners on, which is part of the intention of the operation, is it not?


Lord Whitty: Exactly, but the point I am making is that the report would not be basic estimates and statistics, but it would be, "How are you trying to improve the general standards of this sector?" and the DEFRA approach , which is endorsed by the co-ordination of this, is that we should look at where there are ways of achieving effective good practice, and that is our way. Obviously better enforcement, more effective detection is the way in for Customs & Excise and for tax recoveries and the other enforcement agencies, but our way is to try and get a good practice ethos into the sector.


Chairman: Well, reporting and how things are reported we can perhaps return to when we do the annual report of DEFRA in a couple of weeks' time.

Q354  Mrs Shephard: What is the cost of Operation Gangmaster and how much have you in the DEFRA budget for your part of it?


Lord Whitty: I am not sure that for the DEFRA part of it I would be able to answer, but, as with many co-ordinated operations, there is not a single budget.

Q355  Mrs Shephard: I think it would be of interest given that there do not appear to be either objectives or results for taxpayers to know what is being paid across government as a whole. Perhaps you could let the Committee know.


Lord Whitty: Well, I think that question was raised with the officials when they were here previously. Approximately the DEFRA contribution to that, which is basically the enforcement dimension on the Agricultural Wages Board side, is £125,000.

Q356  Mrs Shephard: And across government you cannot say. I understand.


Lord Whitty: There is not a budget which is structured for Operation Gangmaster.

Q357  Mrs Shephard: Perhaps that could be given to the Committee. After all, it is all public funds, is it not, whichever heading it comes under? Surely that is of interest to the public.


Lord Whitty: I have no doubt it is, but there is not a single budget for Operation Gangmaster and never has been.

Q358  Mrs Shephard: No, but there must be a cost. Whether or not it is listed as a budget, I assume that there is a cost.


Lord Whitty: Yes, and I think that the Customs & Excise, for example, gave an indication of the number of staff or the staff equivalence that were involved and that would obviously yield the cost, but I could not give you that answer.


Mrs Shephard: No, I accept that you cannot, but perhaps that might be made known by some means to the Committee.


Chairman: Just for the record, we have written to the lead department on Operation Gangmaster, asking for precisely the cost and we will pursue that.

Q359  Paddy Tipping: Who are the other players in this field? We had the Fresh Produce Consortium come to talk to us and they said that there is a problem here and if I paraphrase what they said, it was, "It's not our problem". Do you think they have got a responsibility?


Lord Whitty: Yes, they have a responsibility, but they are probably right to say that they cannot resolve it by themselves. For example, they already have some form of code of practice for operations in packhouses, but they need to get everybody signed up to that and there are therefore difficulties in achieving it if you do not have the co-operation or more of the food chain, if I can put it that way, than simply one section of it.

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