Scale and nature of illegal activity
by gangmasters
11. Not all gangmasters are engaged in illegal activity.
We met individual gangmasters who were clearly trying to operate
within the law and were keen to help develop ways to prevent abuses
by their less scrupulous counterparts. The Government emphasised
that "there is nothing inherently illegal in the activity
undertaken by gangmasters".[5]
There is clearly a role within the food chain for a system whereby
the fluctuating demand for the labour required to pick, and pack,
fresh produce can be met at short notice. Legitimate gangmasters
can, and do, fulfil this role. The gangmaster system of supplying
labour is essential to the industry.
12. Nevertheless, we received a wealth of evidence
describing a range of abuses by some gangmasters. Such abuses
are often connected to the deductions made from wages to pay for
accommodation, travel to and from the workplace, and, in some
cases, the cost of coming to the UK. Evidence from Citizens Advice
was particularly helpful in providing examples though other witnesses
provided similar stories:
- A Citizens Advice Bureau (CAB)
in Norfolk reported a case of a group of Portuguese nationals
who were being paid £3.00 each for cutting 1,000 daffodils
after deductions for accommodation and travel.[6]
- A CAB in Cambridgeshire described workers being
housed in partitioned containers with no water supply. The conditions
of their contracts included an agreement to repay recruitment
costs of up to £100 if they left within six months.[7]
- A CAB in the Midlands described how a woman from
the Ukraine had been recruited by a gangmaster who had charged
her £600 for documentation which she had never seen. Her
wages were less than the minimum wage. Accommodation was provided
in portacabins with one kitchen and one toilet between 18 people.[8]
- CABx have been approached by workers who are
in fear of their gangmasters. Intimidation is also sometimes less
direct: workers fear that they will lose both their jobs and their
accommodation if they complain. CABx report that EU nationals,
particularly those from Portugal, are told by their gangmaster
that they are working illegally even though they have a right
of freedom of movement throughout the EU. This creates a culture
of fear and a reluctance to seek advice.[9]
13. A TGWU paper from August 2000 on the gangmaster
system in Sussex contains details of the way illegal immigrants
are brought into the country by gangmasters and the conditions
in which they are working. It describes how they respond to advertisements
in their own country. They pay up to £2,000, often borrowed
at exorbitant interest rates from the person making the arrangements,
for setting up the job, obtaining a visa and travel to the UK.
The paper goes on to describe the exploitation of the workers
once they are in the UK:
"From the money paid to the workers the
gangmaster deducts rent, transport charges, interest on loans
and any other items which enable him to claw back money. Little
or no attention is given to the National Minimum Wage or Agricultural
Wages Order by the gangmasters. The illegal workers have no recourse
to get their rightful wages, as they fear if they complain, they
will be sent back home. Threats, intimidation and even physical
beatings are not unknown. The work itself is often boring, with
hard labour and long hours. It can be hot and dirty, or wet and
dirty if doing field work. It is known that workers are fined
(money deducted from their wages) if the gangmaster/producer does
not think that they are working fast or hard enough."[10]
14. Government officials confirmed these stories.
For example, an official from the Immigration Service in the West
Midlands described how there had been two fatalities in Lincolnshire.
The deaths were related to the "the long and arduous working
conditions for the people concerned".[11]
15. Since we started our inquiry there have been
a number of reports of serious incidents involving migrant labourers
who work for gangmasters. On 7 July three migrant workers who
had travelled from Birmingham that morning to pick spring onions,
were killed when the van in which they were travelling collided
with a train at an unmanned level crossing in Worcestershire.
The occupants of the van were reported to be working for gangmasters.[12]
On 8 June there was a serious fire in a three-bedroom house on
the Fairhead estate in Kings Lynn. It was reported that there
were 18 Chinese migrant workers staying in the house at the time
of the fire.[13]
16. The Government confirmed that some gangmasters
are meeting labour shortages by supplying non-EU citizens who
are working in the UK illegally and UK nationals working illegally
while in receipt of benefit.[14]
Other forms of illegal activity include non-compliance with the
Agricultural Wages Order, which sets the Agricultural Minimum
Wage, and with the National Minimum Wage; failure to collect 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.[15]
17. Although many witnesses who gave evidence to
the Committee could cite examples of illegal activity, none was
able to provide evidence of the scale of the problem or what proportion
of gangmasters are engaged in illegal activities. The Committee
approached the inquiry relying on anecdotal evidence; we were
surprised to find that all those connected with the industry were
similarly reliant on anecdotal evidence to demonstrate to us that
the problem is "getting worse". We acknowledge that
quantifying illegal activity is, by its very nature, extremely
difficult. The Government stressed this point to us in its written
and oral evidence. Nevertheless, we were surprised that there
appears to have been very little research carried out into the
scale of operations by gangmasters. The Government could not tell
us how many gangmasters are operating, what work they are engaged
in and what are the scale of their operations.
18. Similarly, the Government appears to have little
idea how many casual workers are employed in the horticultural
and agricultural industries. The June 2002 census of agriculture
and horticulture in the UK shows that 64,000 seasonal and casual
workers were employed in these industries. The Government states
that this is "generally thought to understate the total number"
because the numbers will increase in the harvest months of late
summer. The census does not count those working in related industries
such as the packhouses. When pressed on the lack of available
information in this area, Lord Whitty said "we [Defra] do
not do labour statistics or labour market research".[16]
19. If the Government does not even know how many
casual workers there are and who they are working for, it is plainly
difficult for it to make any estimate of the scale of any illegal
activity being carried out within that section of the labour market.
The Government cannot develop an appropriate policy response to
a problem, or allocate appropriate resources, if it cannot make
even a rough estimate of the scale of that problem. Lord Whitty
confirmed that "Defra had not commissioned any specific research"
and that it does not "have a sufficiently comprehensive view
of the situation".[17]
20. Defra's response to criticism that, by its
own acknowledgement it "does not have a sufficiently comprehensive
view of the situation", is extremely disappointing. Moreover
no Government Department appeared willing to take any responsibility
for addressing the difficulties with gangmasters. We recommend
that the Government commission a detailed study into the use of
casual labour in the agricultural and horticultural industries.
This study should not be used as an excuse to delay further any
concerted policy action but should be used to inform ongoing policy
solutions. It should publish its findings by March 2004.
Pressures on the food chain
21. As we describe in the introduction to this Report,
changes in the demand for casual labour can be attributed to changing
consumer tastes in terms of the demand for ready-packed produce,
to more sophisticated farming methods, and to the ability of supermarkets
to monitor the demand for produce in a more responsive way. However,
we were also told about how the risks associated with changing
demand are being transferred down the food chain. Some witnesses
claimed that the costs of labour, and the risks associated with
the highly elastic demand for it, are being met by those at the
bottom of the food chain and not those at the top.
22. We were told that the contractual relationship
between a supplier and the supermarkets is "a relation contract,
not a written contract".[18]
That is, there is no commitment to buy and if goods are rejected
a supplier is left with no other market in which to sell them;
but he or she still carries the cost of the labour used to produce
the goods. Gangmasters also told us that suppliers were often
heavily reliant on individual supermarkets and could not therefore
risk antagonising their major customer by trying to negotiate
over price or why produce was being rejected. The main variable
cost which suppliers have is the cost of labour. It follows that
they will seek to reduce this cost when their costs are under
pressure. We heard conflicting evidence about whether using unscrupulous
gangmasters helps suppliers reduce costs.
23. In its evidence to us, the Fresh Produce Consortium
(FPC) argued that there was no relationship between the illegal
activities of gangmasters and the prices paid by supermarkets,
arguing that any money saved from, for example, the non-payment
of taxes and National Insurance disappeared into the profits of
illegal gangmasters. In his oral evidence to the Committee the
Chief Executive said: "The industry does not get a cheap
deal out of this. Criminal gangmasters make a lot of money but
that is in their pockets; it is not in a reduced price to the
pack-house that uses them."[19]
This view was also supported by the National Farmers' Union. One
of its witnesses acknowledged that the prices paid by supermarkets
were "extremely competitive" but he did not believe
that this "is having a major effect on the cost that we are
paying for labour".[20]
The FPC argued that "By trying to switch the responsibility
onto supermarkets, it is taking our eye away from what the real
issue is".[21]
24. However, gangmasters said that they struggled
to compete with illegal gangmasters who were able to offer a lower
price because they were not paying the correct taxes or working
within the legislation.[22]
The Government's evidence appears to support this view. It argues
that illegitimate gangmasters "are able to supply workers
at rates which legitimate gangmasters cannot match". Furthermore,
there is "little evidence of most labour users being prepared
to pay a premium for 'legitimate' gang labour".[23]
25. We are convinced that the dominant position
of the supermarkets in relation to their suppliers is a significant
contributory factor in creating an environment where illegal activity
by gangmasters can take root. Intense price competition and the
short time-scales between orders from the supermarkets and deliveries
to them put great pressure on suppliers who have little opportunity
or incentive to check the legality of the labour which helps them
meet these orders. Supermarkets go to great lengths to ensure
that the labels on their products are accurate, for example, whether
they are organic or contain certain products. We believe they
should pay equal attention to the conditions under which their
produce is harvested and packed, and label it accordingly.
26. We ask the supermarkets to re-examine their
policies in this area bearing in mind their own stated policies
on corporate social responsibility. Supermarkets cannot wash their
hands of this matter. We urge them to monitor their suppliers
more closely, eliminate supply routes which rely on illegal gangmasters,
and take action where illegal activity has been identified.
27. We note the work carried out by the Competition
Commission in its 2000 report into supermarkets.[24]
The evidence we heard echoed that given to the Competition Commission,
in particular, the unreasonable transfer of risk from the supermarket
to the supplier. We received no evidence to suggest that the Code
of Practice recommended by the Competition Commission and adopted
by the industry, is making a significant contribution to reducing
the activities described in the 2000 report. The Office of Fair
Trading (OFT) is currently reviewing the effectiveness of the
code. In our private meetings with gangmasters, the Code was dismissed.
We recommend that the Department for Trade and Industry revisit
the relationship between the supermarkets and their suppliers.
The evidence we received during the course of this inquiry suggests
that the code of practice recommended by the Competition Commission
has failed. We welcome the OFT's review of the code. A more interventionist
approach may now need to be considered.
28. Arguably the pressure on costs throughout the
food chain is fuelled by the demands of consumers. However, comparisons
can be made with consumers' concerns about some imported goods,
such as coffee, and the conditions under which they are produced.
For example, it is clear that some consumers are willing to pay
more for produce which has been what the Ethical Trading Initiative
describes as 'ethically sourced'.
29. There appears to be little public awareness of
the problems with the illegal activity of some gangmasters and
the working conditions of those who are employed by them. It seems
likely that there is potential for informed consumer pressure
to encourage and support good labour practices in the supply of
fresh produce. The Ethical Trading Initiative has hosted seminars
about gang labour with industry representatives. More needs
to be done to promote consumer awareness of the issues related
to gang labour and identify those suppliers and supermarkets who
subscribe to, and enforce, ethical employment practices. Such
a development could have an effect on purchasing decisions in
the same way that public demand is now growing for Fairtrade products.
5 Ev 68, para. 11 Back
6
Ev 91, para. 2.1 Back
7
Ev 91, para. 3.1 Back
8
Ev 91, para. 3.2 Back
9
Ev 93, para. 4.2 Back
10
TGWU, Gangmaster system in Sussex, August 2000 Back
11
Q 221 Back
12
"Victims of a train and the demand for cheap food",
Times, 8 July 2003 Back
13
"Investigation to be launched to root out illegal trafficking
of migrant workers", Eastern Daily Press, 19 June
2003 Back
14
Ev 68, para.11 Back
15
Ev 68, para. 12 Back
16
Q 339 Back
17
Q 333 Back
18
Q 283 Back
19
Q 6 Back
20
Q 127 Back
21
Q 38 Back
22
Q 60, Ev 95, and private conversations with gangmasters. Back
23
Ev 71, para. 37 Back
24
Competition Commission, Supermarkets: a report on the supply of
groceries from multiple stores in the United Kingdom, Cm 4842,
2000 Back
