Select Committee on Environment, Food and Rural Affairs Fourteenth Report


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

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