Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses(Questions 100-119)



  100. So one year from this announcement?
  (Mr Broadbent) Yes.

  101. You had seized 2.5 billion up to that point?
  (Mr Broadbent) 2.7 billion up to that point. As I said, we do not have full data for the year just ended yet.

  102. How many smuggling gangs have you broken up?
  (Mr Broadbent) Again, I hesitate because I have a problem with data for the current year which is still coming in. Last year we broke up 43 gangs.

  103. Forty-three?
  (Mr Broadbent) I am reasonably confident this year that the number will be higher, probably materially higher.

  104. How many millions of pounds of criminal assets have you seized?
  (Mr Broadbent) Again last year I think that the benefits determined by the court were of the order of £8 million. This year, again without having full data, I am confident that the number will be higher, and I think probably higher by a multiple.

  105. It would need to be to keep with this target?
  (Mr Broadbent) Yes.

  106. The final one, collecting an additional £2.2 billion in tax revenue. You said £200 million after the most recent year. What is the total since this announcement?
  (Mr Broadbent) The 200 to which I referred was the amount in addition to the forecast and the forecast incorporated the benefits assumed from our strategy, so in a sense the £200 million is over and above the assumed forecast.

  107. By how much?
  (Mr Broadbent) I do not think I can answer that question offhand. I can ask my colleague or let you have a note.[3]

  108. Let us have a note. Like my colleagues, I am a bit confused by your policy on prosecutions. It is right, is it not, that from 1999-2000 to 2000-01 the lost revenue rose from £2.9 to £3.5 million and it is right that during that same period prosecutions fell by 19%?
  (Mr Broadbent) That is correct.

  109. Is it not possible that there is a deterrent effect that would arise from more prosecutions? It says in the paper in paragraph 5.9: "ensure that criminals know that the risk of being caught has increased substantially." It does not sound like this objective of the campaign is being met when your prosecutions are going down and your revenue lost is going up.
  (Mr Broadbent) I think the critical thing is risk of being caught because the numbers of serious criminals that we are dealing with is going up. As I explained, within that, the number of multi-defendant cases, the number of custodial sentences in excess of two years, and the average sentence are all going up, so for those who are doing this activity at a level of seriousness where a court case and custodial sentence are a possibility, the numbers being caught are going up and they are going to prison for longer.

  110. Perhaps you would let me have a note on the number of people you have prosecuted for each of the last 10 years.
  (Mr Broadbent) I would doubt we have data for ten years but I could certainly let you have the data we have.[4]

  111. As far back as it goes. Again as a result of the March 2000 announcement, paragraph 5.26 and 5.27 the penalties available for selling unmarked tobacco products were increased. "Retailers found selling unmarked tobacco can face: Prohibition of tobacco sales for up to six months." How many retailers have been prohibited from selling tobacco for six months?
  (Mr Broadbent) This is one of the successful parts of our policy because the answer is almost none and the reason for this is that after that July end date there were a relatively large number of seizures of unmarked packets. We did not prosecute people immediately but we seized the goods and we warned them, and the number of seizures dropped off to practically zero. Our current assessment is that the fiscal marks have been very effective in eliminating substantially the smuggled goods from the retail distribution chain, and that it is a very powerful support to our strategy.

  112. What about fines of up to £5,000 for allowing premises to be dealing in unmarked tobacco; how many people have been prosecuted under that heading?
  (Mr Broadbent) We have two prosecutions pending. We have no prosecutions completed with fines of up to £5,000. It is a very interesting area. The critical area, I think, having proved that fiscal marks have cleaned the retail distribution, is to go for owners of what I call the "informal" distribution network, like boot fairs for example, and those are the people we are going for where you are going find these prosecutions.

  113. How many National Lottery terminals have been removed?
  (Mr Broadbent) I believe one.

  114. Only one. Is there a problem with forged fiscal marks?
  (Mr Broadbent) There is not a significant problem of which we are aware. I do not think we have any evidence of forged fiscal marks.
  (Mr Wells) Amongst counterfeit products, which we estimate is between 11 and 17% of the smuggled market, increasingly counterfeit products carry a mark, or it would not be very effective counterfeiting.

  115. I wanted to ask you about Andorra. I am looking at a British Medical Journal article which says that it was an important example because it illustrates the whole business rather well. Exports from Britain to Andorra (population 63,000) increased from 13 million cigarettes in 1993 to 1.52 billion in 1997. "Since few of these cigarettes were legally re-exported and Andorran smokers do not generally smoke British brands, then either each Andorran (including children and non-smokers) was smoking 60 British cigarettes a day in 1997 or these cigarettes were being smuggled out of Andorra." Am I right in thinking that the Andorran problem has been closed down?
  (Mr Broadbent) I think the problem to which you are alluding in general is a very real one.

  116. My question was going to be if it is not happening through Andorra any more, through which countries specifically is it happening now?
  (Mr Broadbent) Moldova, Afghanistan, Latvia. The smuggled exported UK-manufactured product is a major problem. We are very reliant on the co-operation of the tobacco manufacturers to assist us in tackling it. That co-operation is different as between the different companies and in some cases patchy.

  117. There is quite a lot of evidence that tobacco manufacturing companies are encouraging this illegal trade.
  (Mr Broadbent) I would not generalise between the companies. I think they are different and each company behaves rather differently in this area.

  118. I have been sent a copy of a release by Gallaher which they put out conveniently one week before this hearing in which they say that they are stepping up their co-operation with you. One of the things that Gallaher promises to do is to only supply products where there is a legitimate demand for the product in the intended final market and, as necessary, will share understanding of that demand with Her Majesty's Customs & Excise. How many of the tobacco manufacturing companies in the UK have not reached such an agreement with you in the way that Gallaher has?
  (Mr Broadbent) Gallaher is the only company to have reached a formal agreement with us. There are, as you know, three large UK manufacturers. We have had a dialogue and informal discussion for many months with these tobacco manufacturers and we have decided we want to move that into a more formal set of agreements because we are not very happy with the arrangements. Gallaher is certainly one of the most compliant companies and they have readily signed an MOU. Not every other company has signed an MOU.

  119. You are expecting that they will sign a memorandum of understanding in due course, are you?
  (Mr Broadbent) That depends on their behaviour.

3   Note by witness: The Tackling Tobacco Smuggling document sets out the annual revenue benefits which accrue from the successful implementation of the strategy. The first year, 2000-01 of the strategy was successfully implemented and the total revenue benefit was therefore £435 million more than would have been the case without the strategy. Back

4   Ev 53 Back

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