Examination of Witnesses(Questions 100-119)
MR RICHARD
BROADBENT AND
MR MIKE
WELLS
MONDAY 29 APRIL 2002
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
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