Examination of Witnesses(Questions 180-199)
MR RICHARD
BROADBENT AND
MR MIKE
WELLS
MONDAY 29 APRIL 2002
180. People can import pornography then?
(Mr Wells) There are certain restrictions in terms
of drugs, weapons, pornography, etcetera, which are provided for
as exceptions from the general provision of free trade within
the Community. Tobacco, alcohol and most other consumable goods
are not in that category.
181. Surely if we treat tobacco not as a consumable
good in that sense but as a health hazard, it would be open to
the British Government to take a different tack?
(Mr Wells) It is not illegal to consume tobacco in
the United Kingdom.
182. I wonder if I could ask very quickly some
points about the questions of penalties. How many of your staff
smoke smuggled tobacco?
(Mr Broadbent) Well, I do not have, I am afraid, hard
figures on that that I feel confident I could give you.
183. On the question of penalties, I am a bit
worried about your observations that really there is no action
taken on anybody who is found with the odd packet of tobacco that
has been brought into the country here and there. I am not suggesting
that their child benefit should be stopped, but is it not possible
to look at something equivalent to spot fines like the equivalent
of a parking fine? Police stop people all the time for a variety
of things. If they are found with tobacco that has been bought
or smuggled at one point, then fining in that way would presumably
be a sanction?
(Mr Broadbent) It is less that we ignore possession
of smuggled tobacco; it is that we do not have officers in every
pub. Clearly, it goes on and we just do not come across it. I
think it would be highly cost-ineffective to put an officer in
every pub to try and spot it. Without diminishing the seriousness
of the offence, and where it is blatant and where we come across
it we do take action—and you can see this in some of the
distribution hot spots in Scotland and London—to get on
top of the problem we have to get to the people just above them.
184. If I can just finish this point. There
was advertised in one of the Glasgow papers recently buses from
the west of Scotland to France which were basically billed as
a Smuggler's Special. Is no action taken in these circumstances
against individuals who advertise that or bring stuff back, or
indeed against shopkeepers? I must say I do not agree with your
view that this has been resolved at the retail level. I am aware,
and I am sure my colleagues are aware, of a system of dual pricing
in a number of shops where you go in and you are unknown and you
ask for cigarettes and you get them at full price, you say you
do not want those cigarettes and they have other cigarettes which
are at a different price. That is going on in quite a widespread
fashion across the west of Scotland and I am sure in a number
of other areas. It appears that you are taking no action against
that and it does give a clear message that this is not a serious
problem.
(Mr Broadbent) I am sorry, I think there is a confusion
about "no action". There is a series of proportionate
actions. We do have a very significant inland disruption effort
which visits a whole range of premises and, in fact, for the last
year for which I have figures we made something in the order of
over 25,000 visits by specially created strike forces who go into
particular areas, and the west of Scotland is a particular concentration,
and they will deliberately make seizures, tackle premises. The
action we consider in each case is do we seize, do we confiscate,
do we fine, do we prosecute, and that is a judgment which we do
try and make proportionately in each case.
185. My final point, and maybe I can have a
note rather than an answer, could you clarify what percentage
of smuggling is by, as it were, Robin Hoods who are helping people
get cigarettes cheaply and what percentage by organised criminal
gangs because there is a perception that you are just cheating
the tax and therefore it does not matter, it is a victimless crime
in some way. It is very much my impression that a lot of this
is done by organised criminal gangs who are being subsidised effectively
by people buying low price cigarettes. Were this publicised it
seems to me that would have an impact on a lot of people in my
area who are relatively law abiding in most things but do not
see this as a crime.
(Mr Broadbent) This was one of the early thrusts of
the publicity campaign to understand that a very high percentage
of this traffic is with organised gangs. If you assume that 80%
of the commercial scale traffic is clearly largely organised and
then you have the remaining traffic, much of which does involve
people who when we stop them have criminal records.[7]
Essentially Dover at the peak of this trade became a magnet for
criminality and you saw associated criminality rising very fast.
The fact that criminality is inextricably linked with smuggling
is something that we do try to drive home in our publicity campaigns.
Can I just try and reassure the Committee that I am very seized
of the seriousness of the point you were raising about what we
do inland. It is not often realised that in the last year for
which I have numbers we seized about 10,000 vehicles for smuggling
and a quarter of those vehicles were seized inland, including
in places like west Scotland. It is not a free ride.
186. No, I understand that.
(Mr Broadbent) It is just that prosecution is not
always the thing we do because of the time. We seize vehicles
inland, we seize goods, money, it is not a free ride.
Chairman: Thank you very much, Mr Davidson.
Mr David Rendel.
Mr Rendel
187. Thank you, Chairman. Would you agree, Mr
Broadbent, that there are actually three different benefits to
the public sector in bringing down the smuggling of tobacco? The
first is obviously the extra amount of duty you can raise by making
sure that smuggling does not go on. The second is that on the
whole the less smuggling there is the more the price of cigarettes
will go up and that is beneficial to the health of the country
in general. The third is if you reduce smuggling that gives the
Chancellor the opportunity, if he wishes to, which some fear he
may not have at present, to carry on raising the level of duty
on tobacco because there is some fear at present that all he is
doing is increasing the amount of smuggling if he increases duty.
Are all those three valid?
(Mr Broadbent) Yes, I think they are valid. I would
just possibly rephrase the last one as giving the Chancellor more
flexibility on fiscal policy because I think if you do not have
a controlled regime, whether you want to keep duty constant in
real terms, reduce it or increase it, they are all very difficult
choices because you do not have control over the average price
in the market.
188. Thank you. You were a bit hesitant about
naming any companies but you have, in effect, named Imperial as
being one of the most difficult companies that you have dealings
with at present. Are companies like Imperial free to carry on
exporting wherever they wish even when you have raised one of
these red or yellow cards warning them that exporting to a particular
country is very dangerous?
(Mr Broadbent) It is not an offence to export tobacco
and one of the problems we have is we have issued a number of
red and yellow cards, actually more to Imperial than other companies.
The red and yellow card is our indicator of risk and we suggest
to the companies that they should satisfy themselves as to the
bona fides of that customer. Other manufacturers have respected
that and stopped exports to that customer, there are two cases
with Imperial where they are continuing to export to customers
to whom we have issued a red and yellow card, one of those customers
is in Moldova and the other is in Afghanistan.
189. Has this fact been made known to the public
and press? I would have thought it would have been very interesting
to make sure that is publicised.
(Mr Broadbent) I think I have just made it known.
190. If you are to put pressure on Imperial,
as I am sure you should if they are not co-operating in this way,
then I would have thought the maximum publicity of that is bound
to be beneficial to you and to the country.
(Mr Broadbent) I think it is important for me to say
that we rely on the co-operation of Imperial and there is not
no co-operation, it is just that we have had some problems with
timeliness, promptness, completeness of information and perhaps
there is sometimes an attitude that suggests that their market
share of smuggling is a consideration for them as well as the
level of smuggling per se.
191. I am delighted that we have raised this
point publicly in this session and we have not had to keep it
until later, if I may say so. May I ask why you have not publicised
this before? It seems to me that you could have done some good
perhaps by publicising Imperial's poor behaviour.
(Mr Broadbent) Yes. We are engaged in a very intensive
dialogue with Imperial, including exchanges of letters and meetings
practically as we speak. I think when you are engaged in a dialogue
with somebody with whom you need to work to solve the problem
you do not just lash out, you try and do all you can to achieve
a voluntary response, but when your patience finally gets short
you find that the Chairman goes to a Committee like this and says
he has concerns.
192. I am delighted that you have done so, if
I may say so. You were talking earlier about the UK Duty Paid
mark and you said that the policy had been very effective because
almost everything that is being sold now has the mark on it. How
do we know that all the smuggled goods are not simply adding that
mark as well even though they have not paid duty?
(Mr Broadbent) There is a possible counterfeiting
problem that my colleague rightly points out. To put it at its
fullest, when the marks were introduced we visited retailers,
we had quite a lot of seizures of non-marked packets, but the
number of seizures of packets seized without marks has now dropped
to very, very small levels, negligible levels, and that suggests
that the retail trade is more compliant than it was. There is
clearly a potential problem with counterfeiting but, of course,
if you can keep the retail trade compliant and try to keep a firewall
for hitting the counterfeit, the counterfeited product has got
to go to the boot fairs and the informal distribution channels,
which is another area for us to tackle and where we are currently
focusing our effort. That is where I think the legislation, the
powers the fiscal marks give us, is going to be very, very important
because it makes it an offence for the owner of the premises to
allow non-marked cigarettes to be traded on those premises. So
if you own a boot fair then I can go to you and not just the man
with his two sleeves of cigarettes. That is the area we are now
wanting to pursue.
193. Can I turn to paragraph 5.14 where you
note that there have been comparatively few seizures as a result
of the scanners being introduced in the first year and the reasons
that are given in this report for that are all to do with the
scanners having taken longer to introduce or the amount of training
that had to be given and that sort of thing. May I ask whether
that means that the success rate per scanner when it is in use
is up to the level that you expected?
(Mr Broadbent) The success rate per scanner when it
is in use is in line with what we expected. The issues are the
external ones and I think we still have a lot of work to do with
port authorities to make sure the scanners can be utilised 20
hours a day with a throughput going through them and we have had
our own issues of familiarising ourselves with new technology,
particularly image interpretation. I have brought a few images
with me that I will be happy to show you afterwards. It is not
easy to spot actually.
194. The scanners themselves are working well
is what you are saying?
(Mr Broadbent) The scanners have worked well and when
they are working well the rate is in line with output.
195. Can I turn to 5.18 where the Report indicates
that in one case where a scanner was introduced the amount of
seized goods fell to about a fifth of what it was, only 20 million
as compared to 100 million. That looks very good, it reduced the
problem by four-fifths. Does that indicate that smuggling is also
down, in fact, or is it just seizures that are down in some way?
(Mr Broadbent) I think there are several issues there.
In that particular case, as it happens, our own analysis was that
a lot of that decline related to an associated operation in Hong
Kong because a lot of the Hong Kong traffic was coming through
Southampton. It is always a little difficult to know what is cause
and effect but we do know that we interdicted high levels of tobacco
in Hong Kong at about the same time the scanner started work.
196. So it may not have been the scanner working
that had this effect?
(Mr Broadbent) As always, there is not always cause
and effect. This is why I am so careful about saying that is this,
or that. The second thing is, and there is no doubt, we have some
knowledge of this, the scanners act as a deterrent. Some of our
covert operations tell us that the scanners have a deterrent effect
and smugglers will try and switch their trade to avoid them.
197. But you have not got scanners at all ports.
(Mr Broadbent) We have not got them in all ports yet.
198. Just the major ports.
(Mr Broadbent) We have got them in the big ports.
What is important about the latest tranche of scanners is we are
going to start moving them around a bit more. It is quite interesting,
for example, very recently we had one scanner covering both Hull
and Immingham and we switch it backwards and forwards and we can
sometimes see the traffic trying to guess where we are going to
be in the morning, it gets down to that level. We have got to
be very adept at this. I think we need to get more adept at it
but we will get better at it I think.
199. So where you have been able to introduce
other scanners have you found a similar fall in the number of
seizures?
(Mr Broadbent) No, I think Southampton was unique
and I think it was associated with some other activities as well
as the scanner.
7 Note by witness: Customs do not retain statistics
that clearly define the percentage of `opportunists' involved
in tobacco smuggling. Given the funding and distribution requirements,
organised criminal gangs are clearly responsible for large-scale
freight smuggling which accounts for around 70-80% of all tobacco
smuggling into the UK. Tobacco smuggling by air and cross-channel
passengers and through internet sales delivered by post, account
for the remainder. Both organised criminal gangs and `opportunist'
smugglers are involved in these types of smuggling, though there
is no method of accurately identifying the appropriate proportions. Back
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