Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses(Questions 200-219)



  200. What is the average fall when you introduce the scanners?
  (Mr Broadbent) I do not think we have had scanners in operation long enough at ports to know the answer to that really. In most ports it has only been a few months, six months, that the scanners have been there.

  201. Was Southampton the first one?
  (Mr Broadbent) No, it was not. It was one of the early ones, I think.

  202. The question that did strike me was it seems rather odd if you have really been able to reduce the problem down to four-fifths of what it was, and you seem to indicate if the seizures are down by four-fifths then probably the smuggling is down by four-fifths. If that is correct, if there is a straight forward correlation there, then the fact that smuggling dropped by four-fifths in that one port I would have thought gave you a very good incentive to introduce the scanners a lot more quickly than you did and I am surprised you have only got the 12 now and I am surprised you are still waiting to get up to the 20 that is recommended.
  (Mr Broadbent) I think first of all that particular drop in Southampton was not just due to the scanner and if there was a drop the pattern we have seen in other ports has been it has been a deterrent and diversion effect. I think the scanners are very important but I would not draw the conclusion from that that you can put the scanner in the port and it drops off very fast.

  203. Let me put the question to you another why. Why has it taken so long to get the scanners in, it looks like they are a very good idea?
  (Mr Broadbent) There is a number of reasons. First of all, these scanners are built for us, nobody else is doing this, so we have basically had to get involved in the design and construction of the scanners. We are on the verge of ordering some more. It takes four or five months to build each one to our specifications. The second thing, as we were discussing earlier, is these are complex bits of machinery and a major constraint is training quite large numbers of staff, and I think it is probably fair to say we under-estimated how many staff, to operate them and to interpret the images. Then, of course, we have to negotiate with the ports. We cannot just put a scanner in a port, we have to negotiate with the ports and get structured and often do building work and the ports have to employ more staff and often buy more plant. It is quite a big programme. We do believe the scanners are performing and we will go on steadily increasing their number locked into our ability to resource and position them effectively.

  204. Does the Customs service have any rights over the design of ports? For example, if a port is redeveloping, do you have the right to say "we have got to have space for where we want to move vehicles so we can scan them properly"?
  (Mr Broadbent) Yes. I believe the technical position is that the ports are required to co-operate with us but we normally find it sensible to work in co-operation with ports, not least because the problems can often be—

  205. Sorry, are required to co-operate with you after they have gone through the planning process and designed their port and built it or are required to co-operate with you when they are designing that port?
  (Mr Broadbent) Most ports were built quite a long time ago and most of the problems—

  206. Some are being redeveloped.
  (Mr Broadbent) You will find that land is very often at a premium at ports. In some ports, for example, we are increasing our examination rates by a factor of ten and this is an enormous increase. A port has got itself invested and deployed to allow for a certain examination rate and if we take Felixstowe it has gone from ten examinations a day to 70 and will shortly be 100. It is quite difficult for the port overnight to change everything. A bit like tobacco companies, I have to say the co-operation of individual ports is a bit different. I think particularly the ro-ro ports, which are usually the most constrained in terms of size and have the biggest premium on throughput, have the greatest difficulty in coping with our requirements.

  207. I come back to my original point. When they are redeveloping do they have to co-operate with you in the design or do they only have to co-operate with you as best they can once the port has been redeveloped or built or whatever?
  (Mr Broadbent) I just turn to my colleague as to what the decision in law is.
  (Mr Wells) All ports are required to be approved by Customs and Excise but, as Mr Broadbent has said, of course many ports are already preconstructed and have existed for many years. If I give you an example: at Shell Haven on the Thames, which is being constructed at the present time, we are fully engaged in the process of the construction of that port and have been in discussion with the owners of that port as to the sites that we would look to use.

  208. If you had to agree it then in a sense you have a veto, you can say that you need to have a certain amount of space for your scanners to work.
  (Mr Wells) It is a very absolute position with the port, a once-off, and that does not help you with an ongoing port with existing infrastructure like Dover, which has been configured over many, many years.

  209. Can we move on to paragraph 5.24, the seizure of vehicles. I think you were saying earlier that you only seize vehicles if the duty evaded is worth more than £50,000 because it has to be proportionate.
  (Mr Broadbent) That was in relation to heavy goods vehicles. That is guidance that we issue to make it clear to people how we will exercise our discretionary powers.

  210. That was because under, what, human rights you have to make it proportionate?
  (Mr Broadbent) It is very important for any sanction we impose that people know what the sanction will be and that we are proportionate to the issue.

  211. What makes me slightly surprised is that you can only seize an HGV if the duty that is being evaded is more than a certain amount but you can seize a van regardless of how much. I can understand you saying that since the HGV costs £100,000 it is disproportionate if you seize it when the amount of duty being evaded is less than half the cost of the HGV. But if it is a question of proportionality, you would think that the half the value would apply just as much to a van worth £10,000?
  (Mr Broadbent) This is quite a technical area.
  (Mr Wells) The issue is not one of our ability to seize vehicles. They are all liable to seizure and we seize them all. The question is whether we choose to exercise our discretion to restore the vehicles. In the case of heavy goods vehicles we have picked £50,000 because that tends to be the differentiation between smaller quantities that are in the cab of the vehicle, ie the driver himself is smuggling, and the much larger quantities that tend to be the freight consignment itself. Clearly where the driver of the vehicle has smuggled maybe a couple of thousand cigarettes it would be a disproportionate impact on the haulage company to seize their vehicle and not restore it. Clearly, they are in a slightly different position from a situation where the individual with their own vehicle chooses to use it for smuggling.

  212. What happens to seized vehicles?
  (Mr Broadbent) We destroy them.

  213. You do not re-sell them?
  (Mr Broadbent) With cars we used to have a policy of re-selling them. The trouble is they go back to the market as second-hand bangers and we find smugglers buying cheap second-hand bangers.

  214. Not particularly cheap if they are worth up to £100,000 each.
  (Mr Broadbent) I am sorry, I thought you were asking about cars.
  (Mr Wells) In the case of HGVs or high value cars, we try to find ways of selling those where we are satisfied that they will not get back into the hands of smugglers, for example selling them overseas and we have sold some in the Middle East, but clearly where we feel that that is unlikely and they will get back into the hands of smugglers, in particular low value vehicles, then we destroy those.

  215. Apparently there are exceptional circumstances in which you do restore small vans. What exceptional circumstances would those be?
  (Mr Wells) For example, there are situations where we feel it would be inappropriate not to do so for humanitarian reasons. Somebody may be seriously ill or they may have small children with them.

  216. It is basically humanitarian?
  (Mr Wells) There may be other circumstances. This is particularly so following a recent Court of Appeal case where people are smuggling not for profit. In other words, and this is relatively unusual, people who are bringing back goods for sale at cost price to others without the intention to make money for themselves in the process, perhaps not realising that that is in fact illegal. In that context we have concluded, indeed the Court of Appeal has suggested that it would be disproportionate to not restore those vehicles. In those sorts of circumstances we would consider restoring them.

  Mr Rendel: Thank you.

  Chairman: Thank you, Mr Rendel. Mr Barry Gardiner?

Mr Gardiner

  217. Can I start off by congratulating you for the job that you have done. I think that it is very good to see that this Report implies that the increase at least in smuggling has stabilised, the rate of growth has reduced, and we wish you well for getting it down to the levels that you project. You mentioned three tobacco companies. I am sorry I do not keep abreast of this world. You mentioned Gallaher's who had signed a memorandum of understanding with you, you mentioned Imperial who, as I understand it, have not signed a memorandum of understanding with you. Who was the third manufacturer that you were talking about that manufactures in this country?
  (Mr Broadbent) The third major supplier is BAT.

  218. And they have also not signed a memorandum of understanding with you?
  (Mr Broadbent) That is correct, although there are no particular difficulties in our discussions with BAT about a memorandum. I should make it clear in relation to Imperial that it is more our reluctance to sign the memorandum than Imperial's because to sign a memorandum you have got to be clear that the other person is committed in spirit as well as to the letter of the memorandum.

  219. That is very helpful. You would say at the moment you are not satisfied that Imperial Tobacco Company is committed in spirit to the memorandum?
  (Mr Broadbent) In recent meetings with Imperial we have made it clear to them that there are five or six areas where we need to see evidence of their commitment before we would sign a memorandum of understanding.

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