Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 120-139)

Wednesday 31 March 2004

Mr Mike Eland, Mr Mike Wells, and Mr Richard Summersgill

  Q120 Mr Davidson: The pilots demonstrated that 20% was better than 10% or 30%?

  Mr Wells: 20% is the lowest we can go down to with civil evasion cases.

  Q121 Mr Davidson: That seems to be the most effective in term of these pilots?

  Mr Wells: In those cases where there is full co-operation. Clearly in cases where there is less than that then we may not reduce it to that figure, it is an incentive.

  Q122 Mr Davidson: The point about pilots is an interesting one, to what extent do you pilot different approaches to tackle particular issues in particular sectors?

  Mr Eland: We do pilot different forms of risk testing in different areas. For example we have done one with the Inland Revenue where we have taken some big construction projects and worked through all of the oversight companies through to the sub-contractors. We experiment in that way doing different approaches to risk.

  Q123 Mr Davidson: How many different sorts of pilots do you have running throughout the United Kingdom?

  Mr Summersgill: Quite a large number, I cannot tell you off the top of my head.

  Q124 Mr Davidson: Is 1,000 a large number?

  Mr Summersgill: We are probably talking about 30 or 40 different pilots to try different approaches. We do things called test drilling, which are basically small pilots looking to test the size of different kinds of risk. We are also doing pilot projects testing different kinds of approach. For example, in London recently we ran a short pilot where we invited solicitors effectively to do a self-audit, and that was quite successful. That started in London in the last financial year 2003-04.

  Q125 Mr Davidson: I want to clarify the pattern of a trial, it is just in relation to prosecution and the decision to prosecute in 2.15. If you decide to prosecute this will depend on whether lawyers, accountants and others who advise on VAT matters are involved. In how many cases was action then taken against the advisers?

  Mr Eland: I do not have that information. Clearly if we felt they were part of the conspiracy we would take action. I do not have a number for that.

  Mr Davidson: Having been involved in the work on the Proceeds of Crime Bill it is clear that the advisers in many cases are the people who make all this happen and they are the ones that generally walk away scot-free and no action is taken against them. It relates to the point I was pursuing earlier on about the professional competence of advisers, it seems to me in all of this advisers are being dealt with very, very leniently.

  Chairman: Do us a note if you have information on that.[7]

  Q126 Mr Field: In answer to Mr Steinberg you were talking about your officers specialising in countering fraud, do you know how many have the accreditation, the government approved professional qualification?

  Mr Eland: The Government approved accreditation is very much directed at internal fraud and all our internal investigators are qualified in that way. Following the Butterfield Report we are looking to accredit all of our training of investigators to an external body and we are going to follow the police service standards.[8]

  Q127 Mr Field: Various government departments are backing the professional qualifications for countering fraud officers not just dealing with internal matters, the Department of Health is dealing with contractors, might you look at that?

  Mr Eland: I will look at that.[9]

  Q128 Mr Field: Following Mr Davidson's point, he raised the question about how many accountants and other professionals were referred to their professional associations, you were unclear about that, could we have that covered by a note as well?

  Mr Eland: I will have a look at that as well.[10]

  Q129 Mr Field: Could you tell us something about how you as a Department try to learn from your successes against countering fraud?

  Mr Eland: We do use methodology, part of our intelligence operation is very much identifying criminal methodology and patterns from existing cases and investigations and then turning that into information that is disseminated to investigators and other so that they can spot future things of that type.

  Q130 Mr Field: To what extent do you share and learn from other departments? Do you regularly meet other departments and share information about countering fraud?

  Mr Eland: The Department for Work and Pensions, the Inland Revenue and ourselves in particular do that.

  Q131 Chairman: Could you say something about what "do" means, please?

  Mr Eland: In the case of those three departments in the shadow economy area we are working in joint teams. We have constant information sharing round that. With the heavier sort of frauds we have contacts between our investigation service and the Serious Compliance Office in the Revenue.

  Q132 Mr Field: My last point is a question which was raised by Mr Steinberg or Mr Jenkins about bonuses.

  Mr Eland: Yes.

  Q133 Mr Field: When we had the Lord Chancellor's Department here examining their lamentable record in collecting fines they promised us they were going to consider an idea of paying bonuses and learning from those officers who collect the most, it was not put to you as a joke question but as very serious one, I wonder to what extent you have considered or whether it is one of the pilot studies Mr Davidson was referring to or might be one of your pilot studies?

  Mr Eland: Two comments on that. I am sorry I did not mean to treat it as a frivolous point, I do accept it as a serious point. What we do is try to reflect an individual's performance over the whole year in a performance pay system. If they are very successful in pursuing fraud that will be reflected and that will translate into a bonus. We have not tried to link the amount of that bonus to amounts of fraud detected. Another possibility which we can look at is under the question of whether we have team bonuses, because that can also be helpful in this area. We have done some experimentation.

  Q134 Mr Field: What is it linked to?

  Mr Eland: They will be given a performance report. They will be given targets that they ought to achieve during the year and then they will be given an overall box marking in relation to their performance against those targets. That box marking will earn them a bonus, it is indirectly linked, not directly linked.

  Q135 Mr Field: Given that these officers will be lamentably paid compared with the professionals they come up against have you got some idea of the differences in salaries and to what extent bonuses might close that gap?

  Mr Eland: Clearly there will be significant differences in salaries in different parts of the economy. We are dealing with everybody from small businesses through to large businesses, so it will be variable. Clearly for somebody in our large business office who is dealing with a large company the difference could be significant.

  Q136 Mr Field: The better your officers are the more likely it is that they will be poached.

  Mr Eland: There has been movement between us and the private sector. It has not always been one-way. Particularly in the avoidance area, we have set out to recruit people from the top end of the accountancy profession to come and work and help us detect avoidance schemes and the like. The head of our tax practice at the moment is an ex-partner in one of the big four accountancy firms.

  Q137 Mr Field: As we are trying to draw general lessons from our inquiries in our report, might we have a note from you on not just how your bonus system works, if there are more details you want to give us, but whether on reflection you think that it could be developed?

  Mr Eland: Yes, we will be pleased to do that.[11]

  Q138 Chairman: Do you have any idea, and if not you can provide us a note, how much you paid out in legal fees to independent barristers and solicitors for the 69 prosecutions that you secured last year?

  Mr Eland: I do not have that number, no. I will let you have a note.[12]

  Q139 Chairman: I suspect that the people you were paying were charging a lot of money.

  Mr Eland: Yes, they do.

7   Ev 15 Back

8   Ev 16 Back

9   Ev 16 Back

10   Ev 16-17 Back

11   Ev 17-18 Back

12   Ev 18 Back

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