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.
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