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UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 886-vi House of COMMONS MINUTES OF EVIDENCE TAKEN BEFORE northern ireland affairs committee
organised crime in northern ireland
Wednesday 3 May 2006 MR JOHN MCGRATH, MR DAVE WALL, MS LINDA MACHUGH and MR JOHN NEVIN Evidence heard in Public Questions 359 - 479
USE OF THE TRANSCRIPT
Oral Evidence Taken before the Northern Ireland Affairs Committee on Wednesday 3 May 2006 Members present Sir Patrick Cormack, in the Chair Mr David Anderson Gordon Banks Mr Gregory Campbell Rosie Cooper Mr Christopher Fraser Mr John Grogan Mr Stephen Hepburn Lady Hermon Meg Hillier Dr Alasdair McDonnell Stephen Pound ________________ Memorandum submitted by Department for Social Development
Examination of Witnesses
Witnesses: Mr John McGrath, Head of Regeneration Directorate, Mr Dave Wall, Head of the Voluntary and Community Division (Charities), Ms Linda MacHugh, Head of the Urban Regeneration Strategy (Liquor Licensing), and Mr John Nevin, responsible for security fraud, including social security fraud, Department for Social Development (DSD), gave evidence. Q359 Chairman: Could I welcome you, Mr McGrath, and your colleagues. Would you like briefly to introduce yourselves and then we will begin the formal session? Thank you for coming in a moment or two early. There is not the likelihood but the possibility of a division in the House, in which case we would have to adjourn the proceedings for 15 minutes while people voted. I hope that will not happen but by starting early we hope to counteract that possibility anyhow. As we are starting at a quarter past three, we will aim to finish by a quarter to five, but we may not finish before five o'clock, it depends how things go. Mr McGrath: Thank you, Chairman; we are prepared for some interruptions. I am John McGrath. I am the Deputy Secretary in the Department for Social Development, responsible for urban regeneration, community development and also social policy legislation, including the two pieces that you are interested in. On my right, I have with me Linda MacHugh, who is the Director in charge of Urban Regeneration Strategy, who is responsible specifically for liquor licensing and has the detail on that. On my left is Dave Wall, who heads up our Voluntary and Community Unit, which has responsibility for the oversight of charities, and again is taking that piece of work forward. I think we have got some indication that the Committee might also have some issues in terms of social security fraud, medicine requests, and so on, and, while it is not strictly part of my remit, we have with us a colleague, John Nevin, who is Assistant Director in Social Security, who will be able to deal with those specific questions. Q360 Chairman: Thank you very much. You are all very welcome. We appreciate your coming. This is a part of a continuing inquiry into organised crime in Northern Ireland. You will know that we have seen the Chief Constable and many other leading figures from Northern Ireland and figures from the world of commerce and industry and you may well have read some of the published evidence that we have received. Some evidence we have received, by request of our witnesses, in private and, although obviously, by definition, that will not be published, we will be able to draw upon it in making our own recommendations and coming to our conclusions. We hope to be in a position to publish a Report to Parliament during the second half of June. There has been a little bit of slippage because of heavy Northern Ireland business on the floor of the House. We will be coming to Northern Ireland in connection with our inquiry again next week, and possibly a further visit in early June. That is the background. You will also know that when we received evidence from the licensed trade there was very considerable concern expressed at the suggestion that the 'surrender' requirement might be abolished, because it might make it easier for criminals, and especially those organised into the licensed liquor trade, which can be extremely lucrative. Perhaps you could tell us whether you are still taking this suggestion forward and, when you do that, perhaps you could just tell us how you are conducting your consultation, or have conducted it, and whether you started with very, very firm, fixed views and policies in mind, or whether you are genuinely open to persuasion as a result of the facts, figures, suggestions and indeed objections that are put to you? Mr McGrath: I wanted to make just a couple of opening remarks, Chairman, if that was possible, which helpfully would be in connection with the points that you flagged from the trade's evidence and then perhaps we could deal with questions. We forwarded memoranda on both liquor licences and charities to the Committee, and a couple of features I wanted to pick out which I think would be of particular relevance to this Committee and this inquiry. On liquor licensing, the current review was instigated in early 2004, following representations from the PSNI and the trade itself, including clubs. The consultation was launched on 1 November 2005 and it finished at the end of January. We are currently analysing the responses to the consultation and the Minister, David Hanson, plans to make a statement fairly shortly on how he intends to proceed, in terms of new legislation. Therefore, in those terms, you will understand that what we can say today relates largely to the rationale behind the current proposals. There are six objectives proposed to underpin licensing policy, but key among those is the prevention of crime and disorder. The Minister's proposals developed from close working between my Department, PSNI, the Northern Ireland Office, the Northern Ireland Court Service and the Department of Health and Social Service and Public Safety, and involved extensive pre-consultation with a wide range of interests, including the licensed trade, the retail trade, the tourism and hospitality sectors and registered clubs. The proposals will also have developed in the context of the Department's involvement in the Northern Ireland Civil Service Interdepartmental Working Group on Organised Crime, which is part of the overall architecture of the Organised Crime Task Force. The changes to the system are aimed at strengthening enforcement powers available to PSNI in dealing with problems in licensed premises of all types. They are designed to create a more open and more rigorous licensing system and a critical element of that is the introduction of a personal licence, which will be required by anyone wishing to run a licensed business. Anyone applying for a personal licence will need to prove that they are a fit and proper person to run a licensed business, including having adequate skills and knowledge of the licensed trade and a clean background. Therefore, in a sense it is a response to the point you made about the trade evidence. It is Ministers' belief that the package of measures in the round could actually make it more difficult for organised crime to enter the licensed trade, rather than easier. Q361 Chairman: Would you like to bring in your colleague? Before you do though, you talked about the Minister making a statement shortly. Are you expecting that during the course of the present month, or is it just a question of before the House rises in July: what is the time-frame? Mr McGrath: We are currently actively working on this. I think that 'shortly' would be before the House rises in July. That is the intent at the minute. Q362 Chairman: Thank you very much indeed. That is very helpful. Ms MacHugh: We mentioned concerns about 'surrender'. In framing the proposals, our Minister was not given ever any evidence to suggest that removing surrender would increase the potential for people to enter the trade with an organised crime background, and that includes evidence from PSNI and indeed the trade, there simply was not any. Surrender in itself has been effective in capping the overall number of licences in Northern Ireland, but it does nothing to control either where licences are used up in businesses or indeed who opens businesses. Because the number is capped, it has actually created a market for licences, and at the moment that stands at around £140,000 for a licence; so actually, at the moment, to buy a licence to surrender, what you need is money and it could be argued that is probably not in short supply for anybody in organised crime. Q363 Chairman: Can I ask, to get this absolutely straight on the record, what you are saying is that, regardless of the cost of any premises that may be involved, the actual piece of paper itself has a value, a tradeable value, of around £140,000 sterling? Ms MacHugh: Yes. That is not set by Government; it is set by the open market. That is not to say that all you need to operate premises is a licence, you have got then to take that to court to surrender it, but the licence surrender in itself is not a means to control the trade. Q364 Chairman: If you were selling a licence and I wanted to buy it, regardless of all the other considerations, I would not be likely to get it unless I gave you £140,000 sterling for that piece of paper? Ms MacHugh: That is the going rate, as we believe, at the moment, although that obviously increases and decreases. As I said, the surrender does not itself control the trade. What we are proposing now is a two-tier system of licensing, so there will be licences for premises and also personal licences. In order to get a premises licence, you will have to apply to the local council; this is in 2009, after the Review of Public Administration. To get that licence, you will have to produce an operating plan, which will demonstrate how you intend to run your business in the premises for which you are applying for a licence and how you will meet the six licensing objectives that we have set down, one of which includes the prevention of crime. It will also include how you mean to operate your business in terms of security, so the door staff and all of that. You will also be required to have a personal licence, and to get that you will have to prove that you have the skills and knowledge to run a licensed business and also that you are a fit and proper person to run that business. That is a new thing; up until now there has not been a personal licence system in Northern Ireland. Q365 Chairman: Are there factors that will automatically disqualify, such as criminal convictions? Ms MacHugh: These are still proposals, so as and when the Minister has made his final decision we will be working closely with PSNI to make sure that we have the best system, particularly on the personal licence side of things, to make sure that there is a robust system in place to check people's backgrounds. Q366 Chairman: Will there be a charge made for that? Ms MacHugh: That is still something that we need to work out. There will be a charge for the premises licence, and for the personal licence there may be a charge but that is some of the detail that we will work out as and when the Minister decides he is taking this forward. Q367 Chairman: Those publicans who currently have a notional £140,000 in their back pockets will find that disappears when this new system comes in? Ms MacHugh: If it goes ahead, that is the case. Q368 Chairman: There will be no value at all for the publican who is retiring, who has become ill, for what reason who is getting out of the trade, there will be no value in the licence, in that piece of paper we talked about, if this new system comes in? Ms MacHugh: No. Chairman: Thank you very much indeed. Q369 Mr Campbell: Just on the surrender issue, if I could pursue that somewhat. The Committee, in carrying out the investigation, received some evidence from the Drinks Industry Group and a number of other groups, including the Chief Executive of the Federation of the Retail Licensed Trade. She argued very strongly against the abolition of surrender because - our sessions are in the public domain - that then produced a very robust response from the Federation of Licensed Clubs, which is very much in favour of the proposal to repeal. Do you see the situation as having evolved in recent years? It appears to be one section of the licensed trade, whether it is a commercial club or any other, are very much in the camp of retention and another section are not. Ms MacHugh: I think the Federation of the Retail Licensed Trade are probably in quite an invidious position because they do have to protect the commercial interests of their members. I suppose this is the worry about organised crime. The clubs obviously have an interest in seeing the very strict Accounts Regulations that are in place to monitor the financial controls on clubs, they have a vested interest in seeing that is abolished. I can understand why you got very different responses from both camps. Q370 Mr Campbell: Both of them obviously have commercial interests which they will seek to defend. How can we, as a Committee investigating organised crime, come to a definitive conclusion on the proposals about which way is more likely to impact on the threat of organised crime in some clubs, and a very small number of clubs? Ms MacHugh: Bear in mind, the surrender principle does not apply to clubs. The clubs licensing system is different, so you need to surrender your licence if you are going to open up a club or a hotel or an off-licence. With clubs, you may be referring to the Accounts Regulations, which we are proposing to relax. They were instigated at the request of the RUC, back in 1996/1997, in direct response to a concern that they had about the financial controls on clubs and the potential for that to be used as a front for some criminal activity. Since 2004, PSNI have given us evidence that they believe this is no longer required. Post‑1996, PSNI have got a very rigorous system of enforcement and control and it is PSNI's view that has resulted in a much more robust and comprehensive system in most clubs and that the Accounts Regulations now are not required. It is actually at the PSNI's request that the Minister is now considering relaxing these Regulations. Q371 Mr Campbell: What is the body of responses that you have got thus far on the surrender issue? Ms MacHugh: The body of response on surrender, there has been a lot of support for keeping surrender. I have to say, most of that support has come from the licensed trade itself. Q372 Chairman: Do you suspect that is because of this notional £140,000? Mr McGrath: I think, Chairman, it is not a notional figure, it is a value, and, as my colleague was saying, it is an understandable position of the Federation that they have a vested interest in those, as such. Q373 Chairman: I was not going to suggest that there is anything wrong in this. It is perfectly legal to trade this at the moment, without breaking any laws or regulations. Clearly, if there was a threat that somebody who may have spent 30 or 40 years as a licensee and believed that he, or she, had got to put towards his, or her, retirement fund a piece of paper which he, or she, can sell for this sort of money - it is quite a large sum of money - and thinks that is under threat, of course they will take this line. Is there any sort of compensation during that transitional period, or not? Ms MacHugh: The Minister will be looking at all possibilities before he makes a statement. Q374 Chairman: He will be looking at compensation as one of those issues that have to be faced up to? Mr McGrath: He will be taking into account the points made about that. I think the issue is about distinguishing between small licence-holders and that as an asset perhaps on their books. Although perhaps when originally they required the licence they did not have to invest that sum of money, and licences held by larger conglomerates and how they are accounted for perhaps in their books, there is a range of options within that. Ms MacHugh: I think the other point to bear in mind is that we are not planning to introduce legislation immediately. Certainly the surrender element of it would come in post-RPA, which would be at least 2009, possibly 2010, so there would be a period of grace in which any business could adjust financially to any negative impact. Q375 Stephen Pound: It used to be that you could not drive a taxi-cab in New York without what is called a 'gold medallion', I think which were issued round about 1890 and had a notional value of ten dollars but sold for $20,000. They varied in price constantly and now are used as a mechanism for regulating. How does that £140,000 vary; is that a historic high, is it a low, do you have any data on it? Ms MacHugh: It is a historic high. A number of years ago it would have been about £15,000 or £20,000. Q376 Stephen Pound: Roughly how many years ago? Ms MacHugh: I think maybe ten or 15 years ago. Stephen Pound: What? I wish I had bought one. Q377 Chairman: I take it, you are not declaring an interest? Ms MacHugh: It is interesting to note that since the Minister announced the consultation the cost has actually gone up. You have to make a judgment, I think, when you buy a licence, at this point, are you going to get a financial return on that licence over the period in which surrender is still required, and it has to be a commercial judgment. Chairman: This is really exciting the Committee. Everybody wants to come in. Q378 Stephen Pound: Is there a cap on the number which can be issued? Can any new ones ever be issued? Ms MacHugh: Not under the current system. Q379 Stephen Pound: So it is the scarcity value? Ms MacHugh: Yes; that is the way the market runs. Chairman: Like Canalettos. They are not as pretty. Q380 Stephen Pound: Not exactly but I know what you mean. Can I say, just to pick up another point, and I am reluctant to weigh in behind any slogan of "no surrender," you mentioned, Ms MacHugh, earlier on, that after 1996 the PSNI and I cannot remember the exact words but you said they adopted a more robust role. Was that an operational decision, was that the result of statute, or was that some procedural change perhaps generated by your own Department? What was the basis for that change in direction? Ms MacHugh: The Regulations set down very strict controls over how clubs dealt with money on the premises. They also had to send in annual accounts to the local police station every year. That was followed up, on an annual basis, by an on-site inspection by police, and potentially one or two other, smaller inspections, and they could just walk in and do that. Q381 Stephen Pound: So this is a result of statutory changes? Ms MacHugh: Yes. Q382 Stephen Pound: Which piece of legislation was that? Ms MacHugh: It is the Clubs (Accounts) Regulations 1997, which followed on from the Clubs Registration 1996. Q383 Mr Anderson: Can you give us some idea of the size, of how many licensed premises there are? Ms MacHugh: There are just under 1,900 pubs and off-licences, and I think there are around 540 clubs and there are about 400 others, so that will be some hotels, guest-houses and other premises in which you can buy alcohol. Q384 Mr Anderson: There is an element of compensation we would be talking about here? Ms MacHugh: Yes. Q385 Chairman: According to Ms Carruthers, we would also be talking of one community particularly, because she did make the point in public evidence that most licensees were from the Catholic community; is that right? Ms MacHugh: That would be the pubs, yes. Q386 Chairman: You would not dispute that? Ms MacHugh: No. Q387 Lady Hermon: May I get one point absolutely on the record. The PSNI chose this rule about the Accounts Regulations. Can I just get it clear whether in fact there is a conflict of view coming from the PSNI in relation to the surrender value of these particular licences; does the PSNI support the abolition of the surrender requirement? Ms MacHugh: Yes. The PSNI has been very supportive of the complete package of measures that our Minister is proposing. Q388 Chairman: With or without compensation? Ms MacHugh: With or without; I do not suppose compensation would be, I am sure that PSNI would be - - - Q389 Chairman: No; we want to get this on the record? Ms MacHugh: Deputy Chief Constable Paul Leighton said that the package of measures was a responsible balance in forward thinking and they have been very supportive of the whole of the proposals throughout. Q390 Chairman: We shall be pursuing the finance issue on Monday, when we are likely to discuss this with them. Ms MacHugh: Bear in mind that the proposals also give PSNI much greater enforcement powers than they had before to deal with the premises that they are worried about, and there are some rogue traders. Q391 Lady Hermon: Would you like to elaborate on the greater control that they will have? Ms MacHugh: At present, it is actually quite difficult to close down premises or to penalise premises which continue to break the law, in terms of, say, serving under-age drinkers, so we are planning to introduce a penalty points system, temporary immediate closure powers for the police, if they have a concern about a situation developing in a particular premises. Q392 Lady Hermon: Including powers if they suspect that there is paramilitary activity and criminality, where they will have the powers obviously to go against those other pubs or clubs? Ms MacHugh: Yes, and obviously they would need evidence of criminal activity and there would be greater powers to either suspend or revoke licences. Q393 Mr Grogan: You said there was going to an imminent statement from the Minister, or a statement soon anyway; there is a hint in what you have said and indeed in the memorandum of what might be in it. Just to check, as I understand it, on timing, that you have drawn a distinction between the proposals regarding opening hours enforcement, children and Registration of Clubs (Accounts), which in your memorandum you suggest might even come in this year. Then the other measures to do with bringing in councils, and so on, and their surrender principle, changing that, that would be 2009. I had a letter from the Minister, David Hanson, dated 19 April, when he told me that the Secretary of State and his ministerial colleagues in Northern Ireland look forward to a local Assembly being in a position to legislate on liquor licensing matters. He said the introduction of proposed new legislation is still some way off, and "I can assure you that I will consider all the views received before firming up proposals for the draft legislation." Is the Department saying that this will be left on the table until hopefully by November the Assembly will be up and running, or has the Minister powers to enact the proposals, which in your memorandum you say will come in in 2007 without fresh legislation: how is it going to work? Mr McGrath: I think the Minister's general position is that they would hope the Assembly would determine a lot of these matters, that they would be dealt with on a local basis. I think that is recurrent in every issue we deal with at the moment. The stratagem whereby there would be two sections to this legislation, the second one because it is linked to transferring licensing to local authorities, there would be new local authorities coming into being as a result of new public administration, necessarily creates a different time-line there. That could create the potential, indeed the hope of Ministers is that particular piece of legislation would be dealt with by the Assembly, if it returned. The Minister, as Linda said earlier, is looking at the whole package and the timing of legislation at the minute and his statement will indicate how exactly he wants to take those forward. Q394 Mr Grogan: The first tranche of measures which in your memorandum you say could come in this year, would that require primary legislation, or has it got ministerial powers? Mr McGrath: Yes, it would. Ms MacHugh: This year, I think we are talking about 2007 by the time the legislative process will get through. Chairman: So it will be for the Queen's Speech. Q395 Rosie Cooper: Notwithstanding the subject of surrender, how similar is the proposed licensing system that you outline to the system which is being used currently in England, which is very, very regulated and has served us well over time; how similar is it to that? Ms MacHugh: It is similar but I think it differs in a number of very key areas. The first obviously is that we are not moving to 24-hour drinking, we are having much more curtailed hours. Secondly, as I understand the system in England, a licence is awarded unless there is objection. The system we are proposing in Northern Ireland will be much more proactive. Councils will have to seek the views of key stakeholders from the area, including local residents, the PSNI, local traders and anybody else with a vested interest in looking at how licensed premises are controlled in that area. It will be much, much more proactive and it will not be based on some sort of negative equity but unless there is an objection it will go forward. You will have to actually prove that (a) the premises are required and (b) that the person applying for that is fit and proper. Q396 Rosie Cooper: Do churches qualify as vested interests; would they be consulted properly, generally? Ms MacHugh: Yes, and it is likely that, for example, when local councils get committee planning powers and they look at what is happening in their whole area, this could be one element of it, where is it appropriate for licensed premises to be and what sorts of licensed premises should be in each of the areas. Q397 Gordon Banks: Just to take you back a little bit to talk about the 2,500/3,000 licences roughly which exist and the £140,000, £145,000, is still what they turn over for now, how many sales are there a year of these licences? Ms MacHugh: I do not have any specific figures here but if you would like them I can get them for you.*** Chairman: It would be interesting, yes. Q398 Mr Campbell: Mr Chairman, I just wanted to move on to the issue of 2009, under the present proposals of the RPA we have seven super councils, I think they are called, and they are given the power to enforce the new regime post-2009. Given that there will be new councils, with a completely new local government regime, completely transformed since 1973, will there be any oversight of the councils enforcing the new regime? Ms MacHugh: Yes. In fact, each council will be required to produce a licensing policy statement, which the Department will have oversight of and I think the Minister of that Department at the time. In that, again, they will have to highlight as a council how they plan to meet the six licensing objectives which underpin all the licensing regulations. Q399 Mr Campbell: What will happen? You will be aware, in a different context, of similar concerns on the RPA, but let us say that there were one, or two, or even three councils and their political control was such that their approach to matters of law and order and co‑operating with the police was ambiguous, to say the least, if not outright oppositional, what would happen in that circumstance? If there was some suggestion about misgivings about the allocations of licences, a council's duty was to enforce the law and there was a concern that the council was not being rigorous in pursuit of the law, in terms of the pursuit of certain licensed premises, what would happen in those circumstances? Mr McGrath: Each council would have to show it was addressing the six underwriting objectives. Clearly, Ministers want a system whereby each council can perhaps have some flexibility, otherwise you would have just a uniform system, but equally we would not envisage that any council, in a sense, would jettison any one of the objectives, one of which was about preventing crime and disorder. Q400 Mr Campbell: Yes, but let us say that councils sign up to the six principles, in theory, and they are quite happy and say that they support that, and the problem then becomes evident, post-signing up to that, the practical outworking of councils monitoring the new regime? Mr McGrath: What I meant, Mr Campbell, was that they would have to demonstrate, they are not actually principles or objectives, that they are addressing those objectives in how they discharge their licensing and monitoring function, not that they would say simply, "We support these general six principles, but." Therefore, if they were not addressing those in how they agreed licences, monitored and evaluated them, whatever, they could be open to challenge, they could be open to legal challenge because they were not doing their duty under the law. It would not be enough that they would just be lax on that. Q401 Chairman: This would be within the context, you hope, of a wholly devolved responsibility, is that right? Mr McGrath: This would be in the context, Chairman, of seven, new, significantly enhanced and better laws. Q402 Chairman: Yes, I appreciate that, but also you are assuming it would be in the context of a Northern Ireland where there was a functioning Assembly and an Executive? Mr McGrath: This would envisage they would be giving these reports and the oversight would be to a devolved Minister for Social Development, or whoever, of that day. Q403 Chairman: The Secretary of State would not have a role and this Parliament would not have a role, this would be wholly devolved within Northern Ireland? Mr McGrath: That is right; yes. Q404 Mr Campbell: Just to be clear, in the eventuality of post-24 November there is not devolution, and while we are working towards that, in any case, if that was not the case and in 2009 it was not the case, local councils, the nine super councils, would still have responsibility? Mr McGrath: If the legislation went forward they would still have that responsibility and would still have to report to the Department, and if that was headed by a direct rule minister of the day he would be exercising oversight. Q405 Mr Campbell: If there was a problem with a council or councils, after having signed up to the objectives, in the implementation of those objectives, it would then be the responsibility of whom to oversee that council and ensure that they did what they were supposed to do? Mr McGrath: It would be the responsibility of the department, whatever department it would be, anticipation of any further changes, and the minister of the day, whether direct rule or devolved, would exercise oversight and exercise such interventions that might be set out in detail in the legislation when that was brought forward. Q406 Dr McDonnell: I want to take you back, I am very grateful for the information, I am absorbing it all, but I must say that there is a very strong feeling out there, coming from right across the community, that "if it isn't broke, you don't fix it," and the perception is that "it isn't broke." What I wanted to come back to was the accounts and the regulations which you touched on, because the required regulations brought in in 1997 but then by 2004 it appears that those regulations had worked so well that all the clubs were adhering to them and were pristine clean. Is there any evidence from the PSNI or otherwise, clear-cut evidence, other than hearsay, that the accounting procedures were dramatically improved; have we any black and white evidence? Ms MacHugh: We have relied, and the Minister has relied, on evidence from PSNI and their evidence is that there has been an improvement and that the Accounts Regulations are now onerous, too onerous. What we are proposing is that we replace statutory regulations and statutory guidance, so it is not as if we are suggesting that clubs can do what they want with their finances, there will be statutory guidance. The other thing to bear in mind is that they will also fall under the Revenue and Excise's revenue traders legislation, which applies to anyone handling goods against which there is an Excise duty, whether they are retailing it or wholesaling it, or whatever. That will be the minimum standard that we will start to work the statutory guidance should the Minister decide to go ahead with this. The other thing I should say is that any new clubs coming along must serve a dry year before they are allowed to serve any form of alcohol, and that is to give PSNI an opportunity to monitor how the club is run. Q407 Chairman: Have a dry year? Ms MacHugh: Yes. Q408 Chairman: So only teetotallers are allowed to go in the club for a year? Ms MacHugh: Yes. Q409 Chairman: There is going to be a whole change of clientele then, is there not? Ms MacHugh: These are for new clubs that are created. Q410 Chairman: Yes, I know. I am thinking if a chap wanted to start a new club for his bibulous friends and is not allowed to admit them for a whole year? Ms MacHugh: That is the situation in Northern Ireland at the moment. Chairman: Those who castigate it as the devil's buttermilk will have a field-day for a year. Q411 Lady Hermon: You are saying that is the present position? Ms MacHugh: That is the present position and we are certainly not abolishing that. That will remain as another safeguard. Q412 Dr McDonnell: Can I probe a little further, because I have a couple of other bits I want to ask you. Were these improvements registered across every single club or were there some clubs which failed to meet the improvements on a foul night of the credibility net? Could you give us again, at the back of last year, the police evidence? Beyond the accounts, do you yourselves have any evidence, beyond police evidence, that it is a good idea to repeal the regulations from 1997? Mr McGrath: I think there is a general recognition, on another day, the evidence you got from the Federation itself quoted that the vast, vast majority of registered clubs are run perfectly well and properly, as it should be. Therefore, I think we are talking of only a very small minority, and that is commonly agreed, where there will be difficulties. The view of the police while they were involved in the work leading up to the proposals, they were closely associated with the launch. The comment that we have had back from the police on the documents themselves, if I can just quote from that, is: "The Registration of Clubs (Accounts) Regulations (NI) 1997 were introduced to help the Police Service tackle financial mismanagement in clubs. Taking cognisance of the now existing improved accounting arrangements, we have since 2004 been promoting less prescriptive and burdensome arrangements. We therefore support the proposal to revoke the financial controls and accounts formats and introduce best practice guidance in their place." I think, on that sort of issue there, we have to take a steer from the PSNI and their perception of where the balance of resources and scrutiny should fall. Q413 Chairman: That represents the view of the OCTF as well? Ms MacHugh: Yes. We had a very clear steer from Sir Hugh Ord's office that they were in support of the abolition of Accounts Regulations and a relaxation. Q414 Dr McDonnell: Is that the only evidence you have? Do you have any independent evidence coming through your own system to collaborate that? Ms MacHugh: No, we do not. Q415 Dr McDonnell: Can you tell us that these improvements included every single club, or are there some clubs still out there in a twilight zone? Mr McGrath: I think the general perception is that there are very few clubs in the twilight zone and the position is much different than it was when the current regulations were introduced to respond to the nature of the problem then. Clearly, there will always be some rogues in any sort of system and I think it is the balance, it is proportionality between the tools we are bringing to tackle the problem and in the end it is up to the PSNI to deal with that. The opportunity cost of their policing very rigorous requirements for a lot of clubs perhaps where there is not a problem, you know, if it is not broken or closed you do not need someone to check that it is not broken, it is a balanced judgment, and in that case we are guided heavily by the PSNI's view on this. Q416 Dr McDonnell: We know that the Organised Crime Task Force initially had a reservation about the change. Would you care to tell us anything about how you modified that, or how you persuaded them, in terms of relaxing the regulations? Mr McGrath: The memorandum refers, there were some issues raised and we work very closely in the context of the Organised Crime Task Force, that they would rightly be raising the issues here. If these were introduced to crack down on financial mismanagement and obviously the scope for rogue elements to get into the trade, in a sense, they were doing an element of crime-proofing, testing whether the proposal we were doing was going to let the flood-gates open. At discussion primarily with the PSNI and the representatives of the Task Force, they were satisfied that, in fact, the police view held sway and that this was not a relaxation which would cause any significant difficulties at all. There are no concerns from the Organised Crime Task Force, in this overall architecture, about this proposal. Q417 Dr McDonnell: Just on another point maybe to move slightly to the accounts, have you any evidence, or could you share any evidence, that clubs are used aside from a money-laundering concern for retail outlets, for counterfeit goods; that is another concern that we have? Have you much evidence of that? Ms MacHugh: Do you mean counterfeit alcoholic goods or any types? Q418 Dr McDonnell: Both; everything. Alcohol, yes, but other things, cigarettes, you can come in with all sorts of things, even DVDs, and things like that? Ms MacHugh: Again, the regulations deal with clubs that sell alcohol and it is the alcohol retail part of the business that we are particularly interested in. In all our discussions with both PSNI and members of the Organised Crime Task Force, that has not been raised with us. Q419 Chairman: Are you absolutely confident that if the new regulations that are proposed come into force clubs throughout Northern Ireland will be honestly and properly run, adequately supervised and unable to take part in the sort of nefarious activities that it would seem a small minority take part in at the moment? Therefore, that the new system would be more protective of the whole community than the current system? Ms MacHugh: I think that under the new system clubs will have to follow statutory guidance; so, as I said, it is not as if they have no regulation. Secondly, they will also come under the enforcement regulations that we are bringing in for all types of licensed premises, so there will be other checks and balances in that part of the licensing legislation that will also impact on clubs. Q420 Chairman: So your answer is yes? Ms MacHugh: As sure as one can be in these situations. If you bring in any laws, it does not really say there are not going to be people out there breaking them. Q421 Chairman: No, but what has really changed for the better, you are confident that the changes you are advocating will be for the better? Ms MacHugh: Certainly, PSNI feel that this is a system - - - Q422 Chairman: We are not asking that at the moment. We are asking you if you are confident that what is being proposed will be for the better conduct of these establishments and therefore more conducive to a harmonious community than what exists at the moment? Mr McGrath: Chairman, as I said at the start, I think in the round Ministers believe that these proposals are addressing the six overall objectives, but specifically are not going to increase the scope for organised crime to make access to the licensed trade, in the round; as Linda says, indeed additional requirements for clubs as they come to the overall system and netting off then the relaxation of their specific Accounts Regulations. Q423 Mr Fraser: With regard to the proposed monitoring scheme, I am slightly confused about how you are going to check the people complying with the scheme and what happens and what the consequences will be if they do not actually comply with the scheme? Mr McGrath: If local authorities do not; obviously, that is an issue that we are looking at, in terms of the roll‑out. We will be placing a duty and a responsibility on local authorities, one of a number which they will inherit under the Review of Public Administration. This will not be the only area where they will be taking on duties and responsibilities. The detail of the legislative proposals, the Minister will want to strike a balance between showing proper oversight and not actually having a heavy hand of Government coming second-guessing. Q424 Mr Fraser: With regard to the repeal of the financial controls and regulation, will not that encourage more activity of the kind described just now by Dr McDonnell, in terms of the counterfeit smuggling of alcohol and cigarettes? Mr McGrath: I think the difficulty is our interest in the Department is in liquor licensing and the control of alcohol. If the premises had been used for storing counterfeit goods, it is not an area that we were cognisant of and it is for the PSNI in general, and other issues within the Organised Crime Task Force, to deal with, as a general issue about counterfeit goods. I am sure it is an issue which would be touched upon by PSNI in general terms. In a sense, we are unsighted on that issue. Q425 Mr Campbell: Just on this issue, is it possible or do you have any evidence from the police or within your Department to give us an indication of the scale of these types of problems, whether it is problems with Accounts Regulations on irregularities, or this issue about counterfeit goods? Is there any concept of the scale of the problem; has it started, is it getting worse, is it confined to the 1% or 2 % of clubs, or is it much more widespread? We are talking in a rather nebulous forum. We have heard discussions on the grapevine for years but I do not think anyone has ever said "This is the scale of the problem and it is getting worse," or it is getting better, or it is largely negligible, and has not changed. Is there any way of establishing that? Mr McGrath: I am sure we would have information about breaches of the Accounts Regulations and that could be provided.*** In a sense, we do not have any information about the sale of counterfeit goods in general; that would be an issue pursued by the PSNI. I am sure there will be elements within the Organised Crime Task Force architecture. Q426 Chairman: Do you think you ought to be rather better informed before you make these proposed changes? Mr McGrath: I think, Chairman, our view would be whether or not somebody is selling counterfeit goods beneath the table or on a table in a pub or club, in a sense, is disconnected from the issues we are dealing with about licensing the clubs to sell alcohol. In the same way, a shop could be selling counterfeit goods. Q427 Chairman: If you are drafting laws, the object of which is to make things better, ought you not to have a better grasp of how bad they are before you decide to make them better? Mr McGrath: Our laws, we have a remit for, are about liquor licensing. What I am saying is that the other elements of the corpus of public legislation should deal with the issue of counterfeit goods; it is just not within our remit to be dealing with that. That is the only issue I am trying to clarify. Chairman: We may wish to come back to this, but thank you very much indeed. We have had a good run around on the booze; let us get to the charities. Lady Hermon: A fascinating area of the unregulated business of charities. Chairman: Never has this Committee been so interested in booze. Q428 Lady Hermon: Charities in Northern Ireland. I am not going to speak about booze. I am going to speak about charities. Let me just quote, and this is to Mr Wall particularly, and I may say Dave instead, if you do not mind. You will be familiar, I am sure, with the IMC Report, which highlighted, and let me just quote from their Report, obviously this is the IMC speaking: "We have been struck by the limited controls over charities in Northern Ireland. We have heard frequent allegations that this has facilitated the activities of paramilitary groups by making possible the illicit use of money and the diversion of funds obtained from crime." I am quoting from paragraph 5.20 of the Report, published I believe in November 2004. Why, in heaven's name, has the Government been so desperately, desperately slow to do anything to block this loophole? Why has it been tolerated for such an awfully long time? We are now in May 2006. Would you like to brief us on the changes since the IMC Report? Mr Wall: You will be aware, I think, that there was a review of charities legislation in 1996. I was not involved at that stage but, from reading the documentation, it was clear that the issues that we are all now very aware of were not issues for that review, and there was no established, clear way forward in 1996. There were no stakeholders who were arguing for the very obvious changes that are now required. Q429 Lady Hermon: Were other changes made after that review? Mr Wall: No; certainly not in terms of the regulation of charities. You are quite right and the IMC Report is quite right that, even compared with the rest of the United Kingdom, the regulation of charities in Northern Ireland is extremely light and does need change, particularly in the light of the concerns which IMC have raised and particularly in the light of the concerns of the Organised Crime Task Force. Q430 Lady Hermon: That is the sum total of what you are going to tell the Committee? Mr McGrath: No. I think that is an answer to what is going on in Northern Ireland. Q431 Lady Hermon: I am sure that you will know that, in fact, the Committee did take recent evidence from a member of the IMC, who indicated that this was still a serious problem. Could you just explain to us how it has been that, in fact, we have an Independent Monitoring Commission which made it quite clear that both the Irish Government and the British Government should have undertaken reform in this area? I am repeating myself here; that was a recommendation made in November 2004, we are now sitting in May of 2006. What, in heaven's name, has the British Government done since then? Why is it trying to skate over this issue? Mr McGrath: To be clear, we have monitored over recent years the need to change legislation but also actually to get some clarity about how to change it, and taking account of developments in England and Wales. We have also had to take account of developments in terms of regulation of charities in the Republic to ensure that the border was not used as a sort of mechanism to help some of the difficulties we have talked about. We published proposals last year for consultation. Again, those proposals were developed with PSNI and the Revenue and Customs and the Northern Ireland Office, and the point of that was to establish a strong and visible regulatory framework to increase public confidence in charities and to reduce opportunities for abuse by criminal elements, for clearer control. Central to these proposals is the establishment of a Charity Commission with more comprehensive regulatory powers than the existing Commission for England and Wales. The advantages Northern Ireland has are that not only can it see how things are operating in terms of Great Britain but can tweak and perhaps enhance some of the mechanism chosen or address some of the weaknesses there might be. Again, the Minister's intention is to publish shortly draft legislation to take forward putting in place a stronger regulatory framework, which I think is generally accepted is needed and would be in response to the concerns of the IMC, among others. Q432 Chairman: Can you again define "shortly"? Mr McGrath: Hopefully, again, before July. Q433 Chairman: Does "hopefully" make it stronger than "shortly"? Mr McGrath: The intention is to publish a draft proposal for legislation before July, Chairman. Q434 Lady Hermon: Does the Department make any effort, or has it made any effort, in this review, to quantify the problem in terms of the amount of money that could be siphoned off by charities, or the bogus charities, by paramilitary organisations, of whatever description, whether it is more prominently done by Loyalist paramilitaries or indeed by Republican paramilitaries? Is any effort being made to capture that sort of evidence? Mr Wall: As part of our review, we had detailed discussions with both the PSNI and Inland Revenue and we asked the questions that you asked. The evidence that we got back was anecdotal. The police and the Inland Revenue were both of the view that there was a clearer significant risk in terms of the current legislation. PSNI do not keep records on cases or on the value of fraud. Q435 Lady Hermon: Would it help if they did? Mr Wall: Yes, it would, and we think that the new mechanisms that we will put in place will enable that to happen. The Revenue did identify, again anecdotally, some specific cases. They identified that they had some cases where charities had been set up as vehicles for tax avoidance and that sham charities had been established to avoid stamp duties, and that one charity had been set up to receive large gift shares, which attracted 40% tax relief. They estimate that has a cost of £14 million and that case is currently under investigation. There is currently no formal record-keeping across agencies, in terms of the risk that is posed by the lack of regulation. We hope to correct that under the new requirements and under the new systems that we will establish. Q436 Lady Hermon: Do you think the Department has been rather negligent, when this problem has been highlighted years and years ago, that in fact it is only now that legislation is being passed actually to tackle this negligence? Mr Wall: No. As Mr McGrath indicated, we began to look at the review of legislation again in the year 2000. You have to look at this in the context of changing regulation across the whole of the UK and it is important that the Northern Ireland regulatory system does tie in with the other parts of the UK, particularly in terms of sharing information across different regulators, because that will be an element in successful regulation and control of crime. That was a factor. It is only in the last three years that there has been strong evidence, the IMC Report is one of them, about the need to implement changes in terms of controlling organised crime and paramilitary involvement in charities. Mr McGrath again outlined the timetable as regards that. I think we have pursued that matter as robustly and quickly as we can, in the context of those competing demands, effective co‑ordination of regulation across the UK and dealing with the specific issues in Northern Ireland. Q437 Chairman: Six years is dealing with it urgently? Mr Wall: The issues as regards control of crime and organised crime have only emerged, certainly were only presented to the Department when we set up the advisory group to look at the review of legislation, which was two and a half years ago. Chairman: Even so, during that time, an awful lot of money could have been misappropriated by an awful lot of charities, or bogus charities. Q438 Lady Hermon: If I can just follow on from that point, Mr Chairman. I am sure our witnesses will be aware of the Report of Professor Ronald Goldstock, who was a Government appointment, came very highly recommended and had a very high profile indeed, who did report in January of 2004, over two years ago. He recommended the use of an Independent Private Sector Inspector General within both the construction industry and for the regulation of charities. Why was no consideration given, or has any consideration been given by the Department? Mr Wall: Yes, we are aware of that and we have given consideration to those recommendations. The examples cited all relate to private sector situations where the victims are in fact in the private sector. In the charities field there are a number of differences. One is that the organisational victims, of course individual members of the public are victims in terms of the money they may donate to a charity which is behaving criminally, but organisationally the victims that we have identified would be the Inland Revenue and tax collection. Also, the charity sector in Northern Ireland is very fragmented and by its very nature is really not conducive to that private sector model. We think that the proposed Charity Commission will provide the required regulation, it will have independence and it is a model which is the result of widespread consultation, we had more than 100 responses to our consultation, and there was widespread support for that model. Q439 Rosie Cooper: I think Lady Hermon has covered a lot of this area, but there are some questions I would like to ask. How many organisations do you know of for taxable purposes have charitable status? Mr Wall: As you may be aware, the current regulation for charities, effectively, is through the Inland Revenue, and the Revenue indicate that they have 3,000 organisations on their database. In the last year, we have established a funding database, in the Department, for organisations, voluntary and community organisations that are funded through Government. We have now 6,000 organisations on that database. We are operating on the assumption that there are likely to be somewhere between 7,000 and 9,000 organisations which will be registered as charities once we establish the Charity Commission, because there is a range of other bodies at the present time which would not appear on the Inland Revenue database and do not appear on the Government funders database. For example, churches would run a wide range of youth provision which would not receive Government funding, nor would they have charitable status, at the present time. We are operating on the assumption that we would need a register of 7,000 to 9,000. Rosie Cooper: I think most Members would agree that we were quite astounded to find that Northern Ireland did not have a Charity Commission. I have had to do quite a bit of work with the Charity Commission over time and even I would want them to have stronger powers here in England. I have to say that I hope that whatever the Minister brings forward is a lot stronger, because nothing that I have heard today would make me feel there is any great hope that this will really be wrung out and sorted out. I suppose my natural questions will be operational, in the sense of how do you propose to set it up, how many people will there be, how much money will be put into it, how strong will it be, what will be the regulatory force behind it? How will we know that what you propose, the strategies that you have got, will deal with identifying money that is going through paramilitary activities in these charities? If you have taken nine years, almost ten years, and we have not got very far, how are you going to swing into action now with any force and real relevance, and are you going to put enough money and enough strength behind it, because I fear, unless you do that, then this is a waste of time? Q440 Chairman: There are a lot of good questions there. Give us good, comprehensive answers that will convert us all to be absolutely convinced that you have all the right solutions and you are going to implement them with the vigour and urgency that should characterise people charged with this duty? Mr Wall: I will do my best, Chairman. The quickest way to identify that is the ways in which we envisage the powers of the Commission being different from the powers of the Commission in England and Wales. Currently, the Commission for England and Wales does not cover all charities, it covers, as I understand it, only about 60% of the sector. Some of those, schools, for example, perhaps will not be considered to be high risk, but small charities would be probably one area where there could be the establishment of sham charities and the need for broader regulation, so we are proposing that all charities will be subject to registration, regardless of size. Secondly, there will be a public benefit test in the Northern Ireland regulation which the Commission will apply. The third and perhaps most important in terms of your concerns as regards financial control, there will be much more rigorous accounting standards that will apply in terms of regulation of charities in Northern Ireland. Currently in England and Wales charities which spend over £90,000 per annum have to declare their full accounts and only where they have a turnover of over half a million pounds do they have to carry out a full professional audit. Under the proposals that we are putting forward, all charities will be required to produce evidence of their accounts. For those spending less than £10,000 a year, they will have to produce an independent examination of their accounts. For those between £10,000 and £100,000, they will have to produce full accrual accounts plus independent examination; and for those spending in any one year more than £100,000 they will have to carry out a full professional audit. There will be a regulatory framework which will be much tighter, in terms of examining the financial probity of registered charities, all registered charities. Q441 Chairman: How soon can all that become operative? Mr Wall: According to the timetable we have at the minute, we are hoping to commence the establishment of the Commission next year. I would hope that we would have the Commission operating fully as quickly as possible, and we will certainly be mindful as regards the concerns in terms of the control of crime. There is an issue, however, in that it will take a certain amount of time actually to get people on to the register. Q442 Chairman: Good people will be watching and listening with interest to your evidence, and all these vague descriptions of time are a little bit tantalising, so can you put some figures on as quickly as possible? We have got 'shortly' down, so we are making some progress, but when do you think the people of Northern Ireland can feel that if they give money to a charity they are indeed giving money for a charitable purpose? Mr Wall: It is intended that the Commission will be established in March 2007. I would hope that within 12 months we would have clear evidence of a Charity Commission operating which the Northern Ireland public can depend upon. Q443 Chairman: So give with great care until 2008 and then you can give with abandon? Mr Wall: One should always give with care, I trust. Q444 Rosie Cooper: How will the Charity Commission be alerted, other than via the accounts, which no doubt can be handled if you are sufficiently interested to make sure of that? In England and Wales they tend to wait for people to 'phone in, and we have looked at various task forces where the police do not notify each other, they do not go out proactively themselves seeking evidence of fraud. How will they operate, what will be the thing that starts an inquiry? Mr Wall: A public inquiry will be one route. We are establishing a regulatory forum, which will include the regulators across the UK but will also include the police and the Revenue. The legislation will also include gateways, in terms of sharing information between the Revenue and the Police Service and the Commission. Q445 Rosie Cooper: Will that be required, or will it be they find out about an organisation which they think is possibly not a charity and being used for the wrong reasons; will they be required to pass on that information to the Charity Commission and other organisations, or will it be just left in the air, they may do, they may not? Mr Wall: Are you talking about the police or the Revenue? Q446 Rosie Cooper: If the Revenue find out, will they be required to make sure the Charity Commission know, will they be required to pass it on to the police and the Organised Crime Task Force, or whatever; will that be required? I think it is really important, because otherwise some people will say it is perhaps not high on their agenda and it will just go by the by. Mr Wall: I think it will be clearly in the interests of the objectives of both the Police Service and the Inland Revenue, where crime is suspected, to share that information with the Commission, in terms of ensuring improved regulation and control of crime. Q447 Rosie Cooper: Is there a difference between 'in the interests of' and 'required'; that is the point I am trying to get to? Mr Wall: I would need to check the actual wording of the legislation, to give you an answer. I will provide that for you at a later date.*** Q448 Chairman: Perhaps it would be sensible to have a requirement for co‑operation with the Organised Crime Task Force, and perhaps you could take that one on board? Mr Wall: I will take that on board. Q449 Stephen Pound: Did you say seven to nine thousand, or 79,000? Mr Wall: Seven to nine. Q450 Stephen Pound: I was just working out in my head whether that was one charity for every 31,000 people; it seems to me a pretty extraordinary figure. There are a number of charities that I am personally involved in, like the RNLI and the Soldiers', Sailors' and Airmen's Families Association, which are UK charities, so even though they operate in Northern Ireland they are based in the UK. How many of those charities that you are talking about are ones which already come within the aegis of the Charity Commission because they happen to have their office of record in GB? Mr Wall: I have not got numbers. There are different kinds of charities in terms of the relationship with GB; some Northern Ireland branches, if you like, have more autonomy than others, as a kind of franchise. My guess is that we are talking in the hundreds, not above a thousand, a smaller number. Q451 Stephen Pound: I may say, I am just trying to reduce your workload here. Mr Wall: If a charity operates in Northern Ireland under the new regulatory system, they will have to register separately in Northern Ireland, but there will be administrative mechanisms to ensure that information is shared between the different Commissions to ensure that there is not too onerous an administrative burden placed upon charities. Q452 Stephen Pound: An organisation like Guide Dogs for the Blind, for example, or even Greenpeace, or whatever, if they are registered here, would still have to register locally? Mr Wall: They would still be required to register in Northern Ireland. Q453 Stephen Pound: Have you considered a case of 15 years ago? There was an organisation called the West Belfast Family and Children Support Services Group, which was in fact a front for the IRA, and a number of people in the part of west London that I live in gave money to this, thinking it was for the suffering children, and it ended up causing suffering to children. The people who gave that money were actually charged under the then anti-terrorism legislation, including someone rather close to me. Has that consideration come in, because it seems to me, if you have got even a partially unregulated system at the present time, it is not only the fact that the money is going to undesirable places but actually you are creating criminals here? Mr Wall: The new system will not be partially unregulated, it will be more regulated than anywhere else in the United Kingdom. Q454 Stephen Pound: That message to the potential donors would go out? Mr Wall: That is right and we are also introducing stringent controls in terms of public collections of monies, which will apply to all charities. Q455 Stephen Pound: Who will license the public collections? Mr Wall: The Commission will issue an authorisation for any organisation that wants to collect money publicly. The council then will have to issue a specific permit in terms of the specific collection that is intended. Q456 Stephen Pound: For street collection and on private premises? Mr Wall: No, not on private premises; for public collections. Q457 Chairman: I think it is very important that you do take on board the concerns of the Committee that the involvement, or potential involvement, of criminal elements, be they paramilitary-based or otherwise, must be dealt with by close liaison with the Organised Crime Task Force and other means. I am sure you do take all that on board, and I am sure that you also have some idea of the amount of funds that have been diverted to illicit use, so you know presumably the extent of the problem that you are going to be facing? Mr Wall: We are certainly convinced of the extent of the problem. I think the relationships that have already been established between the various authorities will enable us to build well upon that. I also think we have mechanisms to be able to measure the problem in future. Q458 Gordon Banks: Very briefly, because Lady Hermon somewhat stole my thunder on some issues I was going to raise. Going back to the Goldstock Report, which basically you said was not a pattern that you wanted, that you were looking for, do you see that there are any other sectors which could benefit from regulation in a way that Professor Goldstock did actually suggest; sectors such as taxi firms? Mr McGrath: I am not sure we have a view on that, to be honest. Q459 Gordon Banks: You do not think there is any other sector in Northern Ireland that could benefit from IPSIGs, if you like, that you would have an interest in? Mr McGrath: Our primary interest in terms of the Department, in terms of the sector, is the voluntary and community sector, which is actually a very vibrant and active sector in Northern Ireland. As a Department, there is not another sector that we have sponsorship or oversight of, apart from the licensing trade we have just spoken about and other elements in social policy. Q460 Chairman: This Committee has received evidence which would seem to indicate that a degree of regulation and licensing, for instance, taxis and road haulage, beyond what might exist at the moment would possibly be beneficial. Do you have a view on that? Mr McGrath: It is not within the remit of the Department for Social Development to comment on; again, we have no responsibility for it and I have formed no view on it. Q461 Chairman: Right; but that does not mean that there are not people who have strong views on that, absolutely? Mr McGrath: No; and that is a point maybe to pick up somewhere in the future discussions. Chairman: Yes. Thank you very much indeed. Q462 Mr Grogan: On the subject of joint working, which perhaps naturally follows, in your memorandum you refer to the Interdepartmental Working Group on Organised Crime. How does this work; how often does it meet, what are the sorts of current issues that are being looked at and who is represented on it? Mr McGrath: There is an overall framework. The Interdepartmental Group on Organised Crime is one of the strands within the overall architecture of the Organised Crime Task Force, which is at ministerial level, and is headed up by Shaun Woodward. The Interdepartmental Working Group on Organised Crime is within the Northern Ireland Civil Service, it is chaired by the Head of the Civil Service, Nigel Hamilton. To date, it was set up in March of 2005, it has met on four occasions since then and it is how you fit in the other issues with the civil departments, departments such as ours, whose primary focus is public services, how that feeds in to some of the issues that the Organised Crime Task Force is dealing with. We are dealing with liquor licensing and regulation of charities, we are also dealing with social security, all issues like that will be dealt with and fed into the more clear organised crime focus further up the architecture, for the NIO, PSNI, Assets Recovery Units, they all would feature. It is one of the wider strands of that overall architecture which has been put in place between the Task Force itself, the ministerial chaired one, the stakeholder group and then this element to make sure that the civil departments play a role, and the sort of issue that civil legislation is, in a sense, crime-proofed or looked at is fitted in as well in that. That is the overall architecture. Q463 Mr Grogan: For example, when drawing up the proposals on charities or on liquor licensing, how much contact, and at what level, does the Department have with the Organised Crime Task Force, or was this discussed in the Interdepartmental Working Group? Mr McGrath: There are two levels, specifically on liquor and charities. There were specific working mechanisms set up, and liquor involved PSNI and the Court Service specifically to do the details, the nitty-gritty of the proposal worked up in close relationship. In a sense, the wider package was taken through that sort of higher strategic mechanism to ensure that it fitted. Similarly on charities, in a sense, as Lady Hermon said, there is a general view that better regulation should be in force. There was a debate about whether the precise mechanisms were again worked up in close consideration with PSNI and the Revenue and Customs, and again would be seen at the strategic level in the Organised Crime Task Force as an important response, particularly to the points that have been made, and Lady Hermon has referred to them, in IMC reports. There is the meshing of the individual departments working on it and fitting it within what their primary purpose is, which is not reducing crime but ensuring that the overall strategic direction, in a sense, has an element of crime-proofing within them. Q464 Mr Hepburn: On the issue of social security fraud, can you tell us exactly what sort of fraud is going on; is it ID fraud or is it personal fraud and claiming benefit fraud, and so on? Mr Nevin: The main one involves the claiming of benefit by your spouse, working; your age, overstatement of disability or incapacity and probably living together with someone, as a partner, when you claim not to be. Those are probably the three main areas of fraud that we are aware of and have evidence of. I think it is fair to say probably there has been a bit of a change in recent years because we have increased our steps to verify identity, and obviously the gateway to the benefit system is through the National Insurance application and getting a National Insurance number. The process of running that has become more rigorous in recent years and we think that has probably helped to reduce identity fraud. I think also another factor that has contributed to it has been the cessation of payment by order book, because one of the things that people did was try to hijack various identities and then get order books. Then they had payments for 26, 27 weeks, or whatever, and obviously benefit could be paid of well over £100 a week, so if you had managed to obtain these there would be quite a lucrative income from it. I think, in actual fact, if you had been speaking to me five years ago I would have said that identity fraud was a much greater problem then than it is now. Q465 Mr Hepburn: How widespread is the problem? You have suggested that it is more or less individuals involved, in personal fraud. What level of organisation, surely there must be some level of parliamentary organisation involved in security fraud? Mr Nevin: We have no recent evidence that there is any great level of parliamentary involvement. There is some little evidence, we have had contact, for example, with the PSNI, who have to tackle all the fraud going on, and incidental to that it is involved in social security crime. In actual fact, in the couple of cases which have been brought to my attention, the level of social security crime, I can say this is purely relative, if relatively small, a person, or maybe his spouse, claiming benefits, I think probably as a front, to provide an income, so they had a front and an explanation for having some income, and they were there, taking the time that they had to do other crime. Whereas, in the past, when there was more identity fraud going on, it was actually being used to fund other crimes, or getting into drugs, some paramilitary involvement, things like that. Q466 Chairman: Is there any evidence of one community being responsible for the application of a greater degree of fraud than the other? Mr Nevin: No, there is no evidence of that; it seems to be very evenly spread. Q467 Mr Hepburn: How does the problem compare with other parts of the UK; would you say you have a worse problem, or a similar one? Mr Nevin: We have not, I think, gone into the identity fraud end of it. All I can say to you is that we and our colleagues in DWP carry out exercises to estimate the levels of fraud and ours is very comparable with the level in DWP. They have reported recently that under 1% of expenditure on social security benefits is down to claiming fraudulently. The latest estimate for the last couple of years is that we are around 1% of expenditure. Across the whole fraud aspect, I think we are very comparable with our colleagues in GB. Q468 Mr Hepburn: The solution to this and how you tackle it would be similar to other parts of the UK? Mr Nevin: We are very similar. Q469 Mr Hepburn: There are no special measures because it is Northern Ireland to deal with this particular type of fraud? Mr Nevin: No, and we keep in close touch with our colleagues in DWP in Great Britain. Q470 Dr McDonnell: Do you include housing fraud in that 1%? Mr Nevin: In fact, our investigators act for the Northern Ireland Housing Executive in investigating housing fraud. They do not have their own investigators for that. They identify cases and refer them to us and we work closely with them on it. Q471 Mr Hepburn: So you include that in the 1%? Mr Nevin: That is included in the 1%. Q472 Lady Hermon: Are you ever invited to give evidence by or to the Independent Monitoring Commission, at any level, your Department, have you been consulted at all, particularly by the charities? Mr Wall: We get evidence as part of the bigger charities legislation . Q473 Lady Hermon: Thank you. Mr Nevin, you made reference to co‑operation, working closely with your counterparts in Great Britain. Can I just say to you that, of course, we are looking at, our specific inquiry is Organised Crime in Northern Ireland, we are very, very aware that, in fact, the border between the Republic and Northern Ireland makes no difference to those who intend to carry out organised crime. I am sure you are aware that last year there was an agreement signed off between both the British Government and the Irish Government. I am just reading the title here, on "Co‑operation on Criminal Justice Matters" and there is a working group established, as I say, as of last year, to identify areas of co‑operation on criminal justice matters where they could be enhanced or initiated as appropriate. Again, do you have any colleagues of yours who would attend these meetings and sit within this working group? Mr McGrath: I think we are dealing with it on the social security side. Mr Nevin: In actual fact, I was not aware of that particular agreement. Q474 Lady Hermon: I will let you have my copy afterwards. Mr Nevin: Social security has actually had a memorandum of understanding, as part of the UK Government, with the Republic of Ireland, on social security, in fact, since 2000, and there has been very close co‑operation with the Management Committee, which meets three to four times a year. There is regular liaison between ourselves and colleagues in the Republic of Ireland at the operational level, to try to detect and minimise cross-border fraud. On the memorandum of understanding, the committee which deals with that, there was a recent conference, which we hosted, in Armagh, which looked at cross-border identity fraud and the movement of people across borders, so there is actually work going on in the social security field between ourselves in Northern Ireland, DWP in Great Britain and the Republic of Ireland. In fact, this year, or last year I think, The Netherlands also drew up a memorandum of understanding and they were present at the conference in Armagh as guests because they were involved in this and to bring a continental aspect to it. Q475 Lady Hermon: I wonder if that co‑operation has been successful and beneficial? Mr Nevin: It has; it has obviously improved over the years as we have become more comfortable and more familiar with the laws. The laws are not the same in both countries. Q476 Lady Hermon: Do you think that could be mirrored by the charities changes as well, since the IMC specifically looked at the jurisdiction? Mr Wall: We have been having regular meetings with officials in the Republic; they are going through a similar process of review of their legislation. In fact, their legislation is older than our own. Our charities legislation, in fact, goes back to 1964, I think theirs goes back to pre-partition, so they have similar problems to ourselves. The regulatory forum that I spoke about will include officials from the Republic as well as officials from the UK, so we are working proactively and ensuring that there is good communication and we are looking at mechanisms for transferring information between the regulatory authority in the Republic and in the North. Lady Hermon: That is fascinating. Q477 Mr Fraser: Going back to the licence situation, just to clarify something, one of you said that the £140,000 licence is an asset on the books of a business. That is correct, is it not? Mr McGrath: I said, to be clear, there is probably a variety of accounting treatment of this, depending on whether it is a small, single-handed pub or the licence-holder is actually one of the big conglomerates and it may well have been written off. That is the point; there is a mixed approach to that and therefore the impact of the proposals would not necessarily be as draconian to some people, in asset terms, in any terms, as to others. Q478 Chairman: To the single person operating one pub, it could represent a very significant sum? Mr McGrath: It could represent an asset, as I said, Chairman; it may well be not the sum that they paid for the licence in the first place. It is presented, in some cases, as the sort of pension fund. Q479 Chairman: What we have to recognise here, and I am sure you will recognise this, is that this is something which, whether it should be there or not, in your opinion, in fact is wholly legitimate, people are not trading in anything that is remotely illegal or illicit. Therefore, where the impact is going to be great upon, or potentially great upon, an individual who had every reason to expect that this would be a realisable asset then it is important that any change recognises that, which is wholly different from the impact upon a company owning a chain of things, so I guess that you need to take that one on board. Did you want to say anything to us, finally? Mr McGrath: No, I do not think so, Mr Chairman. We have covered most of the points we wanted to make and I hope we have given you as fulsome answers as possible. Chairman: Thank you very much indeed; you have been extremely helpful and we are very grateful to you. It may well be that our Clerk will correspond with you about certain bits of information, if we want a little bit more follow‑up, but we are grateful to you for coming. We wish you a pleasant and safe journey, and I declare the session closed. Thank you very much. |