To be published as HC 1504-v

House of COMMONS



Northern Ireland Affairs Committee

Fuel laundering and smuggling

Wednesday 14 December 2011

Bill Williamson, John Whiting, Alan Lee and PAT CURTIS

Evidence heard in Public Questions 241 - 316



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Oral Evidence

Taken before the Northern Ireland Affairs Committee

on Wednesday 14 December 2011

Members present:

Mr Laurence Robertson (Chair)

Mr David Anderson

Oliver Colvile

Lady Sylvia Hermon

Kate Hoey

Kris Hopkins

Naomi Long

Nigel Mills

Ian Paisley

David Simpson


Examination of Witnesses

Witnesses: Bill Williamson, Acting Director of Excise, Customs, Stamps & Money, HM Revenue and Customs, John Whiting, Assistant Director, Criminal Investigation, HM Revenue and Customs, Alan Lee, Regional Director for Criminal Investigation, HM Revenue and Customs, and Pat Curtis, Senior Officer, HM Revenue and Customs, gave evidence.

Q241 Chair: Good afternoon gentlemen. Thank you very much for joining us. I think we have met most of you before, but could I ask you just briefly to introduce yourselves, and I believe you would like to make an opening statement? Please do.

Bill Williamson: Thank you, Chairman, and good afternoon to you too, and to the Committee. Can I start by introducing the colleagues with me, attending as witnesses today? To my left is Alan Lee, Deputy Director in HMRC Criminal Investigation, based in Belfast. To the right of me is John Whiting, who is our Assistant Director in Criminal Investigation, also based in Belfast, and at the end there is Mr Patrick Curtis, who is our HMRC national oils lead.

Thank you for the opportunity to say a few words at the beginning. The Committee will recall in our last session that Mr Mike Norgrove, who led the witnesses then, told the Committee that we were about to publish some new figures on the tax gap. They were published towards the end of September, and I wanted to start the session today by providing the Committee with those new tax gap figures.

Starting with the figure for the tax gap in diesel in NI, the tax gap is 12% of the market for 2009-10, and that is calculated in terms of loss of revenue to the Exchequer of £70 million. It is quite a significant reduction in the tax gap figure for 2008-09. The main reason for that, we believe, is a difference in behaviour in cross-border shopping. The Committee will recall that we are unable to separate with the data the illicit activity from cross-border shopping. During 2009, the differential was extraordinarily small through the year compared to previous years, so much so that when we look at petrol, we have not been able to calculate the tax gap figure in 2009-10. Indeed the differential between the North and the South reversed itself and we saw what we call reverse cross-border shopping for quite a length of time in 2009-10.

For diesel, on the mainland-Great Britain-we have a tax gap figure of 4%, and revenue loss is calculated at £650 million. I just say to the Committee again, these figures are indicators of long-term trends. The tax gap is not a precise instrument, but over time it continues to show that in terms of lost revenue through this activity-lost duty on fuel-this is a declining figure. That does not mean, of course, that there is any tolerable figure in terms of fuel fraud, so obviously we continue to press ahead with all of the activities that we do to press down on this business. Thank you, Mr Chairman.

Chair: Thank you very much for that update; it is very useful.

Q242 Lady Hermon: It is very nice to see you all here this afternoon. Would you mind, Mr Williamson, if I directed my question to Mr Whiting, because it was Mr Whiting who gave us evidence last time on sentencing?

Bill Williamson: Not at all.

Q243 Lady Hermon: I do think, in fact, the public in Northern Ireland would be rightly entitled to be shocked and very angry, as I think Committee Members were, to discover that in the past 10 years there have been 47 prosecutions for fuel fraud and related tax evasion issues, and of those 47 prosecutions only four individuals-only four gangsters-have actually gone to prison. The others appear to have suspended sentences, and some of them have had their prosecutions dropped. In 10 years, four people have gone to prison for what is a very serious crime, as Mr Williamson has just described. Fuel fraud is a very serious crime. Something obviously has gone horribly wrong somewhere along the line. Is it the fault of HMRC? Is it the fault of the Public Prosecution Service in Northern Ireland? Is it the fault of the courts? In Mr Whiting’s evidence to us the last time, in September, and I am just quoting back, Mr Whiting, "It is not the wishes of HMRC but those of the judiciary that are being carried out." I am sure you really do not want to go on the record as being critical of the judiciary in Northern Ireland, but would you like to explain what has gone so terribly wrong, when in fact the sentence could be up to seven years’ imprisonment? Why is it there have been so few that have actually ended up in prison, where we wish them to be?

John Whiting: It is a very difficult question to answer. The fact of the matter is that HMRC puts together cases in respect of fuel fraud. Those figures do simply relate to fuel fraud, I think.

Lady Hermon: Yes.

John Whiting: Rather than other tax regimes-for example, cigarette smuggling and/or VAT tax frauds?

Lady Hermon: It is just for fuel fraud, yes.

John Whiting: HMRC puts together cases with the same process. Our officers are trained in the same way as officers in England, Wales and Scotland, to carry out the same processes, to gather evidence in exactly the same manner, and to put our cases together in exactly the same way as we do elsewhere in the country.

Q244 Lady Hermon: Do you have a legal team of advisers there? Do you also have people who are trained to take forensic evidence? How specialised and sophisticated is the HMRC team when they are putting together an investigation?

John Whiting: The team is highly trained. There is a very sophisticated process in terms of training officers. Our officers are trained to conduct every aspect of an investigation as would a police officer.

Q245 Lady Hermon: So that includes forensics?

John Whiting: Some items would be lifted in a way in which the officers are trained to be forensics-aware. There are other occasions where we would not enter a crime scene until we had employed a forensics officer. In fact, we are exploring the possibility of seconding a forensics officer from PSNI to assist us, and to be available to us effectively full-time, on our operations, so we are looking to become even more sophisticated than we are. But we are forensics-aware in terms of our crime scenes, and looking to gather all of the available evidence, so that the cases that we put together are, in any way that you might imagine the police would put a case together, as professional and sophisticated as they can be.

Q246 Lady Hermon: So how come we have ended up with only four people-out of 47 prosecutions-going to prison in 10 years for fuel fraud in Northern Ireland?

John Whiting: However much I may wish, as a deterrent effect, for those cases to be before the courts and for individuals to be placed into custody, imprisoned, of course the decision in respect of the outcome of those cases does lie with the judiciary. If you are asking me to explain why, in each of those 47 cases, was there perhaps some fault with the evidence that HMRC put together, the first point I would make is that if there was something missing in the case then my own senior investigation officers would actually decline to put the case forward to the Public Prosecution Service.

My second point is if there was an occasion where there was something missing in the evidential case, then I am certain that the Public Prosecution Service would send the case back to me and say that they would decline to prosecute that case.

Q247 Lady Hermon: Right, so the finger of blame is I think being pointed-correct me if I am wrong-at the judiciary in Northern Ireland. Are the sentences too lenient in HMRC’s view?

John Whiting: My view is that they do not have a deterrent effect.

Q248 Lady Hermon: Mr Williamson, you are nodding your head; would you like to add?

Bill Williamson: Yes, I wanted to add to what Mr Whiting has just said only that we believe the criminal investigation work we do is of very, very high quality, as it is in any of our investigations in any of the tax frauds, because we are expert at investigation of tax fraud. I think it is worth mentioning to the Committee that we do believe we have successful prosecutions. They are not unsuccessful if they do not end in a custodial sentence because part of what we do and what is part of our armoury is the ability to dismantle networks wherever we can, and to use every opportunity to do so. But I think we do feel that we would like to see some stiffer and sterner sentences in alignment with what we are seeing in Great Britain for these types of offences.

Q249 Lady Hermon: Bearing in mind what you have just said, has HMRC already made representations to the Justice Minister, David Ford, to the effect that you want stiffer sentences?

John Whiting: This has been an ongoing process for probably the last four or five years, whereby we have submitted papers and schedules that show comparative sentencing-so all the cases that have been presented to the PPS and the courts in Northern Ireland and the outcomes, compared to all the cases presented to the courts in England and Wales and the outcomes. Those papers have been put forward to-it was not David Ford initially-it was Paul Goggins, who was a Security Minister at the time at the Northern Ireland Office. In fact, that was submitted to the Lord Chief Justice and the Judicial Studies Board, probably about two years ago. Of course I welcomed the opportunity to give evidence before the Committee in September. In fact, reporting the information that we provided to the Committee actually caused some media interest. I then welcomed the fact that the Lord Chief Justice indicated that he would be looking at sentencing guidelines with particular emphasis on excise fraud, including fuel fraud.

Q250 Naomi Long: There are two aspects. You have touched on the fact that you do not believe that the current sentencing in Northern Ireland has a deterrent effect. Do you believe that the current sentencing in the rest of the UK does have a deterrent effect? That is the first question. The second question is, again, in relation to sentencing. One of the challenges that we have been looking at over the last number of months is the challenge of actually convincing the public that this is a serious crime, and not simply victim-free. Do you believe that sentencing structure has a role to play in reinforcing that message in the minds of the public as well as those who are engaged actually in the criminal activity itself?

Chair: Perhaps I could ask you to concentrate on the second question. We will be coming back to the GB situation in a minute, if that is okay.

John Whiting: There was a period of time where we saw a number of individuals really start to flout the law in respect of fuel fraud in England. They were caught and they received very stiff sentences. We quite quickly saw that these individuals retrenched bank into Northern Ireland. That is not to say that we have entirely stopped fuel fraud as such on the mainland, but it was quite interesting to see that harsh sentences caused these individuals, or their associates, to return back to Northern Ireland. So that is a very quick answer to the first question.

The second issue around whether it has a role to play: I believe that it is part of the role. HMRC has a very wide range of tools, and Mr Curtis’s teams are involved daily in seizing fuel, as are some of my teams-seizing fuel on the road from filling stations, huckster sites, bunkering sites, stopping and seizing vehicles, and seizing the equipment used in this kind of fraud. So that is the very basic level of our intervention. But we look beyond that and we actually look to assess some of the people who are involved in this fraud. So we actually calculate what kind of money they are evading.

For example, we visited a filling station recently, questioned the actual pump readings, questioned the takings, and we were actually handed a little black book. That was the true record of the takings. We are now going to prosecute these people for VAT fraud. The filling station has been shut down. They are not being prosecuted for oils fraud; they are being prosecuted for VAT fraud. We also have the ultimate sanction, which I suppose is the criminal investigation and reporting to the Prosecution Service, which may lead, in addition, to fines and/or alternative non-custodial sentences. Of course there is also the confiscation. So there are a number of outcomes in addition to a prison sentence, which might have a deterrent effect, but ultimately prison is potentially the most impactive outcome.

Q251 Naomi Long: Do you think those alternatives have an impact on the public perception of how serious a crime this is? I suppose that is the issue: if the public see those other alternatives as in some way less stringent than a custodial sentence, is there a risk that they would therefore see the crime as being less serious?

John Whiting: I suppose there is the potential that if the public see nobody going to prison, then at the end of the day they think it is not that serious.

Q252 Ian Paisley: To follow on from the question from Lady Sylvia Hermon, if you were able to link the accused to the crime with a scientifically tamper-proof evidence base, would that make successful prosecutions leading to custodial sentences more likely, because the science proves, "It was him what done it, guv"?

John Whiting: You would have to be a bit more specific in how you envisage that happening.

Q253 Ian Paisley: One of the problems that you and your agents have is that whenever you do make arrests that person is able to make all manner of excuses as to how they came across this fuel and how the fuel happens to be with them. They can distance themselves from it.

John Whiting: There are issues around the fact that fuel cannot be contained, by its very nature. We have individuals who have 10,000 litres of fuel. How did that arrive there? Did it arrive in 10,000 one-litre containers, or one container of 10,000 litres? So it is in an underground tank.

Q254 Ian Paisley: If the fuel is marked at source, and is then broken up, you are able to trace the source. You know what I am getting at.

John Whiting: If you want to be specific and talk about the issue of what people described as DNA tagging of fuel, if that is the question you are asking-

Q255 Ian Paisley: I am asking if you were able to successfully link the accused to the crime by way of a scientifically tamper-proof piece of evidence, would that make successful prosecutions more likely? I was very specific in the question I asked.

John Whiting: What I have to say is I do not think what you are suggesting would make any difference in terms of the presentation of a case to the Public Prosecution Service. I do not think that would make any difference. I have not got a problem in linking individuals to a crime. I have to say that we have upped the game in the past three or four years since the introduction of the Cross Border Fuel Fraud Enforcement Group, and we have a big number of cases that are currently sitting with the Public Prosecution Service, waiting for directions, waiting to go to trial. We have other cases that we are ready to take forward.

So whilst historically you might look at the results and say that has been disappointing and I might say that has been disappointing, we have upped the game. But when I started the Cross Border Fuel Fraud Group, we started from a certain point. That does not mean that we are going to get prosecutions into the courts immediately. In fact, there is a time lag, and some of those cases that are very well evidenced-much bigger cases that involve some of the people that you might call the Dons or the actual people at the top of the organisation-these people have been arrested in very well organised and sophisticated interventions that we have made, and they are now under investigation and their cases that are either prepared or under preparation for offence reports to the Public Prosecution Service.

Q256 Ian Paisley: You have upped the game over the last three years, you say. Are you then able to give me the statistics for the number of people you have arrested for laundering and fuel fraud over those last three years, year-on-year? Also can you give me the number of seizures you have made, which is probably quite well advertised, but specifically the number of arrests and how many of those arrests have led or are leading to prosecutions.

John Whiting: In 2009-10, there were 12; in 2010-11 there were 18 arrests; in 2011-12 to date there are 30. In terms of seizures, I think you probably have that information anyway, but my understanding is we are looking at 1 million litres in Northern Ireland in 2009-10; 640,000 litres in 2010-11; and about 600,000 litres in Northern Ireland already this year.

Q257 Ian Paisley: How does that tie into the-

John Whiting: Sorry, can I answer the third question, which related to the cases in hand? I have 11 cases that are post the arrest situation, where I am waiting for charges and formal directions from the PPS, 11 cases with 24 individuals on those reports. I have three cases that are pre-trial involving six individuals; I have one case, which is sitting at trial with three individuals. Eight of those cases involve laundering plants, involving 22 people, which are set to go before the courts.

Q258 Ian Paisley: That level of very impressive and indeed astonishing work seems to suggest this is a very serious crime. It does not seem to tie up with the figures that you, Mr Williamson, have just read out to us about the tax gap, that it’s pretty insignificant. I was getting the impression I was being fed something when you were making your statement. I felt I was being fed that, "Yes, it’s a problem, but it’s not that big a problem. It’s only 70 million quid."

Bill Williamson: That was certainly not my intention, and I think we very much see this as a serious crime. So much so that, as you will know, HMRC is going through its own spending review and having to reduce its resources by 25% over the spending review period. We are recycling, and able to recycle, some money back into serious criminal activity. For oils, there is going to be no reduction in the effort or resources that we are putting into that capability. Indeed, we are increasing the resources of criminal investigation staff in Northern Ireland, so we do see it as a very, very serious activity, and our top priority with tobacco in Northern Ireland. As I said, the tax gap figures are essentially a measure of potential fiscal losses to us. I think what it shows from 2004-05, where the tax gap was around 37% of the market in Northern Ireland, we are now talking about 12%, and of course we are talking about cross-border shopping as well. There is a positive downward trend, but there is absolutely no let up in our efforts.

Q259 Ian Paisley: I welcome downward trends, do not get me wrong. But 2.5 million litres almost three years ago, 1 million litres in 2009-10, over half a million litres in 2010-11, and 600,000 litres to date is suggesting more than £70 million worth of loss. It is quite a substantial amount of loss. I just feel that there is an effort by you, sir, to play this down. Maybe our Committee has been pushing a little too hard in trying to say that work has to be done here and that there are solutions that could be tried, and today I felt that you were trying to push our Committee to a position that this is not as big a problem, "Don’t worry, guys, cool it, you don’t need to get worried about this." We are worried about it, seriously worried about it, and I think HMRC has to do much more. I believe the materials are available to you to do much more, and that is what worries me

Bill Williamson: It is certainly not my intention at all to give that view to the Committee, only to provide the Committee with the latest tax gap figures that we have available to us. As I have said, there is absolutely no let up in the effort in HMRC to press down on this fraud. We are a fiscal organisation. The fiscal crime side is very important, but also we recognise with fuel fraud it has other consequences environmentally and to society, so we see it as a top priority and that will remain the case.

John Whiting: Can I add one point, Chairman? In answer to Mr Paisley’s question, there have been some difficulties around the fact that we sometimes cannot identify where fuel has come from. But one of the teams I have got is involved with visiting filling stations on a regular basis, so regular that perhaps they might view it as harassment. They turn up so regularly that they are testing fuel then looking for the paperwork. They are making these people honest by invigilating, literally spending all day outside and counting the customers and then checking the takings. They have seen the declared takings triple, and actually it forces these people to close down filling stations because they cannot operate legitimately when they can only make a profit.

Ian Paisley: Mr Whiting, I do not for one moment doubt the bravery and the expertise of your people on the ground. They are brave men and women who do a valuable service for the community, and they put their necks on the line every day when they go into someone’s filling station. I accept that. They are doing an excellent job in that regard. But I think there is something missing here. You know that we have taken evidence from a number of groups who said that you could do something else to mark fuel. We have probably actually saved you a lot of manpower and expense. Mark it properly so that it cannot be stretched or removed, and therefore you can stop this from actually occurring and you could save millions and millions and millions of pounds.

Chair: I think we are in danger of getting into a third subject area at the moment, so can we come back to that in a minute? We will come back to that.

Q260 Oliver Colvile: Are you very frustrated with the fact that you are not getting more convictions?

John Whiting: I am not frustrated about the lack of convictions.

Q261 Oliver Colvile: Well, we are.

John Whiting: I think we have put a number of cases through and we have achieved convictions. Actually, our conviction rate is very high. People plead guilty.

Lady Hermon: But they get suspended sentences.

John Whiting: But they get a suspended sentence.

Q262 Lady Hermon: That is the problem.

John Whiting: The "c" word is custodial. I am frustrated about the lack of custodial sentences.

Q263 Oliver Colvile: The frustration you have is actually making sure the sentences are good enough, and that potentially is down to us because we are the politicians, and we set the parameters. So if I was the person who got involved in this activity but there was another thing that I could be convicted for-have you started looking at alternative ways of closing the whole business down, such as looking at a second area that you could go into and prosecute people on?

John Whiting: Absolutely. We are looking at the environmental damage that can be done from the waste from laundering plants. Just two weeks ago I signed an MOU with the Northern Ireland Environment Agency. We share intelligence and we conduct operations together. The Environment Agency sits on the Cross Border Fuel Fraud Enforcement Group, as do the Department of the Environment, who do that job in Dublin. Just last week we had presentations from the county councils in Louth and Monaghan about the environmental damage and the cost to those councils. We are looking to have similar presentations or invite Newry and Mourne to the next Cross Border Fuel Group meeting. We would actually like to use their costs and effectively the damage to their communities as an opportunity to engage the media to advertise the fact that this is an additional cost and issue, and try to persuade the public not to purchase this fuel.

Q264 Oliver Colvile: If you were to go down that route, is that a higher sentence that you would ultimately get if you were doing that, or what?

John Whiting: I do not think the sentences are any greater. The maximum sentence for an offence under the Customs and Excise Management Act is seven years, so the actual sentencing tariff is quite severe.

Q265 Oliver Colvile: Mr Whiting, forgive me, maybe I am being particularly stupid about this, but it seems to my mind that what actually happens is you successfully do your job of actually getting people into court. The Crown Prosecution Service may or may not end up doing a good job. The judge then ends up having a look at it and does not actually deliver the full strength of the sentence that he could end up delivering. So there must be a way in which we can try and send, from the state, a message out that we will find ways that we can make sure that those people who are going to get involved in this kind of criminal activity will receive the full sentence, which we want them to actually have. I am just wondering, rather than going down the route that you have gone down, whether you could look at an alternative sentence or an alternative conviction or criminal conviction to try and prosecute as well, as far as that is concerned.

John Whiting: In engaging with the Northern Ireland Environment Agency, we have one case already where as part of the surveillance evidence, we watched the criminals disposing illegally of toxic waste. We alerted the Environment Agency, which protected the environment by removing that from the location, and they were invited to take part in the interviews, and they will actually prepare a case, and it will effectively be one offence report to the Public Prosecution Service, which will include charges in respect of legal disposal of that waste. When that case is presented to court, it will be joined up with illegal waste offences.

Q266 Oliver Colvile: So what do you think we should be doing in this place to actually try and make sure that we can toughen the law so that sentencing can be better?

John Whiting: I think part of it has already been done, because we have already had the response from the Lord Chief Justice. Having aired the issue here on our previous visit, he has responded and said he is going to look at this, and hopefully we will see some response. We do not expect this in every case because we have a range of cases, which go from the very small offence of removing a small amount of fuel to the complete organised crime case. I do not want the organised crimes to be dealt with, in terms of sentencing, on the tariff that is applied to the lower end of the market.

Oliver Colvile: Okay.

Q267 Kris Hopkins: The figures you gave in evidence suggest that in recent years you have seized about £3 million worth of fuel, at street value. What happens to it, how do you audit it, and are you confident it does not re-enter the economy as illicit fuel again? Because that is a lot of fuel to have in your back pocket or your garage or wherever you have got it stashed.

Pat Curtis: We have specialist contractors that we appointed a number of years ago. These contractors are managed by our internal audit teams. They dismantle the laundering plants, and also on occasion, as has happened this morning, remove the fuel tanks and pumps on the retail site, and of course they uplift the fuel. Most of these companies are in the business of recycling the fuel. There is a market out there for recycling, such as cement factories or kilns. Some of them have to go for disposal to Germany because they are particularly hazardous, and we do a full check on the whole way through from the time of our seizure to the time of disposal, and we get a certificate to sign it off.

Q268 Kris Hopkins: Just very briefly, so of the £3 million worth of fuel, how much of the actual value comes back into our pockets? That is a lot of money, bearing in mind the gap you pointed out earlier on. That could plug a lot of the gap if you can actually recycle that back into the economy.

Pat Curtis: You are 100% right. As I say, every product in this market has got a value. No matter how hazardous it is, it has got a value, especially in the recycling market. We do have a system, which I will explain to you later if you bear with me, of the amount of money that we do get back in a return for this. Again, it is audited through our checks and balances, which underlies the value of our work.

Q269 David Simpson: The word "frustration" was used, I think. One of the Members used it, and I remember it was some of yourselves, John, in relation to it. This whole smuggling issue has been ongoing now for as long as I can remember. In the old days in Northern Ireland it was referred to as the "free state", you could jump everything and smuggle everything. Is it not the case that, unless the proper technology is brought in, whatever that technology may be, that you are really on a beaten docket here? Yes, you may get convictions or prosecutions or whatever the case may be, but there is so much money to be made out of this. I think Pat mentioned that there is a space for everything and a market for everything. Some of it has to go to Germany, and all the rest of it. Because there is so much money to be made at this-it is like the drugs trade-people will take the risk, no matter what the penalty is.

Do you ever envisage a time where you will really get this under control, or is just working or plodding away at it? I am using those words-you may not like what I am saying-but plodding away at it, "Well, we will do our best, we will try and get as many prosecutions or convictions, but really we are not going to stop this because it is the nature of it." Or is it a case that you are completely hamstrung by the system? I have listened to what you were saying from where I have come in, and it just seems to be one process after another after another after another, and eventually getting nowhere. You have so many processes to go through, and jurisdictions or whatever, it has to be frustrating. My question is, are we on a beaten docket and is it the case that we are going to have live with it for X number of years if we continue in the systems we are in?

Bill Williamson: Perhaps I could start, and then one of my colleagues could talk a little bit more about the technology side. Obviously criminality will grow where there is an opportunity, and in Northern Ireland, as you absolutely rightly say, there is a history of fuel fraud. Will we ever defeat it completely? It goes back again to looking at what has happened over the last five to 10 years on the pressure that we have placed, and the economic pressure we are placing, on pressing down on the fraud. As I say, we have measured that by the tax gap and our investment in that. So I think it is not necessarily a question of whether we would get on top of it, because I think you see fraudsters displace their activities clearly into other areas. We have to be constantly vigilant in our investment and attack on it.

I think you are also quite right that we need to invest continually in new methods and technologies. Our strategy for tackling fuel fraud, as it is for tobacco, is multifaceted and multiagency to be able to do that. Regarding the technology side of it, we have a fuel testing programme project under way at the moment, which is looking at three different strands of activity: it is looking at improving our existing capability, roadside capability, looking at the equipment and the tools that we have; we have a programme of work looking at the current marker and strengthening the current marker; and of course we have a programme of work looking at the potential for a new marker. So the technology side is very important, and we have an important and serious piece of work that we are moving forward on all of those fronts.

Q270 David Simpson: In relation to the programme and the roadside testing, how long has that programme been ongoing?

Pat Curtis: If I can use this opportunity, I do need to express the fact that we feel we have our foot to the board on some of our projects.

Q271 David Simpson: That’s a good Ulsterism.

Pat Curtis: It is, thank you for that. I will mention the fact that over the last number of years-maybe four or five years-when we have taken on board improvements in detection tools, some of the things we have introduced were incredibly innovative. I have touched on some of this in a previous session. We would see the teams to be the leaders, to be quite honest with you, anywhere in the world, and I have made contact with, and we have a meeting with, the World Customs Organization in Brussels to explain exactly what it is we’re up to. We do realise that there are different things happening out there too.

Some of the technology we are using at the moment is quite impressive. I think there is a slight confusion here that the launderers have had us beat. They have well improved, they have become far more professional, but we are making a lot of detections of laundered fuel. There is this perception that we’re a beaten docket, to use another Ulsterism, but on the roadside and on the retail sites-never mind the laundering plants, excluding them-we are in excess of 350 detections over the last number of months, purely detecting laundered fuel. So our detection tools are working.

Is there room for improvement? Of course. Is room for improvement in the marker? We recognise this. I did make a statement to you, and I was at our forensics chemist yesterday just to be sure we are still on track, that we will have an enhanced marker out by March. That is still on track. I have seen some of the laboratory tests that we have carried out, and they impressed me. As I mentioned before, I am not a chemist, but I am a practitioner, and I have got teams to organise and manage. I do know whether something is going to work or not practically, out on the road. This new enhanced marker will be a big improvement on what we have. Is it a silver bullet to answer all our problems? No, and I would not be naïve enough to say that. But we do have to give it a chance. On the flow chart, which I will show you later on in the private session, the improvements in the detection capability of this marker could possibly be the answer to all our problems, but may not. Besides that, we are looking at the markers as well.

I know there is some frustration, and sometimes at our end too. It was roughly December 2009 when we went out for expressions of interest. I have to say, we sat on a sift team for six months, and we got a very limited response. None of the markers that were laid on the table or proposed to us passed the first sift. And we have been working at this here for two years, and we have not gone to a formal expression because we are trying to explain to the trade not to waste anybody’s time, to make sure that they are going to deliver to us a product that will pass not only the trade, but meet all our requirements. There is a difficulty. There is not a massive trade function out there that is ready to deliver this. This may sound patronising, but I really do not mean it to be. The profile that this Select Committee has raised has actually generated some more interest from the trade and from worldwide groups that have come to us and presented new markers to us. Did that happen because of the Committee? I have to say that is the only difference between this quarter and the previous quarters.

There was a mention of the Brazilian marker, and I really have to explain this. The suppliers of the Brazilian marker have presented it to us, and we have a joint initiative to make sure of the best use of our resources with our colleagues in the South, and we work together with the state labs. We briefly mentioned last time that we are on phase 7 of this marker, and it has not passed-we have laundered it. That does not mean that they will not, or somebody else will not, get to a level where it makes it incredibly difficult, but the marker, as presented to us, we have laundered it and we have gone back in official reports and explained and made suggestions. We have also made suggestions to these other tender bidders to come out and visit the road fuel teams to see what it is, because there is a complete misunderstanding of our capability out on the roadside. I have to say, to date, some of the tenders were interested, but none of them has taken up my offer, which is slightly disappointing because that could maybe short-circuit some of the items.

In Brazil, if I can touch on that: Brazil suffered very badly in the 1970s because of the oil problems. They did not have the North Sea oil, which we had, and they did not have the Texan oilfields that the Americans had. So they set up a programme, because of their land mass, to introduce bioethanol into their fuel so they would not be caught out so badly again. Their system is that at least 25% of all their fuel product is mixed with bioethanol. Of course the distributors, not the launderers, found out about this bioethanol. Solvent, paint thinners, it is all the same product-alcohol-was being taxed. If they could introduce something else into the stream they could save the tax and make themselves more competitive against their competitors. As I say, it was a fraud and it wasn’t right.

The Brazilian Government rightly went out to tender bid worldwide, and they got this Brazilian marker in. I have to emphasise that this marker, which is really good as a tag marker, is added into solvents that the tax is due on. The fraud is to add more marker in, because the aim behind this is not to launder it out because the test is to test to see if the marker is there. If the marker is diluted the Brazilians say you are fraudulent. So what the fraudsters have to do is get a product and add the marker in. There is no accreditation for the Brazilian marker for antilaundering techniques. I really need to emphasise this. There is no accreditation for this Brazilian marker to pass laundering techniques because that is not what it is geared up to do.

Chair: Okay, thank you. Again, we will perhaps come back to that, as you suggest, a little later.

Q272 Kate Hoey: That was very interesting, Mr Curtis, thank you. Just so I am clear, are you the lead agency, then, that keeps the statistics for all the aspects of criminality around fuel crime?

Bill Williamson: We are, yes. I think the way to see us at Revenue and Customs is we are the Chancellor’s fiscal investigation enforcement organisation. All fraud is an assigned matter to Revenue and Customs, so we would have all the statistics around that particular fraud.

Q273 Kate Hoey: So when the PSNI tell us that they have had something like 140 criminal gangs, of whom none of them were involved with fuel fraud, that is because you have got all the statistics?

John Whiting: I think the answer, where they said there is none, was to the number of cases that they had made arrests, or some of the criminal gangs they had brought down. But how many of their cases involved fuel fraud? The answer, of course, would be none, as it would be none if you said, "How many people have you prosecuted for tax evasion?" So the police do not have any ownership of that particular crime. It is all laid to HMRC.

Q274 Kate Hoey: So it is not a question of any kind of buck-passing; it is just simply the mechanism of it.

John Whiting: If I go back to the issue of the crime gangs, I think the police said it was between 160 and 180 crime gangs. I have looked at their matrix of gangs, and we would have an interest in about 10% of those.

Q275 Kate Hoey: So most of these gangs, or 10% of them, will have had some involvement in fuel fraud.

John Whiting: Of course, you are saying fuel. My interest is much wider, and I would have to say that the vast majority of the crime gangs that I am interested in, and that are on the PSNI’s matrix, are actually involved in tobacco fraud. There are some who have an interest in fuel fraud, but for the vast majority it is tobacco. Four of those gangs are only there because of HMRC’s interest, so the PSNI own that matrix, but it includes crime gangs that are under investigation by HMRC, because some of that crime is very serious indeed

Q276 Kate Hoey: So who is responsible in Northern Ireland for the statistics overall for organised crime specifically?

John Whiting: There is no one that owns the organised crime statistics.

Q277 Kate Hoey: Should there be?

John Whiting: I am not sure that anybody is going to do anything with them, but the Organised Crime Task Force would summarise the successes and challenges that all of the agencies in Northern Ireland face. SOCA, PSNI, and the UK Border Agency have certain responsibilities, and so do HMRC. We each have our independent tasking and co-ordination process. In other words, as individual departments we have aims and objectives. The aims and objectives set to HMRC are trying to reduce the tax gap, and one of the ways we do that is through our law enforcement activity in respect of criminal gangs. The police would have other aims and objectives that would not entirely match with that, so it would be wrong to have somebody sitting above us saying, "Well, actually, you have got to stop investigating that tax crime because I want you to go and deal with something else."

So we each have our own resources, we are individually tasked, but we co-ordinate our effort, not necessarily through the Organised Crime Task Force. That is perhaps a misapprehension. We meet at various groups; we meet under a strategy group and we meet under David Ford’s stakeholder group. There is an oversight and a governance of the overall effort, but the Organised Crime Task Force brings fantastic understanding and it brings a collaboration, which I think is envied by every other part of the UK.

Q278 Kate Hoey: It is just that sometimes it seems a little difficult to get to the real nittygritty of exactly what is happening in terms of the public understanding things. Can I just ask you about this wonderful press release that came out yesterday about "Customs officers dismantle County Armagh fuel laundering plant"? Could you just take us through that? So you have found this, you have got this amount of fuel. What happens now, and how long will it be before the people involved in this are likely to appear in court? What is the average time scale from when you discover something?

John Whiting: The difficulty around a fuel laundering plant-and in fact what I have to tell you about this particular laundering plant is that the police stumbled upon it.

Q279 Kate Hoey: It said they "dismantled" it; they did not say they stumbled on it in County Armagh.

John Whiting: HMRC has dismantled it. But if we just take one step back. The police were present in that area to deal with another issue entirely. They placed a cordon around the activity that was taking place. This laundering plant was within that cordon, and they actually stumbled upon it. They then made a reference to Pat’s team. Pat’s team went in, but there was nobody there, so there wasn’t anybody to arrest. Historically that has been a problem for us. There have been some parliamentary questions in the past that said, "How many people have you prosecuted for running laundering plants?" and it was an embarrassingly low figure.

Q280 Kate Hoey: So probably nobody will end up in court for that.

John Whiting: For that one it is unlikely. Although, for example, if we have taken a forensic view of that, and I am not sure that we have with the opportunities there, we would perhaps pick up cigarette stubs, that kind of thing, which might give us an opportunity. But there may not be anybody prosecuted. In our proactive work, we are trying to actually evidence people at laundering plants so that we can prosecute them.

Q281 Kate Hoey: And just finally, going back to statistics, will this go down as a ticked box for the police or for the HMRC, or when it is a success, do you both take credit?

John Whiting: We would say it is the 18th laundering plant that we have dismantled in Northern Ireland this year.

Kate Hoey: Okay.

Q282 Lady Hermon: Can I just take you back a little bit in your evidence, Mr Whiting, just to clarify one particularly interesting phrase that you used, and it follows on from the point that Kate Hoey has just raised with you. You mentioned "surveillance evidence" in relation to the environmental pollution. Good, you are nodding your head, because I picked up on the phrase as well. Could you just explain, with the surveillance evidence that HMRC is able to retrieve in that situation, do you present that to the Public Prosecution Service in Northern Ireland, and would you like that surveillance evidence to be available in court?

John Whiting: Absolutely we do. It is the evidence of officers who have witnessed this personally. We have conducted surveillance. Perhaps I did not make this clear, but HMRC officers have all the powers of arrest and interview, and everything that you might imagine a police officer does. All of the techniques that a police officer has available to them are available to officers of HMRC, including conducting surveillance. So as part of our operations we regularly conduct surveillance on suspects in their activities.

Q283 Lady Hermon: Just to clarify, surveillance and the same powers that police officers would have-that includes video-recording the culprits in action. Is video-recording the surveillance we are talking about?

John Whiting: If we have the opportunity to conduct video-recording we will do that. But in this instance it would be mobile surveillance, following the individuals as they move the toxic waste from the location of the laundering plant to-effectively it is fly-tipping. So they dump the waste and we have evidenced that as it has taken place. We did not want to expose our hand.

Lady Hermon: Obviously not, yes.

John Whiting: Because we were not ready to make arrests. When we actually came to the point where we made the arrests of those individuals involved in the dumping of that waste, they were offered up to the Northern Ireland Environment Agency to interview for their own purposes.

Q284 Lady Hermon: Yes, and the evidence that you have retrieved about that particular gang will go to the Prosecution Service and will form part of your prosecution case.

John Whiting: Absolutely. In any case where we have conducted surveillance, and we have video or photographic evidence, that is submitted as part of our case where it adds to the evidential package.

Q285 Lady Hermon: May I just push you a little bit further? You do not have to reply to this, but can I also ascertain whether in fact surveillance of an organised gang-we are talking about very sophisticated gangsters here, who are dealing with this-includes the interception of mobile telephone calls? Can that evidence also be made available to strengthen your hand in the prosecution case?

John Whiting: I think it would be fair to say that actually no lawful interception evidence is used, but I think that is a separate debate that has been around for a long time. Interception is not used in evidence in any case.

Lady Hermon: No, I know that.

John Whiting: Even police cases.

Q286 Lady Hermon: I know that, but is the technique used by HMRC?

John Whiting: The technique is available to HRMC.

Q287 Lady Hermon: Yes, but obviously cannot be used at the moment in trials. Would HMRC be supportive of that evidence being made available in court?

Alan Lee: Lady Hermon, I think it is safe to say there is a considerable debate amongst all the lawful-intercept-capable agencies in the UK, and it has been the subject of review now for some considerable time. There are mixed feelings about the wisdom and the benefits or the disadvantages of using intercept evidence as evidence rather than intelligence. We are conscious that other countries do use intercept capability as evidence. There are other countries like ours that do not. It is an extremely difficult subject to give a single view on, and I do not think there is a single HMRC view that I am aware of today. We are presenting all the options to the Committee that is looking into this.

Lady Hermon: Yes.

Chair: It is a much wider debate, I think.

Q288 Lady Hermon: Yes, but it is very interesting to hear. You do not have a fixed view at the moment, but you will come to a fixed view is what you are saying.

Alan Lee: I think that is fair to say, Lady Hermon. It is one of those issues that it is not possible to just say that it is so obvious that we should use it as evidence. There are actually disadvantages to it as well.

Lady Hermon: Yes, thank you. That is really helpful.

Q289 Mr Anderson: Mr Williamson, you said before effectively that you have got overall control in terms of the Treasury. Has anybody ever done any work on what this whole operation has actually cost in terms of time, effort, financial resources and everything else? Coming back to what Mr Simpson was saying, is there almost a reality that we are never, ever going to beat this? I am not saying we should give in, but somewhere down the line we have got to have some sort of cost-benefit analysis. The resources you are putting are huge. Is there a ball park figure or could you get us one?

Bill Williamson: There is a ball park figure, but it is not necessarily based on the work we do in tackling the criminal elements of fraud. In terms of our role in controlling oils revenue, as part of the excise regime that encompasses that, the figure is around £27 million, in that sort of order. That is all the activities that we do to collect around £45 billion worth of excise duty every year, but it not broken down to any lower level than that.

Q290 Mr Anderson: That would be for the whole of the United Kingdom?

Bill Williamson: That is the whole of the United Kingdom, and would encompass everything through our legislative and policy work through compliance, through to the enforcement activities that we perform as well. So it is an overall end-to-end figure. It would incorporate also the various IT accommodation costs that go towards that, so it would be for the business of managing the oils duty collection in the United Kingdom.

Q291 Mr Anderson: That would be for HMRC?

Bill Williamson: That would be for HMRC, yes.

Q292 Mr Anderson: Does anybody have, or can you get us, something for the police, yourselves, the Organised Crime Task Force, SOCA, who really work together to try and resolve this problem that you have all identified for a long, long time. Is there anybody who can give us some sort of idea, "Between us we spent this". And I know, somebody said before, "The police stumbled on this," and we understand all that. But dedicated time, effort and money must be huge in this, and it has to be an issue, so is it worth doing?

Bill Williamson: I am personally not aware if those costs are broken down in that way, and that we could aggregate them back up.

Alan Lee: If it helps, Mr Anderson, we do not get charged by the other agencies. We do not get billed for their services, so if they provide-

Q293 Mr Anderson: The tax bill does, somewhere along the line.

Alan Lee: Yes, they will keep a record of the hours that they commit to us, if they are in support, but in the same way for other agencies that we support, we do not cross-bill them. We might make a record of the time that we do that and note the operations that we supported, but we do not actually quantify it in terms of pounds, shillings and pence.

Q294 Kate Hoey: Dare I suggest that if there was less tax on some of the fuel there might be less smuggling?

Pat Curtis: I will just make the point that on one occasion our colleagues in the Republic of Ireland were selling fuel at a third discount to what we were selling in the UK, but they were suffering quite a large laundering issue down there too. It boils down to the fact that if there is money to be made, that really-the value obviously has an impact on it, but it is interesting. I have thought about that scenario too. If we applied that then there should not really have the same issue in the South of Ireland that we have in the UK, and that has not been the evidence.

If I can also just add a wee bit to what you said, in 2002 or thereabouts, it was estimated, and I’ll mention that they were only indicated values, that the illicit oils market UK-wide was round about 12%, which is why we introduced the updated strategy as it is. We are now seeing it is 4% in all the figures that we have in. If the 4% is the £650 million, in very simple terms each 1% is £150 million, if we keep it simple. That means the reduction from our activities has saved £1.2 billion. That is in the public domain, and that is us doing our activities and getting it down. Would we still lose that £1.2 billion if we were not carrying out our functions as they are? Yes, it would be fair to say that is possible. Is our aim to improve it and reduce that 4%? Yes, definitely.

Q295 Oliver Colvile: I am not sure whether you have answered this, because it has obviously been a very intense meeting during the course of today, and thank you very much indeed for your very candid replies. Do you have an up-to-date figure on the amount of fuel fraud in Northern Ireland?

Bill Williamson: No. As I said earlier on, we do not have the data because of the way the data are compiled. We like to separate the figure that would be fuel fraud and quite legitimate cross-border shopping. We do not have a means of separating that for Northern Ireland as we do for the rest of Great Britain. So the figure that I said at the beginning of our session, a £70 million loss to the Exchequer was the 2009-10 estimate. One could make some assumptions around the fact that the reason that there has been such a reduction over 2008 and 2009 is because of the differential figure between the South and the North, so I think we are probably getting closer to a potential figure there for the illicit market.

Q296 Oliver Colvile: What could make it easier for you to actually come up with that figure? What action?

Bill Williamson: I think I am reliably informed that it is simply not going to be possible because of the nature of Northern Ireland and the border and the cross-border traffic whereas in Great Britain we can do that. We have canalised points of entry and exit, which of course we do not have with the border. I am told that it simply will not be possible to get a breakdown of that figure.

Q297 Oliver Colvile: That is fine, because otherwise we will carry on pressing you on the issue of coming up with this figure and all that. Has there been an assessment on how big the problem is across the whole of the UK? If you were to take the whole of the United Kingdom-Scotland, Wales, England, and Northern Ireland?

Bill Williamson: If you exclude Northern Ireland, the size of the fraud, as Mr Curtis was saying, for 2009-10 was £650 million, and that is the illicit figure that we have estimated. The tax gap is around about 4% of the total market share.

Q298 Oliver Colvile: The Republic of Ireland has on occasions reduced its level of taxation on various things. Do you think that has had any impact upon Northern Ireland as well, on things like fuel and tobacco? It is really coming back to what was asked earlier by Ms Hoey: is it the case that, if you end up reducing it, it actually discourages people from trying to-

John Whiting: Can I just come in, because some of this is actually happening in front of our eyes. It is very difficult to quantify it. If you ask for a number, which is going to be in millions, we cannot answer it. But what we can say is the Irish have recently increased their duty rates. Also what has happened is-we have all seen because when we go on holidays it costs us more money to go into the eurozone.

Oliver Colvile: Very expensive.

John Whiting: Sterling has weakened against the euro, although obviously very recently it has reversed slightly. That has actually taken the profit away from cross-border shopping, so you would not make a specific journey into the Republic of Ireland to buy fuel, certainly not petrol. That is why the answer in the respect of petrol is there is no discernible figure in terms of fraud there, because there is no laundering of petrol. We do see an element of stretching. We can add kerosene to petrol, and other solvents, which is a fraud-it is mixing-but it is not a massive figure.

If we get back to diesel, there is probably a difference in the cost of about 16p, I think, at the moment. So if you were in the South you might buy your fuel there because it would be cheaper, but would you make that special journey from the North to do that? Also, if the smugglers are intercepted and we make a seizure, the profit element is not so great that they can afford to absorb those costs, so we are seeing a huge reduction in the amount of smuggling. So in terms of the term "smuggling" and whether there is a sheer scale of it, the answer is no, and that is why we have seen the figure in respect of our duty loss around diesel reduced to £70 million, which is quite close to what we think might be-there is still an element of cross border shopping-the fraud element.

We have lower duty rates on kerosene for home heating oil. In fact, it is zero, as it is in the South, but their VAT rate is higher than ours. They are now 23%, and we are 20%, so actually our heating oil is cheaper than the South’s, so we actually see smuggling of home heating oil into the South.

Q299 Oliver Colvile: Right. I would be interested to know the price of a litre of petrol in Northern Ireland.

John Whiting: It is about £1.32. What is really interesting is that because the potential gains from smuggling for the fraudster have disappeared, we have seen this upsurge in laundering. We are absolutely not complacent. Yes, the number of laundry plants discovered has gone up, but it is probably quite a cheap exercise to put the thing together again. So while we dismantle a laundering plant, the guys who lost a lot of profit yesterday, it is probably pretty easy for them to build another one up, so we are realistic about this. We are not trying to flannel you.

Q300 Ian Paisley: Are stretching fuels not likely to do more damage to an engine?

John Whiting: Stretching petrol will cause problems. We have had some huckster sites in Belfast selling pure kerosene, and the customers do not know that they are putting pure kerosene in their cars. That is going to cause them damage. We do have a message to get out to the public that they might think they are buying some cheap fuel that is not doing any damage to your car because the launderers have got better and they are not using acid, but actually there are some other risks, and these people do not care. Once they have sold you the fuel, you have got a full tank. That is it, and there is no trading standards comeback.

Q301 Chair: Thank you. Can I just slightly widen that? How does the lost revenue compare between fuel, tobacco and alcohol? Have you got the comparison?

Bill Williamson: We have got the comparisons. Tobacco is another top priority for us in Northern Ireland. On tobacco, we do not have a separate figure for Northern Ireland, and indeed we don’t on alcohol. We have UK-wide figures, and of course, it is a global problem. On tobacco at the moment we estimate the revenue loss as somewhere between a spectrum of £1.1 billion to £3 billion. On cigarettes we have an illicit market share, the latest figures of around 12%. Hand-rolling tobacco, the illicit market share is around 46%. Again, we have upper, lower and spectrums of potential revenue loss. If you look over a period of time, because again there are long-term trend measures, if you go back to the start of our tobacco strategy in 2000, we had an illicit market of 21% on cigarettes and rising, and over 60% on hand-rolling tobacco and rising. So again, we have a similar approach as we have got to oils of tackling this problem all the way along the supply chain and bearing down on that pressure.

Q302 Nigel Mills: I think we touched on this earlier, but you previously told the Committee that sentences in Northern Ireland remain out of line with those in Great Britain. The evidence we had from the Minister of Justice was that HMRC had no complaint at the level of sentences available under current legislation. Are you satisfied that criminals in Northern Ireland get treated the same way by the courts as they would do in Great Britain?

Bill Williamson: I think the Justice Minister is absolutely right. As Mr Whiting said, we believe the sanctions available to us are perfectly adequate. We have already had quite a detailed discussion about the nature of sentencing. We do not believe it is an issue of actually changing the sanctions and changing the penalties. There may be something around the guidance on sentencing that we need to be looking at.

Alan Lee: We do not have a problem with the range of sentencing. Indeed, since the advent of the Fraud Act there are certain fuel frauds in which we can actually involve offences under the Fraud Act that would carry 10-year sentences. We are actively considering options for using the Fraud Act in the right circumstances. To the question of whether the range of sentencing available to us is a disappointment, the answer is unequivocally no. Whether the imposition within that range of sentences is a disappointment to us, the answer is yes, because of the absence of a deterrent effect.

Q303 Nigel Mills: Why is that? Is it because the court sees a prosecution from HMRC as not the same as a fraud coming for prosecution by the police or the CPS and thinks it therefore merits a lower sanction?

Alan Lee: It is difficult to give you a precise answer, a politically correct answer or an answer that would retain my job. It is very, very difficult for us to understand why sentences applied in Great Britain for like-for-like offences do not merit like-for-like sentences in Northern Ireland. We understand the political history in Northern Ireland. We understand unequivocally some of the difficulties that the people of Northern Ireland have had to face over the years, but the fact remains that unless we start to see some deterrent sentences then all the money that we do invest, and Mr Anderson is obviously keen to point this out-the money that we invest in expensive investigations, surveillance operations, evidence-gathering, preparing bundles, putting them to the PPS, and for the PPS then to engage counsel to prosecute on our behalf and secure convictions-is undermined by the lack of a deterrent effect.

Q304 Kate Hoey: But do you have your own view of why it is happening?

Alan Lee: I really could not give you an answer.

Q305 Kate Hoey: Do you think there are too many people getting backhanders throughout the system?

Alan Lee: I do not believe that for a moment.

Q306 Kate Hoey: So it must be another reason.

Alan Lee: I think there are a range of other reasons.

Q307 Kate Hoey: Political?

Alan Lee: Some political, and some to do with fear, intimidation, levels of negotiation and legal deal-making that takes place in Northern Ireland.

Q308 Chair: Who do we ask for clarification? Is there one person that could give us an answer?

Alan Lee: I do not think there is one person that could give you an answer. You could ask John and I in private, and we could probably spend the best part of an hour.

Chair: We will do that then, okay.

Q309 Ian Paisley: Just for the record, you are saying, Alan, that as of today, in the jaws of 2012, the authorities-which means the Government and the courts, the forces of the state-are not prosecuting people enough because of politics? That it politically suits a cause not to prosecute some people. That is what you have just said to us.

Alan Lee: No, I am not saying that at all. What I am saying is we will continue with all vigour to investigate and prosecute. What I am saying is we do not secure the deterrent effect through the convictions that our colleagues in PPS secure for us.

When we train our investigators, and the training is extremely lengthy, and the number of specialist organisations within HMRC, Lady Hermon, that involve things like forensics, professional photography, covert surveillance techniques, all those are available to us. The training and the investment is extremely lengthy, and the measure of success of an investigator leading a case is to secure a conviction. Whatever happens after that conviction is in the lap of the gods. But his or her primary aim is to secure a conviction for the efforts of his or her team.

Chair: Okay, perhaps we will come back to that then.

Kris Hopkins: I think we have just about done this subject to death, to be quite honest. If you are happy, that is fine. Can I ask another question?

Chair: By all means.

Q310 Kris Hopkins: I have only been on this Committee a few weeks, but it does seem that one department does tend to pass the buck to the other departments, that it might be somebody else’s fault. So far it is not the police, but it might be SOCA. It might not be SOCA, it might be the Revenue. Now it appears to be the justice systems. The frustration I got last week was that, but also the fact that-and I will ask you politely-how can we join up the services? They certainly do not appear to be as siloed as they are. We are looking for outcomes. There does seem to be a self-serving response from each of the people we have listened to, who are protecting their bit of territory. Can we create a space where you and the Revenue and SOCA and everybody else can sit in a room and say, "Actually this is the game that we should be playing," because to be honest with you, I do not get the feeling that you are?

Alan Lee: Can I answer that, John? Could I answer that with a question, Mr Hopkins, which is, to what degree do you think it is in the public interest for us to reveal the extent of our collaboration?

Q311 Kris Hopkins: The fundamental thing is this is a Committee of Parliament that is trying to increase prosecutions and undermine the activity of laundering. Lots of this I find in politics is about public confidence. To be honest with you, I am not very confident at the moment that the evidence that I have heard demonstrates that all the players who are going in pursuit-even though their intentions as individuals and individual organisations may be in the right direction-are all actually pointing in the same direction.

John Whiting: I think then it seems to me that we have failed miserably to explain to the Committee the level of collaboration, co-operation, drive and enthusiasm that we have been bringing to this effort for the past 10 years. If we looked at the level of market penetration in terms of fuel fraud 10 years ago, it was considerably higher than it is now. In fact, the level of £70 million, and we are by no means complacent at all, but the level of £70 million is significantly less than it was 10 years ago.

10 years ago, the Organised Crime Task Force was quite a twee idea, where once in a while individuals got together and said, "Hey, look, that is somebody that was involved in setting it up," but it was not what it is nowadays. It is reasonably sophisticated without being an official task and co-ordination process. But if I tell you that the collaboration and the co-operation between the agencies-the police and SOCA will sit here and say to you, "That is the responsibility of Revenue and Customs," and absolutely we are responsible for this issue. It is an assigned matter, and we are responsible for it. We are not in any way being disingenuous or trying to deflect you from saying we are responsible.

We are responsible for the bit of this for which we are responsible. We are dealing with it in respect of our officers who are out of the group dealing with local compliance, conducting VAT visits and excise visits. We deal with it with respect to our road fuel teams and with respect to our criminal teams. We put the cases before the courts. If I tell you that in respect of civil cases, where we have made significant seizures from filling stations, and that has been appealed, it is called condemnation process. We have gone before the courts 15 times this year-we are a bit like Manchester City until last night-played 15, won 15, okay? Every time we have won. We have persuaded the civil courts that we were right to seize that fuel. We present our cases to the Public Prosecution Service, but after that we can do no further because the Public Prosecution Service have the responsibility to prepare the case for court, and they hand it to counsel who presents the case. We give evidence, and it is up to the courts-it is up to a jury to make a decision, and it is up to the judiciary to actually impose a sentence.

Q312 Kris Hopkins: My question was, how do we join this up? Each time we get a defensive answer about, "This is what we do, and it is somebody else." Perhaps you cannot give us an answer now; perhaps you want to go and have a think about it. But how do we actually join up so that we actually gain some confidence? Perhaps you have a joined note all about, "These are the outcomes; these are the bits where we overlap; these are things that we are trying to pursue all together," to give us some confidence over that.

Bill Williamson: Could I just say, Mr Hopkins, that I can quite understand how the Committee, when it is taking evidence from the individual agencies involved, get frustrated around how those organisations may work together. We do have very clear assigned responsibilities, and it is very important that we do because we need to be very clear about who is doing what, and what our objectives are. That does not mean that there isn’t very close co-operation between us, and indeed the collaboration, the agencies in Northern Ireland, and indeed with the law enforcement agencies in the South is superb. I just wonder if we might be able to expand a little bit more on the detail of that collaboration perhaps in the session that would follow this one, to give you maybe more of an assurance than you currently have.

Chair: We will give that a try then.

Q313 Kate Hoey: This is just an idea, Mr Chairman, but I just wondered if you think there is anyone in particular that you think we should have before us that we have not planned to see in our investigation?

Chair: We are seeing the DPP in January.

Kate Hoey: And we are seeing the Justice Minister.

Chair: And the Justice Minister as well.

Kate Hoey: Is there anybody else that you think could help and make this-

Bill Williamson: I think you’ve got a full pack there.

Lady Hermon: Asking the Lord Chief Justice to be interviewed would be wonderful, but the independence of the judiciary will prevail.

Chair: We will see what we can do with them.

Q314 Lady Hermon: Thank you very much indeed. It was Mr Williamson who mentioned the spending around HMRC. This year the Department was cut by about, I think you said, 25% like all of the other Departments. However, I would have liked you to go on and mention that in fact after the spending cut HMRC was granted a huge amount of additional funding, somewhere in the region of £917 million. In his evidence before us in September, Mr Whiting did say, and I am quoting here again that, HMRC are "in the unique position of recruiting and moving additional staff into their areas of work across criminal investigations". So can I just ask you, how many have been recruited? We knew about a forensic scientist or a forensics person who is going to be seconded from the PSNI, but out of that huge amount of additional funding for HMRC, how much is actually going to be invested in Northern Ireland in terms of more sophisticated equipment, and specifically people and perhaps your PR as well?

Alan Lee: The £917 million is an investment into HMRC to largely combat avoidance and fraud, so it is not just into criminal investigations. It is into a range of divisions within HMRC. Within the criminal arena we are recruiting an extra 312, I think it is, criminal investigation personnel nationwide. We have also subsumed over 200 of the people involved in various excise disruption tactics, so overall criminal investigation has grown by over 500 in the last 12 months. Now, within that I have probably grown my region by in excess of 130. Where I place those resources, Lady Hermon, depends upon a range of issues, but does not constrain me to using them on a site-by-site basis. So although I may increase John Whiting’s area by what you might consider to be a nominal figure, and John will know the exact figure that we have negotiated, there are still over 470 personnel in my region that I can and do fly in and ship in if John’s people identify a case that requires additional investment. So we operate flexibly across regions and overall we have grown by in excess of 500 personnel that are directly involved in criminal investigation.

Q315 Lady Hermon: In your region, and your region is Northern Ireland?

Alan Lee: No, nationally.

Q316 Lady Hermon: So Mr Whiting, are you content with the resources, the additional resources that you have been given?

John Whiting: I am, and I have to say that whilst on the one hand being offered extra people is immediately attractive, what is not so attractive is to have to train them. It is actually a real challenge. I would not be prepared to publicly reveal the numbers, but I am prepared to reveal the numbers privately. I am happy to say that the change in the past 10 years is considerable and I would hope that you would be impressed by the resources that we have managed to move into the criminal investigation arena over the past decade. But that is all I am prepared to say publicly.

Lady Hermon: Absolutely, that is fine. Thank you so much.

Chair: Thank you very much for that. I think we will call an end to the public session. Can I thank everybody for attending, and ask them to vacate the room. If the witnesses would not mind taking a break for five minutes as well, that would be useful. Thank you.

Prepared 26th January 2012