Transport Committee - Minutes of EvidenceHC 1609

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Oral Evidence

Taken before the Transport Committee

on Tuesday 8 November 2011

Members present:

Mrs Louise Ellman(Chair)

Steve Baker

Jim Dobbin

Julie Hilling

Paul Maynard

Iain Stewart

Graham Stringer

Julian Sturdy


Examination of Witnesses

Witnesses: Dyan Crowther, Director, Operational Services, Network Rail, and Michael Roberts, Chief Executive, Association of Train Operating Companies, gave evidence.

Q1 Chair: Good morning, and welcome to the Transport Select Committee. Could you please give your name and the organisation you represent for our records?

Michael Roberts: My name is Michael Roberts. I am Chief Executive of the Association of Train Operating Companies.

Dyan Crowther: My name is Dyan Crowther and I am the Director of Operational Services for Network Rail.

Q2 Chair: Could you tell us how much impact the theft of cable has on your operations? What is the scale of the problem?

Dyan Crowther: I will start and I am sure Michael will supplement. It has a major impact on our operational network. It is a network-wide phenomenon. In terms of scale, we average six to eight incidents a day. Indeed, we had two major incidents on the East Coast last night, but, due to some good work from our maintenance people, we were able to run a full service this morning. We believe that will make up 6% to 8% of total delay on our network. In the year to date we have had over 600 incidents of cable theft, which is equivalent to the figure we received in the last financial year. It is a growing problem. It causes significant delay to passengers and a lot of issues also for our staff in terms of maintenance.

Michael Roberts: To complement what Ms Crowther said, it is a growing problem. In 2009 there were just under 750 incidents related to cable theft on the network. In 2010-11 that had increased to just under 1,000. In terms of the number of services affected, last year cable theft either delayed or caused cancellations to over 35,000 services. If you take as an assumption that each of those services has an average loading across the network, that means that just under 4 million passenger journeys were affected. It is a significant problem; it has been growing as the price of copper on world markets has grown over time, and it is a problem which affects all parts of the network and a variety of types of traveller. For us, as indeed for our colleagues in Network Rail, this is an issue which really does need to be addressed.

Q3 Chair: You have both spoken about a growing problem. Why has this got worse? Is it to do with the value of the copper?

Dyan Crowther: Yes. We know from analysis we have done over a number of years that there is a direct correlation not just to the price of copper but to the price of metals generally. If you track the price of copper and metals over the last six or seven years, as that has gone up and down, metal and cable theft on our network has gone up and down. It is also directly related to the ease with which copper can be stolen and disposed of. That is one of the reasons why we have been lobbying quite hard for legislation changes. We do an awful lot to mitigate cable theft. We have deployed a significant amount of resource and investment over a number of years and we need some help. There is not one silver bullet that will solve metal or cable theft on the network. We know that because we have tried a number of avenues and initiatives. We are now looking at attacking the supply chain at source, focusing on where the thieves dispose of the metal and cable, and making that a lot more difficult for them to do.

Q4 Chair: Mr Roberts, are you working with Network Rail to address this?

Michael Roberts: Very much so. The lead for addressing this issue within the industry is with Network Rail as the body responsible for the network, but train operators can help. Drivers, for example, have been briefed to keep an eye out for anything that looks like suspicious line-side activity-white non-branded vans, for example, that might be next to the line, or, indeed, people without hi-vis jackets, which you would expect from railway staff-and alerting not just Network Rail but, of course, the British Transport Police, with whom also, with Network Rail, we are working very closely in addressing this problem.

Q5 Iain Stewart: That leads on to the question I was going to ask about whether there is a regular pattern to this theft. Is it typically a night-time activity when trains are not running, or are they quite brazen about being out in open daylight and cutting and taking the wire when the services are running?

Dyan Crowther: There is no real direct pattern. Cable theft appears to be a random event. You will hear from my colleagues in British Transport Police later on, I am sure, who will talk to you about the type of people that steal cable. They are opportunists; therefore, it is quite difficult to predict. It is very random and that makes our response to these events quite difficult.

Q6 Iain Stewart: In your earlier comments you referred to the supply chain-the dispersal of the metal once it is stolen. Again, is there a regular pattern there? Do they tend to go to registered scrap metal dealers or is there a much wider black market through which this metal can be dispersed?

Dyan Crowther: I do not have a huge amount of knowledge on that. I am sure my colleague, Paul Crowther, can give you some further information on that later on.

Q7 Graham Stringer: Are there alternatives to copper cabling?

Dyan Crowther: Yes, there are.

Q8 Graham Stringer: What, roughly, are the economics of installing new systems against the losses you are suffering at the present time?

Dyan Crowther: It is not economic or achievable to replace all of our cable. We have over 20,000 miles of network. If you look at how much cable we have to support that network, that is quite a large amount. For us to put together a business case or a plan to replace all of our cable is not sensible.

Q9 Graham Stringer: Can you give us the headline figures in terms of how much it is a year-I do not know what the best year would be-and what it would cost you per mile or per 100 miles to replace it with alternative technology?

Dyan Crowther: I cannot give you all of that detail, but I am sure we can provide that later. In terms of direct costs to Network Rail, in the last three years it has been just over £43 million. If you split that, it is about two thirds compensation to train operators and the other third is direct costs to us. There are indirect costs as well associated with that in terms of our staff being deployed elsewhere. In terms of direct costs, it is £43 million.

Q10 Graham Stringer: And what are the costs of new systems-just headline figures?

Dyan Crowther: In terms of new systems, one of the systems we are looking at is Spanish cable, a hardened cable which is very difficult to cut. I do not know the cost of that off the top of my head. It is not so much the cost of those systems; it is the implementation and being able to achieve engineering access, because you would be talking about closing the network down in many parts. We already have a major re-signalling programme going on. To disrupt that would be very hard. Again, I can come back to you with the unit costs of those.

Q11 Graham Stringer: You said earlier that there was no discernible pattern to these events, but there are regional differences, are there not?

Dyan Crowther: Yes, there are regional differences.

Q12 Graham Stringer: Can you describe those differences for us and tell us if you think there is any particular reason for them?

Dyan Crowther: Cable theft started as an issue in the north-east and on London north-eastern routes specifically. I know that. I was the route director in York at the time. It was an issue that was very live to me. At that time, four or five years ago, it made up 10% of my total delay, and my total delay over a year was 2 million minutes; so it was very disruptive. In terms of the reasons why, again, a lot of it, we think, was associated with the economic areas. I have already mentioned that the usual cable thief is an opportunist, someone who will do it on a random basis. It was also availability in terms of where a lot of scrap yards are located with regard to the ease of disposal. It has grown and we know it is growing, not just from Network Rail’s perspective but for other industries as well. We work very closely with industries like the Energy Networks Association and Openreach. We plot cable theft and metal theft collectively; we know where our hot spots are. We know that, if Openreach have a problem in Scotland, it will come to us because they will target-harden their facilities and the thieves will come to the railways. We know that it migrates; there is a displacement. We can do a lot of things in specific areas and it becomes displaced. To a certain extent that is why we are asking for some help on legislation and focusing on the supply chain of metal theft.

Over the last 12 to 18 months we have seen a migration of metal theft further south. We have had fairly high-profile incidents in Woking at the start of the summer, in June. We had cable theft at London Bridge. As I said earlier, we have six to eight thefts a day and those are across the whole of the network, not just in the north-east.

Q13 Chair: Are any of these thieves impersonating railway staff?

Dyan Crowther: Yes, we have evidence of that, and, again, what we try and do is share information in terms of where we know our gangs are going to be on the day. Generally, all of our vans are branded Network Rail. This is where we work with train operators to brief drivers, "If you see any suspicious activity, something that you know should not be there, then please report it", and we have had a number of successes where we have been able to stop cable thieves in the act because of good reporting from drivers.

Q14 Chair: How much of that £43 million is compensation to the train operating companies?

Dyan Crowther: Approximately two thirds.

Q15 Chair: How is that worked out? What is the basis of the calculation?

Dyan Crowther: The basis of the calculation is something that is enshrined within our contractual relationships with train operators. Generally, it is around delay minutes and the number of services that are cancelled.

Q16 Julian Sturdy: I think you both mentioned that there is no one silver bullet to solve this problem, which I would certainly agree with, and, as you rightly mention, we are seeing metal theft becoming a huge issue across the country, not only with cable theft but in other areas as well. What action are you taking with CCTV in certain specific areas-and I know you could not put CCTV across the whole network-to try and target certain hot spots? One of the biggest issues, I feel, if we are going to stop it, is that we have to identify the metal at source, at the scrap yard. Are you doing anything to help the police identify cabling when they do spot checks at scrap yards?

Dyan Crowther: Yes, we are, and we do use CCTV. We also have trembler alarms and what we call ballast cams, which are very small hidden cameras. We have a number of surveillance devices that are tracked back to our controls which we deploy in areas that we believe are hot spot locations or can become hot spot locations. We gain that intelligence from working with our colleagues in the British Transport Police Intelligence Unit. We try and predict and prevent rather than just react. We use a lot of surveillance equipment. We also use a number of products which allow us to mark forensically a lot of our equipment. SmartWater is an example. We have been running a fairly successful trial on the London North Western, in the Nuneaton area, where we have deployed SmartWater quite successfully to try and combat and, indeed, convict cable thieves. Yes, we do use that, and we also use SmartWater successfully on High Speed 1.

Q17 Julian Sturdy: You say that has been successful. Can you quantify that? Is it the case that the thieves are aware of that and are leaving those particular areas alone, or has it aided to bring about convictions?

Dyan Crowther: It has been successful in the sense of aiding convictions and identifying scrap yards that are accepting metal that has been stolen. That has been very important to our colleagues in the police force in terms of being able to mark items and identify them at the source from which they have originated.

Q18 Chair: You say you are using CCTV and trembler alarms. How are you approaching that? Are they being put everywhere or in the danger spots or potential danger spots? What is the profile?

Dyan Crowther: They are broadly put in our hot spot locations. We also deploy them around re-signalling schemes. We know that, when we are about to undertake a re-signalling scheme, the risk for cable theft increases because it is almost like providing sweets in a sweet shop; you suddenly have an influx of cable. We work very closely with our colleagues in the police to take recommendations on the types of mitigation measures we should put in place. In the past we have always laid cable out ready to go into troughing. We do not do that any more. Those are some of the sensible practical things we can do to cut the supply off at source. By deploying things like trembler alarms and CCTV before we even get cable thieves, it almost acts as a deterrent in itself. They know that there is some form of surveillance there rather than waiting for the theft to happen.

Q19 Jim Dobbin: Mr Roberts and Ms Crowther, you have both alluded to the fact that you need more help to do this. Are you referring to help from the Department for Transport? What kind of help could you do with?

Michael Roberts: In particular, what we would like to see would be some form of regulatory action brought into play through Government to complement the operational work that Ms Crowther has mentioned. We would see that being a cross-Department or Government responsibility to introduce. I have to say that the Department for Transport has been helpful, and the relevant Minister, Norman Baker, has been assiduous in arguing the case within Whitehall that some form of proportionate regulatory action, alongside the other things that we have been talking about this morning, would help us better target this issue and reduce the effect of cable theft on the industry.

Q20 Jim Dobbin: The trade unions have alluded to the fact that reductions in staff have affected your ability to keep a check on this. Do you think that is an issue?

Michael Roberts: For my part, I am not quite sure what reductions in staff they might be referring to.

Q21 Chair: Perhaps Network Rail should answer that. Do you have reductions in staff at the moment?

Dyan Crowther: Yes. As part of our efficiency measures we have been reducing the number of maintenance staff that we have around the network and we use external security companies to undertake our security patrols. There is a very good reason why we do not use our maintenance staff to undertake security patrols, which is because of specific training; similarly, a lot of our maintenance staff are out and about at night and we need to have a 24/7 presence in some areas, certainly in hot spot locations. A decrease in staff should not really have an impact on an increase in cable theft.

Q22 Jim Dobbin: What would be the cost of employing security companies to do this?

Dyan Crowther: There is a cost, but there is also a cost in not employing them. Yes, we have a direct cost. Sometimes the security patrols are paid for from our project teams because it is associated with re-signalling schemes. Generally, we bring them in on fairly short-term contracts because it is almost the initial response; we need additional security while we are looking at additional target-hardening measures, which could be cable burial, better fencing or a number of other activities that we have in our toolkit. We quite often deploy security staff as a transitionary measure, and we will, more often than not, work with the British Transport Police to make sure that, where we are deploying security patrols, we are not double-counting in terms of the resources that BTP deploy as well. We try to do it very much as teamwork rather than treading on each other’s toes.

Michael Roberts: It might also be worth adding that the industry contributes to the funding of BTP, which, since 2005, has steadily increased, making available resources in the round for policing, but including this area as well. In the spirit of the current economic circumstances, the industry is keen to ensure that BTP is spending that money efficiently and deploying resources efficiently, but our priority, together with them, of course, is to ensure that, in the context of making improvements in cost efficiency, we do not compromise front-line operations.

Dyan Crowther: We have also worked very closely with British Transport Police in providing some funding for some additional dedicated cable theft resource, because they themselves realised that this was an issue that was not going away and it was not something that was going to be dealt with in a part-time capacity. As an industry and as a police force, we had to say, "Okay, we are serious about this and we need to put some proper resource into it", which is why Network Rail were prepared to provide the additional funding that BTP were asking for.

Q23 Chair: You mentioned earlier that thefts sometimes take place when re-signalling is planned. How do they know it is going to happen? Do you publish the information or is that insider information?

Dyan Crowther: It is a combination of both. We publish all of our engineering works on our website because that is a requirement in terms of passenger information. Yes, there is evidence that there is insider knowledge. There have been a number of arrests of contractors and, indeed, Network Rail staff themselves who have been associated with cable theft.

Q24 Chair: What is the scale of that?

Dyan Crowther: Not huge. Mr Crowther will, I am sure, be able to give you some additional specifics, but it is not something we are getting every day. It is not the norm.

Q25 Chair: But some of it is from information you publish, not just insider information.

Dyan Crowther: Yes, it is. It is difficult to ask a cable thief, "How did you know that there was going to be signalling cable there?" It is not a question I would ask, but, then again, it may be something for Mr Crowther to answer.

Q26 Chair: We will pursue it further with him.

Michael Roberts: It might also be worth mentioning, picking up on one of the earlier questions about whether there is a pattern to when this activity happens, that there is not a clear pattern. Some of this activity is taking place at peak times when, traditionally, signalling work is not carried out because of the volumes of traffic being conveyed on the network. Ms Crowther made reference to the incident in Woking, which was at peak time and had an enormous effect on people trying to get back home in the evening. I think this is an issue that spans all parts of our operation as a network.

Q27 Julie Hilling: Can I go back to the questions that Mr Stringer was asking in terms of engineering solutions? What specifically are the solutions that you are looking at as alternatives to cable?

Dyan Crowther: There are a number of solutions that we are looking at which are short-term in mitigation. The first is steel banding all of our cable. The intention there is to make it difficult for thieves to pull it out of the troughing in the first place. The tactic is very much how we make this difficult, because if you are an opportunist thief you want to be in and out very quickly. The more walls we put in the way-better fencing, steel banding, burying cable-the more difficult it makes it so that they feel less inclined and less opportunist on our network. Those are some of the short-term tactical things that we are deploying across the network at the moment in hot spot locations. We also ballast-bury and deep-bury cable at certain locations. With regard to the longer term, a new in-cab signalling system is clearly the answer. Some Committee members may be aware of the ERTMS trial, which is the replacement for signalling that we have on the Cambrian coast at the moment. That is 20 to 25 years away. It is not a quick fix in terms of replacing the way that we signal our trains. The other issue is around fibre optic cables. Quite often thieves will cut a cable, looking for copper, and it will be fibre optic, and it is the fibre optic that causes us quite a lot of problems as well.

Q28 Julie Hilling: You talked about Spanish cabling. Is that the steel-banded cable or is this different altogether?

Dyan Crowther: No. Spanish cable is encased in a hardened core. It makes it very difficult for thieves to cut, so, again, it is another disruption technique. Steel banding is attractive to us because it is something we can do today. We do not have to re-lay the cable. We can just steel-band it and make it more secure in its current troughing.

Q29 Julie Hilling: When you have to replace cabling, do you then use Spanish cabling?

Dyan Crowther: As part of our renewal schemes when we are renewing cable we look at a number of measures around cable theft, and, if we think we need to put Spanish cable in because it is a particular hot spot location, we will do so.

Q30 Julie Hilling: Why are you not doing that everywhere?

Dyan Crowther: It is about cost, because there is a cost associated with this. Is it economic for us to do so? Yes, there is a huge amount of disruption, but to do that would be quite a big financial burden.

Q31 Julie Hilling: But, wherever you are replacing cabling, whether that is through renewals or theft, why are you not using the Spanish cabling then?

Dyan Crowther: Because in some locations we may choose to bury it. There are a number of things that we would choose to do.

Q32 Julie Hilling: But are you still replacing copper cabling with copper cable?

Dyan Crowther: Yes, in some locations.

Q33 Julie Hilling: That is what I do not understand. I can understand why you cannot do the whole network now and say, "Let’s change it all", but, when you have to change cable, I do not understand why you do not then use one that is not good for the market and is harder to steal.

Dyan Crowther: In some areas where we are replacing cable we have no evidence and no likelihood of cable theft or copper theft. There are a number of criteria that we look at, and that is an assessment that is done during the renewal phase. The engineers will work quite closely with the routes to determine the level of mitigation that is required. The Spanish cable is fairly new. It is something that we have trialled in the north-east and it has been successful, but it is not something that we are now just going to roll out across the network.

Q34 Julie Hilling: Is that cabling more expensive than copper, or how much more expensive is it?

Dyan Crowther: I do not know is the answer to that, but we can come back to you on that one.

Q35 Chair: How do you work out the overall cost of cable thefts? What factors go into that?

Dyan Crowther: There are the compensation costs, which are costs that are attributed to train operators in terms of the level of compensation that they are paid, and the direct costs are things like the cost of the cable, the amount that has been stolen and the amount of additional resources that we have employed. In some areas, for example, we have employed what we would call hand signallers so that when we do get metal theft we can deploy hand signallers to get the train service running as fast as possible. We have employed additional maintenance gangs in hot spot locations so that we can deploy them immediately, and, again, there are things like additional surveillance equipment. All of those items are direct costs to us that we would not normally have looked at.

Q36 Chair: Is that in the figure of £43 million that you gave us before? That is where it comes from.

Dyan Crowther: Yes.

Michael Roberts: In addition to that, we estimate that there are wider costs to the economy. There is the lack of productive time in the economy owing to delays caused to people not being able to reach their work on time and consequently not being able to use that time as productively as they would otherwise have done. Using the Government’s appraisal methodology, we estimate that those wider costs to the economy are probably of the same order of magnitude as the direct costs that Ms Crowther has talked about. It would be something in the region of £16 million to £20 million a year to the economy.

For us, the additional concern is what this issue would mean for the reputation of rail if it was unchecked. Our ability to provide services reliably is fundamental to our ability to attract people to use the railways away from other forms of transport, such as road transport, and thereby to help relieve congestion, which itself is a drag on the economy. Although we have not been able to quantify that wider impact, for us, ensuring that we can tackle cable theft in order to remain a reliable rail network, which, of course, we have increasingly been in the last 15 years, is critical to our ability to meet the wider transport needs of the economy.

Q37 Chair: Have you tried to estimate a cost for those wider impacts?

Michael Roberts: Apart from the wider impacts in terms of lost productivity, the reputational impacts and what that means in terms of our ability to retain and attract business, we have been able to look at the industry ways in which we assess the value of reliability. There is a clear link between reliability and our ability to attract people on to the railways, which has a value in terms of the revenue that we can earn through fares, for example. If we assume that the impact that cable theft-related delay has on people’s perception about reliability has the same effect as other forms of delay, then we would estimate that the potential lost business to the railways is of the order of 0.5 million passenger journeys a year, which has a revenue impact of about £3 million or £4 million a year. That is not insignificant. To put that into context, the network currently makes possible over 1.3 billion passenger journeys a year.

Q38 Steve Baker: You have talked about the widespread cost and inconvenience. Have you formed a view on the adequacy of sentencing and reoffending?

Michael Roberts: Our instinct would be that sentencing probably could be tougher. That is a matter for others to decide upon, but we would like to see the wider impacts and value of the disruption caused as a result of criminal offences surrounding cable theft being taken into account rather than just the pure value of the theft of copper that is involved in those incidents.

Q39 Steve Baker: Have I understood correctly that we are talking about mostly opportunistic, low-level thieving here? Is that right? You are not talking about large organised criminal gangs.

Dyan Crowther: Mr Crowther, my colleague, I am sure, will be more specific, but the majority is opportunist. There are some organised gangs; there is evidence of that, and I am sure that Mr Crowther will go into that in his evidence.

Q40 Graham Stringer: If I have worked the figure out correctly from what Ms Crowther told us, the train operating companies get compensated by £28 million a year. Is that right?

Michael Roberts: No, that is not correct.

Q41 Graham Stringer: What is the figure?

Michael Roberts: It is closer to £12 million to £13 million a year.

Q42 Graham Stringer: Did I mishear, because Ms Crowther said it was £43 million?

Michael Roberts: Over three years.

Q43 Graham Stringer: That is over three years. I misheard.

Michael Roberts: That is the total direct cost.

Q44 Graham Stringer: I missed the "three years". In terms of the compensation, how much of it ends up in the passenger’s wallet?

Michael Roberts: I am unable to say how much compensation has been paid directly as a consequence specifically of cable theft related to delay.

Q45 Graham Stringer: Are there figures available of the difference between what goes to the train operating company and what is passed on to the passenger?

Michael Roberts: In terms of compensation that is passed on to the passenger specifically as a result of this issue, I am not aware of the figures being available, but there are arrangements which have been in place for some time now whereby passengers who have suffered delay are able to claim compensation from operators. The precise form of those compensation arrangements depends on when the franchise was let to run a particular train service. There are essentially two types of compensation arrangement. One is known as the delay repay scheme. The other is based on the old passenger charter arrangements. If it would be helpful, we can make some of the details on how those things work available to the Committee.

Chair: We would be interested to know how that works because we are hearing about large amounts of compensation paid to the train operating companies, but it is not entirely clear to me where that goes and how much of that gets passed on to the passengers, who are the people who are losing out.

Q46 Graham Stringer: It would be interesting to know. You said previously that there are 4 million passengers affected. Do you have figures for what the average delay is to those 4 million passengers?

Michael Roberts: I do not think we have figures on the average delays across the whole network. We have figures for the aggregate number of delay minutes caused as a result.

Q47 Graham Stringer: It would not be difficult to work out the average.

Michael Roberts: Indeed.

Q48 Graham Stringer: Do you think you could provide us with that information and also provide us with what the breakdown is between what the train operating companies get and what passengers get in terms of compensation?

Michael Roberts: We will endeavour to do that. The amount that gets paid in compensation does depend upon the passenger applying for that compensation.

Q49 Graham Stringer: Yes, but it would be interesting to know what went to the train operating companies and what actually went to the passengers, because you made a strong point that reliability and punctuality are important, but when it goes wrong it is also the case that financial compensation is important, is it not?

Michael Roberts: Indeed. It may not be straightforward, but we will endeavour to get those figures for you.

Chair: That would be helpful to us.

Q50 Julie Hilling: My questions were very much along the same lines but I just wanted to harden a question at the end. Are the train operating companies profiting by cable theft?

Michael Roberts: No is the straightforward answer to that. I refer back to my previous answer, which was, given that there is a link between reliability and the ability to earn revenue, and given that cable theft is impacting on our ability to deliver a more reliable service, there is a revenue loss to our industry as a consequence.

Q51 Julie Hilling: You are talking about a long-term loss of revenue, potentially, because people may then choose not to take that journey, but, in terms of an incident taking place and you claiming compensation for that incident taking place, what is the train operating company pocketing for that incident? How much of that compensation goes into the coffers? I accept your point absolutely about long-term revenue, but is there other expenditure the train operating company has to have from an incident, or is that money going into the coffers of the TOC?

Michael Roberts: That money gets paid as part of the standard arrangements which have existed for some time in the industry. I am not aware that operators would incur significant additional expenditure as a result of the delays caused by cable theft.

Q52 Julie Hilling: The answer is that that money then is going into the train operating company coffers.

Michael Roberts: In the same way that compensation is paid under standard arrangements by Network Rail to operators for any form of delay that emerges from delays from the network.

Q53 Julie Hilling: That is a yes.

Michael Roberts: Yes.

Q54 Julian Sturdy: Do you think the UK is a soft option for metal theft compared to other EU countries?

Michael Roberts: I do not have a view on that.

Dyan Crowther: I think we are fairly consistent with Europe. I know that there has been some legislation change introduced in France and, indeed, Belgium recently in response to the growing phenomena in those countries around metal theft. They have followed a very similar path to our own. Indeed, we have regular dialogue with them in terms of the mitigation measures they have looked at, and they are now introducing some legislation changes around scrap metal yards.

Q55 Julian Sturdy: Is that legislation that you feel, within the evidence that you have put forward, you would like to see happening in this country?

Dyan Crowther: Yes.

Q56 Paul Maynard: I am sorry I was late. I was stuck on a train outside Waterloo, not because of cable theft, as far as I am aware. I did not want to go into anecdotal evidence, but I have been inspired to by Ms Hilling’s questions. I was stuck for an hour and a half at the Weaver junction three Thursdays ago on a Virgin intercity train because of cable theft, and, when we eventually pulled into Preston shortly before 2 am, Virgin Trains had to lay on a fleet of taxis to transport passengers to every relevant destination to which there were no more connections. They also had to lay on, I think, a minibus. Can you confirm whether that expenditure by Virgin would have been covered by the payments that they would have been able to claim for the fact of the cable theft?

Michael Roberts: I am not aware of how much compensation they would have got and how much they would have spent on the items that you indicated, but the compensation does help pay for those sorts of measures to ensure that customers get to where they need to get to in a reasonable amount of time and a reasonable degree of comfort.

Q57 Paul Maynard: I genuinely do not know the answer to this, but is that level of service part of their franchise agreement, or are they doing that over and above what they have to do in order to protect their reputation, as you pointed out?

Michael Roberts: The details of each agreement are different, but my instinct would be that that is not something that would have been specified in their franchise agreement with the Department. The decision to lay on taxis and minibuses would have been something that Virgin decided was the right thing to do for their customers.

Q58 Paul Maynard: With regard to the reputational issue, it was noticeable on the train that no one explained that the delay for an hour and a half was because of cable theft; yet, presumably, staff were aware of it. What problems are there in terms of train companies ascribing a cause to cable theft promptly that would allow passengers to be better informed as to why things were occurring?

Michael Roberts: Inevitably, there will be a period of time when, for example, a signalling failure occurs, before it is clear what the cause of that is, whether it is cable theft or anything else. In some cases it may be more obvious than in others to identify whether cable theft has been the problem. It is genuinely a challenge to be able to communicate accurately and very quickly that the specific cause has arisen from cable theft.

Q59 Chair: When we hear there is a signalling fault, that could be cable theft.

Michael Roberts: It could be, but it is not the only reason. One thing that we have increasingly been doing as an industry, and for which ATOC is responsible, through the National Rail inquiries service, which provides both website-based as well as phone-based information to customers about their journeys, where we have reasonable understanding that cable theft is the cause of a problem, is to indicate that. That is a service that we now provide on our website, but, as I say, there can sometimes be a gap in time before we can be clear and, even sometimes when we think we are clear, it may turn out that the cause is something else.

Q60 Iain Stewart: I would like to follow up Mr Sturdy’s last question, looking at what is happening in Europe. I infer from your answer that cable theft is as much a growing problem in other countries, and you alluded to some legislative changes that they are seeking there. In terms of technology and preventative measures, are there any lessons that we might be able to learn in this country from what is happening in, say, France or Germany?

Dyan Crowther: Yes, and they also learn from us. There are various bodies in which we participate, and it is not just the rail industry. As I mentioned in an earlier reply, we work very closely with other industries as well, such as the Energy Networks Association and Openreach. We also share our problem with the supply chain. We have a number of companies that come to us with their solutions and we have trialled a number of initiatives in the hope that it will help us mitigate the problem. We are always open to new ideas. I addressed a European Safety and Security Conference four weeks ago, and, again, that was good networking. Yes, we do share good practice. We share pain as well, because this is not just a European issue; it is a global issue.

Q61 Iain Stewart: But there is no one single success story that we could easily transplant here. It has to be looked at as a package of measures.

Dyan Crowther: Yes. It is a system approach, and if there was one thing we could do, believe me, I would have done it.

Q62 Chair: Do you anticipate that cable theft will disrupt travel to the Olympics? Do you think that is going to be a big problem?

Dyan Crowther: In my earlier answer I referred to six to eight incidents a day. I also referred to an increasing trend. Yes, it is a risk. It is a risk to our network daily. Our role as an infrastructure provider is to make sure that we have adequate mitigation measures in place to manage that risk, and that is not just about cable theft; it is about any kind of infrastructure delay or any other type of delay that may affect the Olympics. Yes, we are very alive to the fact that it is a risk, we are very alive to the network impact and we are working very hard to make sure that we put the correct mitigation measures in place.

Q63 Chair: Mr Roberts, do you want to add anything to that?

Michael Roberts: Just to say that during the course of the Olympics we expect to be laying on an extra 100 services a day to serve the demand for rail traffic to Olympic sites. There will be certain stations which will particularly be the focus of that traffic. Stratford station, for example, will see a 350% increase in traffic. Our interest, as Ms Crowther said, is to ensure that, whatever the cause, the risk of disruption to that service pattern is minimised. Indeed, there is an enormous amount of preparation going on to ensure that we run as smooth a service as we can during what will be an important event for the country as a whole. Having said all that, the issue about potential disruption from cable theft is a concern not just for the Olympics but also for any specific incident where there is major rail-borne passenger traffic-major sports days other than simply the Olympics, or, indeed, bank holidays, whether it is the Christmas bank holiday or at Easter. The Olympics certainly are a cause for us to continue focusing concern on addressing cable theft-related disruption, but we have plenty of other reasons to ensure that we are doing everything we can and that the public policy framework is there as well to address this issue.

Q64 Chair: Should the Department for Transport be doing any more to help? Are they doing enough?

Michael Roberts: My sense is that they have been very active, together with the industry and, indeed, the BTP, who have been leading much of the work and to whom we would like to offer our thanks for their support in leading not just the rail industry’s interest in this matter but, indeed, the cross-sectoral interest. We are focused on the impact on our community, but cable theft is something that affects other sectors and, indeed, other aspects of public life.

Q65 Chair: Ms Crowther, do you want to add anything?

Dyan Crowther: No. I think Mr Roberts has covered anything I wanted to add.

Chair: Thank you very much for coming and answering our questions.

Examination of Witnesses

Witnesses: Ian Hetherington, Director General, British Metals Recycling Association, and Deputy Chief Constable Paul Crowther, British Transport Police, gave evidence.

Q66 Chair: Good morning, gentlemen, and welcome to the Transport Committee. Could we have your name and organisation, please, for our records?

Ian Hetherington: My name is Ian Hetherington. I am the Director General of the British Metals Recycling Association.

Paul Crowther: I am Paul Crowther. I am the Deputy Chief Constable of the British Transport Police, but I am also the Association of Chief Police Officers’ lead for metal theft.

Q67 Chair: Mr Crowther, how seriously do British Transport Police take metal theft?

Paul Crowther: Very seriously indeed. I think I have been misquoted a number of times as saying that this is the second most impactive issue affecting the railways apart from terrorism, but that is not far off the scale of the issue. In terms of the day-to-day disruption it causes to services, which, of course, we are interested in, it also causes us other problems in terms of crime disorder issues that might occur at stations where there are stranded passengers and irate passengers along the line. We take it very seriously indeed. It features very heavily in our policing plan and strategic plan objectives. We have diverted very significant resources to tackle this on a day-to-day basis. There are about 110 officers full time working on metal theft counter measures, and it occupies much of our waking time.

Q68 Chair: Do you need any extra powers?

Paul Crowther: I believe we do. Through my work on the national stage I am aware of the massive impacts that it is having, not just on the rail system but also on the energy systems and telecoms, and the very significant impacts it is having at individual community and business level right across the country. From the work that we have been doing-and I have been looking at this for about four years now-all routes lead us back to the market. It is a very market-driven crime. You will have seen in my submission the graphs that show the almost startling correlation between the price of copper and the number of offences that are committed month on month. As the price goes up on the world market and as it goes up on the chalkboard at the scrap metal dealer, so crime goes up, with just about a one-month lag. It is almost as if the criminals are looking at the markets themselves. We have worked extensively with Mr Hetherington and his colleagues in the BMRA, and with the scrap metal industry more widely, but the conclusions that we have reached are that the vast majority of the stolen material has to find its way out into the market through the scrap metal dealers. In a large amount of cases that is unwitting and the majority of scrap metal dealers are keen to work with us, but there is a significant element who are turning a blind eye or who are involved in criminality themselves.

The regulatory regime around scrap metal dealers is outdated. The main powers available to the police are to be found in the Scrap Metal Dealers Act 1964. It really is Steptoe and Son legislation which has not kept pace with current methods. To give an example, there is a requirement in the Scrap Metal Dealers Act for identification details to be taken from someone who sells material to scrap metal dealers, but there is no requirement for any proof. In this day and age, where probably you cannot go to a tool hire shop without producing photographic ID or a utility bill, you can go to a scrap metal dealer and give a name and address and there is no means of checking whether or not that is true. Therefore, there is a major fault in the legislation in that the traceability of the individual is compromised, which means that the traceability of the material is compromised, and the incidence of cash in the process creates situations where corrupt practices can take place. We think that at the moment the risk-to-reward balance is heavily in the favour of the criminal. The maximum fine under the Scrap Metal Dealers Act is £1,000 at level three in the sentencing powers. The average fine dished out in 2010 was £379. With scrap copper trading at £5,000 a tonne, you can see that the balance is heavily in favour of those who might be skewed towards criminality.

Q69 Chair: Mr Hetherington, is the metal recycling industry itself culpable for what is happening?

Ian Hetherington: The metal recycling industry in the UK is a £5 billion business. We process about 15 million tonnes of secondary material a year. This is feedstock running into steelworks, metal works in the UK and around the world. We generate something in the region of £4 billion a year in export revenues. It is by far the leading recycling industry in the UK, and we in the UK are leading in a whole range of technologies and technology developments which will increase the value of the industry to the UK. Metal theft is a major problem and we fully recognise this. Paul and I have been working, largely together, for a long time on this now, and our messages today will probably in many places converge.

Is the industry culpable? Without doubt, the industry-and I am talking here of the legitimate, regulated, legal industry-will at some point in the supply chain probably receive some stolen material. The amount stolen may seem large, but we are talking of about 15,000 tonnes a year. You will please excuse me. I understand your interests are transport, but that number comes from the totality of thefts across utilities and, of course, across our own members, who, in terms of tonnage, are the largest victims of metal theft. That 15,000 tonnes has to be seen in the light of 15 million tonnes of material processed.

Going back to my point, yes, at some point in the supply chain I am sure that some in the legitimate industry are unknowingly processing material that was originally stolen. The illegal supply chain here is quite long and is evidently very complex. Mr Crowther will have a better understanding of that than I, but this material appears to go through many hands. By the time we see it in the legitimate trade it becomes very difficult to identify. In general terms, I would say that it is not in the interests of the legitimate trade to be knowingly handling stolen goods. The risks are too high, and risk to reputation-and this is an industry that relies heavily on reputation-is too great. The answer is, knowingly, no, but, unknowingly, probably yes.

Q70 Iain Stewart: You have both mentioned that this is a much broader issue than theft of railway cabling, affecting utility companies, thefts from church roofs, from war memorials, all these sorts of things, but, with our focus on transport, is transport just one example of a broader problem, or are there specific issues in the types of theft? Is railway theft more opportunistic or organised than the other areas?

Paul Crowther: I think the railway presents a number of remote targets, which means that the material can be accessed at times relatively unseen, which creates greater opportunities. In that respect I guess it presents a particular target for criminals. I listened to the debate earlier about whether this is focused in particular regions. It certainly is. The north- east area of BTP jurisdiction seems to be, for some reason, the epicentre of metal theft as far as the railway is concerned. We believe that is to do with the traditions of heavy industry within that area, where people are used to dealing with metals and understand the values of them, potentially, although I do not think we have entirely got to the bottom of that. It varies on a regional basis. BT telecoms, for example, have a much greater incidence of theft in the south-east than they do in the north-east. There are some regional differences in the type of criminality and the activity, but we do see that the majority of the offenders are what I would call opportunist but none the less professional criminals. In some studies about 80% of those arrested for metal theft have some previous convictions for other acquisitive crime. If they are not burgling houses, stealing from vehicles or carrying out other street crime, they turn to this, I think because it is seen as a low-risk, high-return activity. They will, therefore, take advantage of the opportunity that presents itself, which might be on the basis of geography and accessibility, or, if we put in place measures to counter a particular hot spot area, they will move into another commodity, like catalytic converters and the materials contained within those. It is a very flexible crime group that is involved in this.

Q71 Iain Stewart: From your British Transport Police perspective, how do you work with other police forces to share information and prevent thefts happening?

Paul Crowther: I chair the ACPO Metal Theft Working Group. Within that group not only do we have the various utilities, industries and Government Departments which are affected, but we also have regional representatives of the various police forces around the country, each of which has its own metal theft initiatives. There is an enormous amount of police resource being diverted into tackling this crime, because in some forces it accounts for 10% of all recorded crime at the moment. We work very closely with other forces, both locally through neighbourhood policing teams, and, indeed, on big set-piece national events, like the one we did the Friday before last, where we had something like 27 England and Wales forces and eight Scottish forces working with 450 BTP officers, carrying out a day of action, as well as international days of action with our colleagues from railway policing organisations across Europe.

Q72 Paul Maynard: I noticed with interest in the BMRA’s evidence that there was a reference to "persistently high levels of theft and low rates of successful prosecution". What hurdles do you find in terms of detection, bringing a prosecution, and, indeed, drawing a conviction? I know this is a difficult question to answer, but what are the typical sentences that someone convicted of metal theft might face?

Paul Crowther: The challenges are many and varied, depending on the circumstances. When we talk about the spread of what are largely opportunist thieves, the first problem is catching them. The remote locations of some of these thefts poses a problem. You heard earlier that we are using technology-cameras, trembler devices, etc.-to catch them in the first place. In terms of prosecuting people, when we discover material in scrap metal dealers-and I have to say it is pretty widespread-which is marked as BT cable or Network Rail cable, not all of which can have found its way into the supply chain unwittingly, I would say, our difficulty then is proving where that material came from. You cannot secure a charge for theft or handling unless you can prove the original theft. Although we may have a piece of cable marked "Network Rail", unless we can show where that came from and that it did not get into the supply chain through a legitimate route, through contractors disposing of redundant cable, for example, then it can be almost impossible to gain a charge.

In terms of sentencing, I think we have made some strides on that. We have engaged with criminal justice partners to raise their awareness of the impacts. We now include in every prosecution file an impact statement that sets out just how impactive this is on Network Rail and the running of the railway or other utilities. We have seen in some cases, but not all, an increase in the level of sentences that are administered. It is not unusual, where we can prove substantial impact, for example, where a town has had its power knocked out, that someone might receive four years’ imprisonment, but that is not the norm. Often it can be a relatively small length of cable that might be worth £40 or £50 but has had a massive impact, but the sentence does not reflect the impact.

Q73 Paul Maynard: Mr Hetherington, when I was reading all the submitted evidence last night, the BMRA evidence leapt out at me because it seemed to be the only one that did not look to expand the scope of the 1964 Scrap Metal Dealers Act. You seem quite reluctant to move to a cashless system, for example. I took your point that you did not wish to see greater regulation on licensed scrap metal dealers while the number of unlicensed, unregulated scrap metal dealers was not being controlled. But, as someone who does not know a great deal about scrap metal dealing, and I confess that, could you give me some indication of the size and scale of the unregulated, unlicensed scrap metal dealing industry? How widespread is it?

Ian Hetherington: It is very difficult to be precise, as you will imagine, about the size of the illegal market. It is pretty clear and I think there is a degree of consensus between the police and the Environment Agency, for example. The Environment Agency currently has a file of 170 sites which are known to be operating illegally. That, we would suggest, is the tip of the iceberg. I would suggest that the size of the illegal trade, in terms of numbers of sites, is possibly as large as the legal trade, and there are 900 permitted legitimate licensed sites in the UK. There are others which are doing different things, but it is broadly that number. But we suspect the illegal, unregulated sector, in numerical terms, to be somewhat of a similar size.

If we suggested in our evidence that we did not think there needed to be some regulatory reform, I apologise for that. It was brevity, possibly, that was the enemy of the fact. We fervently believe that the existing regulations need to be reformed. I would like to see a dismantling of the Scrap Metal Dealers Act and those powers vested elsewhere. We would like to see the powers for identification, for example, embedded nationally, and we are working with the BTP in the north-east now to trial that with three forces there. We believe that the regulations need to be tightened, but what we have said throughout is that, whatever the tightening of regulations is, if that is not preceded by a fairly radical change in enforcement practice, then, frankly, if existing law cannot be enforced, then new law would be enforced no better. That is our position. This is not to resist any regulatory change. It is to say that, hand in hand with that, we need to see some radical changes in enforcement practice.

Q74 Chair: How can the 2010 metal recycling code of practice be enforced better? Is one of the problems that it is not being enforced?

Ian Hetherington: This, in a sense, is back to the issue of enforcement. The code of practice was an attempt by ourselves and the ACPO working group to come up with a set of identity measures. The identification of the seller is the king here. That is what we are all aiming to achieve. If we can identify the seller with a degree of certainty, it becomes easier and more feasible to track back to the original theft and also to secure a prosecution, which is what we all want.

The code of practice was an attempt to introduce a national code by which our members could abide, and all police forces in the UK, we had hoped, would also step into line on this. I would not stand in the way of local policing, but it does produce a proliferation of very well-meaning and relatively short-lived local policing initiatives. These are happening in virtually every force in the UK. Our members are subject to a different set of criteria set out by the police this week in Manchester and parts of Lancashire than they are in Kent or in Norfolk, where there is a different set of measures being proposed. It is a very disjointed picture in terms of policing, for reasons I understand, and the code of practice, although it has provided the basis for some thinking with BTP and others nationally, is still the victim of fragmentation.

Q75 Chair: Mr Crowther, do you want to comment on this issue?

Paul Crowther: If I may, Chair. Mr Hetherington and I discuss this quite regularly, so you will not be surprised that I disagree with some of his points. On the enforcement front, it is patchy simply because it is ineffective. Police forces around the country are trying to find ways to squeeze the market for stolen goods. The Scrap Metal Dealers Act provides very few powers. It only applies to those scrap metal dealers which have registered in the first place. If you do not register, the police have no powers to enter a scrap metal dealer site unless they have a warrant, which is a bizarre situation that we find ourselves in.

The fundamental issue is that there are no closure powers to deal with those who continually flout the law. That acts as a disincentive to those within the industry who want to work with us, because they say, "If we comply and we implement these measures, what about the guy round the corner, who is accepting everything coming through the door and is taking market share away from us?" I am not sure I can go with that logic, but we do know that the attempts at voluntary measures, however well meaning, simply do not work.

I met with the managing directors of five of the largest scrap metal dealers in the country, together with colleagues from the Home Office and the Serious and Organised Crime Agency, and we urged them to take a leadership role to implement voluntary measures requiring identification documents at their sites and then to impose that on the tier two and tier three layers below them, and eventually drive through a different level of behaviour within the industry. That offer was declined because of the impact on business. I think one of the most telling points that was made at that meeting was that, in a pilot that one of the large dealers conducted with the local police in which they did impose identification measures, overnight they "lost" 50% of the cash trade. That says an enormous thing to me about what that cash trade is. Probably the startling thing is that those measures were withdrawn because of the impact on business. Until there is a full set of powers which enable us to support those who want to do something different, I do not think we are going to change the nature of this business.

Q76 Julie Hilling: Mr Hetherington talked before about this long supply chain and I am just wondering if you could describe the journey of a piece of cable stolen. Where does it go on that journey?

Paul Crowther: I mentioned different tiers of metal recyclers. I think it is something that we have devised ourselves to describe it, but at tier one we describe what might be the back street, local scrap metal dealer, small site, perhaps even an itinerant collector. At tier two is a more substantial business, and at tier three are the much larger recyclers, some of whom are multinationals, but tiers one, two and three all trade among each other. Someone who has some scrap metal or some stolen metal to dispose of could go into any one of those tiers. Once it gets into the system, it effectively becomes laundered as it goes into the next tier of the system. It could go in wittingly or unwittingly at tier one and then is sold on as part of a much larger batch to a tier two or tier three supplier. It may then become part of a huge container load of other material which is legitimate, which makes it difficult for someone to spot it in the first place, but, once it is there, it is legitimised and ends up in a container that usually ends up in China. You can see that, unless you can tackle it at that very first introduction into the supply chain, it quickly becomes unidentifiable and unprovable as stolen material.

Q77 Julie Hilling: Is there then an issue about the way that Network Rail or contractors or BT are disposing of cable in the first place? You said a dealer would not necessarily know whether it was legitimate or not. Is there something that could be done there?

Paul Crowther: There is work ongoing on that front. British Telecom probably provide good practice in this regard. They have a single outlet through which they dispose of all their redundant material and order all their cable. I think that is a model that could be followed elsewhere, and I know that is being looked at. But, of course, it is a huge network, if we talk about the rail system, and there are replacement works going on all over the country. The sheer logistics of disposing of that material and ordering material to be installed are themselves huge. We have spoken a number of times to Network Rail and there are some improvements in adjusting the time ordering process so that you do not have huge reels of cable that turn up line-side and you get the insider who can then tell people who come along and steal it. There is more that could be done, but there is work being conducted in that area.

Q78 Julie Hilling: Mr Hetherington, you talked about theft from your members. Is this about stuff that has gone out the back of a lot and somebody coming round to the front of somebody else’s lot, saying, "Buy my goods"? Is that the circle?

Ian Hetherington: Yes. These stories do go round, although probably the more prevalent event is where you have large consignments of valuable material which have been pre-processed, are essentially ready for shipment to the customer and are then being stolen. These represent very high value thefts and are frequently on an organised basis. They are slightly different from the standard thefts from Network Rail.

Possibly I could come back to add something to what Mr Crowther said in terms of practices observed by those organisations that are selling large quantities of scrap material, and cable in particular. We would always point to the work that BT have done as an exemplar in terms of closing down their disposal practices so that it becomes relatively easy now, if cable is delivered into a yard, for one of our members to be relatively certain that it meets the specifications. They all have a copy of it, set out by BT, and, if it does not come with an authorisation code, the chances are that it is stolen, and that will mean a phone call to the police. I recognise the structural problems of Network Rail, but there has to be an accelerated recognition that, until their disposal routes are tightened up, this will continue to be a problem.

If you will indulge me for a second, if I am a metal recycler and a contractor arrives on my weighbridge, and in amongst a load of other material he has some Network Rail cable, at the moment it is very difficult for me, as the scrap metal yard operator, to establish whether John Smith and Co have a genuine title to that material, which they may well do, or not. If it is BT cable or beer kegs, for example, there is a single telephone number they can phone and establish the bona fides of that material and the title to it. We would always make a plea to all utility companies and anybody else disposing of large quantities of this material, "Please make our job a little easier and tighten up your disposal routes", because that is an issue when you have loose material around. There are vast quantities of Network Rail cable out there being legitimately scrapped and it is difficult to differentiate those from the illegitimate. It is difficult for the police; it is difficult for our members.

Q79 Julie Hilling: You hear of lead being stolen from people’s porches. Surely, there is something in terms of scrap metal dealers where Johnny comes along with a lump of cabling or a lump of lead or a lump of something else that should raise all sorts of alarm bells. Is that not happening?

Paul Crowther: I think you have hit on a very important point. I would acknowledge that there are significant parts of the industry that want to work with us and put this right, but when you see the media reports on a day-to-day basis of plaques stolen from crematoriums, whole bus stops being stolen across London, 30 manhole covers at a time being stolen from the streets and the surrounds from someone’s porch, that is being disposed of through somewhere. When someone turns up with a flat-back lorry with that on it and they are not from TfL or the local authority, there must be questions asked about that. I do not think enough questions are being asked because of the amount of this material that we see going through. People must know it is not legitimate in a lot of cases.

Q80 Julian Sturdy: Mr Hetherington, can I follow on from Mr Maynard’s questions and something Mr Crowther has mentioned also, because I am not sure we have quite got to the bottom of this? Does your industry support a move to cashless payments, and, also, do you support closure powers similar to what Mr Crowther mentioned and similar to the alcohol licensing powers that are there at the moment?

Ian Hetherington: If I can take the second point first, as long as any powers of closure are secured through the judicial system we would support them. We believe anybody operating outside the law should be closed down, and quickly.

Q81 Chair: But do you want more powers to be put in the law?

Ian Hetherington: Yes. We do not want voluntary agreements. We want enforceable, tight, sensible laws, but they need to be tight and they need to be sensible. Yes, we would like to see those powers. It is truly bizarre to find that the police cannot, as of right, enter a yard that is operating illegally in this trade. That is madness. No, we would be wholly supportive of that. If we move to the question of cash, the reason we have a very strong resistance to the banning of cash is not because the industry is wedded to cash. If I am being blunt about it, the handling of the amounts of cash we are talking about is a liability for any business. Our customers are wedded to cash and many of them are wedded to cash for very legitimate reasons. It is not because they are handling stolen material, but they have traditionally conducted their business in cash, and many small businesses across the UK continue to conduct their business in cash because they are suspicious of the banks, possibly for good reason, or they have some other motivation for doing it; their staff are paid in cash, possibly. There are motivations I cannot deduce, but a very large number of our customers want to be paid in cash for the material they sell on a day-to-day basis.

Notwithstanding that, if we were to see a ban on cash, the legitimate trade would abide by it immediately and we would see legitimate business-nobody wants stolen material-siphoning off into the illegal trade at a stupendous rate of knots. There was the introduction of a universal cash ban in the last budget in France, and the weekly data we get from France shows that there has been a 30% drop in the legitimate sale of recyclable metal across France arising from that. We will continue to track this over a period of time, as we are doing in various states of the US, where they have trialled this. That is the reason for it. While the legitimate material is siphoned off into the illegal trade, a ban on cash will only serve to enhance the illegal trade, reduce levels of recycling and everything else that will go with that.

Q82 Julian Sturdy: Does not what has happened in France, though, highlight the problems within the industry and the illegal trade that is already going on there? Surely, if we move to cashless payments alongside other measures, like closure powers, etc., that would bring the industry in line? There are legitimate arguments to say that there would be a 12-month period that might be quite difficult, but, if all these powers were brought together in one block and it brought the industry back into line, surely that would be a better way forward and cashless payments would fit in with that process.

Ian Hetherington: All a ban on cash will do is enhance the identification of seller, because you will have a financial audit route through a cheque system or a bank account system. This is all about identifying the seller. We would welcome a statutory tightening of the identification processes, for example, which we believe would achieve the same objective, albeit with some losses, but we need to see the powers of enforcement and a reform of enforcement in place first. You talk about a loss of business. For a small or medium-sized business to lose 30% or 40% of their trade would mean closure and business failure. This is a substantial industry. That is a very high-risk route to go down when there is absolutely no evidence that a cash ban will inhibit crime. Nobody has yet produced any evidence to us that anywhere where there has been a ban on the use of cash there has been a substantial decrease in the rate of metal theft.

Q83 Julian Sturdy: On a slightly different tack, Mr Hetherington, you mentioned tightening up the disposal procedures. If companies like Network Rail and BT-and some might do this already, so apologies if they do-had an approved list of scrap metal dealers that they will send their products to, would that not make it easier to track the process?

Ian Hetherington: Absolutely.

Q84 Julian Sturdy: Does that happen already? Is there an element of that happening already?

Ian Hetherington: There is an element of that happening already, but it is not tight enough, and I recognise the reasons why. Some of this is historical. Network Rail have traditionally disposed of their rail in a very orderly manner. It is very well organised and always has been. I understand, historically, the minor works and cable-related work has been on a different basis. Yes, we would like to see a much tighter disposal route, with much clearer means by which title can be established for contractors. It builds on the point that Mr Crowther just made, that when TfL renews some bus stops in London it is not a nice, neat, clean TfL van that brings the old bus shelter in for disposal; it is a contractor. When you just allow any old local contractor to take material away and dispose of it, it is very difficult. There are lots of legitimately disposed of bus shelters that appear every year. We would like to establish the legitimate ownership of those when they arrive at the yard, and it is difficult to do. Your suggestion is precisely our suggestion.

Q85 Jim Dobbin: Mr Hetherington, you have answered a substantial question I was going to ask in responding to a question from Mr Sturdy, but I have a couple of small points for my own clarification. What is the density of the size of the unregistered sites in comparison to the registered sites? Is it large or is it small?

Ian Hetherington: There is a tendency for them to be small. They tend to be fairly ephemeral, in many cases; I recognise that, although that is not universally the case. The Environment Agency had a great success working with the police. They closed down a yard which was quite substantial. There were prison sentences for the three principals. They invoked the Proceeds of Crime Act. This was commendable stuff. Unfortunately, the site had been operating, to our knowledge, for 15 years. It was a great success, a bit too late, I think I could say, but that is an exception. They will tend to be small and they will tend to be, as I say, ephemeral.

Q86 Jim Dobbin: Have you any idea how many of these small sites there are?

Ian Hetherington: I do not think the police can tell us and I do not think the Environment Agency can tell us.

Paul Crowther: There are two schemes or pieces of legislation involved here. The Scrap Metal Dealers Act requires you to be registered with the local authority. There is no incentive for local authorities to carry that out. There is no fee. You cannot revoke it. Once it is granted, it lasts for three years. Records across the country for registered and unregistered scrap metal dealers are very poor. We frequently go round to visit locations we think are scrap metal dealers, only to find that they disappeared some time ago, and we find lots of scrap metal dealers that the local authority does not know about. There is a separate regime under the Environmental Protection Act through the Environment Agency where a scrap metal dealer has to be permitted or exempted under those regulations. I think at the moment the Environment Agency are talking in terms of 120 un-permitted or exempted sites that they are aware of, but there are two different schemes here, and, to be frank, I do not think anybody knows exactly how many of these sites there are.

Q87 Jim Dobbin: How closely do you work with the Environment Agency on these issues?

Paul Crowther: We work pretty closely with the Environment Agency. They clearly have a different role, and the approach to enforcement the Environment Agency take on environmental issues is one of nurturing and encouraging industries to comply with environmental legislation, which is not the same approach we take, which is enforcement and, "Can we close you down, please, if you are not going to comply with the law?" We do lots of joint operations with them, but we have two distinct roles which can be complementary but are clearly distinct.

Q88 Jim Dobbin: Are you able to do spot checks without any warning?

Paul Crowther: On a registered scrap metal dealer we can.

Q89 Jim Dobbin: Just on the registered ones.

Paul Crowther: Just on the registered ones.

Q90 Jim Dobbin: You are not allowed to do that on a site that is just there and you know it is-

Paul Crowther: No.

Jim Dobbin: That is interesting.

Q91 Chair: Mr Crowther, you have told us how extensive metal theft is. Is it included in the organised crime strategy?

Paul Crowther: It is. It has recently been included in the re-published strategy.

Q92 Chair: Will that make a difference?

Paul Crowther: It will make some difference. Unfortunately, probably only about 30% maximum involves organised crime. The vast majority of offenders are local offenders. They are on the radar of the police and other agencies within their locality but they are not organised criminal groups. We work closely with SOCA and regional intelligence units, and we have gone through an exercise which is called organised crime group mapping. From that, we can identify which organised criminal groups that have already been identified by the police service are also involved in metal theft. We think there are about 119 of those across the country, some of which are dormant on metal theft and active in other areas. We are looking at how we can disrupt those groups, and that is where the organised crime strategy will help, but it does not help on the majority of the offenders in this category.

Q93 Chair: Do you think cable theft will undermine transport for the Olympics? Do you see a big problem coming there?

Paul Crowther: I think I agree with the evidence you heard earlier. It is clearly a risk. It has been identified within the strategic threat assessment, as have a number of other disruption implications for the Olympics. There is work ongoing with Network Rail and the operators to identify high-impact or high-risk locations, which may be some distance away from the Olympic sites but where most disruption would occur if a metal theft were to take place, or, indeed, a suicide or fatality. From that, we are able to take mitigation measures, but, of course, time is marching on and some of those measures will be engineering or environmental measures that need to be put in place, like fencing, etc., but it is very much on people’s radar.

Q94 Chair: Is there any final message you would like to give us for Government or any other agencies on how to deal with this issue?

Paul Crowther: If I may. I listened with interest to Mr Hetherington’s point about the proportionality of legislation, and I do think there is a way that new legislation or regulation could be applied proportionately so that it mitigates the impact on legitimate business. Through my working group, we have put forward to the Home Office some suggestions about what the legislation might look like. At its lowest level, for the law-abiding scrap metal community, it would be that they take part in a licensing scheme. At first licensing there is an opportunity to review whether they are a fit and proper person to be a scrap metal dealer, but once they are licensed they have to comply with a general condition of applying a bit of due diligence about what they receive, and also taking proper identification. Thereafter, there is an incremental layer of measures that could be brought to bear for those who act outside of the law or support metal theft. That could include imposing a cashless model and a requirement to keep metal in the form in which it is received for 96 hours, and, indeed, closure powers. I think there is a way of meeting all the requirements around greater enforcement and regulation but taking account of the impact on legitimate business.

Chair: Thank you very much. Thank you to both of you for coming and answering our questions.

Prepared 25th January 2012