Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 120 - 139)



  120. I would have thought the question of whether or not people are genuinely self-employed would be quite legitimately part of that survey.
  (Miss Chant) Yes.

  121. And therefore the figures should be there.
  (Mr Montagu) We are happy to give you all the figures we have got, Mr Davidson. I can tell you that since the start of the construction industry scheme we have undertaken over 8,500 employer compliance reviews on the construction industry.

  122. As compared to what?
  (Mr Montagu) I am happy to see if we have got details of any in which we have found bogus self-employment.

  123. 8,500 as compared to what? Is that higher or lower than other industries and what degree of success did you have? Tell me what sanctions you have applied.
  (Mr Montagu) We have found 312 industry related irregularities. I have not got a detailed breakdown of those. We took penalty action in 69 of these cases.

  124. Sixty nine?
  (Mr Montagu) Yes.

  125. I find that a bit disappointing. We are talking about an industry where, in the words of your own report, there is a culture of non-compliance. If you wanted to send out a clear signal that this behaviour was no longer acceptable surely it ought to be the case that there are more than 69 people caught and have sanctions applied to them?
  (Mr Montagu) I said that we found 312[12] cases where there were irregularities. This would cover everything from the serious to the trivial. Our main aim in this is actually in the construction industry scheme to enable employers or to enable sub-contractors to understand the scheme, to get used to it, to comply with it. Our main aim is putting them on a sound footing in the same way as we did with the 100,000 new contractors that we discovered and the £280 million extra tax revenue.

  126. Do you accept the fairness of the description of the construction industry as having a culture of non-compliance?
  (Mr Montagu) I am always slightly chary of stereotyping any industry but certainly it is an industry—

  127. It is in the report.
  (Mr Montagu) I know it is in the report. Certainly I would accept it is a volatile industry, it is an industry with a high turnover. It is an industry which we would regard as one where we paid close attention as part of our employer compliance effort.

  128. There are presumably a number of workers, as I understand it from the report, under this new scheme of things who are now registered when they were not previously registered.
  (Mr Montagu) Yes, 100,000.

  129. Do you intend to go back and check whether or not there is money outstanding from previous years?
  (Mr Montagu) No. We took a conscious decision not to do so. What we really wanted was to make sure that the sub-contractor got here or his tax affairs in order. We got the £280 million extra tax and national insurance contributions.

  130. The lesson you are giving is, "If we catch you, you then have to do it properly from then on", but there seems to be no penalty for being caught. If you are saying that there are 100,000 people now who have registered and legitimately are paying tax, many of them will not have been paying it at all before and you are not pursuing them for what they have evaded already?
  (Mr Montagu) If we had evidence that they had defrauded the system or evaded, we would pursue them. That would include contractors and sub-contractors, wherever there is deliberate abuse of the system. With a lot of these 100,000 people, whatever our suspicions might have been, it would have been very difficult to provide fraud or evasion. That is why we concentrated on getting them on to the books and getting their affairs in order.

  131. You do not actually pursue them then? You do not actually go and fish or ask them to indicate where they were or what they were doing or anything like that? You make no effort at all? You do not even sample them, do you?
  (Mr Montagu) No, we have not done a sample. As I said, what we have concentrated on is getting them and keeping them on the books and records.

  132. Can I ask how many cases you have investigated in whatever period for which you hold figures of asylum seekers or illegal immigrants or benefit fraud, people who are working on building sites without being registered or paying anything?
  (Mr Montagu) It is an exceptionally difficult area.

  133. I want a figure.
  (Mr Montagu) I cannot give you a figure because of its being an exceptionally difficult area in this sense—

  134. I know it is a difficult area. I was asking how many times you had done something about it. You may decide that that counts as one. You should be able to give me a figure.
  (Mr Montagu) But we are not here, Mr Davidson, to look into asylum seekers. We are here to police—

  135. Yes, but—
  (Mr Montagu) No, please may I—

  136. No. You are here to answer questions that I am asking you. I am asking you on how many occasions have you gone to a site and taken action to check up, and I group them all together, whether it is asylum seekers or illegal immigrants or benefit frauds, to make it as wide as possible so you did not try and say that if I had said benefit fraud only you might have said, "Hold on, these are asylum seekers and therefore we cannot pursue that". Any group of people who are working and who are cheating the system in some way: how many investigations have you had over whatever period you have taken?
  (Mr Montagu) I have given you the figure of over 8,500. This is to monitor compliance with the scheme. What we are checking is compliance with the registration requirements because this is what falls within the responsibilities of the Inland Revenue.

  137. In terms of the penalties that are applied by yourselves to people that are found evading tax in these circumstances, if you go on to a site and find that there is a whole group of people working in construction who are not registered, what then happens?
  (Mr Montagu) Again it would depend very much on the scale of the evasion. Typically we have tended throughout the tax system when we discover evasion to take the tax due, to take interest and to take penalties, but in cases where we discover deliberate large scale fraud, then we will prosecute.

  138. How many prosecutions have there been of big contracting companies for employing people who are not registered?
  (Mr Montagu) Of big contracting companies, I am not aware of any since the start of the construction industry scheme.

  139. Do you believe that no big construction companies have been employing people who are not registered?
  (Mr Montagu) I believe that we need hard evidence of determined fraud and evasion in order to justify prosecution.

12   Note by Witness: The figures relate to cases where the employer/contractor had failed to operate aspects of the Construction Industry Scheme appropriately. Back

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