Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 30 - 39)



  20. Are you expecting any job losses as a result of this?
  (Dawn Primarolo) No. There are no job losses. There is some reallocation. Obviously all of this has been negotiated with the employees. The unions and all the employees in the organisation have been fully consulted. I am not saying there are not some people who will be asked to consider the option to maybe move to another location from their present one, but that is very, very small indeed. There are people whose jobs will change as we shift our resources to more front line; that is the interface on the business side between ourselves and the customer, the taxpayer.

  21. Have you set new performance targets or performance objectives for these new sections?
  (Dawn Primarolo) Yes, we have. Obviously we have our PSA targets


  22. I am here talking more about ones that may be generic within Customs and Excise.
  (Dawn Primarolo) What we are doing at the same time, and I think this came from the Committee as well, it ties in with our Closer Working, is to set specific objectives in terms of measuring improved customer service, improved compliance and better facilitation. I think the Committee requested that there was an annual report in looking, for instance, at the Closer Working, in measuring that, and that it should be made annually to this Committee. Yes, I am quite happy to do that. What we need to establish is how we measure that. We have our standard measurements that our PSA requires of us—how quickly we answer phones, how quickly we do visits, etc—but we really want to focus much more on the improvement of the quality of the service. This also fits into the joint work that Customs and Revenue are doing on the question of compliance costs, in measuring those and trying to find ways of reducing compliance costs for our taxpayers.

  23. The regional units, as we understand it, are to be abolished. Does that mean that the co-ordination, if you like, both of intelligence and deployment between these two sections will all be done at headquarters?
  (Dawn Primarolo) No. Somebody correct me if I get this wrong. The operations of the offices are intended to ensure that those offices can respond quickly, not only following what is required by the department as our overall objectives but to have more responsibility for delivery of those objectives and to be able to fine tune them for particular need. There is always cross-reference. What Mr Broadbent and his team have tried to ensure in this reorganisation, and obviously it is early days yet, are clear lines of accountability and who will be able to be in contact with whom, rather than nobody having responsibility until it gets to head office. That is being reversed now.

  24. This may not be policy but do you accept that the organisation of Customs and Excise in this way lends itself to a future split in which the business services side of Customs and Excise would effectively become part of the Inland Revenue and the intelligence and investigation aspects of Customs and Excise would become part of the Home Office services, the development of the National Criminal Investigation Service and so on? It does lend itself to that.
  (Dawn Primarolo) That is not the motivation for the reorganisation. We have been through this discussion before about merger between Customs and Inland Revenue and my attitude to that, which is I am not convinced that is the way forward. What it does is clearly, clearly identify the two main functions: the protection of society role, if I can call it that, which is within the enforcement; and the business taxation which is in the other unit and makes it much easier, I hope, for those two units to co-operate with all the other organisations that they have to. One of the things about Customs is that it is not just the Inland Revenue, important as the Inland Revenue are of course, that they are working with and co-operating with, it is a number of other Government departments, for instance the Home Office, MAFF, the intelligence services, DTI on trade facilitation. They have to have focused, clear relationships with a number of different organisations and this restructuring enables us to deliver that. If somebody takes the decision in the future that is for them but that is not the purpose now of the reorganisation, it is efficiency.

  25. But you do accept that it does lend itself?
  (Dawn Primarolo) I do accept that some people might speculate it does, yes.

  26. Right, that is fair enough. Coming to the Closer Working programme itself, which is going to be an important activity of the largest of the Customs and Excise two units, are you satisfied that there is now a meaningful programme of Closer Working which is targeted at producing measurable benefits? You referred to the annual report that we have requested and you have indicated your view about that. When could we anticipate that?
  (Dawn Primarolo) In terms of the progress of Closer Working, and I think that both Mr Montagu and Mr Broadbent covered this in their separate appearances, I think it would be an understatement to say that we have learned a great deal in the approach that hitherto had been used in order to encourage it. We now have real progress in a number of areas. I think that you have been informed, but just to recap, that what we are going to do, for instance, is have 14 of the largest businesses managed by joint teams, Customs and Revenue in one team, and that will start on 1 April. We are going to have 20 shadow economy teams and they will be operational, in addition to the ones we already have, on 1 April. We are developing a single unit on company voluntary arrangements, particularly looking at insolvency, which is something we need to do some more work on, and on joint debt recovery services, which has been of some contention in Parliament in terms of when the two departments engage in these activities. And, of course, a joint audit of our computer services. As I said, it is about getting better value for money, customer improvement, better compliance. Given that we are to start that, locating the teams, teams put in place, training completed, I think for the 20 shadow economy teams the final location has been agreed and the facilities are being developed. An annual report seems to me to be suitable in April 2002 because that is when the teams will have been assessed. I cannot personally see any problem. The Committee might prefer to have a sort of half-way house of an update, say six months into the process, with the formal report being done at the end of the first year. I can do a note to the Committee if you do not already have the information about where the locations of these different facilities are going to be rather than go through all the locations now. As I have said, I am happy to send a note or go through them now, whichever you prefer.


  27. Would it be possible for you to write to me about that?
  (Dawn Primarolo) Yes. I have got quite a lot of information here, Sir Michael. It is things like where the audit computer accounts will be based, where the risk analysis and intelligence will be based, the actual locations. Rather than go through all the towns and cities I am happy to do a note for you and get it to you by Monday, if I can.

  Chairman: Fine.

Mr Beard

  28. Could you update us on the strategy for tackling tobacco smuggling that you launched last March?
  (Dawn Primarolo) The vast majority of the Customs' staff which were planned for introduction have now been recruited. I think we are at 85 per cent of the staff. Three of the x-ray scanners are now operating. There are two more being built for delivery in April and orders are planned for a possible further ten, but naturally we are assessing the scanners. The scanners are mobile, we can move them if necessary. We have undertaken the advertising campaign which is developing. In terms of the results, in the first nine months of this year 2.1 billion illicit cigarettes bound for the UK were actually seized. Our target for the year was 2 billion I believe. Yes, 2 billion. We have severely disrupted or broken up in those nine months 38 organised gangs, very large criminal gangs. In the first nine months we have seized 6,658 vehicles—Customs like to be precise about this—which is up 65 per cent on the corresponding year. Our combined efforts on intelligence gathering, disruption and seizure at ports and then inland disruption and seizure, as well as the use of our increased penalties, are very promising in these first nine months. We are achieving the first set of targets in terms of disrupting those who are organising it as well as seizing the goods. Clearly this is a three year strategy and we need to look very closely at our experience over these last nine months, and that is what we are going through now, and the last three months of the year when we have it, as to what that teaches us about what we need to do to increase our activities to meet the challenging targets of the next two years.

  29. What elements of the strategy are proving most productive? Are the scanners proving very useful in all of this?
  (Dawn Primarolo) Absolutely. As you know, we are not talking about what was commonly known as the "white van" trade, although we have strategies to deal with that as well, this is the systematic freighting in containers, often concealed, of millions and millions of cigarettes at a time. Our intelligence is informing which containers we suspect. It takes us, I think, three minutes to scan one of these containers now, it used to take us five hours with a larger number of Customs' officers to physically search these vehicles. Obviously the scanners are proving extremely useful. The disruption of the criminal chains by using the intelligence combined with action on the ground is proving very successful. Those are the main elements I think.

  30. ASH pointed out in oral evidence that the essence of this smuggling is taking cigarettes from the United Kingdom and going through places like Andorra, Montenegro and Latvia. This must be a very big element of their economy, is it not possible to take steps at that end as well as at the United Kingdom end to stop this?
  (Dawn Primarolo) Indeed, and our intelligence work outside of the UK is directed at that. You are quite right to point out that these goods are coming back from wider fields, the Balkans, the Far East, South Africa, certainly outside the European Union. It is very important that we have that information. Obviously as we are seizing the goods we are profiling the goods that we seize. There is a significant presence of counterfeit tobacco products. It is difficult to estimate exactly but somewhere in the region of 20 to 30 per cent. The rest is predominantly manufactured in the UK by British tobacco firms and, in fact, three brands dominate what we seize. It is very important that in working with the manufacturers we are able to trace whether or not some of the exports actually end up having gone through a chain. They do not go to one place and come straight back, they go through a chain of different countries and then come back, so appear to be sold perfectly legitimately, and that is what happens subsequently. What Customs are working on is to find out whether and how that could be fuelling the products that are being smuggled back into the country and, therefore, what steps we would need to take to deal with it. That is a very urgent piece of work that we are currently undertaking.

  31. Are you at all concerned that some of the tobacco manufacturers themselves are facilitating tobacco smuggling, either knowingly or otherwise?
  (Dawn Primarolo) The tobacco manufacturers in the UK continue to say publicly that they are just as concerned as the Government about the level of smuggling of products into the UK. So we have initiated steps to ensure that we are able to share information that may be helpful in helping us trace goods that are being rerouted back into the UK. Customs' teams have been into the manufacturers and are challenging and are requesting data on the export trade to see whether we can marry that up with the intelligence that we are collecting through the seizure of the goods. I think it is very important to say, nonetheless, that the export of cigarettes from this country is a huge trade and the overwhelming majority of that trade is perfectly legitimate and ends in source. What we have noticed is that certainly there appear to be exports to places where the domestic consumption would not indicate that level of purchase, if I can put it that delicately.

  32. Minister, Mr Broadbent told us that he felt that there was "a very strong common vested interest" between the tobacco manufacturers and Customs and Excise in tackling the smuggling problem. Is that necessarily so?
  (Dawn Primarolo) The tobacco manufacturers continue to say that is their view, yes, and that it is not in their interests to see the growth in the last few years that we have in this huge trade—we are talking about one in five cigarettes before the Government started its action—and they wish to co-operate with us. So we now have a series of questions which we would expect them to co-operate in answering so that we can ascertain whether there is a link, and if there is what they, and us, need to do about it.

  33. Is it not strange that so many of the smuggled cigarettes actually originate in the United Kingdom?
  (Dawn Primarolo) I think in the United Kingdom it is a huge industry in terms of production here. Of course, we are talking about very substantial companies: Imperial, Gallaher, BAT. These are world leaders, so it is not surprising that there is a huge manufacturing base here in the UK and a lot of that would be exported.

  34. The campaign for Action on Smoking and Health has suggested that there is almost an unhealthy closeness between elements of Customs and Excise and the tobacco manufacturers. Would you care to comment on that?
  (Dawn Primarolo) I deeply regret that comment, it is not true. I think Customs are proving quite clearly now that cannot be true, once they have the specific resources and the new strategy, by their ability to challenge and to deal with this growing problem of the smuggling of cigarettes. I do not think it is helpful that anybody should speculate or make allegations, whoever they are, without the facts of the case, and there are no facts to substantiate such a proposition.

  35. What did the Butler report into the collapse of the Regina v Doran case tell you about the workings of Customs and Excise's legal team?
  (Dawn Primarolo) It revealed the complexity of the work undertaken by Customs and in particular when you have a department that is putting together international intelligence collection and is trying to stop goods arriving here in the UK in the first place rather than wait for it to arrive here and seize it. My understanding is that on all of the points, and there was a review team to look particularly at the role of Customs having prosecution powers and solicitors' offices inside Customs, that report has now been reported to the Attorney General, because it was decided that the Attorney General would be the best person to deal with this. He will be making recommendations on that on behalf of the Government. I think that the problem for Customs clearly is they are very high profile cases, so when a case goes wrong it is big news. When their success rate is scrutinised they have a very, very good and high success rate, it is just that the nature of these cases means if they go wrong they are rather large cases that go wrong.

  36. The Butler report was quite an indictment of the legal team in this particular case. Were the findings of the report surprising in the department?
  (Dawn Primarolo) Personally I thought it was rather mixed. It did say some rather good things about the department, it said quite a few. Obviously it is important, it is nice to have the good things said, but one has to focus on if there are weaknesses and those need to be addressed. Customs are a robust organisation in the sense if something is not being done correctly then they will set about taking on the recommendations and dealing with it. The review on whether or not the solicitors' offices should remain in Customs and Excise, as I said, is a matter for the Attorney General and not for me, and I think that is right given some of the criticisms that have been made, and will be reporting soon I understand.

  37. You have already received the report that you are referring to?
  (Dawn Primarolo) Yes, we have, but the Attorney General is in the lead on it, not us. The review team looking at what should happen, on behalf of the Attorney General, obviously is looking at both the reports.

  38. When is it likely to be published?
  (Dawn Primarolo) I really do not know that because it is not in my gift.

  39. There is no forecast?
  (Dawn Primarolo) No. I do not think it is going to be very long though.
  (Mr Hanson) It should be ready soon.
  (Dawn Primarolo) Yes, I understand it is going to be quite soon. It is the Attorney General, we will just be notified when he has made the decisions on the date.

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