Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 20-39)



  20. That was what was recommended, was it, by the—
  (Mr Broadbent) That was the key recommendation in the Gower Hammond Report, and, in fact, it came into effect on 1st April this year. I now meet regularly with the Attorney General to see how it is going. As you would expect, an interface between a law enforcement agency and a prosecuting authority needs to be managed very carefully.

  21. The other question that arose last time was the phenomenal smoking habits of Andorra, where there were enough cigarettes imported for the population, man, woman and child, smoking for 24 hours a day for the whole of their lifetime and have some left over. Has this been gone into by yourselves or the Foreign Office, or, indeed, inquiring into the firms from Britain who are actually exporting them there?
  (Mr Broadbent) Yes, I think we have done quite a lot of work on tobacco since we last met. Indeed, it is a very major priority of ours. I was glad to have the opportunity recently with your colleagues in the Public Accounts Committee to have quite a long discussion about tobacco, and, as a result of that, they decided to call before them the Imperial Tobacco company to be asked a series of questions about their supply to countries like Latvia and Afghanistan. In fact, that hearing took place last Wednesday, and I think the report of the PAC is still awaited.

  22. Your note, Mr Broadbent, says, "The role of the Board has not substantially changed in recent years", which is a surprising observation, considering that it was seriously deficient in the past?
  (Mr Broadbent) I should probably apologise for the slightly—I think the wording was possibly not what I would have perhaps chosen if I thought it through. The point I was trying to get to was that my understanding, and indeed my view, and I think Mr Roques's view, is that the issue with the Board before was not that it should have operationally have been running the department. The Board cannot do that, it should be an exercise in proper oversight of the department, including its operational matters. And it could not do that for two reasons: one is that it lacks certain qualities, notably strong ones: active representation, composition of the Board, but secondly, and I think probably most importantly, it lacked anything to oversee. There was not an executive management committee, there was not an individual—the Board could not line manage the department. I believe the real essence of the changes that were introduced are clearly that we have strengthened the composition of the Board, but we have introduced into the organisation clear, focussed decision making structures where the management committee are six people who are solely and completely and explicitly charged with running the organisation, no hiding of difficult issues. So the Board now has something to oversee. When I say its role has not substantively changed, I do not mean to say it is not different, it is different, but I see it more as putting it in a position where it can discharge its role of strategic and operational oversight. It is not, I think, that Mr Roque suggested the Board should take over the running of the organisation, but it should be allowed to do its real job. And I hope the changes made now allow it to do its real job, hence taking on its proper role.

  23. Your note also says, "The Board reviews the strategic issues facing the department in its response to them." Do these strategic issues include operational and performance issues?
  (Mr Broadbent) Yes, we in fact have a Board meeting coming up in a fortnight's time. Beyond the normal reports of the Management Committee and Audit Committee, probably the major agenda item will be a review of tax strategies, and we are going to go through each of our taxes, of oils, tobacco and VAT, and we are going to be clear where we stand in relation to some of the issues we have been discussing in some detail, and we will seek to identify the issues that we need to tackle if we are going to continue to make progress. I hope the Board, particularly the non-executives, will tell us if they think we have got the wrong issues, or we are missing something or going too slowly. That will be a fairly typical Board discussion.

  24. Because that was one of the areas Mr Roques was surprised the Board never covered. What is the benefit from you now covering those areas?
  (Mr Broadbent) From the point of view of an organisation, and I do have a very strong belief in the benefit to a group of executives who get very close to problems from people who are a bit further away from them who need to say one or two things, or many things, but frequently, "You are missing something here", or "You are trying to pretend this thing is not going wrong, but it is, wake up", or saying, "Look, I faced this sort of problem before, what happens next is X". These are the sorts of inputs that I have most frequently seen on Boards which are of the greatest value. I think the relationship between executives and non-executives, like any other team, is a very organic thing that has to be built over some period of time. There has to be, if you like, sufficient trust for there to be robustness.

  25. Why are there no non-executives on the Management Committee? What stops them having the wool pulled over their eyes?
  (Mr Broadbent) The Management Committee is an executive body, meets at least weekly, often more than weekly, twice a week, so the non-executive would almost de facto become an executive by attending. I think that if they did attend, I would want them to be executives, because the Management Committee is the group of executive directors who I want to be accountable for the organisation. They have to be the ones who actually run the business. In a sense, if you have a non-executive there, it kind of allows an opening. But the truth of the matter is it simply meets frequently, therefore, a non-executive would become an executive.

  26. Mr Spencer, what changes have you noticed in the operation of the Board in the years since the Roques Report?
  (Mr Spencer) A number of changes. Firstly, as Mr Broadbent has already pointed out, we have more non-executive directors coming on, so I think the balance on the Board between executive and non-executive is going to be helpful and much more constructive, as Mr Broadbent was saying, for allowing people to see the wood for the trees. I think that will make a significant difference. I think also, because the Management Committee, the executive directors, if you like, are now clearly accountable and very clear about what their accountabilities are, their ability to report back on those issues and for the non-executives to be able to interrogate and question them on those issues is much clearer and much more simple. There are no no-go areas, therefore, the entire organisation is visible at that meeting, rather than just elements of it. I think those are the biggest issues. I also think, as a subset of that, if you like, that the Board now has the ability to set its own agenda, and therefore, I, as a non-executive, have much more influence in what those agenda items will be.

  27. What are the most significant agenda items that now appear that did not appear before?
  (Mr Spencer) There are operational reporting issues that now appear. Previously we had worked under the softer issues at these Board meetings, HR issues, IT issues, that were not tax or Customs Policy based, whereas now those operational issues are much more a topic for debate.

  28. Regularly?
  (Mr Spencer) Regularly, yes, very much so. They cannot be avoided now. They are pretty much standing items of the agenda that the executive directors have to report on.

Mr Cousins

  29. Mr Broadbent, I wonder if I could bring you back to the Roques Report again. There were 65 recommendations, of which 62 were accepted, sometimes in modified form. It would be useful for the Committee, I think, to have, since time does not permit working through all 65 recommendations, an update on the comments that Customs and Excise provided for the Roques Report. If I could draw your attention to one or two of those: there was a proposal in the Roques Report to introduce tax stamps in order to reduce fraud for spirits, and the response then was that it was under consideration. What is the progress on that?
  (Mr Broadbent) There was a consultation period with the Trade, as a result of which, the decision was taken by Ministers not to introduce physical marks at this time. The reason for that was that the compliance cost, effectively, for the Trade, was very material. Instead, we have been asked, and we are now currently engaged with the Trade, in having a series of discussions about a voluntary scheme which the Trade suggest will achieve the same effect. If we are satisfied that it will achieve the same effect, and these discussions are continuing, we will act on that basis. If not, we will go back and give advice to our Ministers.

  30. When do you expect to take a decision about that?
  (Mr Broadbent) I would think the discussions with the Trade will take the order of six months. The decision on physical marks was announced in the Budget, so we have about six months' work to do with the Trade to be clear whether or not we can get a voluntary scheme which gives us the data we need.

  31. Another point made in the Roques Report was the need to devise what was put as a "close to zero tolerance policy" at ports and rail terminals. There was quite a sensitive response to that, which concludes with the number of vehicles seized by Customs and Excise in those situations rising 100 per cent to 10,219. I wonder what the figure for 2001-02 was, just to see whether that improvement has been maintained?
  (Mr Broadbent) It was of the same order, I believe slightly higher. There was a change of policy. We implemented the policy, and we are not going to see another trebling of vehicles seized, I do not think. There are two things behind that: one is that actually the policy has been tremendously successful, and the figures we published last November suggested that the cross-channel bootleg trade, if you like, fell by 76 per cent in that year, so there are actually fewer vehicles to seize, which is a good outcome. The second thing is that, seeing that, what we have actually done is now extend the policy to HGVs, which I think is the next critical area, because increasingly, this trade is being squeezed out of the classic "white van" trade, but there is still a problem with commercial traffic and we are now starting to seize HGVs in certain circumstances, if we can find them with the goods on board and the driver knows it.

  32. Do you report to the Board on these sorts of indicators?
  (Mr Broadbent) There are generally very close contacts between port directors and my directors in ports. I do not think we have a national standard for reporting to ports our vehicle seizures.

  33. But if the Committee wanted to know how many seizures, whether it be of cars, vans or HGVs, that would be possible for us to know?
  (Mr Broadbent) I can provide that information. The HGV seizures at the moment are in the hundreds, because it is, as I said, a new policy, and the vehicle seizures would be broadly the same order of the previous year, but I am happy to provide those numbers.

  34. You recruited 146 extra officers as a result of the Roques recommendations—
  (Mr Broadbent) 146 officers were redeployed into Excise work, we did not actually recruit additional staff.

  35. Are you recruiting additional staff?
  (Mr Broadbent) Only in very limited circumstances at present. We recruited a number of staff last year to implement the tobacco strategy, quite a large number of staff over the last couple of years. We are not presently recruiting staff.

  36. Do you have enough bodies on the ground to do the job?
  (Mr Broadbent) I have quite a large number of bodies, and I think that, for me, the issue of resources goes as much to my ability to use the bodies I have got as to having more of them. That is a function of—the issues we deal with are highly geographically flexible, so often I have people in the wrong place; I need people with the right skills, and I sometimes need the systems to support them. And as much as the actual number of resources, I am concerned with these issues, the flexibility and the skills of the resources I have to deploy.

  37. Turning to the way that you report progress—this is not in the context of the Roques Report, but more generally—and looking at the Spring Report published in June, it is a bit dismaying that you only have Quarter 3 figures, rather than the full year figures?
  (Mr Broadbent) I recognise that. It is actually a function of the lateness of the publication of the Report, if I can put it that way, because—and I think it is true of other departments as well—but we had a particular problem: we assembled and hoped to publish our Spring Report rather earlier, because it was the latest date available at the time the Report was assembled. Then, I think, through a slightly unfortunate series of events, the Budget obviously came rather later this year and we had a new Minister, so we were faced with the challenge of, "Should we wait, rewrite the entire Report and then publish it later, or should we publish what we have now, and we will obviously provide the full outcome data in the Autumn when we publish our Autumn Report?", and we chose the latter course of action.

  38. But the full year figures are now available?
  (Mr Broadbent) The full year figures are available in some areas. It depends a little bit on which area we are talking about. For the simpler output measures we will probably have full year data, but if, for example, you asked me the question—outcome targets are significantly more difficult to assess, because you often have to do a lot of analysis of market share, commercial sales, a lot of external data is required to assess whether you have met the market share target, for example. So some figures we have, and some we would not have.

  39. I wonder if I could draw your attention particularly to rates of sickness absence. It does seem slightly extraordinary that you cannot report on full year figures for such a basic indicator?
  (Mr Broadbent) I would be very happy to let you have the full year figure, which I believe is not very different from the one which is published. It was just a decision we had to make about, "Do we publish the entire document as it is, or do we try and wait", and I felt it was already late, this report, and I took the decision to say we should publish it now and provide the full data in the next report.


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