Select Committee on Treasury Minutes of Evidence

Examination of Witness (Questions 1 - 19)




  1. May I welcome you Mr Roques to the Treasury Sub-committee. Would you for the benefit of the shorthand writer introduce yourself please?
  (Mr Roques) My name is John Roques.

  2. May I begin by questioning you in very general terms on your report? The £670 million was lost. Customs were clearly investigating a fraud and chasing a fraud. Was it inevitable in very broad terms that this happened and that only with hindsight can we see the need for significant changes?
  (Mr Roques) I do not think it was inevitable. It is important to remember that the £670 million was the loss in respect of the cases they were examining. The actual losses were almost certainly much, much larger than that. I estimated an order of magnitude of £500 million a year. The £670 million was for losses actually identified specifically on the cases which were subject to investigation. In terms of the £500 million a year, I would say that not enough thought was given to the control regime and not enough thought was given to the audit regime. I will bore you with the fact that I am an accountant, but the concept of risk in accountant's jargon means you are only supposed to have a risk approach to audit where you are satisfied the controls are strong. You are also supposed only to have a risk approach to audit that when you start your audit it confirms the adequacy of the controls and that was also not true. I would have said much earlier that they should have abandoned the risk approach to audit when they identified the control systems were inadequate and returned to rather more old fashioned physical control. Sadly none of the people were there to have carried out that task when that might have been discovered.

  3. But the money need not have been lost.
  (Mr Roques) I do not believe anything like the amounts of money that were lost should have been lost. To look at the other side of the coin, I do not believe you can have a system where there are no losses. In all aspects of Excise the perfect system would be unmanageable, would stop trade and therefore there will be losses. However, I do not believe the losses should have been anything like the magnitude they were.

  4. The National Audit Office report concludes that the balance between revenue protection through disruption activity and prosecution was not properly assessed, but says "even with the benefit of hindsight, it is difficult to determine whether a policy of greater disruption would have led to a lower level of revenue losses". What is your view on that?
  (Mr Roques) There are three elements. There is the control element, that is improving systems of control. I am absolutely satisfied that they could have reacted much more quickly to improve the control regime. The second element was disruption. I do not think disruption was heard of as a strategy until drugs in circa 1998-99, whereas any strategic approach would at least have thought of the concept of disruption. It was not thought of at all in respect of Excise. In my judgement better controls and a disruption activity would have reduced the quantum of those losses. How much they would have reduced them by is impossible to speculate on.

  5. Nonetheless you slightly disagree then with the National Audit Office.
  (Mr Roques) I think the losses should have been reduced and that disruption would have been effective, as it is proving to be effective in the drugs arena. It would also have been as effective in the alcohol and spirits area. . . . One of the points which is very important is once you allow a trade to be created, you have created your customer base, you have created your distribution systems and I believe then supply will always follow one way or another. That is why the fraud moves around because the market is there, the distribution system is there and they will be satisfied. If the market, the distribution system, had not been created in 1993-94, then the consequences would be different.

  Chairman: That is very helpful. Can we turn now to the conduct of the inquiry itself?

Mr Laws

  6. You were appointed by the Paymaster General on 30 June 2000 and you were asked to complete your review by 30 November of the same year. Some people go on for years and years with their inquiries. You had about five months. Did you have the resources to do a proper job of this and the time to do a proper job?
  (Mr Roques) In my judgement, yes. Firstly, as you will know, I effectively had three teams. I had a team of people from Customs who were working directly for me. I had a team of people from my old firm, Deloitte & Touche, who were working for me and I had a team of people from the lawyers, Linklaters. I had a lot more people than just me. Secondly, I have to say I was pleased to have the time constraint which was put upon me. It makes for a more effective use of your time, you become focused much earlier in the process because you know there are time constraints and in my judgement it is unlikely that additional amounts of time would have improved the quality of my work. I was quite content with the time I was allowed. My only disappointment was that I delivered my report on about 7 December, whereas I had been very ambitious to meet the 30 November requirement.

  7. I shall not probe you too much on missing the deadline by a week. You did note in your report, "I have not in all cases been able to develop my recommendations for change in sufficient detail for implementation to be practicable without further analysis and consideration by Customs and Excise". Presumably because of the time deadlines.
  (Mr Roques) Clearly time had an impact, but I felt that once I had developed the outline of a recommendation, the nuts and bolts of it would be much more successively developed by internal teams from Customs. It was much better to pass the ball along to them.

  8. You do not feel that had you had more time your recommendations might have developed in a slightly different way than they have in practice.
  (Mr Roques) No.

  9. You submitted the report on 7 December.
  (Mr Roques) I think that was the date.

  10. It was then published in July 2001.
  (Mr Roques) I believe so.

  11. Do you know what the reason for the delay was and whether there were any amendments to the report you submitted prior to publication?
  (Mr Roques) There were no amendments other than the crossings out which you can see in the report which are rather limited. There were no changes, no deletions other than those.

  12. In your report you mention your thanks to the Chairman and others who helped in the process of the inquiry. You did, however, say, "In almost all cases I have found them open and responsive to the idea that change is necessary to improve the effectiveness of the Department". That hints that maybe not everybody was. Are there particular layers perhaps of management or staff you think are resistant to some of the changes you have suggested?
  (Mr Roques) There were some people in management at the time and some people who had management roles during the period of the investigation who had moved on, who were not as enthusiastic about some of the changes I thought were necessary.

  13. Who were they?
  (Mr Roques) I have no memory of which particular names.

  14. Not senior people then.
  (Mr Roques) No. The new management team which the new Chairman has assembled are more prepared to see change.

  15. Than the previous senior managers.
  (Mr Roques) The Chairman as an outsider, as I would call him, has a tough job in creating a cultural change to try to run the Department as I would see it in a more businesslike way rather than as an advisory Department of State of the Civil Service. You do need different processes.

  16. Do you feel perhaps that previously it was not being run along sufficiently business-type lines?
  (Mr Roques) I do not. One example I give is that there is a much greater admiration for those who work in policy than those who work in operations. I understand why people have that view if you are talking about a government department, but if you are talking about an enterprise like Customs & Excise operations, which is about what the people actually do, it is at least as important, maybe often more important I would say, than policy matters. Cultural changes of that sort are tough to introduce.

  17. Did you receive full co-operation from those people whom you spoke to or sought to speak to during the course of your inquiry?
  (Mr Roques) The way I would put it is that by the time I had finished, yes.

  18. There is one individual in particular—and I do not want to go after particular individuals too ardently—whom you name in your report, a Mr McGregor. You said, "During the course of this enquiry, I interviewed the senior National Investigation . . . staff to obtain views on a number of issues in relation to excise diversion fraud . . . Jim McGregor was appointed as Deputy Chief Investigation Officer, Commercial Fraud in 1996. Following a year in this position, he was promoted . . . Unfortunately, I have not had the opportunity to speak to Mr McGregor". That does seem quite odd, given his key role in this area. What were the reasons for that?
  (Mr Roques) I thought it was odd. We had many—I must not exaggerate, several—pieces of correspondence between us as we tried to find dates and at various times he was abroad, unavailable, sick and therefore we failed to meet. He would say, if he were here, that right at the end, he knowing that I was going to finish on 30 November, he thought he might be able to make himself available in December or January. I declined to see him at that time.

  19. What conclusions do you draw from his lack of enthusiasm to meet you?
  (Mr Roques) I drew a conclusion that he was not enthusiastic to meet me.

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