Examination of Witnesses (Questions 120
WEDNESDAY 25 APRIL 2001
MONTAGU CB, MISS
CB, MR JOHN
YARD CBE, MR
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
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
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
(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
(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