Examination of Witnesses (Questions 160-179)
MR RICHARD BROADBENT, THE EARL OF CRANBROOK, MR MICHAEL WHITING AND MR NEIL CARRIGAN
MONDAY 5 NOVEMBER 2001
160. Paragraph 4.24 of the Comptroller and Auditor General's report says that "Customs are satisfied that Lodge Service have undertaken sufficient visits . . . We noted, however, that Customs staff have not accompanied Lodge Service on a sample of visits to see whether the checks are being adequately carried out". Do you think you could or should actually accompany Lodge Service on visits?
(Mr Broadbent) Yes, I think we should and we have set a target of one per cent of visits per sample. We have now in fact accompanied two visits. The reason we had not accompanied Lodge visits before was that ENTRUST do also do their own visiting and in fact Lodge Service visit the lower risk cases. We had given a higher priority to accompanying the ENTRUST visits which we had done.
161. May I return to the concluding paragraph of the Comptroller and Auditor General's report which was referred to earlier by Mr Steinberg, when he pointed up the difference between Customs' own view that ENTRUST had been effective and the Comptroller and Auditor General's view, "I consider however that there are some fundamental weaknesses in the design of the Scheme". He went on to make some other recommendations himself and I should also like to take you through those. The first one was, "Customs should examine whether the scheme could be simplified without loosening key controls over tax credits and expenditure on projects". Where does that now stand?
(Mr Broadbent) There are some simplifications which might be introduced, but our honest judgement is that those are at the margin. This is a complex scheme and probably the controls cannot be radically simplified without changing the scheme radically.
162. The next point was that Customs should look at whether the organisational responsibilities could be more clearly separated to avoid concerns over conflict of interests.
(Mr Broadbent) Narrowly on the issue of waste management, which was instanced in this case, oddly enough I have come at this from a slightly different direction. The waste management representatives, because they are the only ones who have money at risk, have actually been very helpful on the board in pushing for effective regulation. It is very difficult. We have tried to create an organisational balance. Our terms of approval set out a range of interests which should be represented. There is perhaps a wider question which the NAO report does not ask, which might be asked, which is whether the board should be representative at all. That is a valid question to ask and one which the Government will take into account in its review.
163. It might instead be entirely independent and hands off.
(Mr Broadbent) We have sought to get a balance of representation. We have done the best we can and I think there is a good balance now. There is a quite separate question as to whether in fact you can do something completely different.
164. That brings me straight onto the next point which is that Customs should consider further whether groups such as the waste management industry have too dominant a role, whereas local community groups are less well represented.
(Mr Broadbent) The waste management industry had three directors out of 11 and now has two out of 11 which is not a dominant role. This is a board of some standing; I am glad to see that the recent appointments have been of very high calibre.
165. The Comptroller and Auditor General's next recommendation was that "Customs should ensure that ENTRUST review whether all environmental bodies meet the most recent requirements for enrolment". We are talking about new applications. How does that stand?
(Mr Broadbent) That has been completed.
166. "Customs should consider ways to provide ENTRUST with a greater range of options for taking action against environmental bodies". We have discussed this to some extent already. "Customs should consider whether to make it a condition of the scheme that environmental bodies must commit contributions to projects within two years after receipt". Where does that stand?
(Mr Broadbent) That is something we are actively looking at at the moment. I can go into the pros and cons if you wish.
167. Where do you stand?
(Mr Broadbent) There is a balance of judgement which we have not yet made. If you put a two-year cap on it you will lose a lot of large good schemes. A good many of these schemes take more than two years.
168. You mean it takes more than two years to
(Mr Broadbent) If you can be satisfied that the money is under control, there is a lot to be said for allowing longer-term schemes.
169. If there were a cap but it were to be a different period, could it be for two and a half years or three years?
(Mr Broadbent) That is the issue on which we perhaps need to do some more work.
170. The next point, "Customs should consider whether local authorities should not be allowed to require successful bidders for waste disposal contracts to make contributions to specified environmental bodies"
(Mr Broadbent) We should consider this. We are considering it actively and I would add that Customs feel uncomfortable at this development where local authorities are sometimes making it a term of contracts that contributions are made to environmental bodies and our current feeling is, although we are reviewing it, that we want to see whether we can find a way of stopping it.
171. A final recommendation. "Customs should make it a requirement that environmental bodies should prepare their audited accounts in a way that allows ENTRUST to check whether notifications received during the financial year have been fully accounted for".
(Mr Broadbent) This is being done. ENTRUST are currently trialing a disclosure in accounts and if that trial is successful it will be implemented next year.
172. May I turn to the question of the contract with ENTRUST? You said earlier that there is no new contract. Could you tell us what there is and what you have done and when you did it?
(Mr Broadbent) We do not have a contract with ENTRUST and it is important to make that point at the outset and importantly we have taken legal advice to make sure we do not create a contract with ENTRUST because it would be completely wrong to do so. We do have what are called terms of approval and this is really a service level agreement, it is the mechanism by which we make it clear to ENTRUST what we expect them to do to discharge their responsibilities. It is my control mechanism over ENTRUST. It says you can just do certain risk tests.
173. You had a service level agreement before. Do you have a new service level agreement now?
(Mr Broadbent) We have always had a service level agreement. It has been frequently revised because of the rapid development of the scheme and the latest revision was made quite recently, last month I think.
174. This was the one at the end of October.
(Mr Broadbent) The beginning of October. To give you an idea of that, the discussions on the revisions which were incorporated in that started in January. The original intention was to try to produce them by August which is ENTRUST's financial year and they got held up because some of the issues are quite complex.
175. It is true to say that very recently you concluded a new service level agreement.
(Mr Broadbent) Yes, it is true.
176. That is the agreement which includes the 12-month provisional extension, as it were.
(Mr Broadbent) Yes. It includes a termination provision of 12 months, which is there to create a degree of certainty in an uncertain position.
177. May I ask you about the guidelines for approved objects under the scheme, regulation 33 sets them out? There are six guidelines: A to F. Do you have a breakdown of the proportion of the funds which go into each of these different categories?
(Mr Broadbent) There is a breakdown. I do not actually have the detailed percentages with me. What we have been looking at closely recently though are the C and CC categories which are the ones which the Government set out most recently in line with their waste management strategy and made it clear they wished to see an increase in the proportion of funds going to those categories.
178. What is the proportion at the moment?
(Mr Broadbent) It is currently 56 per cent going to those categories which is up from 33 per cent.
179. Forgive me, but I am not aware of the Government's stated target. Have they stated a target higher than 56 per cent?
(Mr Broadbent) They have not stated a target. They have made it clear they wish to see significantly more money going into these objectives relative to other objectives. No target has been set.
(Mr Carrigan) An indicative guideline was 65 per cent.