HL Deb 13 March 2001 vol 623 cc682-4

2.40 p.m.

Lord Campbell of Croy

asked Her Majesty's Government:

Whether large amounts of Scotch whisky have been taken from bond, without payment of tax, and fraudulently delivered to the home market instead of being exported.

Lord McIntosh of Haringey

My Lords, losses of excise duty on spirits during the period 1994–98 were reported by the National Audit Office on 9th February. It is not possible to say how much whisky was involved without research involving disproportionate cost.

Lord Campbell of Croy

My Lords, I am grateful to the Minister for that Answer. When the subject was previously raised at Question Time, the Government indicated that additional special investigators had been assigned to the case. Can the Minister confirm that the report of the National Audit Office indicated that the criminal practice continues, involving much falsification of documents?

Lord McIntosh of Haringey

My Lords, the report of the National Audit Office to Parliament on 9th February did indeed identify large-scale fraud and a weakness in control within Customs and Excise, which made the fraud possible. The weakness involved Customs and Excise officials allowing spirits to continue leaving the bonded warehouses in the hope of following them up to find the ultimate destination. That did not work as well as it ought to have done. As a result, there were substantial losses.

However, that practice was stopped in 1998 and physical controls were reintroduced at bonded warehouses. When the matter was reported to Ministers in the middle of last year, the Paymaster General took immediate action, reporting to the National Audit Office and commissioning an independent report on the matter.

Lord Elton

My Lords, if the Government do not know how much whisky has gone astray, how can they say that the cost of discovering how much was involved is disproportionate?

Lord McIntosh of Haringey

My Lords, I did not make myself clear. The Government know how much spirit has gone astray. The only way of identifying what proportion of that is whisky as opposed to gin and vodka would be if the individual administrative documents were analysed separately. That is the exercise which would be too costly to undertake.

Lord Tomlinson

My Lords, is there not a liability on the freight forwarder in relation to the documentation? Is not the freight forwarder required to have insurance against the likelihood of this type of fraud? What steps have been taken against the freight forwarders involved in unloading these spirits on to the home market in order to recover the duty that has been lost to Her Majesty's Treasury?

Lord McIntosh of Haringey

My Lords, this is not an issue of freight forwarders. The owners of the spirits place their product in the bonded warehouses owned by warehouse-keepers. The owners are entitled to take the spirits out of the bonded warehouse. It is the responsibility of Customs and Excise to ensure either that they are exported so that no duty is paid, or, if they are to be used in the home market, that duty is paid. That is the process over which Customs and Excise have failed to exercise adequate control.

Lord Campbell of Croy

My Lords, does the Minister agree that the distilling industry is not at fault in this criminal practice? It is likely to be gangs of criminals formed especially for the purpose who are carrying it out.

Lord McIntosh of Haringey

My Lords, that is certainly the case. It is not the distilling industry which is responsible. As the noble Lord, Lord Campbell of Croy, rightly says, these are gangs of criminals. I am not minimising the extent to which matters have gone wrong, but there have been 97 convictions and 300 years of prison sentences.

Lord Pearson of Rannoch

My Lords, can the Minister give the value of the spirits that have gone missing? How much is actually involved in the overall racket?

Lord McIntosh of Haringey

My Lords, the National Audit Office's report of 9th February gives a figure of £668 million. That is a very large figure. I should add that even that large figure represents only one per cent of alcohol tax in this country.

Lord Newby

My Lords, one of the consequences of the large loss of revenue is that a decision has been taken to transfer responsibility for the Customs and Excise prosecution service to the Attorney-General. Can the Minister give us the rationale for that decision?

Lord McIntosh of Haringey

My Lords, as the noble Lord knows, the Attorney-General has published on this matter within the past 24 hours. Although there will still be a prosecution service within Customs and Excise, it will be subject to independent scrutiny. The Attorney-General would confirm that that decision was not taken simply on the basis of the fraud—the subject of this Question—but on wider considerations.

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