§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Betts.]
11.34 pm§ Mr. Russell Brown (Dumfries)I had feared that the House might sit until early morning, so I am delighted to have the opportunity to hold this debate in what is still the evening. This is a vital issue, and I know that some colleagues were disappointed that I was not able to secure a longer debate on the subject in Westminster Hall, as that would have allowed other hon. Members to take part and make valid contributions. Other colleagues have commented during the day that raising this matter in the Chamber is not the wisest thing to do. Comments have varied from "Smuggling of alcohol and tobacco goods is something that everyone does," to "It's a real vote loser to try to stop cheap cigarettes and alcohol coming into the country." This is an issue that we cannot ignore, and while I appreciate that my hon. Friend the Paymaster General will tell me that much is being done, I believe that a lot more can and should be done.
Almost three years ago, my hon. Friend the Member for Waveney (Mr. Blizzard)—he is in the Chamber tonight—had an Adjournment debate on illegal imports of beer. He said then that he felt it wholly appropriate to raise the matter in the run-up to the Christmas period. Three years on, as we approach the festive season once again, it is still appropriate. In my humble view, the situation has worsened.
In the eyes of many, the quick answer to this illegal activity is to reduce significantly all the taxes and duties on tobacco and alcoholic goods. Prices would then fall and the market would close down for the traders and dealers in smuggled and bootlegged goods. Those here tonight know only too well that this will not happen and that we have to deal with the issue that confronts us today.
Cigarette smuggling is so widespread that it poses a serious threat to public health; first, by making cigarettes available cheaply and encouraging consumption; and secondly, because the tobacco industry tries to encourage Governments to reduce taxation in response to smuggling. This results in lower prices, which in turn increase consumption.
How big an issue is this? Frankly, the fact that visitors to the continent buy an extra 200 cigarettes or an extra bottle of spirits, or that business men or lorry drivers on the continent carry a small amount of extra goods for family or friends, is not the issue. Bootlegging is the process whereby tobacco and alcohol products are legally purchased in countries with lower tax rates and then illegally sold on to individuals, distributors and retailers here in the UK. The white van trade, as it is called, appears to account for about 25 per cent. of smuggled cigarettes.
The other 75 per cent. of smuggled tobacco goods are a direct result of large-scale organised crime undertaken by criminal gangs and involve freight consignments of millions of cigarettes. This form of smuggling is increasingly controlled by gangs involved in the trafficking of illegal drugs. The figures show that over 60 per cent. of those found smuggling have been involved in other criminal activities and have other convictions. What is classed as the risk-to-reward ratio for tobacco
939 smuggling is lower than that for illegal drugs, and many organised crime gangs are increasingly moving from narcotics into tobacco. It is estimated that 15 per cent. of the cross-channel smuggling of cigarettes into this country is a direct result of Italian gangs.
With the world of information technology has come another avenue of exploitation. Increasingly, people are purchasing alcohol and tobacco goods via the internet, from sites which are not regulated, which use child-friendly marketing, and which do not—as far as tobacco products are concerned—carry any health warning whatever. By simply entering the term "discount cigarettes" to an internet search engine, somewhere in the region of 2,000 pages of links can be produced.
The impact of all this illegal activity is significant. During the recess, I visited a local store in the Georgetown area of Dumfries, where I met the owner, Mr. George McCall. We discussed at length how this activity is affecting individual businesses. It was no surprise to hear that, on average, independent retailers are losing 16 per cent. of their trade. That is nearly £62,000 a year in lost sales, all due to bootlegging. In my home town, I am aware of one small business which, frankly, is on the verge of stopping selling tobacco and alcohol. In the owner's simple words, he cannot compete with a chap living around the corner who operates a racket.
A further adverse effect is that lower sales can lead to higher prices of other goods on sale in the shops. I am sure that my hon. Friend will keep me right, but I believe that the estimated loss to the Treasury resulting from smuggling alcohol and tobacco goods is in the region of £4 billion a year. That money could be spent on schools, hospitals, pensioners, policing, and additional Customs and Excise officers.
Parliamentary questions tabled on this matter over the past year number well in excess of 50, but I am disturbed to see from the answers that we do not appear to have any real idea of the number of prosecutions. That is indeed worrying. It is important to show that we are not sitting idly by while all this happens. Only by giving accurate figures of arrests and prosecutions will we be able to send out the message to the public that we are serious. We want to tell them that we are determined to put a stop to this illegal activity, and that people who are involved are likely to get caught.
Penalties also need to be reconsidered. In recent weeks, the national press has carried stories to the effect that Customs and Excise officers are threatening to seize and sell the cars of members of the public who buy cigarettes from bootleggers. I do not know how much truth there is in that report, but I believe that something as radical as that must be done if we are to curb this activity.
The same report made mention of a number of vehicles belonging to bootleggers that were seized in Scotland. It also reported the confiscation of an ice cream van loaded with thousands of cigarettes, parked near a school. That is the aspect that I want to consider next. Within neighbourhoods, households can pinpoint the house where cheap cigarettes, tobacco and alcohol can be purchased. However, it is not only adults who know about those houses— schoolchildren as well as adults know where such goods can be bought. Quite honestly, those who are supplying the goods do not even give a second thought to 940 the age of the customer or purchaser. Children as young as nine or 10 can be seen in many neighbourhoods buying cigarettes and alcohol, not only for their parents but for their own consumption.
In considering the debate and the answers given to parliamentary questions, I see that my hon. Friend said in a reply given in April that it was intended to employ a further 1,000 Customs and Excise officers to deal with this matter, with a substantial number to be based at Dover. Although I believe that additional officers are required in the field, it concerns me that some of them may have been taken from other Customs and Excise activities.
In my constituency and that of the hon. Member for Galloway and Upper Nithsdale (Mr. Morgan), staff have been reduced from 12 in 1995 to the current three visiting officers, one home officer and one administration and secretarial officer. It is expected that the latter will be removed from her post in about six months. If we are determined to pursue best value, is it appropriate that four Customs and Excise officers should have no administrative support? Those individuals will have to open their own mail, and carry out typing and other clerical duties, even though their expertise lies in the profession for which they were trained.
Examination of the situation indicates that in Scotland and elsewhere we are seeing a centralisation of certain areas of business. I do not believe that constituencies such as mine and that of my hon. Friend the Member for Ayr (Ms Osborne), where there are similar reductions in Customs and Excise staffing, provide the Customs and Excise services that businesses and individuals are looking for. Reductions in the numbers of officers dealing with VAT and debt management are but two examples of situations in which I believe that there is significant pressure, leading to a possible decline in the quality of service.
I said earlier that, owing to the risk-to-reward ratio, many organised crime gangs were moving their activities from drugs to illegal tobacco. However, it must be said that many of those who have become involved in the sale of smuggled tobacco and alcoholic products later use the moneys generated from it to fund the beginnings of a new activity: dealing in drugs.
It is not uncommon in my area—and, I know, having spoken to colleagues, in many other parts of the country as well—for some people involved in such activities to purchase cars and properties with cash. We are talking about sums of £30,000, £40,000, £50,000, and beyond. They have that money readily available because of their activities. It is big business, and business that cannot be ignored. It is inevitable that, as more and more individuals become involved in the sale of such goods, they start to encroach on what is seen as someone's else patch. As one might expect, that brings with it acts of violence.
In the scenario of illegal activity, some individuals generate significant sums for themselves, but there are always those who have to pay a price. In this instance, they are law-abiding citizens who pay their taxes. If we could put an end to all such smuggling tomorrow, just think of what we could do with the extra £4 billion.
We must also ensure that those who believe that they are doing nothing wrong by purchasing a few cheap cigarettes or a bottle of cheap whisky realise that they are involved in illegal activity. It is not uncommon for such 941 goods to be on sale in the workplace as well as the local pub or club. People need to understand that they could be jeopardising their livelihood if a responsible owner of a business or employer discovered what was happening where such people were gainfully employed.
I hope that my hon. Friend will take on board my concerns. This debate is about protecting independent retail business and children; it is about the loss of revenue to the Treasury; it is about adequately resourcing Customs and Excise, and not just to combat smuggling. Above all else, this debate is about supporting those who pay their taxes. I appreciate that much has been done, but there is much more to do.
§ The Paymaster General (Dawn Primarolo)I congratulate my hon. Friend the Member for Dumfries (Mr. Brown) on securing this Adjournment debate, as I do my hon. Friend the Member for Waveney (Mr. Blizzard), who three years ago—to the day, I think—secured his debate on the subject.
My hon. Friend the Member for Dumfries was absolutely right to focus on the following four issues. First, tobacco smuggling undermines the Government's health policy, which, because of the health risks associated with smoking, is to reduce the number of people who smoke. Secondly, there is the loss of revenue to the Government. Recent figures show that freight smuggling, which has been an area of huge growth in the past couple of years, costs in the order of £2.5 billion a year—not £4 billion, as Imperial Tobacco is saying.
Thirdly, my hon. Friend was right to point out the criminal activity associated with smuggling. I will turn to that and explain what we are doing. Such activity not only grows in our communities, but these people do not care to whom they sell the products. There are also international criminal gangs involved in organising such activity. Fourthly, and vitally, there is the question of the undermining of legitimate business, which has a right to look to Government to take action to protect it.
I shall deal briefly first with the scale of the problem that we face. We need to be clear, as my hon. Friend has said, about the type of people who are involved in this debate. This is not a debate about the opportunistic amateur who crosses the channel and comes back with a large supply of cigarettes, although that occurs and we have penalties to deal with it. This is a debate about the systematic freighting into this country of about 16 billion cigarettes a year—one in five of those that are smoked. It is an activity that has been growing. It is organised by criminal gangs who use freight consignments from places such as China, the far east, the Baltic, the Balkans and South Africa. Almost 80 per cent. of illegal cigarettes are smuggled in maritime freight.
Although there are those who would argue that this is a question of the duty that is charged on cigarettes, we should consider first that the products come from sources where no duty is applied—they are illegal cigarettes—and secondly, that even countries within the EU that impose lower duty rates, such as Italy and Spain, suffer the same problem.
In its report "UK Threat Assessment", published in May 2000, the National Criminal Intelligence Service estimated that 19 per cent. of all identified organised crime groups were engaged in excise fraud. It further 942 estimated that 21 per cent. of drug trafficking gangs also engaged in excise smuggling. As my hon. Friend has pointed out, some use tobacco smuggling to fund their drug smuggling activity. Previous convictions of those detected by customs involved in tobacco smuggling include people who have records of heroin and cocaine trafficking, manslaughter, arson, grievous bodily harm and a variety of other violent crimes. My hon. Friend is right to underline the seriousness of this issue.
I shall outline the Government's strategy on providing funding to deal with this challenge and touch on some of the problems to which he referred in Scotland. Following a detailed assessment of the scale of the problem, in order to show their determination to tackle the problem the Government announced on 1 March that we would devote a further £209 million to pay for almost 1,000 anti-smuggling staff in customs and X-ray machines to detect consignments of illegal goods in freight. The aim of the strategy is to target the highly organised criminal activity. There are 500 additional staff working at the frontier and inland, another 300 specialist investigators, almost 100 extra intelligence specialists and, as I have said, a national network of X-ray scanners that are helping customs to deal with the issue. Our strategy is to increase seizures and stem the flow so that the smuggling does not increase and, over three years, to reduce the smuggling.
In the first six months, we have seized almost 1,500 million cigarettes—930 million in the United Kingdom and 547 million overseas en route to the UK. We have broken up 25 of the organised gangs that supply the huge volumes of cigarettes. We have increased the penalties for those whom we catch. We are looking at seizing their resources and their vehicles, as well as imposing heavy penalties and terms of imprisonment. We are also making it clear to the tobacco manufacturers that we expect their co-operation in dealing with this problem. A substantial number of the cigarettes seized were produced in Britain, left this country, and have been smuggled back in. Clearly, there is a lot that tobacco manufacturers can do to help us to deal with that problem.
Although we are determined to deal with the white van trade—the smaller dealers crossing the channel—we are also dealing with the massive amount of freight and the gangs that organise it. Customs does not flinch from prosecuting the smugglers when that is necessary. New offences and penalties will be introduced on 1 July 2001. Pack marks on cigarettes, showing where they were produced and where duty was paid, will help enormously. From 1 July 2001, managers of pubs, clubs, factories and so on who knowingly allow their premises or workplaces to be used for the selling of unmarked tobacco will face substantial fines and will be prohibited from using their licences for up to six months. My hon. Friend mentioned internet selling. Customs is aware of the threat and has taken significant steps to tackle it. I note that Imperial Tobacco's chief executive commented on Customs action and its effectiveness.
Customs aims to tackle the problem on a nationwide scale. To achieve that, its resources are rightly targeted at the key entry points through which the vast majority of cigarettes come into the country. In addition, Customs is targeting the inland distribution of those cigarettes, to which my hon. Friend referred.
In Scotland, Customs strategy has been to hit the sellers again and again, using rapid response blitz techniques. That involves locally based officers plus mobile national
943 strike forces. My hon. Friend should look at the total resources that we apply to the pressure points, rather than at the geographical location by residence of some of our officers.
As I speak, a Customs strike force has been hitting the blatant inland sales of illicit cigarettes in Scotland and has deployed for this purpose an additional 30 officers over the past few days. I did not arrange that because of tonight's debate, but I am glad to be able to demonstrate to my hon. Friend and the House the way in which we are tackling the problem.
Over the weekend alone, Customs seized more than 100,000 cigarettes, 135 kilos of hand-rolling tobacco, 433 litres of alcohol, four vehicles and, as my hon. Friend rightly pointed out, one ice-cream van, which had been used to sell smuggled goods. More importantly, perhaps, Customs drove the sellers of smuggled tobacco out of one of the most notorious markets in Glasgow.
I should add that one of the officers was assaulted and required several stitches to a head wound. That shows the determination of those who seek to defend their illegal activity. Customs officers are facing increasing levels of violence. They have demonstrated their commitment to tackling the problem on our behalf. It is clear how intent the criminals are on making their money.
As a result of the strategy and both the inland and the frontier activity, customs officers have massively increased the number of illicit cigarettes that they have taken off the streets this year. In the first six months of this year, they seized more than 20 million illicit cigarettes in Scotland. That represents an increase of 300 per cent. on the same period last year. I say to my hon. Friend that those results do not demonstrate a lack of resources: quite the reverse. They show the determination to make sure that those resources are in place.
I take the opportunity of my hon. Friend's debate to point out that one of the huge problems that we are facing is the amount of counterfeit cigarettes entering the 944 country. Those are cigarettes that do not even reach the health standards that we require in the UK. Customs has seized counterfeit cigarettes. That demonstrates not only the unscrupulous nature of those selling the products—they do not mind to whom the cigarettes are sold, including children—but the fact that the organised criminal activity is not about tax. Those cigarettes bear no tax in the first place. We estimate that slightly more than 20 per cent. of the cigarettes seized this year are counterfeit. That puts massive pressure on health and on our resources.
My hon. Friend urged that we must ensure that resources are not taken from other areas—for example, VAT assurance work. The extra resources that the Government have made available are specifically to ensure that continued work in other areas, be it alcohol, drugs or VAT assurance, will be maintained and pursued with enough vigour.
I cannot overstress the seriousness of the development of this criminal activity over the past few years. However, I say with all confidence that we have the resources in place. The penalties are on stream. Legitimate traders will be defended, as will our children. We will seek out and prosecute offenders.
As my hon. Friend says, we should not be complacent. We must be vigilant. I can assure him and other right hon. and hon. Members that we will not ease our pressure, whether cigarettes, drugs or alcohol are being sold illegally, to ensure that the criminals do not profit from their activity, that they are prosecuted and that we seize any resources that they have to ensure that even if they serve a prison sentence, they will not receive money on their release. We will reinforce the Government's health policy.
I hope that that will go some way to reassure my hon. Friend. I also hope sincerely that over the next year I will be able to report positively to the House the progress that customs has made in stemming illegal trade.
Question put and agreed to.
Adjourned accordingly at two minutes past Twelve midnight.