Customs and Excise: Review of Current Practices (Hansard, 15 July 2003)

§ The Attorney-General (Lord Goldsmith)

Further to my reply to Lord Clarke of Hampstead on 11 July (Official Report, WA 63), I can announce that today the Government are publishing in full the independent report, its summary and recommendations, of the Hon. Mr Justice Butterfield following the completion of his review.

The Economic Secretary to the Treasury and I asked Mr Justice Butterfield to examine the circumstances that led to the termination of the London City Bond (LCB) prosecutions in Liverpool Crown Court on 25 November 2002, the changes in practice within HM Customs and Excise (HMCE) since the time of the cases to which those prosecutions related, and HMCE's compliance with best practice in the use of investigation techniques. The full terms of reference for this review were given in the reply I gave to Lord Peston on 25 November 2002, (Official Report WA 26). In addition the House will be aware that the 97WA Government are looking at the links between law enforcement agencies which investigate serious crime, alongside the review the Chancellor has announced on the future of the tax institutions.

The Government welcome the report, and is grateful to Mr Justice Butterfield and his team for completing the study so promptly and for the extensive research that underpins his conclusions.

The review's main findings are:

that there were major failings in the investigation into and prosecution of the LCB cases, investigated by HMCE from 1995 to 1998;

but that, since then, there have been significant changes, including:

far-reaching improvements in management, structure and culture within HMCE;

changes to the legal framework controlling the regulation of Excise warehouses, which have closed the loopholes used by the criminals in the LCB frauds; and

following the Gower/Hammond review, the separation of responsibility for the conduct of prosecutions from responsibility for the conduct of investigations, by making the Customs and Excise Prosecutions Office (CEPO) accountable to the Attorney-General, and not to the Commissioners of Customs and Excise, since April 2002;

that these changes have gone a long ways towards dealing with the problems within HMCE underlying the LCB cases, and Mr Justice Butterfield makes a number of recommendations designed to reinforce this change process.

Mr Justice Butterfield also identifies three important areas of concern in criminal law and practice highlighted by the LCB cases, all of which have a wider application than HMCE cases. These are:

the use of "abuse of process" in trials as a mechanism for attacking investigation processes;

the challenges investigators and prosecutors face in complex cases in meeting their disclosure obligations under the Criminal Procedure and Investigations Act 1996; and

aspects of informant handling.

HMCE investigation and prosecution

The Government welcome Mr Justice Butterfield's conclusion that significant progress has already been made by HMCE in dealing with the issues underlying the failure of the LCB cases, and the unequivocal finding that there is no evidence in the LCB cases of improper enticement or encouragement to commit crimes or of entrapment.

Most importantly, the Government welcome Mr Justice Butterfields's conclusion that "HMCE should now put the events of the London City Bond cases behind them and move forward, but not in a spirit of complacency", and the recommendations he makes on how this process, already substantially under way, can he reinforced.

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Mr Justice Butterfield makes a number of important recommendations that encourage HMCE and the CEPO to continue the programme of reform underway in the Department. These recommendations relate to:

HMCE's role as an independent investigating force—the Government accept Mr Justice Butterfield's finding that, under the current arrangements, HMCE should continue in its present role;

the handling of human intelligence sources—the Government accept these recommendations, and HMCE will promptly implement the new guidelines and procedures which are outlined in the report;

training for investigators—the Government accept these recommendations, and HMCE; will incorporate them into an improved training programme for specialist investigators;

external scrutiny of investigations work—the Government accept the principle of external scrutiny of HMCE investigations work, and HMCE has been asked to undertake a study to identify how additional external scrutiny can best be introduced; and

HMCE's regional structure, and in particular expertise in Scottish Law—the Government agree with the analysis in the review, and has asked HMCE to ensure that proper and informed legal advice is available to Scottish investigators and intelligence officers.

In addition, the review recognises that CEPO has been revitalised since the Gower/Hammond review and welcomes the changes that have taken place, in particular the increased independence that followed the transfer of accountability for HMCE's prosecution function to the Attorney-General in April 2002. However, Mr Justice Butterfield draws a number of conclusions, which include recommendations:

that, in order to make its independence from HMCE even more transparent, CEPO should become an entirely separate prosecuting authority accountable to the Attorney-General;

that there should be an increase in the number of investigation legal advisers employed within Customs, who play no part in the prosecution process but are available to provide advice to investigators; and

that a more systematic dialogue between HMCE and other government departments responsible for related practical and policy issues would be desirable.

The Government strongly agree that the ability of prosecutors to exercise their decision-making and other prosecution functions independently should be ensured. The Government will be considering the full practical implications of these recommendations, and in particular how the independence of the prosecutors in CEPO can best be strengthened further. The Government will provide a detailed response to all these recommendations in the autumn.

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Criminal justice system

The review concludes that the criminal justice system does not work as effectively as it should, but recognises that some of the problems identified are being addressed in the Criminal Justice Bill currently before Parliament. The review recommends that consideration is given to:

reforming the operation and rules of the disclosure regime in complex criminal cases;

the power of judges to control proceedings before them relating to abuse of process; and

the operation of the Regulation of Investigatory Powers Act 2000.

These recommendations have potential implications across the criminal justice agencies and departments. While accepting that they highlight important areas of concern, the Government will give them further detailed consideration before deciding whether to accept them.