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Fuel Laundering and Smuggling in Northern Ireland

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Fuel Laundering and Smuggling in Northern Ireland House of Commons Northern Ireland Affairs Committee Fuel laundering and smuggling in Northern Ireland Third Report of Session 2010–12 Report, together with formal minutes, oral and written evidence Ordered by the House of Commons to be printed 20 March 2012 HC 1504 Published on 27 March 2012 by authority of the House of Commons London: The Stationery Office Limited £0.00 The Northern Ireland Affairs Committee The Northern Ireland Affairs Committee is appointed by the House of Commons to examine the expenditure, administration, and policy of the Northern Ireland Office (but excluding individual cases and advice given by the Crown Solicitor); and other matters within the responsibilities of the Secretary of State for Northern Ireland (but excluding the expenditure, administration and policy of the Office of the Director of Public Prosecutions, Northern Ireland and the drafting of legislation by the Office of the Legislative Counsel). Current membership Mr Laurence Robertson MP (Conservative, Tewkesbury) (Chair) Mr David Anderson MP (Labour, Blaydon) Mr Joe Benton MP (Labour, Bootle) Oliver Colvile MP (Conservative, Plymouth, Sutton and Devonport) Mr Stephen Hepburn MP (Labour, Jarrow) Lady Hermon MP (Independent, North Down) Kate Hoey MP (Labour, Vauxhall) Kris Hopkins MP (Conservative, Keighley) Naomi Long MP (Alliance, Belfast East) Jack Lopresti MP (Conservative, Filton and Bradley Stoke) Dr Alasdair McDonnell MP (SDLP, Belfast South) Nigel Mills MP (Conservative, Amber Valley) Ian Paisley MP (DUP, North Antrim) David Simpson MP (DUP, Upper Bann) The following Members were also members of the Committee during the Parliament: Ian Lavery MP (Labour, Wansbeck) Stephen Pound MP (Labour, Ealing North) Mel Stride MP (Conservative, Central Devon) Gavin Williamson MP (Conservative, South Staffordshire) Powers The committee is one of the departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in SO No 152. These are available on the internet via www.parliament.uk. Publication The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the Internet at www.parliament.uk/niacom. The Reports of the Committee, the formal minutes relating to that report, oral evidence taken and some or all written evidence are available in a printed volume. Additional written evidence may be published on the internet only. Committee staff The current staff of the Committee are Mike Clark (Clerk), Duma Langton (Inquiry Manager), James Bowman (Senior Committee Assistant), Becky Crew (Committee Assistant), Ravi Abhayaratne (Committee Support Assistant) and Jessica Bridges-Palmer (Media Officer). Contacts All correspondence should be addressed to the Clerk of the Northern Ireland Affairs Committee, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 2173; the Committee’s email address is [email protected]. Fuel laundering and smuggling in Northern Ireland 1 Contents Report Page Summary 3 1 Introduction 5 Fuel crimes in Northern Ireland 5 2 The scale of the problem 8 Estimates of revenue loss 8 Other financial costs 9 Non financial costs 9 3 Involvement of organised crime gangs 12 Paramilitaries and former paramilitaries 12 Related criminal activity 13 4 Bodies involved in countering fuel laundering and smuggling 15 Her Majesty’s Revenue and Customs 15 Organised Crime Task Force 17 Communicating the fight against organised crime 17 Northern Ireland Executive 19 5 Enforcement 20 Investigations, prosecutions and sentencing 20 Jury trial 22 Evidence exchange 23 Civil recovery and other measures 23 6 Marker technology 25 Conclusions and recommendations 28 Formal Minutes 31 Witnesses 33 List of printed written evidence 34 List of Reports from the Committee during the current Parliament 34 Fuel laundering and smuggling in Northern Ireland 3 Summary Fuel fraud costs the UK taxpayer hundreds of millions of pounds in lost revenue every year. Northern Ireland alone is estimated to have lost £70 million in 2009-10. Only five years ago this figure was as high as £250 million, and while we welcome the downward trend, fuel fraud remains a particularly serious problem for Northern Ireland. While 4% of diesel sold in GB is thought to be illicit, in Northern Ireland the comparable figure is estimated to be 12%. Other commodities are smuggled across the land border between Northern Ireland and the Republic of Ireland. Tobacco smuggling in Northern Ireland, for example, is estimated to cost the taxpayer £42 million in lost revenue, and is as high as £3 billion for the UK as a whole. The market share for illicit cigarettes in Northern Ireland is estimated at 12%, and as high as 46% for hand rolling tobacco. Lost revenue means less money to spend on public services in Northern Ireland and across the rest of the UK. The loss to the public purse remains unacceptable. Fuel fraud is not just about loss of tax revenue and it is not a victimless crime. It is the men, women and children of Northern Ireland who are the victims, and often the primary ones. It is they: • who have to live in an environment damaged by the fuel criminals, • whose rates bills are higher, as district councils foot the bill for cleaning up the harmful wastes left by laundering - about £330,000 in the last five years, • whose public services are reduced through loss of public revenue to finance them, • whose jobs with legitimate fuel suppliers are put at risk, • whose life and health are put at serious risk on roads and ferries, and • whose motor cars are damaged by illicit fuel. Fuel fraud is carried out by organised criminal gangs, some of which have paramilitary links and are engaged in other crime, notably tobacco fraud, bottled gas fraud, drugs, human trafficking and money laundering. Buying illicit fuel puts money in the pockets of organised criminals. Her Majesty’s Revenue and Customs, the Serious Organised Crime Agency and the Public Prosecution Service in Northern Ireland have had some success in recovering assets, but we are concerned at the apparent limited success of assets recovery as a deterrent. This lack of deterrence is exacerbated by the poor record for imposing custodial sentences in Northern Ireland. Between 2001 and 2009, only four people received custodial sentences for fuel fraud in Northern Ireland. This does not compare well with the sentencing record for comparable offences in Great Britain. We share the widespread concern that such a sentencing record, if continued, would ever deter fuel fraudsters. We, therefore, welcome the announcement from the Lord Chief 4 Fuel laundering and smuggling in Northern Ireland Justice for Northern Ireland that he is including duty evasion and smuggling in his programme of action on sentencing, and look forward to sentencing guidelines being developed, which should be rigorous. The lead agency for countering fuel fraud and tax evasion in Northern Ireland is HMRC, and we welcome the resources—finance, staff and skills—that it has invested in combating fuel fraud, but the scale of the problem still requires it being given an even higher priority. We are bitterly disappointed with the continuing delay in HMRC’s acquisition of a new marker. We urge HMRC to focus its efforts on acquiring the latest and best marker technology available as soon as possible, commence a pilot as soon as practicable, and report back to this Committee before the 2012 Summer Adjournment. We recognise that, while it takes the lead on fuel crimes, HMRC does not act alone. It is a member of the Organised Crime Task Force in Northern Ireland, chaired by the NI Minister for Justice, which includes a range of bodies, from government and private sectors, all interested in fighting organised crime. The OCTF has greatly improved the co- ordination between agencies in Northern Ireland, and across the border with their counterparts in the Republic of Ireland, but it could do more. Raising awareness of the damage done to the Northern Ireland public by fuel fraud and organised crime generally is an important strand of the OCTF’s work, and we acknowledge HMRC’s particular contribution to this. We want to see greater involvement by appropriate Ministers in the Northern Ireland Executive in presenting to the people of Northern Ireland the close connection between fuel fraud and the negative impact it has upon the provision of public services. Fuel laundering and smuggling in Northern Ireland 5 1 Introduction Fuel crimes in Northern Ireland 1. Criminal activity involving fuel fraud is a major problem in Northern Ireland and is proportionately three times larger than similar fuel crime in Great Britain.1 It deprives the Exchequer of millions of pounds in lost excise duty, it takes business away from legitimate organisations, and leaves environmental waste to pollute and scar the countryside. It funds organised crime in Northern Ireland. It also feeds the attitude that some crimes create no victims because ‘it’s only taking from the taxman’, but taking from the taxman reduces the amount of revenue raised by Her Majesty’s Revenue and Customs (HMRC) and, therefore, the money available to spend on public services not only in Northern Ireland, but also in Scotland, England and Wales. 2. While the primary focus of the inquiry has been on fuel fraud, we also received evidence on other forms of tax evasion that reduce the UK revenue: tobacco smuggling in Northern Ireland, which may be carried out or funded by the same criminal gangs, is estimated to cost around £42 million a year in lost revenue and between £1 billion–£3 billion for the UK as a whole.2 Tobacco smugglers can make up to £1.5 million profit per container lorry coming into the UK.3 A similar level of crime also affects the Republic of Ireland.4 3.
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