UK Government Tries To Cover Up £2bn Customs Tax Failure

by Jason Gorringe, Tax-News.com, London

19 July 2001

A damning report on its customs and excise service which the UK Government has been holding up since February will be slipped through Parliament today in a way which, Ministers hope, will escape attention. An obscure backbencher will be persuaded to ask a Parliamentary question just hours before Parliament rises for its summer recess, and the report will be released as part of the answer. But MPs will have no chance to debate the affair until October, by when it will be forgotten.

At least, that's what Ministers have planned. But David Davis, who recently competed for the Tory leadership and who has been re-elected chairman of the public accounts committee, says he intends to force Customs & Excise to admit its blunders. Last February, when the Government admitted the existence of the report, Mr Davis, whose committee has not been allowed access to the report, said: 'Officials had been aware of the threat and scale of the fraud as early as 1994, but did not take effective action to curtail it until 1998. They took a further two years before ministers knew the scale of losses involved.'

The report describes how Customs and Excise allowed criminals to get away with up to £2bn in unpaid tax by permitting huge illegal sales of tax free gin and whisky, and accuses customs officials including the former chairwoman, Valerie Strachan, of failing to press ministers to increase staff when they knew that their undercover operations were on the point of collapse.

As a result criminals got away with a sting which enabled them to buy millions of tax-free bottles of spirits from bonded warehouses across Britain claiming they were for export. The drinks were then diverted to off-licences across the UK. Customs did not have the staff to prosecute more than a handful of the suspects.

The report by accountant John Roques has been kept secret by the Treasury since February, when the national audit office, parliament's financial watchdog, revealed the loss to the taxpayer. It accuses civil servants of losing their grip of investigations. The report is said to be highly critical of board members between 1994 and 1996 for refusing to argue the case for big staff increases when Tory ministers were seeking public expenditure cuts. The result was that demoralised and overworked staff lost track of the duty free spirits once they had been sold to pubs and clubs and were only able to recover some £45m in lost duty.

Now that the Public Accounts Committee has made it clear that it will publish criticisms of Customs and Excise officials alongside publication of the report, Paul Boateng, the Treasury minister in charge of customs, has arranged for Customs and Excise to issue a detailed response to the report which will claim that the errors could not happen again. It will say big staff increases under Labour, and a reorganisation of the department by the new customs chief, Richard Broadbent, has closed all the loopholes.

David Davis says that the original mistakes and the subsequent attempts to cover them up 'shows a reckless disregard for the interests of the taxpayer. The attitude displayed to ministers and to parliament borders on contempt.'

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