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Fraud: EU Committee Report

My Lords, not being a member of the sub-committee and with the massed ranks of the Liberal Democrats behind me, I should like to congratulate the noble Baroness, Lady Cohen, on a very succinct report. Its best attribute is that it has lots of diagrams. Despite her excellent introductory speech, diagrams and pictures pave the way to accessibility and help people to understand the issue. To echo a point already made, a striking aspect of this problem is that it has come out of the success of the single market. But that was 15 years ago, and during my time of being involved in European affairs—the past 10 to 12 years—it has been a known problem of some magnitude and yet one that we are still left with. While the report is of very high quality, it makes for a depressing read as it outlines the size of the problem, the simplicity of the crime, and the difficulty in finding solutions. If this sort of crime occurred as single incidents involving each of the hundred or so gangs that get involved in it each year, it would still result in a huge amount of crime. Before the recent tightening-up of the regime, the sums mentioned in the report work out at £50 to £60 per person in the UK. The noble Baroness mentioned the Olympics, but the problem is of equivalent size with the social housing budget of this country, the Royal Navy carriers project currently under way, and is actually similar in size to our annual net contribution to the European Union. A very large amount of money is involved; indeed, it is so large that it is difficult to conceptualise. That is presumably why it does not appear on the front pages of our tabloids each day, as would any other crime committed on a similar scale. On simplicity, it was staggering to read in the report that although we know about mobile phones and computer chips, along with reverse charging on certain precious commodities, this criminal activity accounts for something like 10 per cent of our total legitimate trade figure. It is a white collar fraud crime of amazing proportions. The noble Lord, Lord Steinberg, is not in his place right now, but he mentioned money-laundering and the banks. I used to be in the financial services sector and I remember spending huge amounts of time with individuals, private citizens, in order to get them to comply with money-laundering rules by asking them to prove who they were as a company secretary or director by showing their passport, driving licence and latest utility bills. We would go through all this, and if we were even slightly concerned about anything we would refer it on to what is now known as SOCA, but at the time was the ICS. We had the impression that all our money-laundering prevention procedures, including those of the banks for the money must pass through their systems, failed in this area. The solutions are a source of even more frustration. The report has two themes, one of which competently goes through how the system is tweaked at the moment, while the other moves on to highlight how we might start to tackle this crime using either the origin system or, potentially, harmonisation. However, we do not have solutions to the problems of how to implement those proposals. More than that, even if we did come up with a perfect system, particularly for the United Kingdom, we do not have a way to deliver it because taxation is not an area for qualified majority voting. So to achieve this fundamental change in the VAT system, we would have to have 27 out of 27 member states agreeing in unanimity to changes in the system. So we have problems both in finding solutions and how to apply them. Even if the report from the Commission due at the end of the year comes up with the best solution, can the Government say how we are going politically to deliver it to the Council of Ministers? I should like to put one or two further questions to the Minister. First, what is the priority this is likely to be given under the Portuguese presidency, and have the Portuguese mentioned it in their programme for the EU over the next six months. I would particularly like to find out how many prosecutions there have been involving carousel fraud and have those involved anyone other than the minnows. Have any of the main players been prosecuted, and what have the penalties or sentences been? What strikes me about the whole subject is the size of the crime. Back when I was 11 years old in 1963 and on holiday in Devon, the Great Train Robbery took place. It was a case of shock-horror when £2.6 million was taken from that mail train in Bedfordshire. Those criminals were eventually apprehended. They each received 30 years’ imprisonment. Some escaped; some, I think, are still serving their sentences. Twenty years later, in 1983, we had the Brink’s-Mat robbery, the size of which—£26 million—was quite staggering then. Both crimes have gone down in UK criminal history and folklore. Yet here we have an annual fraud of between £3 billion and £4 billion, perpetrated by as many—or as few—as 100 masterminds. We hear so little about it, and have so little hope of a solution.