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Fraud: Staffing Levels

Volume 727: debated on Monday 9 May 2011


Asked By

To ask Her Majesty’s Government what assessment they have made of the staff levels at Government agencies dealing with financial, banking and tax fraud.

My Lords, the Government are determined to step up the fight against fraud. This important work is done by both government and non-government bodies, including the Serious Fraud Office, Her Majesty’s Revenue and Customs, the Serious Organised Crime Agency and the Financial Services Authority. Ensuring that staff levels are adequate is a matter for each individual body, but I understand that the SFO expects to be able to adjust its numbers as necessary to meet its business needs, and that HMRC will be increasing the number of staff tackling fraud and tax avoidance.

I am grateful to the Minister for his reply, but he must be aware that HMRC will suffer massive cuts over the next three years, and that the current level of tax fraud and avoidance, on its own estimate, is £40 billion a year. Will he therefore look urgently at that state of affairs and have regard to the position of the Serious Fraud Office, which has lost roughly half its most senior personnel in the past few months to American law firms and banks, which makes its role in tackling complex fraud super difficult?

My Lords, this is an extraordinarily difficult area. As my noble friend says, the level of tax fraud and uncollected tax receipts is extraordinarily large. That is precisely why, within a tight settlement for HMRC and every other department, HMRC has been allocated an additional £900 million over the spending review period. That will take up the number of full-time equivalent staff dealing with fraud and other tax avoidance matters from 20,000 at present to some 23,000 by 2014-15. That adjustment has already been planned for. As far as the SFO is concerned, we are clearly not talking about remotely the same order of magnitude of numbers of people, as that body has fewer than 400 people. The new management of the SFO has taken enormous strides since 2008, when the management changed. For example, the average time taken over its investigations has dropped from an average of five years on pre-2008 cases to some 15 months on newer cases, and the conviction rate has significantly increased, so the SFO is very much showing how it has become more effective with less resource.

Is the Minister satisfied by the resources that were made available for the investigation into the Phoenix four—the people involved in the so-called saving of Rover—which has resulted in no criminal charges being made, and literally a slap on the wrist being given to the directors who behaved so scandalously and betrayed the trust of so many people in Longbridge?

My Lords, I will not be drawn into second-guessing decisions taken by the investigating authorities on any cases. However, I have heard absolutely no suggestion that the investigations in that case were in any way circumscribed by a lack of resource.

My Lords, does the Minister accept that, while the additional £900 million that HMRC has to fight fraud is very welcome, the hollowing out of the HMRC regional structure means that many individuals and firms around the country now feel that there is no adequate, as it were, day-to-day supervision of their tax affairs, and that therefore they can get away with it? Will he take back to his colleagues at HMRC the fact that it is not just the people dealing with fraud who need to be reinforced, but that we need to have a continuing robust structure of local management of individuals’ and companies’ tax affairs if fraud is not to take place in the first place?

I am grateful to my noble friend for bringing up that specific issue. Of course the question of local coverage is important. I will do as he suggests and take that back to my ministerial colleagues and to the management of HMRC.

My Lords, the Minister will be aware that many of the organisations involved here, especially the FSA, have suffered serious and debilitating rates of staff turnover in the past few months—in part explained by the uncertainties associated with the reorganisation of financial regulation and management. A major source of that uncertainty has been that the Government’s Bill to change the status of the FSA and associated organisations is at least four months late. When will the Government bring this legislation forward? Why did they not get on with it and end the uncertainty?

My Lords, I suppose it is my fault for raising the FSA in my Answer, even though it is not a government agency and therefore, more than the other bodies we have been talking about, manages its own affairs. I would not for one moment, though, agree with the noble Lord’s assertion about the state of staffing at the FSA, which continues to do an important and extremely difficult job—albeit within a flawed regulatory structure. We have been through rounds of consultation. If we brought the legislation forward too quickly, I would be criticised about the lack of pre-legislative consultation and scrutiny. It is coming forward with due speed because, as the noble Lord recognises, this is a big mess that we have to clean up, we have to get it right this time, and we will do so.

Will the noble Lord be prepared to place in the Library the response that he gets from his colleagues to the question asked by the noble Lord, Lord Newby? Secondly, in that reply, will he give details on the number of HMRC revenue offices that will be closing annually between now and 2014?

My Lords, I will certainly take that away and see whether a useful information note on the regional question can be produced without disproportionate cost. I will certainly see whether an information note can be produced on HMRC’s regional coverage.