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Northern Ireland: Illegal Petrol and Diesel

Volume 755: debated on Tuesday 15 July 2014


Asked by

To ask Her Majesty’s Government what is their estimate of the total loss to HM Treasury caused by the production and smuggling of illegal petrol and diesel in Northern Ireland.

My Lords, the latest tax gap figures published by Her Majesty’s Revenue and Customs estimate the market share for illicit diesel in Northern Ireland at 12% to 13%, or around £80 million, in 2011-12. Petrol fraud was estimated as negligible.

I thank my noble friend for that reply. Given the illegal production and smuggling of fuel in Northern Ireland for decades, given the fact that today a quarter of all fuel sold in Northern Ireland is illegal, and bearing in mind the loss to the Treasury which my noble friend just mentioned and the fact that there has not been a single conviction, is he surprised to learn that many people in Northern Ireland believe that that set of circumstances points to the fact that a deal may have been done with the smugglers, akin to that for the on-the-runs, suggesting that if they stick to smuggling no other action will be taken against them? Can my noble friend assure us that no such deal has been conducted in writing, in words, or by a nudge or wink by this Government?

My Lords, I can absolutely do that. First, perhaps I may correct the noble Lord. A quarter of all diesel consumption is not illegal; 12% to 13% is illegal; the balance is made up of diesel that is bought in the Republic and brought across. I also assure the House that it is not true that there have been no convictions in this area. There were nine convictions last year, nine convictions the previous year and four convictions the year before. It is true that, unlike in the rest of the UK—or, rather, in England and Wales—there have not been custodial sentences in Northern Ireland, but legislative change last December was undertaken specifically to deal with that problem.

My Lords, when the Independent Monitoring Commission was established by the British and Irish Governments, we sought to investigate this problem and were shocked to discover that, despite the fact that the Northern Ireland Office had been there for a very long time and was very well resourced, almost no resource was being put in by HMRC to address it. It just did not seem a priority. We worked very hard, without trying to create a problem or embarrassment for the Government. It is true that, by the time that we were finishing up, HMRC had appointed a substantial number of people to address the problem, but there is now no Independent Monitoring Commission and the Northern Ireland Office is a shadow of its former self. How can the House be assured that there will be proper monitoring and accountability to ensure that HMRC continues to do what it needs to, because that certainly was not the case in the past?

My Lords, I do not know about the past, but in very recent times HMRC has had in-house resources in Northern Ireland to deal specifically with this issue. Additional funding has gone to the road fuel testing units, which are crucial. There is the introduction of a new, more effective marker just round the corner. It is worth informing the House—to demonstrate that we are being effective in this area—that a plant capable of producing more than 8 million litres of laundered fuel was recently found and dismantled in a cattle shed in Crossmaglen.

My Lords, is the Minister aware that cheaper diesel and petrol prices in the Republic have forced the closure of most filling stations in Northern Ireland in a strip 10 or 20 miles wide along the border? Will the Government therefore move to equalise fuel taxes, as is being done in the case of corporation taxes?

My Lords, the setting of the duty rates for diesel and petrol are obviously done at a UK level. Although this is a problem, it is only one of the many considerations that have to be taken into account. There has been a differential in diesel pricing between the Republic and Northern Ireland for a very long time. Some people are obviously going across the border but, as I said earlier, as a proportion of the total consumption of diesel in Northern Ireland it is relatively modest.

Will the Minister consider publishing all the available data on quite legitimate cross-border traffic? It might further illuminate the debate on Scottish independence, where many people feel that you can have differential rates north and south of a land border without any apparent change in consumer behaviour.

My Lords, there is a lot of data published about the duty rates. Noble Lords can see those. What is extremely difficult to do is to demonstrate with any great degree of precision exactly how much of a product crosses a border without a customs post. That is obviously a challenge between the Republic and Northern Ireland, as well as more generally within the EU.

My Lords, there is also, of course, a problem of smuggling from mainland Europe into the UK. I went down to Dover a couple of years ago and was shocked to see how porous our borders are. We spoke to the customs officer there; in terms of illegal alcohol and tobacco, there just were not the staff to stop the vehicles to check them.

My Lords, tobacco smuggling has been a problem for some time. The additional resources that have gone into HMRC over the course of this Parliament, which amount to about £1 billion, have among other things enabled more to be put into that area also.

HMRC figures confirm that in 2013-14 illicit fuel was identified at some 33 filling stations. Does the Minister agree that it would be helpful if HMRC would publish the names of the filling stations concerned so that law-abiding motorists could make an informed choice not to use them?

The slight danger is that others might not, of course. The HMRC is looking at this issue. There is a legal problem at the moment. The legislation would allow naming and shaming to take place only above a certain financial threshold, which would not be met by some of these petrol stations, which are typically small and independently owned. There is also a bad faith test in the legislation so there would need to be a change in it, but HMRC is looking at that issue.