HC Deb 09 March 2004 vol 418 cc413-20WH

4 pm

Mr. Eric Insley (Barnsley, Central) (Lab)

I am grateful for the opportunity to have this debate about my constituent, Mr. Steven Chivers. I should point out that he is a long-standing friend of mine and I have known him for over 35 years.

To put it mildly, my constituent has been treated very poorly by the Government and by Customs and Excise. Mr. Chivers' case raises several issues, including the losses he suffered at the hands of Customs and Excise, the wider elements of operations carried out by Customs and Excise and the legality of, and confusion surrounding, what are known as indicative levels of tobacco and alcohol imports, which are used by Customs and Excise to make judgments when people import such goods. His case also highlights the actions of Customs and Excise in targeting consumers of tobacco and alcohol in this manner—Mr. Chivers took his motor car to France and brought back alcohol and tobacco—rather than spending more time targeting large—scale smugglers.

Mr. Chivers' case draws attention to the lack of control or supervision of Customs and Excise. You will be aware, Mr. Benton, that, over the past few months and years, there have been numerous press reports on the money that Customs and Excise has wasted on certain trials and other issues. Customs and Excise seems to act without any control or governmental supervision. This case also highlights the confusing advice given to those travelling abroad, particularly to France, by ferry operators and organisations that provide trips to countries such as France specifically to buy alcohol and tobacco.

The decision in this case brings to light the conflict between the actions of Customs and Excise and court judgments. There is clearly a conflict between the Crown court judgment in Mr. Chivers' appeal and the attitude of Customs and Excise to section 144 of the Customs and Excise Management Act 1979. Mr. Chivers was stopped at Dover in May 2001 as he returned from a trip to France to buy alcohol and tobacco for his own consumption. The alcohol and tobacco were seized and his vehicle was impounded. However, the difference between the impounding of Mr. Chivers' vehicle and that of other vehicles is that his was a lease car and a registered taxi. By confiscating that motor vehicle, Customs and Excise deprived him of his means of making a living.

Mr. Chivers successfully appealed that action at Maidstone Crown court:the court overturned the actions of Customs and Excise, but that was in June 2003—some two years after his vehicle and those products were seized. During those two years, Mr. Chivers had to pay for the lease on his motor car at over £300 a month, the hire of radio equipment for his taxi business and insurance and other payments for the vehicle. He also had to find another way to make a living during that period because his taxi had been impounded

When Mr. Chivers appeared a Maidstone Crown court, the judge found in his favour and decided that he should be awarded reasonable costs in respect of the court action, his expenses in pursuing the case and compensation. However, Customs and Excise invoked section 144 of the 1979 Act, which required the judge to certificate Customs and Excise as having acted reasonably. It was therefore not liable for any damages case brought by the claimant in respect of a seizure. In other words, Customs and Excise was in a win-win situation. It was found to have acted unlawfully by the court, but invoking section 144 meant that it was not required to make any reparations or pay compensation or damages. Even when it is found to have acted unlawfully, it gets away with it.

At this stage, I should point out that Mr. Chivers is not seeking damages. He is seeking only compensation for the loss of his livelihood and the loss of his vehicle during the two years that it was impounded by Customs and Excise. He is also claiming the amount that he expended on the tobacco and alcohol, which were found to have been seized unlawfully by Customs and Excise.

Mr. Chivers' vehicle was eventually returned to him in 2003. He was also offered limited compensation, which he has disputed, as this no where near covering the costs he has incurred during the past two or three years in pursuing the case and due to the loss of his livelihood and motor vehicle. It is my view that he should now be compensated for the loss of his vehicle and the payments that he had to make on the leased vehicle in the two years.

I wrote to my hon. Friend the Minister about the case, and it took four months to receive a reply from the Treasury. In that response, he stated that under section 144 and the terms of the seizure of the vehicle, the Government or Customs and Excise were not liable for any compensation because, at the end of the lease, the vehicle reverts to Mr. Chivers, my constituent. However, that is not the case. At the end of the lease period, the car does not revert to my constituent, although he has the option of purchasing it. As it is a taxi, subject to high mileage and everything that goes with that, he would not purchase it. which is why he went for a leased vehicle in the first instance. Even though Customs and Excise was supplied with a copy of the lease agreement for the vehicle, it chose to give a wrong interpretation of the terms. I hope that my hon. Friend will reconsider that point.

As I have pointed out, the case highlights the considerable confusion over the use of indicative guidelines. My hon. Friend and I have corresponded on several occasions about them. I tend to accept the European Union's view that the indicative guidelines have no place in a single market. Either we have a single market in which we can import tobacco and alcohol in unrestricted quantities or we do not. I appreciate and support the idea of preventing smuggling, but the indicative guidelines are contrary to other Government policy.

On several occasions, my hon. Friend has written to say that any individual in this country may bring in unlimited quantities of tobacco and alcohol, and people are given that advice on cross-channel ferries and trips abroad, particularly to Calais. People travelling abroad tend to think that they have a right to bring in unlimited quantities. However, that is obviously not true because of the indicative guidelines used by Customs and Excise, which many people ire simply unaware of.

I know about the leaflet issued by my hon. Friend's Department, but he will remember that he was required to triple those indicative guidelines just over a year ago after pressure from the European Union, which found them to be inadequate. I accept that they may be the highest in the EU, but the public are still confused about the reason for them.

Customs is targeting consumers rather than real smugglers. Shops in certain parts of my constituency do not stock some brands of tobacco and cigarettes because they cannot compete with the price of illegal imports circulating in the area. I could take my hon. Friend to certain shops, and the shopkeepers would be able to point out the houses to which large quantities of cigarettes are delivered. From there, they are distributed by runners.

Shopkeepers simply cannot compete with the price of such cigarettes, which are being sold in bulk. We should be targeting those imports, not taking the cigarettes, alcohol and motor cars of genuine consumers who are unaware of the indicative guidelines put out by the Government in respect of the single market. Once again, I refer to the confusion that has been caused.

My constituent brought in two litres of Bacardi. two litres of Campari and 30 litres of beer. He also brought in a substantial quantity of hand-rolling tobacco. For that, he lost his motor vehicle and his livelihood for two years. I compare that to a case in my constituency in which an individual was convicted for avoiding £2.5 million of duty on imported cigarettes—I do not mean cigarettes worth £2.5 million; I mean £2.5 million of duty. Somewhere along the line, Customs and Excise has got its priorities wrong. It attacked a constituent of mine for a few bags of tobacco and a few litres of beer, yet large-scale smuggling is still going on.

Customs and Excise appears to be able to do as it likes and does not appear to be responsible to anyone. It was found to have acted wrongly when Maidstone Crown court decided in favour of my constituent, but it is refusing to compensate him to anywhere near the level of his losses. It is hiding behind section 144, which states that because it acted reasonably—in view of the guidelines, that is obviously questionable—it does not have to pay. Again, I stress that my constituent is not claiming damages; he seeks compensation.

It took my constituent two years to get the case overturned, but Customs and Excise does not want to compensate him for the few thousand pounds that he lost. That is despite the fact that a newspaper article on 26 November 2002 pointed to the fact that Customs and Excise had probably lost £1.25 billion in respect of fraud cases and the monitoring of certain imports in a warehouse case. I compare that to a few litres of beer and a bag of tobacco. Even the Maidstone Crown court judge, who allowed the section 144 order, said that my constituent should not be out of pocket as a result of the actions of Customs and Excise.

There is a clear contradiction between what the judge intended and the attitude of Customs and Excise, and the compensation that it is offering. The judge clearly agreed that the action should not have been taken against my constituent and that he should not be out of pocket. Customs and Excise refuses to offer compensation, thus forcing him to consider other ways of trying to obtain the compensation that is due to him.

I believe that my constituent has been badly treated by Customs and Excise, which appears to be taking draconian measures against genuine consumers while ignoring large-scale smuggling that results in hundreds of millions of pounds in duty being lost. I ask my hon. Friend to re-examine the case to determine whether he can authorise the payment of proper compensation to my constituent.

4.15 pm
The Economic Secretary to the Treasury(John Healey)

I begin by congratulating my hon. Friend the Member for Barnsley, Central (Mr. Illsley) on securing the debate, which has provided an example of the tough way in which he pursues the interests of his constituents. As he said, I have been on the receiving end of his strong and fair, but tough, representations.

This debate is about the compensation and expenses that are properly payable in the case not just of Mr. Chivers but those in similar situations. In discussing any such case it is important to understand not only the facts of the particular case and how the law should be applied, but what the law says about the resolution of differences such as those that my hon. Friend pointed out in this instance.

I will deal with the specific points on compensation but, before doing so, I shall try to set those points in the legal framework in which Customs officers make decisions to seize goods and vehicles, and in which they acted in Mr. Chivers' case.

Mr. Chivers and his wife were stopped by Customs officers at Dover eastern docks on 10 May 2001. At the time of the seizure, the relevant legislation was the Excise Duties (Personal Reliefs) Order 1992, which was enacted by the previous Government in line with EU advice. That order made a presumption of commerciality when hand-rolling tobacco in excess of 1 kg was brought into the UK from another EU member state. After the interview, the officers concluded that they had evidence of commercial use and the 30 kg of hand-rolling tobacco belonging to Mr. Chivers was therefore seized. That amount of hand-rolling tobacco is enough for at least 36,000 cigarettes. It would last a 20a-day smoker five and a half years.

In October 2002 I laid new legislation before Parliament, which repealed the 1992 order. That legislation made it clear that tobacco and alcohol on which tax has been paid elsewhere in the EU and which has been imported to the UK for someone's own use is not liable to duty. It also made it clear that tobacco or alcohol imported for payment in cash or in kind, whether for profit or straight reimbursement—-known as commercial use—is subject to UK duties.

Mr. Illsley

On two occasions, my hon. Friend has mentioned evidence of commercial use. Could he elaborate on that? I have seen nothing in what I have been shown to suggest that Mr. Chivers was involved in the commercial use of those products.

John Healey

We must consider the question whether the case for commercial use was tested in the Court of Appeal; I shall address that point later. I was trying to explain the framework in which Customs officers acted at that time—and act now—to make judgments about commercial or personal use, because that framework is different.

I was about to address my hon. Friend's point about minimum indicative levels. Those levels were set, on EU advice, at 800 cigarettes and 1 kg of hand-rolling tobacco. As a result of the changes that I introduced in October 2002, they are now set at 3,200 cigarettes and 3 kg of hand-rolling tobacco—the highest minimum indicative or guideline levels in the EU. That is at least six months' supply for the average smoker.

The new regulations remove the burden of proof on the individual to show that goods are for their own use. Again, that measure was introduced in 1992 under a previous Government and it reflected guidance from the EU. Under the new legislation, it is for Customs to be satisfied that goods are for commercial use. The point for my hon. Friend is that the legislation establishes that on the basis of a series of criteria set out in regulations, including the explanations offered by people importing large quantities. Customs has publicised the criteria widely—indeed, he mentioned a leaflet that refers to them—and it stands ready to explain its reasons for reaching such a view to any court or tribunal as necessary.

The new regulations reflect recent interpretations offered by the courts and represent an overhaul of 10year-old EU-based legislation. They have brought UK legislation fully in line with UK court rulings, EU-based legislation and existing practice.

The old regulations specifically said that a passenger with goods in excess of the minimum indicative levels had to prove that the excise goods were for their own use, but Customs has always had to be satisfied that it can explain and defend decisions and judgments when challenged at a tribunal or in court.

Mr. and Mrs. Chivers' car, which was used to carry the seized goods, was itself seized under the power in section 141 of the Customs and Excise Management Act 1979 to seize vehicles used to carry goods liable to forfeiture. As my hon. Friend said, Mr. and Mrs. Chivers appealed against the seizure on 15 May 2001, and the case was heard at Dover magistrates court on 25 April 2002. The court supported the decision made by the Customs officers, condemned the goods and the car, and awarded costs to Customs. However, Mr. Chivers appealed against the decision on 26 April 2002, and the appeal was heard in Maidstone Crown court on 17 June 2003.

The Crown court concluded that Customs had not proved that the hand-rolling tobacco was not for own use, so it allowed the appeal. However—this is the central point for my hon. Friend—in coming to its conclusion, the court also ruled that there were reasonable grounds for the seizure, if not for the permanent forfeiture of the goods, and it therefore signed a certificate under section 144(1) of the 1979 Act. That was not invoked by Customs, as my hon. Friend argued; the court made the determination, according to the merits of the case. The granting of a certificate is by no means automatic and is often not awarded in such cases.

It might be helpful if at this point I make clear to my hon. Friend the purpose of the legislation. Section 144 provides limited protection to the Crown in cases in which, although the court requires restoration of something that has been seized, it is satisfied that Customs' decision to seize the goods, and the car if appropriate, was reasonable, given the information available to it at the time. That was the decision taken. Let us say that a certificate is granted. Section 144(2) provides that the claimant cannot recover from Customs any consequential costs arising as a result of the seizure. However, section 144(3) preserves the claimant's right to have the seized item returned and to compensation in respect of any damage caused while it was seized.

That is the significant and central matter in this case and similar cases. In other words, Parliament has seen fit to provide a limit on the costs and expenses that an individual may recover if the courts are satisfied that Customs' actions were reasonable. Had the court refused to grant a certificate, Mr. Chivers would have been entitled not only to compensation for any damage, but to costs and expenses, which is the argument that my hon. Friend made. However, the court issued a section 144 certificate in this case. Therefore, Mr. Chivers is not entitled to recover any damages or costs, such as those incurred in respect of his travel between home and Dover on the day of the seizure, taxi fares while not in possession of the car or the finance costs for the car.

My hon. Friend mentioned my reply of 11 February, in which I explained to him that Customs understood that the agreement in relation to Mr. Chivers' car was a lease purchase agreement in which the title to the vehicle transferred to Mr. Chivers once the final payment was made. That is not uncommon in such an arrangement. However, Customs officials now understand that that is not so in Mr. Chivers' case and the vehicle is subject to a genuine lease. It follows that my argument in the letter regarding the effect of paying Mr. Chivers' lease payments—in other words, that we would be subsidising his purchase—is incorrect. I regret the error and apologise to Mr Chivers and my hon. Friend for that mistake.

I need also to make it clear, however, that it remains the case that the Crown court issued a section 144 certificate restricting the claims that Mr. Chivers can make against Customs for losses arising from the seizure of the goods and the car. As such, lease payments for a car are not recoverable. As a result of the court's ruling, and in accordance with its liability under the terms of the certificate, Customs returned the seized car to Mr. Chivers and offered to pay the purchase price of his goods, which have been disposed of, the cost of the trip and legal costs that he incurred up to and including the Crown court hearing.

In respect of the amount offered for the goods that were destroyed, I have advised Mr. Chivers that he can ask the Department for Constitutional Affairs to appoint an independent referee, who will adjudicate on the amount to be paid by Customs. We are not, as my hon. Friend put it, forcing any option on his constituent. It remains open to Mr. Chivers to seek further legal advice if he wants to pursue a claim on other matters relating to the case.

My hon. Friend made several wider points about tobacco smuggling and illicit markets, and Customs' response. As he will be aware, tobacco smuggling grew rapidly in the UK from the mid-1990s, so that by 2000 almost one cigarette in five smoked in the UK was illicit, at a cost at that time of more than £2 billion a year to the public purse. Without intervention, the illicit cigarette market was set to hit 34 per cent. last year, but in 2000 we introduced a tough clampdown on tobacco smuggling, so that the scale of the illicit market is on a downward trend. It has been reduced to 18 per cent., and over the three years of the tobacco smuggling strategy receipts to the public purse have risen and more than £3 billion of revenue has so far been protected.

My hon. Friend is concerned that Customs somehow may be targeting shoppers, not smugglers. Part of the purpose of the reforms that I introduced and the next stage of the strategy I launched in October 2002 was to confirm that the Government fully uphold the rights of UK citizens to bring back unlimited amounts of alcohol or tobacco from cross-channel shopping trips, so long as they are for their own use. We are, however, determined to crack down on smugglers who bring back alcohol and tobacco to be sold illegally in the UK.

My hon. Friend and I know the scale of the problem. Our own area of South Yorkshire is one of the hot spots for such activity, and he may like to know that Customs has seized about 17 million cigarettes in South Yorkshire in the current financial year alone, often in joint operations with the police.

The new guideline levels are designed to be fair for the honest shopper, tough on criminal smugglers and clearer about the distinction between the two. They help to clear up the confusion about which my hon. Friend is concerned. They help to draw the distinction in the public mind between the honest shopper and the professional smuggler, and they help the Customs officer to make better judgments between the two. The balance between tackling smugglers and upholding the rights of shoppers has been effectively struck.

It being half-past Four o'clock, the motion for the Adjournment of the sitting lapsed, without Question put.