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Red for danger

22nd January 2004
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Which of the following most accurately describes the problem?

Chancellor Gordon Brown has ordered Customs & Excise to crack down on the use of illegal diesel. Miles Brignall reports.

Beenoffered any cheap diesel lately? How about some smuggled fuel from Ireland, or some that fell off the back of a tanker, so to speak? If so, you're not alone during 2002 about 5% of all the dieselpowered vehicles in England. Wales and Scotland was illegal in some way.

The use of laundered red and green diesel, smuggled fuel from abroad, tax-paid diesel "cutwith paraffin and the straightforward use of rebated red diesel is estimated to be currently costing the Treasury a staggering £650rn a year in lost taxes.

But even that figure is put into perspective when you consider that as recently as 2000 the use of illegal diesel was costing the country more than ilbn a year, accounting for more than 8% of the total market. Whichever way you look at it, the use of illegal diesel is big business for all concerned.

No doubt the drop in the pump price of diesel has had some impact on those figures, but the major reason fewer operators are running on illegal fuel is that Customs & Excise (C&E) has launched a determined offensive against the suppliers and users. In 2001 Chancellor Gordon Brown ordered C&E to force the use of illegal diesel down to 2% of the total by 2006 (remember it had been at 8% the year before). In fairness to the often-criticised body, it is on target to do just that.

Several fronts

As C& E's national head UK Oils Strategy, Paul Gerrard is the man behind the campaign. He reports that the war is being fought on several fronts: "We have doubled the number of crews that operators will see stopping vehicles and dipping tanks from 17 to 34, which are now backed up by a number of mobile testing units.

"We also now have a 50-strong team of intelligence officers working throughout the country, acting on tip-offs and carrying out investigations on the basis of information they receive."

One major source of information is the oil industry itself. All vendors of red dieselparaffin and the like are now required by law to keep complete records of who is buying these products, and that data is shared with C&E. Several tip-offs have come from this source, including one large operator in Somerset. Customs found out that he was buying a very large volume of paraffin without an obvious legitimate use.

When officers visited the operator's depot they found that the diesel in his bulk storage tanks had been mixed with 50% paraffin. An audit of his books OP" uncovered huge discrepancies in the volume of diesel bought compared to the mileage of his vehicles. He was hit with a £50,000 tine and plenty of other tax cheats have met a similar fate.

In one particularly bizarre case, employees of an oil supplier in the North-West spotted a tanker running in an exact copy of their firm's livery. When C&E and police officers stopped the vehicle the driver ran off and it was found to contain a full load of laundered red diesel (see box).

The problem is particularly serious in Northern Ireland. where the diesel market is heavily influenced by the sale of illegal fuel by paramilitary groups (and other organised criminals) and the easy access to cheaper fuel in the Republic of Ireland. No less than 63% of the market is accounted for either by legal cross-border shopping or the sale of smuggled or laundered fuel.

Challenging target

However, Gerrard says that for the first time in almost a decade deliveries to legitimate fuel stations are starting to rise, suggesting that the C&E campaign is having an impact.

Undoubtedly the biggest challenge facing Gerrard and his team is yet to come. Getting the figure down to 2% is going to be difficult, particularly when you consider just how sophisticated some of the organised gangs have become. The number of detections for misuse rose by only 18% (to 3,960) last year, despite massively increased activity by C&E.

Gerrard stresses that legitimate operators have apart to play in the fight against the use of illegal fuel:When we shut down a coach operator in Belfast who had been running his fleet on red diesel, several former coach operators who had gone out of business rang us up and said that they had always wondered how this particular firm had been able to undercut their quotes.

The same is true in the haulage business if one operator is gaining a commercial advantage through the use of illegal fuel, every competitor suffers. I would urge anyone whosuspects an operator of using illegal fuel to call our confidential hotline.

Meanwhile, he says, all operators can expect more routine checks over the coming years. C&E has just announced in its annual report that roadside checks rose from 16,000 in 2001/2 to more than 29,000 in 2002/3. and Gerrard promises that anyone caught running on rebated fuel is in for a hard time.

C&E will seize the vehicle and there will be a thorough examination of tachograph charts and fuel invoices. As for the fines suffice to say that they could be large enough to put the operator concerned out of business for good.

• If you have information on the illegal use of fuel call Customs & Excise anonymously on MOO 59 5000.

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Locations: Belfast

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