£1bn alcohol fraud problem

The problem of alcohol fraud in the UK, which is costing the Treasury an estimated £1 billion a year, is a significant and growing problem in the UK. The Treasury has recently stated that on beer alone over £700m (around 7-12% of the total UK market) is lost in excise and VAT a year.

The most significant problem is at the wholesale point of the supply chain. The majority of wholesalers are legitimate traders who are paying duties and taxes correctly. However illicit traders are selling alcohol straight from the manufacturers for cut price or full price without paying for duty or tax.

In April 2009 the Government published its Alcohol Fraud Strategy, but the impact has, to date, been limited. Alcohol fraud is severely damaging the business of legitimate traders; the Federation of Wholesale Distributors are reporting losses on sales of beer of up to 40% because of the illicit trade in alcohol.

Only 7 people in 2008-09 were prosecuted for crimes relating to alcohol fraud and the number of prosecutions has fallen by almost 50% since 2006.

Rochdale MP Paul Rowen secured a Westminster Hall debate on the issue, which took place this afternoon (Thursday 11 February), and focused on the need for tougher action by HM Revenue and Customs to deal with illicit alcohol supply chains.

Mr Rowen said more must be done to prosecute when there is evidence of fraud and argued that HMRC should immediately seize goods and thereby disrupt the supply chain if they become aware of prices offered on products which are simply not credible. He also proposed that HMRC put new measures in place to require notification of all movements of ‘at risk’ alcoholic goods from or within the UK and track them.

He called for robust controls and prohibition of some products for export to limit fraud and added that HMRC should ensure that goods are being exported correctly and thorough checks are carried out before any duty is repaid.

Mr Rowen said: “I called for a debate on this issue because it is clear that the Government’s alcohol fraud strategy is failing. Given the state of public finances, the Government can ill afford such revenue losses.

"The Government need to take stronger measures to tackle alcohol fraud, and I have laid out a number of proposals today to help them do this. More should be done to protect legitimate traders that are being harmed by illicit alcohol chains. Tackling illicit alcohol is also an important part of confronting the wider impact on public health caused by the availability of cheap alcohol.”