HM Customs and Excise (now part of HM Revenue and Customs) collected £162 billion of gross receipts in 2003-04 in value added tax (VAT) and excise and customs duties from over 1.8 million business traders. The Committee's report examines the NAO standard report on the work of the Department during 2003-04 (contained within the 95th report of the Commissioners of Her Majestys Customs and Excise for 2003-04, published as HCP 119, session 2004-05, ISBN 0102931593 in December 2004). It makes a number of recommendations focusing on work related to the two key revenue streams of VAT (which generates £63.6 billion net) and hydrocarbon oils, mainly on petron and diesel fuel (which provides £12.7 billion and £9.8 billion respectively).

Following on from the National Audit Office's report on the work of HM Customs and Excise (included in the HM Customs and Excise 2002-03 annual report (HCP 52, session 2003-04, ISBN 0102926751)) the Committee's report focuses on two key issues: their approach to combating the problem of alcohol fraud, and their management of revenue from large traders. Findings include: there is significant uncertainty about any estimates of spirits fraud based upon current methodologies and data sources; better use needs to be made of existing information from alcohol producers to track suspected illicit products; and poor communication within the Department has undermined anti-fraud operations and prosecutions.

On cover: Annual report and accounts 2003-04/ HM Customs & Excise

VAT missing trader fraud is a large-scale criminal attack on the EU VAT system, which costs the UK exchequer approximately £1 billion a year. Although the Department has been trying to tackle this fraud for six years, they still have not stemmed the flow of tax losses. Recently they obtained authority to introduce the special measure of "reverse charge" for mobile phones and computer chips but this can only be a provisional solution. The problem can only be tackled at EU level and ultimately the European Union will have to agree a new legislative framework for administering VAT.

In 2004-05 HM Revenue and Customs paid £15.8 billion of Tax Credits. The Department recalculates each award annually and has identified that for 2003-04 it overpaid some £2.2 billion to 1.9 million families. It believes that 2004-05 will see a similar level of overpayment. This is partly due to the nature of the scheme where awards are provisionally based on previous income whilst the final award is based on actual income. However the level of overpayment has been higher than was initial estimated and repayments have caused distress to some families. This report looks at measures being taken to reduce overpayments; claimant error and fraud; and the settlement with EDS over problems with the computer system. The Committee attaches great importance to this subject and wish to return to it in the future.

This is the fourth National Statistics annual report which highlights the variety of work carried out by statisticians and other analysts in the Government Statistical Service (GSS) during the year 2003-04. It considers the progress made in implementing the statistical plans set out in the National Statistics Work Programme for 2003/04 to 2005/06, across three main areas of work: major developments in cross-cutting departmental or theme boundaries; work carried out under the aegis of the 12 National Statistics Theme Groups; and quality improvements carried out in the context of the National Statistics Quality Review Programme.

The Major Projects Report 2003 provides information on progress made by the Ministry of Defence in procuring major defence equipment against cost, time and technical performance targets. It covers 30 projects split, according to Smart Acquisition principles, between the 20 largest projects on which the main investment decision has been taken, and the 10 largest projects yet to reach that point. For the 20 largest projects, costs are forecast to have increased by £3.1 billion in the last year, and are now 6.1 per cent over their approved costs. Difficulties on four older projects (which predate the introduction of Smart Acquisition) account for the majority of cost and time overruns. Following on from a NAO report on this topic (HCP 195, session 2003-04; ISBN 0102926581) published in January 2004, the Committee's report examines four main issues: the impact of the large cost overruns and delays; departmental risk management; ways of developing a more constructive relationship between the Department and industry; and lessons that need to be learned to avoid such poor procurement performance being repeated in future.