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16/05/2012

Duration:
26 minutes
First broadcast:
Wednesday 16 May 2012

John Waite investigates the story behind the missing billions of unpaid fines, fees, compensation orders and confiscation orders.

Recent reports by the National Audit Office and the House of Commons Public Accounts Committee put the amount outstanding at almost £2 billion. The Ministry of Justice is cutting services by approximately the same amount.

It's already shut 129 of 142 courts due for closure.

The Legal Aid fund will be cut by £450 million.

Overall the Ministry of Justice will be looking to save over £2 billion of its £10 billion budget.

So who is not paying their fines and are criminals getting off scot-free?

Is the money simply uncollected - or uncollectable?

John Waite speaks to magistrates, criminals, victims of crime and key players in the legal system.

He visits a Magistrates Court and joins police on a raid.

  • TRANSCRIPT

    THIS TRANSCRIPT WAS TYPED FROM A RECORDING AND NOT COPIED FROM AN ORIGINAL SCRIPT. BECAUSE OF THE RISK OF MISHEARING AND THE DIFFICULTY IN SOME CASES OF IDENTIFYING INDIVIDUAL SPEAKERS THE BBC CANNOT VOUCH FOR ITS COMPLETE ACCURACY.

    FACE THE FACTS: Unpaid Fines

    Waite
    There's a well-known saying that crime doesn't pay. Today we investigate why it is that the criminals, the people who commit that crime, don't appear to pay either. And why there is a mountain of debt, almost £2 billion of financial penalties, currently owed to the Ministry of Justice.

    Bacon
    The law abiding majority have got every right to be very angry. Many people who are fined by the courts are effectively getting off scot free. Now I personally think financial punishments should be swift and they should be tough but at the moment they look too much like a risk worth taking.

    Waite
    In the past six months, two influential reports - one by the House of Commons Public Accounts Committee and the other by the National Audit Office - have accused the Ministry of Justice of failing to collect almost £2 billion in fines, fees and confiscation orders in England and Wales. If that £2 billion were paid tomorrow, it would be divided in varying proportions between the Ministry of Justice, the Home Office, the Crown Prosecution Service and the Police.

    And it's not as though any of those don't need the money. The MOJ has introduced plans to cut the £2.1 billion legal aid bill by £450 million. It's already closed 129 of the 142 courts due to be shut by autumn 2014. Overall the department must reduce its £10 billion budget by 23% to save more than £2 billion by 2015.

    It's a similar story with the police - cuts of 20%; the UK Border Agency, which is currently struggling to get people through passport control at airports, and the Crown Prosecution Service are under equal financial pressures.

    Not that some of the people we've been speaking to, and who pass through the courts, seem particularly concerned about the state of our national coffers.

    Waite
    Have you ever been fined?
    Man on street
    Yeah I owe about £700.

    Waite
    You owe 700?

    Man on street
    Yeah fines.

    Waite
    What have you been found guilty of?

    Man on street
    Offensive weapons.

    Waite
    Carrying offensive weapons?

    Man on street
    Yeah.

    Waite
    And how much have you paid?

    Man on street
    Nothing.

    Waite
    Nothing at all?

    Man on street
    No I've got no money to pay.

    Waite
    So what happens if you don't pay your fine?

    Man on street
    You go to jail.

    Waite
    Is that what you're facing?

    Man on street
    Yeah, yeah.

    Waite
    Do you mind that?

    Man on street
    No.

    Waite
    So when I tell you that £2 billion a year goes unpaid in fines, collection orders, that wouldn't surprise you?

    Man on street
    No it wouldn't surprise me one little bit.

    Waite
    This £2 billion worth of uncollected penalties is of great concern to the Public Accounts Committee. Its longest serving member, Conservative MP Richard Bacon, says whilst the Ministry of Justice has made significant progress in several key areas, when it comes to collecting unpaid penalties, there is still a long way to go.

    Bacon
    I was looking at a report we did in 2002, called Collection of Fines and Other Penalties in the Criminal Justice System and the problems that we're identifying now are sadly not new, this has been a growing problem and it's been getting worse.

    Waite
    That £2 billion of unpaid debt to the Ministry of Justice has three main parts.
    By far the biggest is £1.3 billion of outstanding confiscation orders. They are aimed at stopping criminals profiting from their crimes. So, major drug traffickers are expected to return their yachts and fast cars bought with the proceeds of their crimes.

    Next - a relatively small amount, around £120 million, is the shortfall in court fees, where the MOJ simply didn't charge enough to cover its costs.

    Finally - £610 million made up of unpaid fines levied by the courts, on-the-spot fines handed out by the police, and unpaid court costs. And this also includes Compensation Orders owed by convicted criminals who have been ordered to pay cash to recompense their victims.

    Magistrates insist that compensation orders have the highest priority when it comes to being paid as they're often levied for offences such as assault.

    Price
    Well I opened the front door and as I opened the door he just went for me, he pushed me into the front room, thumped me around quite a bit and I don't think I even got a punch in at all. At one time he did actually say well do you want your other jaw broken as well and to be honest it was all a bit of a blur.

    Waite
    In 2008, Neil Price was attacked in his home by a lodger after a dispute about the rent. The man was later found guilty of assault.

    Price
    The magistrate made a compensation order for £900. Well then what happened I didn't receive anything, so I then got in touch with the court and eventually they made a £5 weekly thing out of his benefit and in fact I received £30 to this day.

    Waite
    One reason why the amount of uncollected penalties in the justice system continues to rise is because criminals who don't have much money are allowed to pay in instalments. So money collected is never going to keep up with the money owed.
    But many are starting to argue that in the case of compensation money, the government should create a special fund so that victims of crime can be paid in one go. John Fassenfelt is Chair of the Magistrates Association.

    Fassenfelt
    My famous example was an elderly woman that was punched in the face, we sentenced the individual concerned and we also said that you will pay a compensation to the elderly lady of £150. Now as it stands at the moment that particular individual, the defendant, was on benefits so we can only really order that he paid at £5 a week. Now that £5 a week, if properly paid, will go through the letterbox of that elderly lady once a week and she will be reminded of that offence and her victim statement said she was extremely upset by it. So what we're saying to government is surely that elderly lady should be paid out £150 and you should just recoup the money from the defendant and put it back into the compensation fund. To me it's a no brainer.

    Waite
    I'll be putting that proposal to courts minister Jonathan Djanogly later in the programme.

    But now from compensation to confiscation. Because, of the £2 billion of judicial penalties unpaid, 1.3 billion is made up of what are known as confiscation orders, when convicted defendants are ordered by the courts to return any money or goods they've acquired through crime. But even before that, police work hard to establish the assets of people facing prosecution. Then they apply to the courts for a so-called restraint order which freezes the assets and thus prevents alleged criminals from hiding their ill-gotten gains.

    It's early morning just after six o'clock in a - it has to be said - fairly deserted town at this time of the day, we're at the main police station and we're about to join a police raid.

    Police Raid Actuality
    Give you a call back.

    Waite
    Officers from Zephyr, a specialist regional police team working across the South West of England, are about to arrest a woman suspected of involvement in a major financial crime. And when her car emerges from her driveway, we give chase.

    Police Raid Actuality
    ... at the traffic lights.

    Yeah, we think we're just pulling the car over to a suitable...and we've just stopped the car now.

    Waite
    Pulled over to the side, the female suspect is arrested.

    Police Raid Actuality
    You don't have to say anything but you may harm your defence if you don't mention in questioning something which you rely on in court and anything you do say may be given in evidence. Do you understand that? Yeah?

    Waite
    The detective leading the operation says his team has already "restrained" i.e. frozen millions of pounds worth of properties during this investigation. Today one property in particular is the focus of their efforts.

    Police Officer
    If you start an investigation with the end in mind then you're always thinking about the confiscation, you're thinking about the value of the assets and you're thinking about making sure that the defendant can't dissipate them. So timing of when we put a restraint on is really important.

    Waite
    So in other words basically you're doing something today to stop this asset - this valuable house - being, as it were, squirreled away or sold or passed on so you can't get at its value?

    Police Officer
    Yeah absolutely.

    Waite
    With the suspect on the way to a local police station, the team head back to her house where officers will go through paperwork. First, though, they have to gain entry.

    Police officer at the door. He's knocked on the door. There are four more hanging back. Policeman peering through the window to make sure.

    Police Officer
    Can you come to the door please?

    Waite
    After an hour or so inside the house, officers - including a civilian financial investigator - return to headquarters with a large sack of documents.

    This is the police evidence bag full of evidence you've brought from this morning's raid, what sort of thing is in there?

    Police Officer
    Well it's miscellaneous paperwork - documentation, unopened letters there - obviously we need to find out what's in those so those will be opened at another time.

    Waite
    So from your point of view it's been a successful morning?

    Police Officer
    I think so yes.

    News clip
    After a life of luxury, jail for the fraud gang who conned taxpayers out of millions.

    Waite
    The amount some criminals owe the justice system is truly extraordinary. We've obtained a list from the Crown Prosecution Service of the biggest debtors. Until recently Shakeel Ahmad and Syed Mubarak Ahmed had unpaid confiscation orders worth more than £200 million against their names. This has now been reduced to £32 million on appeal.

    The pair are serving a prison term after being convicted of what's called VAT carousel fraud at Leicester Crown Court. Craig Matthew Johnson committed a similar sort of VAT crime and is also on the list as owing £24.6 million.

    News clip
    Craig Johnson lived the archetypal luxury lifestyle here - the stately home, the swimming pool and the obligatory Ferrari.

    Add a grand piano, a fully equipped gym and his own helicopter and the picture of criminal excess is complete.

    Waite
    But according to some, the value of these confiscation orders - £1.3 billion pounds remember - merely reflects the effectiveness of the police in identifying assets and putting restraint orders on them.

    Max Hill, Chair of the Criminal Bar Association, says they far exceed what the authorities can ever seriously hope to recover.

    Hill
    The law allows for a very high calculation of the benefits of crime. And the law permits investigators to work on the basis that somebody has a criminal lifestyle and where that applies, as a matter of law, every financial transaction that that person undertakes is deemed to be part of the lifestyle. And so you can see that through that mechanism - which is legitimate under the law - very high calculations of so-called benefit from crime can be reached. And that allows investigators to say to the court these very high sums are all caught by the net. It doesn't follow that all the money from every transaction that a person has engaged in is necessarily in a Swiss bank account, sometimes it is, sometimes it isn't. But if instead of using the full force of the law investigators restricted the financial calculation only to the money which they knew they could find tomorrow or today then you might arrive at a situation where all of that money was paid, the convicted criminal served his time, came out and went straight to Switzerland to find another £100 million. And that is why we arrive at very high calculations of benefit because investigators legitimately want the ability to chase people down, even after they've served their sentences. But it follows that there are sometimes to the normal ear unnaturally high calculations and it also follows that the prospect of recovering all of that may be very low indeed.

    Waite
    So a significant amount of the £2 billion which the Public Accounts Committee and the National Audit Office, amongst others, suggest could be swelling the coffers of the justice system is highly unlikely ever to be fully recovered.

    And ironically, the drive to reclaim the houses, cars and yachts bought with the proceeds of crime - pushes up the Ministry of Justice's legal aid bill. Because, unlike in civil courts, in criminal cases anyone whose assets are frozen - is deemed to have little or no money, and therefore they almost always qualify for legal aid to defend their cases.

    Hill
    In every criminal case the court has to decide whether somebody is entitled to legal aid or not. In the case of wealthy defendants whose assets are frozen the law does not allow their frozen assets to be taken into account. In other words wealthy defendants are almost automatically entitled to legal aid. By changing the law in a simple way to allow the criminal court to take account of the frozen money we could alleviate the burden on the legal aid fund.

    Waite
    And we have discovered that almost £15 million of legal aid was paid out to defend almost 50 confiscation cases over the past three years. A change in the law to stop wealthy defendants qualifying for legal aid is another proposal we'll be putting to Justice Minister Jonathan Djanogly in a moment.

    But before that what about the other massive pot of outstanding money? Six hundred and ten million pounds still owed by people who have not paid their fines, court costs, and compensation orders. An outstanding amount of money in more ways than one.

    This is Dale Street Magistrates Court, a large handsome 19th Century building along from the Walker Art Gallery in the heart of Liverpool. Four courts have been sitting this morning here, hearing a routine mix of minor offences, many punishable by fine. Justice in Courtroom Six, where I was observing, was certainly swift - 10-15 minutes on average per case - and most ending in a fine. But what do those who now face a fine here - and many not for the first time - think of the system?

    Can I ask how old you are?

    Court attendee
    Eighteen.

    Waite
    Have you been fined before?

    Court attendee
    Yeah.

    Waite
    Did you pay your fine?

    Court attendee
    They're on-going.

    Waite
    What was your ASBO for?

    Court attendee
    Don't know, just all my previous. I've got about a grand outstanding - about a thousand pound outstanding.

    Waite
    And how much are you paying that off?

    Court attendee
    Four pound a week. Fines are no good. They're giving people fines my age who haven't got a job, so I've got to go out and find money to pay fines which is going to get me into more trouble isn't it.

    Waite
    Now you've just incurred a fine of - well it's £200 including costs and I've got here this is your 32nd offence, I think, for shoplifting - are you going to pay that?

    Second court attendee
    I've always paid my fines because of the fear of bailiffs or anybody else coming, it's too horrendous.

    Waite
    So what's it going to mean to you?

    Second court attendee
    Of course I'll have to cut down on other things which means me - it's going to be hardship but then again it's my own fault isn't it, you know.

    Waite
    And what do you think about the £2 billion worth of fines and compensation orders that haven't been paid?

    Second court attendee
    I find that unbelievably hard to believe because I don't see how anybody in this day and age can get away with not paying a fine - they're automatically taken out of the dole but £2 billion seems a hell of a lot.

    Third court attendee
    The fine now for drunk and disorderly or breach of the peace is £100 and it's about £85 court costs or the other way round. So £185 for just being drunk on the street - that's disgusting. Well my total fines now are £772 just for being an alcoholic.

    Waite
    And have you paid those - have you been trying to pay those?

    Third court attendee
    Well when you're an alcoholic you spend your money on alcohol, you tend to forget the fines when you're drunk.

    Morgan
    I'm very much in favour of fines because all the research evidence suggests that fines are the most effective penalty that the courts or anyone else can impose - if they're collected.

    Waite
    Rod Morgan is Emeritus Professor of law at the University of Bristol and a former Chair of the Youth Justice board.

    Morgan
    I mean in terms of subsequent reoffending fines are rather effective but the system will only be effective if people aren't able to not pay their fines with virtual impunity or manipulate the system in various ways - that brings the system into disrepute and it angers the public at large quite a lot.

    Waite
    Historically, Professor Morgan says, people accused of crimes routinely ended up in court where their individual circumstances would be taken into consideration. In recent years, however, fixed penalty fines - for driving offences say, or, most recently, fixed "Penalty Notices for Disorder" - things like criminal damage, minor assaults even shoplifting - are levied on the spot. Another reason, he believes, why so many fines go unpaid.

    Morgan
    If we went back 20, 30 years a magistrate would be faced with a shoplifter, they'd decide that this was a first or a second offence, that a fine was the most appropriate penalty and they would think well the going rate for a first offence of shoplifting is X but this person has explained that they're unemployed, they're on benefits, they've got several children, they are in poverty essentially, they would moderate the size of the fine - say bring it down to half of the going rate - and they would also give time to pay. When it's dealt with in court there is a statutory obligation to consider capacity to pay and then to tailor the size of the penalty to the pocket of the defendant. We've now moved to a system of on the spot fines, in effect, for very large numbers of offenders where there's just a standard fine with no acknowledgement of the capacity of the person to pay.

    Waite
    And if those who are fined in this way don't pay, then they will, finally, be ordered to appear before a court. And increasing numbers are - according to magistrate John Fassenfelt, Chair of the Magistrates Association, who sees many people who have not paid a string of PNDs - those fixed penalty notices for disorder.

    Fassenfelt
    I think the difficulty we face is that many of the individuals that come to our courts are on benefits and the level of fines that you want to fine them you cannot because you must take into account what they can pay back in a year. And an individual that's on benefits, likely to stay on benefit, we can really only take £5 a week from their benefits - the maths is easy - you can only collect £250 in a year. So the offence may well warrant a bigger fine than £250 but the guidelines says that you can only fine them £250. I had a young girl in, a youth of 17, about six months ago that was clearly stealing from a shop to feed her habit and she had had three PNDs, which mounted because they double when they don't pay them in the first 28, 14 days. She had figures of somewhere in £400-£450 and it wasn't helping her because you have to focus on curing her bad habit.

    Waite
    On the spot fines were introduced in order to reduce the workload of the courts, so have they worked?

    Morgan
    I regret to say that what appears not to have been done is a serious cost benefit analysis of whether we're actually saving any money by giving these additional powers to the police and dealing apparently with a lot of stuff out of court, which in the end is coming back before the court because what the statistics show is that something like 40-50% of people who are getting these on the spot fines are not paying them. They're eventually appearing before the court and that's expensive.

    Waite
    So, is it time for the government to look again at the efficacy of fixed penalty fines? The Justice Minister is Jonathan Djanogly.

    Djanogly
    Err yes. The first issue here is whether it's right for the police to issue so many out of court disposals or tickets, if you like. We think the last administration were too lax on this issue. We think that tickets were often issued for instance for violent crimes when they should not have been, which is why we've tightening the guidelines. The second issue is that for those who do get issued with tickets frankly they need to pay them and if there is a record of people not having paid their fines then frankly they shouldn't be given more tickets, they should be going into court. And this is really a systems issue, so this year we're going to be rolling out a 24 hour national fixed penalty database which will improve the quality of identification checks and greatly assist officers deciding on the offenders suitability for tickets.

    Waite
    And what about the wider concerns we've heard today - and those critical reports by two financial watchdogs - the NAO and the PAC - who say although fine collection is improving, it's being out paced by the growth in fines outstanding - currently £2 billion?

    Djanogly
    Well when you say the situation's getting worse I simply deny that, the situation is that our fine collection has been getting better...

    Waite
    But the amount of outstanding fines has gone up.

    Djanogly
    Well that's because a court has found more criminals to issue fines to - it's got nothing to do with our ability to collect. Our ability to collect has improved, the amount we have collected has improved, the changes that we're putting in place is going to improve it still further.

    Waite
    We've spoken to a number of offenders on the programme who say they have no intention of paying their fines, never have, never will, that it's a risk worth running.

    Djanogly
    Well yes and indeed some criminals will stay in prison longer rather than pay their fines at all. We need to realise that the fine enforcement debt book and indeed other aspects - confiscation orders for instance - are quite unique, unlike commercial organisations you have no relationship with the individual before they incur the fine and these people often go abroad, they often salt their money into overseas jurisdictions, judges will sometimes issue confiscation orders, for instance, against multiple people for the same assets.

    Waite
    So it's all a bit of a muddle and that of course is the conclusion from the Public Accounts Committee?

    Djanogly
    Well it will always be a muddle because criminal activity is not rational. What we have to do as a government is to improve collections and that means changing the way that it was done in the past, which I would certainly admit was inadequate. Last year we had record confiscation order collections of £108 million, that was an increase from the previous year...

    Waite
    It's still not a patch on 1.3 billion though minister is it?

    Djanogly
    It's - well it's an improvement from what it was in the past...

    Waite
    And the irony - the irony of these confiscation orders is when assets are frozen suspected criminals then qualify for legal aid - so it's pushing up your legal aid costs.

    Djanogly
    That is a different point. But we are also looking very carefully at how we can improve systems for confiscation orders, so for instance we're increasingly working with other government agencies in the MOJ - that's SOCA and the CPS - and indeed foreign agencies and we've had a lot of success in the last year with foreign agencies. We're now piloting the use of charging orders and orders for sale, which is in effect using the civil law to reclaim the money. And also increasingly if these people are in prison we're withholding privileges until the confiscation orders have been paid.

    Waite
    Can we talk about victim compensation because a lot of that goes unpaid? What kind of justice is that?

    Djanogly
    Compensation orders can be an effective way for offenders to make reparation to victims for what they've done.

    Waite
    Only if they're paid though.

    Djanogly
    Well for the government to get involved in paying that reparation, rather than just enforcing it, would undermine the link between the two, which we see as important. But also that compensation orders need to be seen in the overall context of what we do for victims and the support for victims that the government does give directly has been increasing, so for instance we spend £66 million a year supporting victims and that's going to be increased by another £50 million a year. So you have to put compensation orders into the overall context of the support that we give to victims.

    Waite
    Don't we need a government fund set up to pay the victims of crime immediately and then we, the taxpayer, would subsequently be repaid by the perpetrators of that crime through their fines at a later stage?

    Djanogly
    Well as I said the government does give significant sums directly for victim support and support is help not just money. On the money front we are going to be doing two things though - we think it is wrong that the taxpayer is taking the financial burden from people who are in prison and so that's why we introduced the Prisoners Earning Act to make offenders share the financial burden of crime, by making prisoners contribute to the funding of vital victims' services. And the other thing that we're going to be doing is we're going to remove the £5,000 limit on compensation orders in magistrates courts which means that people will be able to get more compensation.

    Waite
    So £2 billion it stands this year, when will it be nearer to zero?

    Djanogly
    Well I would hope to see rapid progress in the next few years.

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