An increase in the smuggling of alcohol and tobacco is leading to lost revenues and more organised crime, a Commons report has warned.

The Treasury Select Committee report said more than £1.2bn worth of tax revenue was lost through tobacco and alcohol smuggling last year via the Channel ports alone.

And MPs warned that a massive cash injection was needed for Customs and Excise to reduce the amount of goods smuggled into the UK.

They said in addition to lost revenue, smuggling also had wider effects on society including:

• Small firms such as newsagents, pubs and off-licences being put out of business.
• Violent and organised crime becoming involved in smuggling, especially in the vicinity of the Channel ports.
• Children being encouraged to smoke and drink because of lower prices and easy availability.

The report also dismissed calls for duty rates on alcohol and tobacco to be cut to undermine the profit margins of smugglers.

It said: "Although it is not disputed that reducing excise duty rates would stop the notorious `white van trade' in smuggled alcohol and tobacco, it is less clear that this course would affect large-scale smuggling, which appears to be the major problem."

The MPs attack recent cuts in front-line customs staff and say the time has come for a massive increase in funds to fight smuggling.

"We believe that far more should be done to keep smuggled goods out of the UK," they said.

'Dissatisfied'

"This will require significantly more resources for Customs and Excise, both for front-line staff at ports, particularly the major container ports, and for inland and investigative staff.

"The gradual erosion of staffing levels in Customs and Excise in recent years has, in our opinion, contributed to the rise of smuggling and must be reversed."

The MPs said they were "profoundly dissatisfied" that Customs and Excise resources had to be diverted from other areas to deal with the crisis.

They are calling for at least £35m to be invested in extra Customs and Excise officers, and they warn the government against delaying the installation of a national network of x-ray scanners.

The report also calls for the merger of the Inland Revenue and Customs and Excise to "improve compliance with taxation, reduce businesses' compliance costs and collection costs".