Scrapped for Cash

Date: 05/01/12

The level of metal theft in the UK has increased significantly since the onset of the economic downturn in 2008, with estimates suggesting that an astounding £770million of metal is being stolen per annum. Every day, there are eight thefts or attempted thefts of railway cables, which cause 240,000 minutes of delays to passengers every year - costing Network Rail a staggering £43million over the last two years. Now there are calls to tighten the control of scrap metal merchants with the introduction of the Metal Theft (Prevention) Bill. With this in mind, James Perry, senior solicitor at business law firm DWF, looks at the possible implications of the Bill and the impact they may have on the rail industry.

The Issue

As metal thefts, particularly from railway lines, hit their highest ever levels, the spotlight has focused on the scrap metal industry and the endemic nature of cash-in-hand transactions within the trade. As the price of scrap metal soars, these unregulated dealings have come to form a significant 20 per cent of the industry’s value.

On the 15^th November, following a first reading in the House of Lords, Graham Jones MP introduced the Metal Theft (Prevention) Bill in the Commons. The Bill has already received widespread support from Parliament and key players within the transport industry. It aims to reduce the level of theft, and steer the scrap metal industry towards regulation by introducing licensing, banning cash-in-hand dealings and introducing tougher police powers, whilst at the same time seeking to protect the overall service that scrap dealers provide.

 Victims of Crime

While many industries have been affected by the surge in metal thefts, including a 700 per cent rise in the thefts of copper and metal from the electricity networks between 2009 and 2011, there has been no sector harder hit than the National Rail network. Figures from the British Transport Police indicate that theft of overhead power cables has risen by 70 per cent over the last year alone, and between 2010 and 2011, over 2,700 cable theft crimes were reported.

Serious Safety Issues

Arguably, the greatest cost is to passenger safety on the railways. A recent incident, reported by South West Trains, saw a train left stranded on the line after thieves stole sections of railway cabling. The besieged passengers disembarked from the carriages and headed for the embankment, walking along the railway line and putting their lives in danger.

To counteract the severe costs to the rail industry and the general public, the Metal Theft (Prevention) Bill looks to bring regulation to an industry that has become a breeding ground for illegal activity.

Regulating the Industry – A Price Worth Paying

The primary purpose of the bill is to introduce the first robust registration scheme for scrap metal merchants. This, however, is not the first attempt to create a registration scheme for scrap metal merchants. In 1964, the Scrap Metal Act introduced the necessity for Local Authorities to maintain a register of scrap metal merchants, and allowed certain conditions to be imposed should the metal merchant be convicted of illegal trading. However, the implementation and monitoring of the provisions within the Act has been lax, and has failed to provide a durable system of registration.

The new Bill seeks to introduce a comprehensive licensing scheme for dealers, which could be run electronically, removing the current out-dated provision run by individual Local Authorities. To cover the cost of such a scheme, merchants would be required to pay a fee in order to obtain a licence.

It also lays out plans to allow magistrates courts to add restrictions to the licences of business that fall foul of the scrap metal dealing rules. In addition to the restrictions, a level five fine could be imposed, costing the business up to £5,000. Higher penalties would also be sought, including criminal sanctions, if the theft has been from a railway line, reflecting the danger that such crimes pose to public safety.

Virtual Payments

The Metal Theft (Prevention) Bill seeks to restrict all transactions to cashless payments – this is a move that is likely to receive strong support from the scrap metal industry as it seeks to fix its tarnished reputation.

The prevalence of cash-in-hand payments within the business has led to suggestions that the industry is crawling with unscrupulous dealers, looking to make a quick profit. Tightening of money laundering legislation over the past decade has done little to improve the situation, leaving the scrap metal industry a target for criminals looking for an easy way to make money.

It is likely that supporters will push hard to impose restrictions on merchants, leaving them unable to process or sell scrap metal until the payment has cleared. Whilst this may seem excessively onerous, it is a system which has already achieved success in France, Belgium and parts of the US.

Critical Crack Down

Although a licensing system and the prevention of cash-in-hand payments will help to regulate the scrap metal trade, without increased police powers there is little to say that illegal dealings will cease.

 Therefore, the Bill seeks to introduce a number of new pieces of legislation to toughen the powers that the police have, allowing them to search scrap metal dealerships and ultimately close them down if they are found to be engaged in criminal activity.

In an attempt to reduce the losses suffered by the victims of metal theft, it has been suggested that scrap metal should fall within the Proceeds of Crime Act 2002, allowing it to be recovered by organisations such as the Serious Organised Crime Association (SOCA).

For the thieves themselves, the Bill would see legislation passed that introduced criminal sanctions that focus on the total impact of the metal theft, rather than solely on the value of the metal stolen. For instance, in the case of theft from railway lines, the courts may consider the delays this has caused to passengers and the cost that those delays in turn cause to the rail provider. There has also been the suggestion that mandatory CCTV should be installed into every scrap metal dealership in order to allow for photo identification of each seller, acting as a deterrent to thieves. This would be particularly useful in civil recovery cases where an employee steals from their employer.

Will It Succeed?

Although the Bill is short and is likely to pass through both Houses quickly, requiring little Parliamentary time, its structure only allows for the repeal of the current regime, paving the way for a new registration and licencing scheme for scrap metal dealers.

If both Houses agree to scrap the current scheme, a victory for the rail network will only follow if the scope of the new initiative is as far-reaching as supporters are pushing for. It will be necessary for key influencers from the rail industry to keep up the pressure on the finer details of the new legislation, and submit detailed proposals to Parliament at every stage, to ensure no ambiguity finds its way onto the statute book.

The desire and will to resolve the problem was there in 1964 when the matter was last debated, but implementation left a weak scheme that failed to reign in metal thefts and prevent unscrupulous dealers flouting the law. It has taken 40 years to get this back on the agenda, and all parties concerned must fight to ensure that the current opportunity is not missed and the problem is resolved once and for all.

This article orginally featured in railways Strategies Magazine authored by James Perry, Senior Solicitor in the Banking and Finance Team