John Healey

The government has defended its handling of Customs and Excise after the collapse of a major fraud case.

John Healey, the Treasury's economic secretary, told the Commons that the government was taking action to repair the damage caused by problems that developed in the mid-1990s.

On Tuesday the Court of Appeal overturned the convictions of seven men previously found guilty on charges relating to practices at the Fort Patrick bonded warehouse in Ipswich, Suffolk.

Spirits had allegedly been removed from the warehouse and sold on the domestic market without duty and taxes being paid, when they should have been transported overseas.

The case collapsed when the prosecution admitted that the original trial judge should have heard evidence from a Customs officer who had dealt with the owner of a separate warehouse, London City Bond, who later became an informer.

The unreliability of the officer's evidence had been cited in the collapse of an earlier trial involving LCB.

Healey told MPs on Thursday that eight cases had collapsed and a further 20 were under review as a result of the court rulings.

A total of 32 convictions had been overturned and there were a potential 93 convictions that could be found unsafe.

Fraud in the two cases were estimated at almost £430 million, said Healey.

The minister placed the blame on "organised criminal gangs [who] took advantage of weaknesses in the excise regime" at the bonded warehouses.

He said the government had tightened controls and overhauled the management of Customs and Excise.

A previously announced inquiry into the prosecution failures had already begun work, Healey added.

Responding for the Conservatives, Stephen O'Brien said the government had been responsible for the prosecution collapses, rejecting suggestions that fault lay with earlier Conservative administrations.

"There is now a massive dossier of damning indictments against his departments," he said, pointing out that the attorney general has ordered an inquiry into one trial collapse only for "another case to collapse while the investigation was on".

"Is it not plain that since this government took office in 1997, Customs and Excise...has been reduced to a chaotic mess?" he asked.

"Is this latest loss of taxpayers' money not another damning example of Customs in chaos?"