The British government could cut off a significant source of paramilitary funding by lowering the rate of duty on fuel in Northern Ireland, it was claimed today.
A powerful House of Commons committee said the difference in cross-border road fuel prices and the difficulty of carrying out normal law enforcement was helping to sustain terrorism activity.
The Northern Ireland Affairs Committee report found that fuel prices were significantly higher north of the border.
"We believe that the existence of a significant cross-border road fuel price differential, combined with the difficulty of carrying out normal law enforcement within Northern Ireland, is helping terrorism and organised crime to sustain itself and indeed to increase its influence," it said.
"It is within the Treasury's power to mitigate a significant source of paramilitary and organised criminal finance by reducing fuel duties in Northern Ireland."
In an agreed report, the committee said the social fabric of Northern Ireland was being undermined by a "significant culture of non-compliance".
"It is imperative that the Government takes action to address the social and economic problems associated with fuel duty differentials," it said.
"Decisive action is needed now in order to stem the tide of lawlessness and bring about lasting economic stability in Northern Ireland."
The report also found that many small operators north of the border were going out of business because of the "increasing trend" of smuggling.
"The sale of this illegal fuel is endemic throughout the border regions and evident in all parts of Northern Ireland, with both organised criminals and paramilitaries being involved," it said.
"Smuggled fuels of all types are mixed and/or laundered and sold, sometimes disguised as fuel from reputable suppliers, placing legitimate traders at a commercial disadvantage.
"Small operators, who are unable to compete with the lower prices offered by illegal traders, are going out of business," it added.
The committee found that the excise duty on petrol was 20p per litre on petrol and 25p per litre on diesel higher in the province than in the Republic.
Although it accepted the Government's argument in principle for a unitary tax and duty rate throughout the UK, it said Northern Ireland's land border with another European country and the "unrest which has enabled organised crime to take root" made the situation unique.
"We are therefore calling on the Government to carry out a full cost-benefit analysis of the effects of the differential on Northern Ireland, as a prelude to setting a separate, lower, rate of fuel duty for Northern Ireland which would go some way towards mitigating the unique problems that have arisen," it added.
The committee paid tribute to the achievement of Customs and Excise officers in combating fuel smuggling but said new regulations were needed to help in the fight.
"The present licensing system for fuel retail premises was not designed to deal with the sale of illegal fuel or fuel duty evasion and was based largely on health and safety requirements," it said.
"In view of the shortcomings of the present scheme, we consider that a new more comprehensive and effective licensing regime for premises involved in the selling of fuel is urgently required.
"This would provide Customs and Excise with the necessary powers to combat the problems associated with the sale of illegal fuel at filling stations," it added.
PA