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4.15 pm
Mrs. Helen Jackson (Sheffield, Hillsborough): I am speaking to amendment No. 5, not because the Labour party opposes the principle of a landfill tax or levy but because we feel that such a tax should be a fiscal instrument that operates in a way that can truly be said to benefit the environment. The costs and benefits of the employers' national insurance contributions have not yet been properly worked out. The amendment attempts to address those issues and highlight the aspects of the landfill tax or levy that still cause great concern to businesses and major employers that are involved in waste disposal and that will therefore be liable to the environmental tax.
When the Environment Select Committee conducted an inquiry into recycling, we were convinced of the case for the waste hierarchy that puts waste reduction at the top, followed by waste recycling or waste recovery through incineration, followed by incineration without any energy recovery, followed by landfill. That hierarchy is roughly correct, particularly in a small, over-populated set of islands such as Britain, where it seems ridiculous to use large areas of land, often in overcrowded urban areas, and to have large, dirty lorries trundling to and fro, causing extra environmental pollution while distributing heavy-duty landfill waste among tips. Such an operation presents a cost to the public, particularly in large, urban conurbations. We are very much in favour of taking whatever measures we can to ensure that those costs are met by businesses in a way that affords better environmental solutions to waste disposal.
My hon. Friend the Member for Bristol, South(Ms Primarolo) also said that large-scale landfill sites that are inadequately managed can also pose a danger. The existence of methane in large landfill sites is well known. If sites are well managed and the necessary resources are provided, the methane can be a source of useful energy recovery; but if the resources are not provided, the site becomes dangerous to the public and to residents living around it. For those reasons, it makes sense to have a fiscal incentive that ensures that the costs to the local community and to commercial waste firms are addressed. We have tabled the amendment because the tax, as presently worked out, does not take proper account of those implications.
There is an absence in the Finance Bill generally of complementary incentives from the other side of the waste industry to accompany the landfill levy. In the Environment Select Committee report on recycling, published on 6 July 1994, we concluded that we did not believe that there was a case for the imposition of a landfill levy at that time. Where a levy was to be imposed, however, we believed that it
In order to encourage alternative forms of waste management, more effort needs to be taken to complement a landfill levy; to encourage other--
The Chairman:
Order. The hon. Lady knows that she is drifting far from the amendment, and we are possibly having a clause stand part debate. I hope that she can return to the amendment.
Mrs. Jackson:
Mr. Morris, I think that you will accept that my argument returns directly to the implications of the amendment.
I am arguing that, unless there are alternative incentives for big waste disposal authorities and unless the costs of the landfill levy are counterbalanced immediately by an offset in employers' national insurance contributions, the costs will fall especially on local authorities, which have the overall duty of waste disposal in their areas, in such a way as to constrain their initiatives to promote or put resources into complementary types of waste disposal.
The local authority in Sheffield in whose area I live has a magnificent reputation for incineration combined with heat recovery. It will be unable to continue developing such initiatives if that element of local authority spending
is constrained. The authority estimates that the landfill tax will take £900,000 of its budget in the first year and£1.8 million in the second year. The authority is worried because, to this day, it has received no assurances from the Department of Social Security of the amount or scale of the compensation that will come back to it in the employers' national insurance offset.
Far from the landfill levy being part of an environmental policy that will help to redress the negative side of the waste hierarchy in Sheffield, the good schemes that the authority wants to promote may be constrained by the way in which the tax is levied. A great deal of material that goes into landfill could be used, with a small amount of research and development investment, for anaerobic composting, which could benefit Sheffield's large municipal parks. That is the type of complementary waste operation that may be difficult to cope with as a result of the landfill tax as it is presented at the moment.
The steel industry will be affected. We received a document from the British Iron and Steel Producers Association saying that its initial calculations show that the annual direct gross cost of the landfill levy will be about £18 million and that the national insurance offset will only marginally reduce that. Steel is probably the industry best suited to recycling. I am very proud of the company Stocksbridge Engineering Steel in my constituency, and I am always amazed that its works transforms 10,000 tonnes of messy scrap metal into 12,500 tonnes of engineering steel for use in the aerospace and other specialised industries. That is accomplished in one week, and all the company's products are recycled from scrap metal.
Stocksbridge Engineering Steel, as a major steel producer, simply cannot afford the landfill tax. According to its calculations, it will mean on-costs of 36p for every tonne of steel produced--which will amount to almost £200,000 a year. The firm wants certain elements of the levy to be reconsidered in view of the extra costs that will be imposed.
For example, it requires the definition of waste to be clarified further. The firm wants to know which of its waste will be declared inert waste and which waste will be charged at £7 per tonne. Until it is clear about which of its waste will be charged at £2 per tonne and which will be charged at £7 per tonne, it will find it very difficult to plan and to finance its forward projections on the extra cost to the business. That is of particular concern when, as the amendment points out, firms are still unsure about the benefits that will accrue from national insurance contributions.
There is a further cost and a further complication for the steel industry in areas such as South Yorkshire. Anyone who is familiar with that area will know that there is much derelict steel industry land and many empty factories in South Yorkshire. The technology has changed and, although the industry is not producing less special steel, it is producing it in very different ways in a much smaller area.
The steel industry has been left with large areas of land which can be reclaimed only through landfill operations and it must dispose of its waste, while facing the added costs imposed by the landfill tax. The industry must also pay for the waste that is used to reclaim and redevelop many derelict sites, such as those in Rotherham at Templeborough which are owned by the firm that controls
Stocksbridge Engineering Steel in my constituency. The landfill tax would impose that second cost on the British steel industry, on top of the £200,000 that I have mentioned already.
In addition, it is also unclear whether the disposal of material that is used in reclamation will be subject to landfill tax. I am sure that we will return to many of the issues when we discuss other clauses in Committee, but I think that it is important to raise the matters now in the Chamber. The firm is the largest employer by far in my constituency. Any issue that will cause the firm such financial concern--36p on-costs on every tonne of engineering steel that it produces--is serious. The firm supplies about 60 per cent. of the manufacturing sector with steel, so it will be a problem for manufacturing production nationwide.
Mr. Paddy Tipping (Sherwood):
I am pleased to speak to the amendment. I had the opportunity to talk about the landfill tax during the Budget debate, and I welcomed it. I still welcome the landfill tax, and I have now had the opportunity to consider it further. My support for it is still substantial, although I have some reservations about one or two issues.
The importance of the landfill tax in the Budget is that it moves taxation from labour to environmental issues, such as pollution. That must be right, and I look forward to future Budgets pursuing that approach. I am, however, concerned that the landfill tax will come into effect on October 1996, but the discount on national insurance contributions will not come into effect until April 1997. That is the issue that amendment No. 5 addresses.
I strongly believe that those two issues should be closely linked, and that there should be no gap between them. If the Government believe that we should switch taxation from labour to pollution, a clear manifestation of their support would be a timetable that coincided. At the moment, there is a clear six-month gap, and that is not acceptable.
In essence, the aim of the policy is to tax pollution.I wish to examine that aim in relation to domestic waste producers--all of us who put our waste in dustbins. The policy as it stands does not provide the necessary linkage. Although it is a green policy, it is one of which no one will be aware. The ordinary householder will not be aware of the landfill tax, and that is a real weakness.
Local authorities will face some difficulties, as some of my colleagues have already mentioned. It is clear that the landfill tax will cost local authorities more. The final figures have yet to be worked out, but the provisional figures seem to show that the additional cost for local authorities, which collect about 22 million tonnes of domestic household waste a year, will be about£154 million. There will be a reduction in national
insurance contributions of 0.2 per cent. Perhaps the Minister will tell us the level of wages that that national insurance discount will affect. I suspect that it will be about £10,000, so full-time employees will get the discount but part-timers will not.
Nationally, the additional cost to local authorities will be £154 million, but the rebate on national insurance costs might be about £30 million. In other words, local authorities will face a net additional cost of something like £124 million. It is plain as a pikestaff that someone will have to pick up these costs; it seems to me that that "someone" will be the poor council tax payer.
I am particularly concerned about my local authority in Nottinghamshire. Judging by the figures that it gave me just this morning, it seems that the county council disposes of 500,000 tonnes a year of household waste.I should like to praise local authorities, which sometimes do not get the praise that they deserve. Many years ago, there was a move in Nottinghamshire towards incineration. The Eastcroft incinerator disposes of an average 125,000 tonnes of domestic waste a year, leaving a substantial amount--375,000 tonnes--to go into landfill.
I should like to ask the Minister whether the ash from the incinerator will be classified as inert material--an important point. The difference between a disposal cost of £7 a tonne and £2 a tonne--for inert material--can make a great deal of difference to council tax payers. Certain bodies such as the CBI have questioned how the categories into which waste is divided for the purposes of the £7 band and the £2 band are defined. I know that consultations are going on, but the guidelines eventually issued will have to be clearly understood by everyone. This, I am afraid, is yet another example of legislation being passed without the ground rules being clear, and that is not good practice.
As I said, 375,000 tonnes of domestic waste go into landfill sites in Nottinghamshire.
"should be imposed in order to encourage alternative forms of waste management."
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