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5.15 pm
The Paymaster General (Mr. David Heathcoat- Amory): The amendment has given opportunities for a fairly general debate on the landfill tax. May I respond to some of the points raised and correct some of the misapprehensions that exist, especially among Opposition Members?
The landfill tax will essentially do two things--encourage good environmental practice and raise money that will be used to cut the main rate of employers' national insurance contributions. It will therefore help employment and the environment at the same time. The hon. Member for Dudley, West (Mr. Pearson) is right: we are not alone in introducing such a tax. It already exists in Denmark, the Netherlands, France and parts of Belgium and I understand that the Italians are proposing to introduce such a tax. In general, the rates of those taxes are above what we are proposing.
Mr. Austin Mitchell:
Is it not a fact that there is zero rating for the disposal of inert materials such as the gypsum that I referred to?
Mr. Heathcoat-Amory:
I understand that that is not true. There are a number of specific reliefs and exemptions in some countries, but they do not, as I understand it, cover entirely the point that the hon. Gentleman raised, but I will touch on the case that he instanced.
This is not an environmental European tax. We have no desire to harmonise such tax rates throughout the European Community. We are introducing it in this country because it suits British conditions and it is good for our environment. Also, we can relieve taxation on employment in the way that I have mentioned.
It is not the first time that the British Government have used taxes to encourage better environmental practice, but this is the first tax that will be introduced specifically for environmental purposes. We are using an economic instrument to achieve an environmental goal.
The objects of the tax are to ensure that landfill waste is properly priced and that the charges that are borne by waste producers reflect the environmental harm that is caused. Landfill operators will bear the tax and will have to account for it to Customs, but they will pass on additional costs to those who produce the waste. It is important that the disposal costs that those producers face reflect the full environmental impact of landfill.
That environmental impact can take a number of different forms--the production of methane, which, as the Committee knows, is a greenhouse gas that contributes to global warming; or pollution of groundwater. It may not have a direct environmental effect--it could be in the category of nuisance to local residents. Committee members who have landfill sites in their constituencies will know that landfill operations frequently cause problems of dust, dirt, noise, litter, seagulls and traffic movements. It is important that all those external costs are captured and attributed to the waste producer.
Ms Primarolo:
The right hon. Gentleman said that the site operators would pay the tax--which we know--and that they would pass that on to the waste producers, presumably through increased charges. We will look at the mechanisms for that in Standing Committee. Local authorities have a responsibility to dispose of other people's waste and industrial waste, and they collect waste within their boundaries. What mechanism does he envisage to ensure that, in those circumstances, the waste producers bear the increased charge? Local authorities have the responsibility to collect but they may be capped or restricted on spending--and they have not yet been told by the Government how they are expected to cope with the loss of revenue resulting from the extra charges that they will have to pay.
Mr. Heathcoat-Amory:
The landfill operator will bear the costs and then pass them on to waste producers. I shall deal with local authorities later in my remarks. However, the local authority--a district council, for example--will be in the best position to influence the amount of waste that is landfilled and the amount diverted to recycling or other waste streams. It will be in the best position to take the necessary corrective action.
Sir Roger Moate (Faversham):
Waste disposal diverted into recycling or incineration is more expensive than landfill--even more expensive than landfill plus the landfill tax. Come what may, local authorities will face an extra cost for disposal, which must be paid for by somebody--by the local authority, the national taxpayer or the council tax payer. If we impose a green tax, someone has to pay it. That charge will have to be met in the coming year by some local authorities. Can my right hon. Friend give an estimate of the total revenue that will come from local authorities this year and next year, which will have to be collected from local council tax payers?
Mr. Heathcoat-Amory:
My hon. Friend is not entirely correct in saying that alternative waste disposal such as recycling is necessarily more expensive than landfill. For example, with aluminium cans the industry will melt them down to make new aluminium products. That waste stream is, in some cases, cheaper than landfilling that metal. Indeed, there are already a number of good and self-sustaining recycling schemes, even without the
I repeat the point that capturing those external costs, whether they be pollution or a form of nuisance to residents and others, is an important consideration. It will encourage the waste producers, whoever they may be, to look for ways to produce less waste and to reuse and recycle more waste if they cannot avoid producing it. We know that there is substantial scope for businesses and others to adopt better waste management practices. The tax will give them a precise incentive to continue to do so.
In other words, what we are proposing will reinforce the existing policy of sustainable waste management, which was set out in considerable detail in the White Paper published by my right hon. Friend the Secretary of State for the Environment last month. The concept in the White Paper was of a waste hierarchy, headed by waste minimisation. The most desirable aim must be not to produce so much waste. Lower down the hierarchy is re-using waste.
Further down again comes the recovery of waste, which can include recycling, composting and energy recovery from incineration. The hon. Member for Sheffield, Hillsborough (Mrs. Jackson), who is no longer in her place, was under the misapprehension that the landfill tax would somehow act as a disincentive or inhibition on composting. In fact, the reverse is the case, as the hierarchy shows. If waste can be composted, it will avoid landfill tax. At the bottom of the waste hierarchy is disposal, which includes landfill.
The landfill tax will be an important means of moving waste up the hierarchy and away from landfill. The hon. Member for Bristol, South (Ms Primarolo) said, bafflingly, that the tax would send a signal that landfill was the most desirable means of disposal. That calls into question her understanding of the whole principle of the tax because the reverse is the case. By taxing landfill, we are providing an incentive to move to other, more environmentally benign means of dealing with waste.
Ms Primarolo:
A study for the Department of the Environment undertaken by Coopers and Lybrand showed that, with a levy on landfill even as high as £20 per tonne, recycling would still remain a relatively unattractive financial option and that the use of the tax alone would not be enough to develop alternatives. Therefore, essentially the Government are saying that landfill is all right or that options that are worse than landfill but cheaper are also all right.
Mr. Heathcoat-Amory:
The hon. Lady is now arguing for a much higher rate of tax, which can only double the anxiety expressed by some of my hon. Friends. If she is suggesting that the modest tax we are proposing will not boost recycling in the way that we wish, that is an argument for a higher charge. We do not accept that. Although the tax will not overnight create vast quantities of recycled waste, that might be a good thing. By flooding the market with recycled products, we might kill the very process that we are trying to promote. We believe that the tax rates of £2 and £7 will at least nudge the market towards a greater use of recycled materials and therefore move waste generally up the hierarchy that I described earlier.
Mr. Winston Churchill (Davyhulme):
Would not the penal rates of taxation on landfill favoured by the
Mr. Heathcoat-Amory:
That is a serious point, which my hon. Friend was right to highlight. All that we have heard this afternoon is reaffirmation that the Labour party is a high taxer by nature. When it sees a tax, its instinct is to raise it.
When my right hon. and learned Friend the Chancellor proposed the landfill tax in his 1994 Budget, he made it clear that he wished to consult widely on the details. That will include secondary legislation--to answer the specific point raised by the hon. Member for Dudley, West. In fact, the details in the Bill are the fruits of the consultation exercise. We thought long and hard about the rates and we also consulted outside interests. The tax will be levied per tonne. The standard rate, which will apply to most waste, will be £7 per tonne.
Following the persuasive representations that were made during the consultation exercise, we decided that there will be a lower rate of £2 a tonne for inactive or inert waste. Examples of this are soil, sand, gravel, brick, concrete, glass and so on. These do not decay to any significant extent and have much less potential to pollute the atmosphere or groundwater with gas.
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