The Landfill
Tax
142. The Landfill Tax came into operation in October
1996. We were told that the former Government's intention in introducing
it was, firstly, to ensure that "the full cost of the environmental
implications of disposal were taken into account in the price"
and secondly, "to seek to shift behaviour" away from
disposal towards re-use and reprocessing.[272]
On top of the 'gate fee' which waste owners must pay to landfill
operators to deposit their waste in a site, the tax set a charge
of £2 per tonne for inert wastes and £7 per tonne for
'active' wastes which by degrading will potentially release pollutants
into the immediate environment. The landfill operator is charged
with collecting the tax from the waste owner and passing it on
to the Treasury. As an incentive to environmental improvement,
the operator is allowed to pay up to 10 per cent of the tax into
a special environmental trust fund and in return, will receive
a proportionate rebate on National Insurance contributions for
employees.[273]
143. The tax has only been in operation for eighteen
months and it is therefore rather early to make definitive conclusions
about its success or failure. Progress thus far has been marked
by anecdotal reports of increased fly-tipping and the diversion
of commercial wastes to exempted sites (such as agricultural land
and golf courses) and into household dustbins as some have sought
to avoid paying.[274]
In so far as these reports indicate a problem for management by
the Environment Agency, they are discussed further in the section
beginning at paragraph 247. Difficulties have, however, also been
posed for the management of wastes: the waste industry told us
that much of the waste which has been diverted from landfill is
construction waste such as soil and aggregate, which the industry
uses for constructing landfill 'cells' and restoring sites after
use.[275] We were pleased
that the Government addressed this problem in the 1998 Financial
Statement and Budget Report by granting an exemption to materials
required for these purposes. Of rather more concern is that the
diversion of wastes into exempt activities and sites enables them
to "drop out of the control of licensing and the recording
of data".[276]
This would appear likely to aggravate the existing, significant,
problems which the UK has in assessing its production of waste.
144. It seems that the tax has had its greatest impact
upon the local authorities. As we shall discuss in greater detail
later (see section beginning paragraph 207) these authorities
have traditionally drawn up long term contracts for their waste
disposal needs, for periods of between ten and twenty-five years.
Those who, like Manchester City Council, last drew up a contract
in the 1980s or early 1990s prior to development of the tax, may
have made a long term commitment to landfill which cannot be escaped
until the contract expires. In Manchester's case, the contract
has seven years still to run.[277]
It, and other authorities like it, is committed therefore not
only to paying the tax but to paying the higher rate for the large
part of their waste (from households, parks and gardens) which
is classed as "active".
145. The requirement to pay is not in itself a bad
thing: Colin Vaughan of Greater Manchester Waste Disposal Authority
admitted frankly that the tax had provided a strong incentive
to reconsider the local waste management strategy.[278]
What has proved difficult is the inability of the authorities,
because of capping, to pass the full cost of the tax back to the
householders who are presenting increasing amounts of waste for
disposal. Peter Fenton told us that:
" ... local authorities
are not polluters in their own right, they are collecting waste
and dealing with it - there is a charge on domestic refuse ...
but whilst local authorities operate in a capped environment,
effectively for every £1 we pay in landfill tax it is a pound
less to spend on education, social services ..."[279]
Ken Manton of the Local Government Association supported
this claim.[280] At
the same time as they are paying the tax, furthermore, local authorities
are having to plan and invest in facilities which will enable
them to move away from landfill in the future: Bob Lisney, also
speaking for the LGA, described this as a "double whammy"
which could last for up to ten years.[281]
Since these groups gave evidence to our inquiry the Chancellor
of the Exchequer has increased the rate of the tax for 'active'
wastes from £7 to £10 per tonne, from April 1999.
146. Complaints have also been raised about the operation
of the environmental trust funds. While the Environmental Services
Association, representing the waste industry, described the scheme
as "positive",[282]
the March Consulting Group complained that operation of the trusts
is dominated by the waste industry and Hampshire Waste Services
suspected that the money raised thus far may have gone into projects
benefiting public relations rather than the environment.[283]
These concerns were reiterated by the community representatives
whom we met in Liverpool. They told us that application forms
for registration as environmental trusts are expressed in complex
legal language, acting as a deterrent to small groups, and that
money is being channelled into a few large organisations although
community organisations may have a better idea as to what would
provide genuine environmental benefit in the locality.[284]
147. Whilst voicing these specific complaints, most
witnesses appeared to accept the principle of the tax, as they
accepted the principle of landfill itself. In looking for improvement
in the operation of the tax, most presented the same idea: that
the tax should be subject to a 'price escalator' in the same way
as road fuel duty. This would ensure the steady increase of the
tax towards an upper threshold and, because the increase would
be predictable, local authorities and others affected would be
better able to plan to accommodate it or seek alternative management
options.[285] We asked
the Minister whether the Government would produce a long-term
plan for the tax and he said this was "a matter for the Chancellor";
he added that the DETR is in negotiations with the Treasury concerning
the use of additional Landfill Tax revenue for environmental projects
and that he would particularly like to see money being granted
to local authorities to encourage recycling.[286]
148. The Landfill Tax is the UK's first primarily
environmental tax and we welcome it. However, we consider it to
be essential that the Government states clearly its plans for
the tax to the end of this Parliament, in order that waste holders
may plan effectively for the future management of wastes arising.
We are encouraged that the Minister has expressed a wish for Landfill
Tax revenues to be used directly to fund recycling. This should
become Government policy.
244 Making Waste Work
Cm 3040, HMSO London 1995 p60 
