APPENDIX 6
Memorandum from Quarry Products Association
AGGREGATES TAXATION
Following the evidence given to the Committee
for its 1999 Pre-Budget Report Inquiry, the Quarry Products Association
wishes to highlight a number of issues arising from the Budget
decision to introduce an aggregates tax. We will keep our evidence
relatively brief, but can expand or clarify any issues of particular
interest to the Committee.
THE JUSTIFICATION
FOR AN
AGGREGATES TAX
Following the Budget announcement of an aggregates
tax, a number of justifications for taxation have been made by
Treasury and DETR ministers. We believe the apparent justifications
are flawed and inconsistent.
Justification One
"The QPA did not make alternative proposals"
At 6.00 pm on the evening of the Budget, Financial
Secretary Stephen Timms, MP telephoned the QPA Director General
and said that he (the Minister) had no choice but to recommend
aggregates taxation to the Chancellor becuase the QPA "had
not made an alternative offer". This same assertion, that
the QPA had not made an alternative proposal, was repeated by
Mr Timms to an audience attending an Industry Forum meeting on
the morning of Wednesday, 22 March.
This claim is completely false. The process
of negotiation has been as follows. In July 1999, the QPA submitted
its detailed "New Deal" package to Government. Following
the 1999 Pre-Budget Report announcement that Government was "minded
to" introduce a tax unless the QPA offer was improved, further
discussions took place involving Mr Timms, DETR Minister Nick
Raynsford, the officials. During this process the QPA agreed to
increase the value of the proposal, including increasing the contribution
to the Sustainability Foundation by 30 per cent to 13p per tonne
of aggregates, and was also asked to strengthen its SSSI proposals,
to confirm the application of the "New Deal" to Scotland,
and to provide more detailed "green purchasing" proposals.
A meeting took place between QPA representatives,
Mr Timms, Mr Raynsford and officials at the Treasury on Wednesday
8 March, and at the request of the Treasury, the QPA was asked
to confirm its position on SSSIs, Scotland, and green purchasing
by Wednesday, 15 March. The QPA letter of 14 March in response
to this request is attached (Appendix 1).
Taking together the original QPA New Deal proposals,
subsequent discussions with ministers and officials, and the QPA
letter of 14 March, there is no doubt that the QPA made a clear
and defined proposal to Government, in spite of Mr Timms' claims
to the contrary.
Justification Two
"The QPA made additional and anti-competitive
demands on Government as part of its proposals."
Mr Timms stated in Parliament on 23 March (Hansard
col 1204) that the QPA "then started to add new strings to
the package, and one aspect of its proposals was seriously anti-competitive
and not compatible with European Law". The Budget report
(page 121, paragraph 6.90) claims that "the industry has
made delivery of the voluntary package conditional on undertakings
from the Government on procurement policy which were unacceptable".
The report does not offer any explanation as to why such conditions
were unacceptable.
The point of issue here is green purchasing.
The QPA had proposed to Government that, as part of a partnership
approach to minimising the environmental impacts of aggregates
supply, Government should introduce a purchasing preference for
aggregates suppliers meeting agreed and independently assessed
environmental criteria. A potential legal framework for this purchasing
initiative was submitted to Government and is set out in Appendix
2. Our working assumptions in making these proposals were that
Government would look positively on an opportunity to manage public
supply chains to promote good environmental performance, to differentiate
between "good" and "bad" suppliers, and to
use its own Best Value initiative to this effect.
Mr Timms claims that our green purchasing proposals
were late demands ("the QPA then started to add new strings
. . . " see quote above).
In fact the full QPA New Deal package submitted
to Government in July 1999 included explicit proposals to promote
green purchasing and establish a Quality Mark for environmental
performance. This was clearly identified as a key element of the
QPA proposals. It is completely misleading for Mr Timms to suggest
that these are late and unreasonable demands—green purchasing
has always been a fundamental element of the QPA package.
The claim of Mr Timms that our purchasing proposals
are "seriously anti-competitive" we also find curious.
Our proposals are not anti-competitive or restrictive in that
the environmental "Q" Mark would be completely open
to both QPA and non-QPA members. Our legal advice is that the
proposals do not present a general problem in terms of either
European or UK law. Beyond making the assertion in Parliament,
the Treasury has not responded to the QPA proposals to identify
its concerns. This is yet a further example of the unwillingness
of Government to respond in any constructive or detailed form
to proposals put forward by the QPA.
To add further confusion to the issue of green
purchasing by Government, Government's recent consultation paper*
on Guidance to local authorities for reviewing the implementation
of Best Value states that "The experience to date of the
best value pilot authorities and others suggests that such Reviews
have the potential to make a real difference to performance on
the ground. If that potential is to be realised, then reviews
will need . . . to give effect to the principles of sustainable
development".
However, the Treasury has just published (16
March) draft procurement guidelines for Government departments
on whole life costing which states:
"Procurement Guidance No. 7 Whole Life Costs.
Key Points for Senior Management.
Procurement must not be used as a vehicle for
delivering policies such as environmental sustainability".
This raises a number of questions:
1. Has the Treasury ruled out absolutely
the use of Government purchasing to encourage good environmental
practice from suppliers?
2. If so, why was the QPA not advised of
this policy from the publication of the detailed New Deal package
in July 1999?
3. Why has the Treasury suggested that a
purchasing commitment from Government was a late and unacceptable
condition from the QPA when this had been a clear and explicit
element of the partnership proposal by the QPA since July 1999?
4. Why has the Treasury been unwilling or
unable to respond to the detailed "Q" Mark/green purchasing
proposals made by the QPA?
Justification Three
"The Industry did not support the QPA proposals".
Stephen Timms said in the Budget debate on 23
March that "some of the smaller quarries defected and made
it clear that they did not like the package that was being developed"
as part of his justification for aggregates tax. Similar comments
were made by Government to the media.
We would like to put this issue in perspective.
When, in May 1998, Planning Minister Richard Caborn formally asked
the QPA to make an alternative proposal to tax, QPA members represented
90 per cent of aggregates output. This situation has not changed,
and QPA members still represent 90 per cent of aggregates output.
It was always a key element of the QPA package that a partnership
between the QPA and Government would require Government support
in helping to extend the proposal across the 10 per cent of the
industry not represented by the QPA.
This is precisely why the QPA proposed the use
of preferential purchasing by Government from companies meeting
the criteria of the environmental "Q" Mark. The issue
was fully recognised by the Environmental Audit Committee in its
report in the 1999 Pre-Budget Report, which recommends an aggregated
tax with exemption for companies adhering to a satisfactory QPA-type
voluntary agreement, with a specific purpose of the aggregates
tax to "ensure adherence to the scheme".
We have acknowledged that without such partnership
support from Government, the voluntary approach would be difficult
to deliver for 100 per cent of the industry. In the weeks leading
up to the Budget, a spokesman for a small sector trade association
(The Brittish Aggregates Association) apparently representing
2-3 per cent of aggregates output, indicated opposition to both
aggregates tax and the QPA New Deal proposals. Whereas the QPA
had delivered a progressive proposal to generate real environmental
improvements, there were clearly operators (whether BAA members
or not) who were reluctant to make such environmental commitments.
We suspect that the minority of the industry opposing environmental
commitments are precisely the operators where the most significant
improvements are needed.
We find it astonishing that Government was not
prepared to take positive steps to implement a partnership, which
included clear encouragement for good operators and an equally
clear incentive for all operators to meet higher environmental
standards. Instead, it has taken a tax decision to in effect support
operators with lower environmental standards, and used the existence
of such regressive operators as an excuse for Government's inactivity
and unwillingness to engage in a positive partnership with the
quarrying industry.
CONCLUSION
We deeply regret the Government's decision to
turn its back on the positive environmental partnership with the
quarrying industry proposed by the QPA. The essence of the decision
is that Government is unwilling to use its huge purchasing power
to encourage good environmental practice. We find this an extraordinary
position for Government to adopt.
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