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Mr. Letwin: I am glad to see that the hon. Gentleman, who knows a great deal about the industry--much more than I do--gives his assent to that proposition. I shall be very surprised if the Financial Secretary can produce any evidence that those assertions, which I believe to have been given to me in good faith by both sides of the industry, are false. The estimates that I have been given vary, but they
Next we have to add the increased costs of administration. I do not want to exaggerate the case, because I want to make a genuinely robust case rather than a political statement. I do not know the increased cost of administration, but I am sure that the Financial Secretary will acknowledge that it will be more than zero. Dealing with a new tax and keeping the records required for it, especially in the case of--if I may be permitted a pun--the disaggregations required to deal with an aggregates tax that is to be levied on a series of commodities, some of which are exempt and some of which are not, with some that are exempt being produced at the same time as some that are non-exempt, making it difficult to disentangle one from another, is bound to occasion a significant increase in administrative costs for producers.
I have been given various estimates, and I do not know how reliable they are. I am inclined to think that 10p to 20p a tonne is a reasonable estimate of additional administrative costs. If I take the lower end of that scale, at about 10p, that takes us up to about £2.50 a tonne--£1.80 plus the uplift of 80p for the primary products, plus the 10p.
Taxes are collected by Customs and Excise with unvarying efficiency. [Interruption.] I say that with a degree of irony, in the sense that it is not always the case that Customs and Excise collects the right amount and it is not always the case that all our constituents feel that they are properly treated, but taxes are collected with unvarying efficiency in the sense that Customs and Excise always swoops early. This is not a party political point, although the Chancellor has certainly taken policy steps to advance tax receipts in many respects, including corporation tax. This is a point about administration under all Governments.
Customs and Excise quite properly sees it as its duty to protect the Revenue, so it swoops early. It looks for the money as soon as possible. That has a cash-flow effect on the firms that produce the goods, because the goods are not always sold quickly, and the definitions of commercial exploitation in the relevant sections of the Bill are, as we have had reason to note in lengthy discussion, such that one need not have sold the item to be liable to the tax. There will be a cash-flow effect. I do not know what it will be. I have taken estimates, and it sounds as though about 10p a tonne would not be an unreasonable estimate. That gets us to £2.60.
Undoubtedly, the administrative burden and the price increase will together conspire to accelerate the process of consolidation in the industry. To some degree that may be a good thing; for many producers it will be a bad thing. It is clear that it will tend to concentrate production in fewer locations. The Financial Secretary might argue that the tax is thereby having an effect, but one thing is sure: that that will tend to raise internal transport costs. I do not know the amount, but it has been suggested to me that it might be as high as 75p or as low as 50p. I will take the lower estimate and add 50p. We now have the following: £1.60 plus 80p equals £2.40; £2.40 plus 10p equals £2.50; £2.50 plus 10p equals £2.60; £2.60 plus 50p equals £3.10.
I am told that a differential of £3.10 is vastly greater than the transport cost differential implied by importing pre-cast concrete from northern Europe. If the Financial Secretary has figures to the contrary, we shall be most interested to hear them. Such a differential will clearly hugely exceed the transport costs from southern Ireland. If that were not the case, my estimate of the transport costs increase owing to consolidation in the industry would, clearly, also be too low, but I am told that moving pre-cast concrete by ship is an efficient method of transport--not, of course, one that would be applicable to the use of such concrete deep in Wiltshire, but perfectly applicable on the south coast and, indeed, through the London docks, in London.
In other words, a large part of the construction industry in the United Kingdom could be serviced by pre-cast concrete from the northern ports of Europe at a far lower transport cost than would be involved because of the more than £3 differential that has been identified. That is a serious problem, but we have yet to hear from the Financial Secretary any set of equivalent figures, or disputations of those figures, that would allay our fears. We have not invented those fears; they have been expressed by the industry, which has, in principle, no reason to invent them. If it were true that the displacement of jobs and business would not occur, why should the industry care about the tax; it would merely pass it on to a virtually inelastic buyer--the construction industry? House occupiers and people trying to build business premises might object, but I have not the slightest idea why the industry would invent those figures, so there must be some truth in them.
Given all the arguments of principle that we have discussed at length and rehearsed again today and given the problems of implementation and the way in which the aggregates tax has been proposed in the Bill--for example, the failure to produce an exemption clause such as that suggested by the hon. Member for Somerton and Frome--I am driven to the conclusion that there is a failure in the Government's factual analysis; they have not recognised that the differential will have a serious effect on thousands of jobs in the United Kingdom, and that needs to be addressed urgently.
Mr. Timms: I shall respond to the hon. Gentleman's points in detail in a moment, but before he completes his speech, will he confirm that it would be the intention of an incoming Conservative Government not to introduce the 0.1 percentage point reduction in employers' national insurance contributions that balances the revenue that we expect to receive from the aggregates levy?
Mr. Letwin: Yes, that is absolutely correct. The intention of an incoming Conservative Administration will be not to introduce the entire package, but to seek to negotiate with the industry the very kinds of environmental improvement that were so near to completion when some siren voice got at the Prime Minister and managed to reverse the trend of Government thinking, pushing them back into introducing an aggregates tax. We want to have a serious and adult discussion with the industry about how
Mr. David Taylor (North-West Leicestershire): The hon. Gentleman's analysis of the projected extra costs is admirably rigorous, but does he accept that those figures are, by their very nature, tentative? The British Aggregates Association has come up with a figure of £4.35, whereas his is £3 or so. Is it not equally possible that the Government's approach, with the figure being very much at the low end of the spectrum, is likely to represent the eventual outcome? If it did not, could not a future Government respond by regulation?
Mr. Letwin: Well, that is possible. Of course there is room for uncertainty. I have also received the British Aggregates Association figures. I have consciously chosen the lower end of the estimates that we have received so that I cannot be accused of inventing figures for effect. Neither the hon. Gentleman nor I--and nor, and this is my problem, the Financial Secretary--knows what the exact figure is. If it is anything like any of the figures discussed by the industry, it is sufficient to outweigh the transport costs. That is the problem.
I may be wrong, but I do not understand how that problem can be cured within the structure of the tax. If that cannot be done and we all wake up three, four or five years from now and 5,000, 7,500 or 10,000 jobs--the estimates vary--have disappeared as a result, it will be too late; it will be impossible to re-create those jobs in the United Kingdom for years to come. We have a serious problem: the Government do not have the factual basis on which to be confident that the tax will not have those dire effects. That is why the House should accept the amendments tabled by Conservative Members.
Mr. Timms: As we have heard, under new clause 5, moved by the hon. Member for Somerton and Frome (Mr. Heath), a rebate would be allowed from the aggregates levy for so-called green quarries, and the rebate would be introduced by secondary legislation. We debated a very similar new clause in Committee yesterday. It was moved by the hon. Member for Gordon (Mr. Bruce), who is well able to look after himself on such occasions, but he withdrew it on the basis of the assurances that I was able to give him. Of course, I am happy to repeat those assurances today. I hope that the hon. Member for Somerton and Frome agrees that his hon. Friend the Member for Gordon was right to withdraw his new clause after yesterday's debate in Committee.
I remind the House that the aggregates levy as set out in the Bill will have important and significant environmental benefits. It will do so by ensuring that the price of aggregates reflects the environmental cost of obtaining them--using a straightforward price mechanism for an environmentally beneficial end. That is a mechanism that the Liberal Democrat party well understands; it would thus be mistaken for the hon. Member for Somerton and Frome to suggest that the price mechanism will have no effect. There certainly will be an effect. I stress that point, because it is at the heart of the environmental benefit that we expect from the introduction of the aggregates levy.
We announced in the Budget that we are attracted to the idea of differential rates of aggregates levy for green quarries. We are exploring with a variety of interested parties options on how that might be achieved, but as I have pointed out several times, significant practical problems remain--not least the definition of a green quarry. We need to know how those issues can be overcome in a practicable and workable way before we introduce legislation to give effect to that idea. When we have a workable scheme, we shall legislate.
The new clause is guesswork. I suggest to the hon. Member for Somerton and Frome that the scheme would need to take into account factors that are not referred to in the new clause, which is couched in terms of environmental protection measures being taken. However, other considerations might need to be taken into account. It is possible, for example, that the location of a quarry might have an impact on the extent of its environmental friendliness. I should certainly not want to exclude that possibility, as the new clause does. As I think that the hon. Member for Gordon acknowledged yesterday, during our debate in Committee on exactly the same proposal, nothing is to be gained in the meantime by introducing legislation that may well turn out not to be quite right when we have resolved the way forward--[Interruption.] I give way to the hon. Member for West Dorset (Mr. Letwin).