Select Committee on Environmental Audit Appendices to the Minutes of Evidence

Letter to the Financial Secretary, HM Treasury from the Director of Development and External Relations, Biffa


  You will no doubt recall that we are long term campaigners for a more "joined up" approach with regard to budgetary, fiscal and regulatory instruments in this area—best encapsulated in the nation that we need far more finesse when understanding the relationship between the cost of those instruments to specific sectors in relation to their current "internality" or sectoral turnover values. This note concentrates specifically on the working of the Landfill Tax. Attached are graphed data for tonnage trends in each of the three classes of material—exempt, £2 band and standard band. If one considers the financial translation of this tonnage data our estimates suggest the following conclusions:

    —  Between January 1998 and September 2000 industrial and commercial tonnage inputs have fallen from around 70-75 million tonnes to 45-50 million tonnes.

    —  Input levels of standard rate material have remained approximately stable or fallen marginally. However it is generally accepted that municipal tonnages over the same period have probably risen from 20-24 million to 25-28 million tonnes.

    —  Inputs of £2 low rate materials have fallen consistently through the period which reflects our view that much of these materials have:

        (i)  been diverted into licensed but unregulated sites such as golf courses,

        (ii)  been transferred from the commercial builders skip stream into domestic CA sites,

        (iii)  been genuinely recycled within the waste and construction industries for reuse as secondary aggregates.

    —  The precise apportionment of tonnage between the above three activities will probably never be known. Our estimate is that if local authority recycling rates have moved to 8 per cent in the equivalent period (yet their tonnage arisings have shown consistent increases) then as much as 2-3 million tonnes of domestic related builders' rubble which formerly appeared as commercial waste is now being deposited via civic amenity sites—maybe more. The irony of this is that that two million tonnes used to come to landfill at a cost of £4 million per annum (equals revenue for the Treasury). That material now probably comes in as municipal waste at standard rate at a cost to local authorities of £22 million per annum (equals benefit to the Treasury). There is a netting off effect in so far as many local authorities are claiming higher recycling rates simply because they are recycling far higher levels of aggregates and building spoils rather than packaging and genuine domestic waste which is the object of the DETR's targets. In some cases totters manage CA sites on a free of charge basis, gaining their income by the rights to all recoverable material entering the site. It is but a short step for them to allow non domestic waste into the site in exchange for cash payments where their income from recovered material becomes uncertain and they can operate safe in the knowledge that the county council will pick up the disposal costs.

    How much is not known because the collection framework for statistics in this area is not integrated between Customs & Excise, DETR, the Environment Agency and the waste industry.

    —  When one considers the overall revenue tax flows we believe that the net yield from the tax has peaked and begun to decline. This overall total trend marks a sharp increase in the cost of local authorities of the Landfill Tax—rising from around £190m per annum in January 1998 to nearer £310 million per annum today. It is for this reason that I suggested that the Prime Minister's recent announcements of awards to local authorities for incremental kerbside recycling—amounting to around £100 million-£140 million per annum—could be regarded as misleading on the basis that they were paying a similar extra amount in Landfill Taxes anyway.

  Our conclusion from this is that these monies should be returned in a more formalised framework. You are about to consult on the strengths and weaknesses of the existing Entrust programme but we have argued in submissions to various Select Committees for the past four years that local authorities should be allocated an equivalent 20 per cent or similar share of overall Landfill Tax flows via a system that should be operated and administered via a public sector version of the existing Entrust regulations. Such a system offers transparency and national consistency in the efficient distribution of such available funds and they should be competed for by all WCAs and WDAs with approved schemes vetted by a central panel comprising representatives from appropriate public sector bodies. This would represent far greater value for public funds distribution than the existing system which—frankly—will probably be impenetrable and identify no clear benefits in terms of public availability of information, external evaluation and avoidance of duplication.

  Industry and commercial producers of waste have reacted sharply in response to market forces by achieving further increases in levels of recycling, economies of scale and waste minimisation. In the public sector the price system is far less effective because there are dis-economies of scale, poor quality of knowledge exchange and widely different systems of data collection.

  These comments are meant to be helpful because we believe in the inherent strength of the Landfill Tax and we totally support the clear ability of the Landfill Tax Credit Scheme to deliver unparalleled improvements in understanding in this area. With regard to the latter point we have already committed around £5 million to what we hope will become the world's first integrated framework of environmental data on resource flows through the UK economy. That data is being collated on a regional, material stream and industry sectoral basis from funding underpinned by the regulations. The first example of a geographic programme—for the Isle of Wight—has recently been published and a copy is enclosed for your information.

  There is clear logic in this country possessing such a database on the environmental flows of materials and the "externality" flows of pollution in the economy. These can then be compared with the "internality" financial flows which Gordon Brown uses to develop his financial strategy via an informed framework of policy development developed by region, material/pollution streams and industry sectors. Such an understanding is vital if we are to avoid significant inflationary or job loss threats in the decades to come as we move towards the internalisation of environmental externalities. At the moment our policy framework tends to encourage businesses to export that pollution by closing down operations in the UK because abatement costs, budgetary and fiscal instrument pressures and other factors make it easier to produce in China than here in the UK. In terms of global environmental pollution this is simply a fudge. It is in everyone's long term interest to confront these issues sooner rather than later.

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