Response from HM Treasury
Since the Minister has freely acknowledged that
harmonisation is many years away, the case has still not been
made for the levy in its present form for Northern Ireland. In
the year's grace which the phased introduction will give to manufacturers
of processed products in Northern Ireland, we expect to hear either
that the Government's efforts to achieve harmonisation promise
success, or that the phasing of the levy will be further postponed
until a proper case can be made for it.
There is a strong case for the aggregates levy in
its present form in Northern Ireland. The aggregates levy has
been designed to incorporate the environmental costs of extracting
virgin aggregate into market prices, which includes noise, dust,
visual intrusion and damage to biodiversity. The levy also aims
to shift demand away from virgin material to recycled construction
and demolition waste and other alternative materials. The environmental
benefits of the levy should apply in Northern Ireland as elsewhere
in the UK.
While the original research that underpinned the
case for the levy and informed the setting of the rate did not
include Northern Ireland quarries, the international group of
experts which advised on the use of contingent valuation techniques
in the second phase of the London Economics study were content
that Northern Ireland should be excluded for practical reasons.
This research was focused on economic assessment of the environmental
impacts of quarrying, and not the detailed design of the levy.
The Government has introduced a phased introduction
of the levy for aggregates used in processed goods in Northern
This is in response to the particular case of Northern Ireland
producers of goods containing processed aggregates, for example,
precast concrete, mortar and asphalt. Such aggregate will pay
no levy during the current first year of the aggregates levy,
and the levy will increase over the next five years by 20 percentage
points a year until the full rate is payable. This offers this
particular sector time to adjust to the tax, for example by using
different inputs, eg recycled aggregates, and technologies to
reduce their demand for taxable virgin aggregate.
We remain concerned that, having now admitted
that part of the founding research "was not at all robust",
the Government should continue to place so much confidence in
the remainder of the research.
The Government believes that those parts of the independent
consultants' research that made the case for a levy and informed
the rate of the levy were robust. The research which established
that there were significant environmental costs associated with
extraction of virgin aggregate and provided estimates of these
costs was endorsed by an expert review. However, the Government
does believe that work undertaken on a small number of unrepresentative
recycling sites to establish the external costs of this sector
of the industry was not robust. This does not in any way undermine
the Government's confidence in the main body of the research.
28 June 2002
1 Introduction of the Aggregates Levy in Northern
Ireland: The Government's Response, Third Report 2001-2002 (HC 713) para 4 Back
Finance Bill (not amended in the committee and as amended in standing
committee), volume 1, part 5, clauses 127 Back
Introduction of the Aggregates Levy in Northern Ireland: The
Government's Response, Third Report 2001-2002 (HC 713) para 5 Back