Letter from the Quarry Products Association,
Northern Ireland to the Chairman of the Committee
The Quarry Products Association (NI) represents
70 per cent of the aggregate, blacktop, concrete, sand and gravel
companies in Northern Ireland. We have been campaigning vigorously
against the introduction of the Aggregates Tax in Northern Ireland,
because of the unique circumstance of the proximity of the border
with the Irish Republic.
Despite being an issue which has united every
strand of opinion in the Province HM Treasury still shows no indication
that Northern Ireland will be given separate consideration, despite
our different circumstances from the UK mainland, and the fact
that Northern Ireland was never even considered during the study
prior to the levy being announced.
The introduction of the tax will severely damage
the competitiveness of Northern Ireland companies as manufacturers
in the Republic will be able to import their concrete blocks,
precast concrete and asphalt into the North tax free.
We estimate that this will endanger up to 4,000
jobs, a figure supported by the Department of Finance and Personnel,
and longer term will result in northern companies relocating in
the Republic. The tax will also have a severe impact on the environment,
particularly in border areas, by increased lorry movements from
the Republic.
We would therefore respectfully ask that this
serious issue be raised and discussed at the next meeting of the
select committee, and that you consider making representations
to the Treasury on our behalf. Any changes to the finance bill
of which the Aggregates Tax is part will take place prior to the
pre-Budget Statement in November.
I have enclosed a briefing document and Editorial
for your information.
21 September 2001
Background
The Northern Ireland Branch of the Quarry Products
Association was formed in 1998. The membership, which is expanding,
now accounts for 70 per cent of aggregates output. Our membership
includes major, medium and smaller sized companies. The Association
represents companies engaged in the supply of primary aggregates,
the processing of recycled and secondary materials, the production
of downstream value added products such as asphalt, lime, mortar,
ready mix concrete and pre-cast, and road surfacing contracting.
Aggregates Tax—What is it?
The Chancellor announced on 21 March 2000 that
a green tax to tackle the environmental cost of quarrying and
encourage the use of recycled materials is to be introduced on
1 April 2002. The tax of £1.60 per tonne, to be charged on
a weight basis, rather than as a percentage of value is to be
applied to all virgin sand, gravel and crushed rock extracted
in the UK. This will include all aggregates incorporated in downstream
products like asphalt, bricks, blocks, concrete, etc.
Imported virgin aggregates will be taxed. How
this will be applied, however, not even Customs and Excise are
sure. They work with finite resources which are directed toward
the greatest risk. The excise duty on a smuggled oil tanker is
around £12,000, the duty of a load of stone is around £35.
It does not take a genius to know where the resources will be
directed.
At present, imported added value products such
as bitmac, asphalt blocks and pre-cast concrete will not be taxed
simply because it is considered to be too difficult to determine,
outside the jurisdiction, the amount of aggregates contained within
such processed products.
Why is Northern Ireland at a Disadvantage?
By way of illustration, consider this example.
A client owns a hotel in Enniskillen and he wishes to resurface
his car park. Contractor A from Irvinestown tenders for 1,000
tonnes of blacktop, as does Contractor B who is located just over
the border.
With the Aggregates Tax in place in Northern
Ireland, Contractor A has to pass on the £1.60/tonne to his
customer on the blacktop. The client, however, goes to Contractor
B and buys the blacktop south of the border, as he can buy it
without the tax being applied.
The same client has also had to purchase ancillary
concrete kerbs, gulley pots and concrete blocks. Once again, because
of the Aggregates Tax, he buys these products over the border
as these are downstream products and imported from the South tax
free.
The client was able to get the job done £1,600
cheaper on blacktop alone (1,000 tonne x £1.60) by giving
the work to Contractor B. Contractor A lost the contract and may
need to lay off several workers due to lost contracts, all due
to the imposition of Aggregates Tax.
Northern Ireland is the only part of the UK
with a physical land border with another EU Member State, ie the
Republic of Ireland, of which five out of six counties border.
With no similar tax rate being introduced in the Republic, producers
in Republic of Ireland will be able to select their products in
the North at a significant advantage to local manufacturers. This
imposition, combined with lower fuel cost and Corporation Tax
in the Republic, will exacerbate the disadvantage Northern Ireland
producers.
The imposition of this tax will also have a
disproportionate increase in construction costs in Northern Ireland
due to the significantly lower ex-quarry price of aggregate compared
to Great Britain. Equally, it is estimated that this tax will
take some £21 million out of capital budgets in the public
sector in Northern Ireland and there has been no assurance given
that this net loss in capital spending will be compensated for
at a time when the Assembly is trying to address the infrastructure
deficit in the Province.
What Effect will it have on Jobs?
The percentage of the workforce employed in
the quarrying industry is much greater in Northern Ireland than
in Britain.
The industry has provided thousands of jobs
throughout Northern Ireland and is often the only prospect for
employment in rural areas, apart from agriculture.
The total estimated as being directly employed
in the NI industry is 5,600 and, as Counties Antrim, East Derry
and North Down represent 35 per cent of production, there are
approximately 3,600 jobs at risk. This, we feel, will rise to
near 4,000 when one takes into account the effect on local economies,
particularly those within 25 miles of the Republic of Ireland
border, and further job losses occasioned by the inevitable reduction
in public sector spending.
The conclusion of this issue is that large scale
unemployment will take place, and one has to ask the questions,
in which industries are these people going to be employed, and
who is going to train them? There may be movement to the Republic
of Ireland, which will incur a further loss of revenue to the
Exchequer.
Is This A Green Tax?
No one would argue against any industry carrying
out their operations in an environmentally responsible way. At
present all QPA members in Northern Ireland have to adhere to
strict Environmental Legislation.
The Aggregates Tax purpose is to encourage the
use of the recycling of materials in construction projects. Unfortunately,
in Northern Ireland we do not have the vast urban regeneration
that they have on the mainland. We have enormous resources of
good quality aggregate, unlike England who have very little apart
from river gravels and china clays. We do not have the huge stockpiles
of waste material from steelworks or power stations which they
have on the mainland.
Northern Ireland last year recycled approximately
700,000 tonnes of material used mainly at the Odyssey Project,
the new City Airport and the Laganside site at the old Sirocco
Works. The material can still be seen sitting there ready to be
used in a new residential and retail outlet project.
The imposition of the tax, as we have indicated
before, will mean increased lorry movements across the border.
It is a fact that for every tonne of stone manufactured and delivered
approximately 13 kg of CO2 is released into the atmosphere,
of which 50 per cent is transport related.
The imposition of the tax, therefore, will leave
Northern Ireland at an environmental deficit.
How much Political Support have we had?
The Quarry Products Association in Northern
Ireland has lobbied MLAs, Westminster MPs and the Treasury intensely
over the past 12 months.
On 8 June 2001 there were the following written
answers in the Northern Ireland Assembly:
Sir Reg Empey, the Minister for Enterprise,
Trade and Investment, wrote that he shared the concern of the
industry that the proposed aggregates tax of £1.60 per tonne
" could have an adverse impact in Northern Ireland. The First
and Deputy First Ministers met the Chancellor of the Exchequer
on 24 January 2001 to emphasise the Executive's concern. Subsequently,
my Department and the Department of Finance, in consultation with
the NI Quarry Products Association, put a detailed case to the
Chancellor advocating the exclusion of Northern Ireland from this
levy. The Chancellor has asked for a more detailed analysis of
the potential effect upon Northern Ireland and this work is presently
underway".
Following representations by QPANI members to
a number of MLAs, Gregory Campbell, the Regional Development Minister,
gave information on the estimated impact of the Aggregates Tax
in Northern Ireland. "The introduction of the tax will raise
roads structural maintenance costs by some 4 per cent and the
cost of capital schemes by between 4 per cent and 17 per cent
depending on the nature and scale of the works. The impact of
the Water Service capital programme is estimated at about 1 per
cent additional costs and about 0.5 per cent on the public transport
capital budget. As recently as last month (May 2000), my Department
made further representations to the Department of Finance and
Personnel on my behalf, and registered bids for additional resources
to cover the increased costs in the context of next year's budget.
The bid reflects current estimated costs, which total just under
£8 million, rather than the £7 million we had assessed
earlier. Failure of the bids will impact adversely on my capital
programmes, particularly in the Roads Service, where the structural
maintenance programme will also be severely affected".
Later in the month (15 June 2001), in response
to questions arranged by QPANI, the Education Minister, Martin
McGuinness, also gave information on the effect of the Aggregates
Tax on school refurbishment and building projects in Northern
Ireland. He said that the cost of aggregate would be about 0.6
per cent of the contract value and was estimated to amount to
an additional cost of £600,000 per year. "My officials
have raised this pressure o the capital budget with the Department
of Finance and Personnel officials and I will be discussing this
with the Minister for Finance and Personnel at our next meeting".
On Monday 6 August 2001, the Quarry Products
Association (NI) Aggregates Tax Committee had a joint Ministerial
meeting with the Department of Finance and Personnel and the Department
of Employment, Trade and Investment to discuss the way forward
in our campaign.
The Minister informed us that he was hoping
to meet Paul Boateng, First Secretary to the Treasury, very shortly,
hopefully in Northern Ireland. A meting with him is essential
in order to convey the stark reality of job losses, company closures
and the environmental deficit that the introduction of the tax
will mean for Northern Ireland.
On Tuesday 7 and Wednesday 8 August 2001, in
a joint venture by QPA(NI) and the British Aggregates Association,
a Customs and Excise team responsible for levy policy and implementation
visited Northern Ireland. The team were taken to a number of our
members in the Fermanagh border area and saw at first hand what
this tax will do to businesses in that area.
Our first visit was to Tarmac's Quarry at Ederney
where they manufacture concrete blocks, concrete and asphalt,
and employ 28 people. Pat Lyons, Northern Ireland Business Manager
for Tarmac in Northern Ireland, gave a presentation to the team
to illustrate the effect tax-exempt products from the Republic
of Ireland will have on their business.
The additional cost of £1.60 per tonne
for aggregate, which goes into his blocks, concrete and asphalt,
will make them uncompetitive. The financial impact of this will
be to turn an acceptable annual profit into a loss.
Tarmac have planned a substantial investment
for the quarry, which has been put on hold until the final outcome
of the Aggregates Tax question is known. Pat made it quite clear
that the introduction of the Tax will put the future of the quarry
at risk and jeopardise the employment of 28 people in an area
already hit by job losses.
The situation was repeated when we visited Tracey
Concrete in Enniskillen and Paddy Clarke and Sons in Lisnaskea.
Both these companies are long established County Fermanagh firms.
Patsy Tracey outlined the consequences for his company of the
Aggregates Tax. These were investment in new concrete mixers cancelled,
losses of 30 jobs in the ready mix concrete business, loss of
business in both the South and the North due to the import of
tax-exempt products from the South and, ultimately, the re-location
of his business into the Republic.
The same scenario was painted at Paddy Clarke
& Sons by Paddy Clarke himself who implored the Customs and
Excise people to do all in their power to convince HM Treasury
back in London of the serious situation here.
Ralph Clarke, Senior Director in Ready Use Concrete,
joined us for dinner in Dungannon on the Tuesday evening. Ralph
informed the Customs team that his company were already negotiating
for possible re-location sites in the Republic for their existing
operations in Strabane and Derry.
In Armagh, we took the Customs and Excise team
to visit W J H Crozier, David Coote Concrete, Armagh City Quarries
and Douglas Acheson Ltd. Roddy Acheson took the team on a drive,
crossing the border a number of times to illustrate the numerous
routes that importers from the Republic will be able to use to
supply his present customers with cheaper aggregate after the
tax burden has been placed on him. The Customs and Excise team
acknowledged the consistently alarming message that was coming
forward and voiced genuine concern that Northern Ireland producers
face a clear threat from imports from the South of Ireland.
They admitted that at no time in the early stages
of levy policy formation and the original analysis carried out
by London Economics was the Northern Ireland situation even considered.
I, as Regional Development Manager for the QPA in Northern Ireland,
relayed the Association's view that at the very least the implementation
of the tax in Northern Ireland should be suspended for at least
12 months pending further investigation into our unique set of
circumstances. During that time, other options in which the protection
of the Northern Ireland industry can be considered.
It is clear that, as far as policing the tax,
the Department's resources will be stretched to the full. Customs
and Excise work on finite resources and budgets and resources
are normally targeted towards the greatest risk. Considering that
the lost excise duty on a tanker of oil is in the region of £12,000
and a lorry load of stone is £45, it does not take a genius
to work out where the resources are going to be directed.
Having spent two days with the Customs and Excise
team, I am cautiously optimistic that they will go back to England
and report to HM Treasury that the Northern Ireland situation
is unique and is very serious, and that further investigation
is required. We are, at present, forwarding to Customs and Excise
additional relevant facts and statistics.
May I take this opportunity, on behalf of those
employed in the industry, particularly those in the 50 per cent
of Northern Ireland which is within 25 miles of the border, to
appeal to you, the greater Northern Ireland public, who may have
family members, or even know just one person who works in the
quarry, concrete or sand and gravel industry, to lobby your local
MLA or MP and, if possible, write to Gordon Brown, Chancellor
of the Exchequer, 11 Downing Street, London.
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