Select Committee on Northern Ireland Affairs Minutes of Evidence

Memoranum submitted by the Construction Employers Federation, Northern Ireland


  The Construction Employers Federation is the representative body for the construction industry in the Province. We represent some 500 individual construction firms who collectively account for over 80 per cent of all construction work in the Province. The construction industry employs some 45,000 operatives and makes a contribution of 8 per cent to Northern Ireland's GDP with a turnover of some £1.9 billion per annum.

  The CEF has been directly involved with the Quarry Products Association in lobbying against the introduction of this tax. We fully support the QPAs detailed argument about the detrimental affects that this tax will have on both the quarrying industry the construction industry in the Province.


  The proposed levy will apply to virgin sand, gravel and crushed rock which is subject to commercial exploitation in the UK. It will be charged £1.60 per tonne. The levy will not apply to recycled aggregates or to certain secondary aggregates. Imported virgin aggregates such as raw stone, sand and gravel etc. will be subject to the levy when first sold or used in the UK but the downstream aggregate products will be exempt.

  Northern Ireland is however in a unique position in that it is the only part of the UK with a land border with another EU member state ie the Republic of Ireland where such a tax does not exist. The QPA has covered in detail the practical effects that this will have on the market in Northern Ireland.


  The proposed tax will have significant effect on public infrastructure projects.

  The total volume of aggregate sales in Northern Ireland is 22 million tonnes per annum, of which some 60 per cent is sold to the public sector clients.

  The total tax raised on 22 million tonnes would be £35 million per annum (22m x £1.60)

  The public sector would account for 60 per cent of this tax ie £22 million. In other words £22 million per annum would be lost from the public sector infrastructure programme each year because of the Aggregate tax. That is equivalent to more than twice the value of the total major roads programme for 2001-02 and would bring into question whether significant projects such as the Westlink underpasses or the A1 Newry to the border or the Al Loughbrickland schemes that are currently in the major works preparation pool will ever be completed.

  Earlier this year the DRD Minister Gregory Campbell MLA gave a written answer to the Northern Ireland Assembly on the estimated impact of the Aggregates tax on his Department as follows "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 on 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."

  The Programme for Government has recognised that our infrastructure has suffered from many years of under funding and is attempting to address this issue but this proposed tax will put those plans in jeopardy. Some Departments have made bids in the draft Programme for Government but it is noticeable that others who also spend significant amounts on capital projects such as Health, Education and Social Housing do not appear to have made any provision.

  The impact on the private sector impact of aggregates tax is unquantifiable in terms of additional costs imposed on clients investing in private sector construction projects. Major investment decisions could be put at risk however at a time when the industry is beginning to experience a slowdown in economic growth.


  Government has announced a £35 million per annum Sustainability Fund which is to be allocated using the population based Barnett formula. This gives £29 million to England and £6 million to be shared between Scotland, Wales and Northern Ireland. Under this Mechanism Northern Ireland will receive approximately £1 million this equates to a 2.4 per cent share.

  This is iniquitous however because Northern Ireland Contributes some 10 per cent to the total UK output of aggregates and hence we will provide 10 per cent of total tax revenue. We submit therefore that Northern Ireland's share should be 10 per cent of the Sustainability Fund ie £3.5 million per annum.


  It is estimated that the average new building by detached house requires 400 tonnes of aggregate. This will increase the cost by £640 or approximately 1 per cent.

  However as a result of government policy of passing on direct capital costs and charges to the private housing market, the cumulative effect has been to increase new house prices over the last two years by some 30 per cent. The Aggregate tax will be an additional burden on this sector which is showing significant slow down in demand.

  It is also our view that this policy of passing on such charges is a direct taxation on a small sector of the community which we believe is contrary to the government's Equality policy in accordance with Section 75 of the Northern Ireland Act 1998.


  The tax constitutes a major threat to employment in rural areas within up to 25 miles of the Border where 110 of the 176 active quarries in Northern Ireland are located (Geological Survey Northern Ireland). In other words 62 per cent of active quarries will be affected.

  The quarrying and ancillary distribution and transport industries employ some 5,600 employees in the Province. Two-thirds of these jobs are at risk ie 3,500 located in Border areas which are identified as TSN areas (Targeting Social Need).

  Much of the quarrying and related industry is located in unemployment blackspots of and areas of social disadvantage which are already struggling to cope with problems beset in these rural agricultural communities.

  The DETI/IDB would therefore come under strong pressure to take remedial and expensive measures to counter the potential job losses in the new TSN areas.

  We would also submit that the proposed introduction of the tax has failed to address the equality impact provisions of Section 75 of the Northern Ireland Act 1998 insofar as the implementation of the tax will generate a significant imbalance and unfairness between quarry operators within Northern Ireland.


  There has been very broad consensus against the introduction of the aggregates tax. The Assembly passed a motion unanimously on 12 December 2000 which called upon Ministers to make representations to the UK Treasury on behalf of the industry to prevent the introduction of this tax in Northern Ireland. This received cross party support from all MLAs including those who are known to support environmental issues.

October 2001

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