Select Committee on Northern Ireland Affairs Minutes of Evidence

Memorandum submitted by Friends of the Earth (Northern Ireland)


  1.  Quarry industry lobbyists have argued that the introduction of the Aggregates Levy in Northern Ireland will give operators in the Republic an unfair advantage and that jobs will migrate over the border. These are real fears facing any state that has a land border with another and which wishes to introduce taxation for social, environmental or economic reasons. One response is to resist all change and to therefore forego the benefits which taxation of this kind can bring. Another response is to recognise that the industry is, unsurprisingly, primarily concerned about its short-term profits and not about wider issues of public policy and public good. This latter response requires a demonstration of the benefits of the Aggregates Levy and proposals for overcoming the concerns of the industry and those who work in it.

  The Northern Ireland Assembly has been lobbied hard by the quarry industry and seems to have accepted the arguments against the levy without the benefit of a different view. This submission from Friends of the Earth intends to redress the balance and make the case for the full implementation of the Aggregates Levy in Northern Ireland.


  2.  In the pre-Budget Statement in November 1998 the Chancellor, Gordon Brown, concluded that there were "significant environmental costs" of quarrying that were not already covered by regulation and began to make the case for a tax on primary aggregates. The case for implementing the Aggregates Levy in Northern Ireland rests on nine interconnected points.

  2.1  Making the polluter pay—The polluter pays principle is well established and lies at the heart of resource taxes of this kind. An Aggregates Levy would play a key role in ensuring environmental costs, including those associated with the longer term and more irreversible costs, such as the loss of habitats and landscape, are internalised by the quarry industry more fully.

  2.2  Increasing efficiency—An Aggregates Levy would provide an incentive to increase the recycling of aggregate materials, the re-use of components and materials and the utilization of secondary aggregates where appropriate. All of these incentives will contribute to reducing the demand for primary aggregates and developing a sustainable aggregates supply industry in Northern Ireland.

  2.3  Integrating with policy—An Aggregates Levy would complement the Landfill Tax and integrates with current Government policy and international trends. Both, for example, would encourage the recycling of building materials, the landfill tax through increasing supply by discouraging disposal, and an aggregates tax through increasing demand by discouraging the supply of primary aggregates.

  2.4  Shifting the tax burden off job creation—An Aggregates Levy would contribute to sustainable development by raising revenue that will be used to cut employers' National Insurance Contributions and shift the tax burden onto environmental damage and inefficiency. Employers' National Insurance Contributions are effectively a tax on jobs. Put simply, cutting these contributions would enable companies to employ more people.

  2.5  Create sustainable jobs—Ecological taxation, of which an aggregates tax is an example, is increasingly becoming recognised as an effective means of creating long term sustainable employment. Research carried out by Friends of the Earth[1] suggests that a number of alternatives exist for creating employment in rural areas, alternatives which are not compatible with the unsustainable extraction of aggregates. Up to 6,000 jobs (an increase of some 2,000 jobs over the losses predicted by the Quarry Products Association in their worst case scenario) can be created in areas such as organic farming, producer retailing, timber production, tourism and recycling of aggregates:

    —  up to 3,600 jobs in organic production;

    —  up to 1,400 jobs in farmers' markets;

    —  200 jobs in hardwood timber production;

    —  10 to 15 jobs per salvage yard; and

    —  unspecified numbers of jobs due to knock-on benefits to local businesses, farm shops or other producer retail initiatives, producing alternatives to aggregates other than timber or sustainable tourism initiatives.

  The Aggregates Levy, in conjunction with other measures, would help make way for the creation of this employment. Put starkly, unless the quarrying industry is made more efficient through a strong economic signal in the form of the Levy, these opportunities will be lost to short-term protection of an unsustainable industry.

  2.6  Creating flexible and robust communities—An Aggregates Levy, by decreasing dependence on aggregates extraction, will enable communities, particular hard hit rural communities, to develop more diverse means of income and thereby regain control of their economy and prosper without degrading their environment. Judicious application of a substantial Sustainability Fund, as described below, could create the opportunities for communities to diversify, as they must, to survive.

  2.7  Encouraging innovation—The evidence from other forms of ecotaxation suggest that an Aggregates Levy would encourage companies in Northern Ireland to become more innovative and flexible to meet the demands of the new economic climate. For example, the OECD in 1993 noted that in Japan pressure to increase energy efficiency and lower pollution had reduced energy and raw material inputs and delivered competitive cost advantages. Even at the initial low rates the Landfill Tax encouraged firms to innovate and invest. Sectors that were hardest hit by the tax have been some of the most innovative and firms that gave evidence to Parliamentary inquiries critical of the Landfill Tax and its impact on business have found new markets for their waste materials. An Aggregates Levy would give Northern Ireland's indigenous industries the opportunity to establish themselves as world leaders in innovative, environmentally sound enterprises. A Northern Ireland company, Powerscreen, is already a world class supplier of aggregates recycling plant.

  2.8  Increasing equity—Everyone should have the right to live in a clean, healthy environment. Unfortunately the threat of unemployment and poverty force many communities to accept less than this. They have to make do with a degraded environment, noise, dust and dirt. This is totally unjust and unacceptable. An Aggregates Levy can increase equity by reducing the environmental costs borne by the poor who "live downwind, downstream and downhill" from pollution sources.

  2.9  Strengthening the levy in Great Britain—The quarrying industry in the rest of the UK will argue that an exemption for Northern Ireland will put producers in Great Britain in an unfair, disadvantageous position therefore the exemption must be extended. An exemption for Northern Ireland will make it very difficult for the Government to fully implement the tax in Great Britain and may result in no tax at all.


  3.  Friends of the Earth considers that most of the arguments made by the Quarry Products Association, and in turn by the Northern Ireland Departments, against the introduction of the Aggregates Levy could equally be put forward by any region of the UK. The analysis appears flawed in that statistics quoted for Northern Ireland are compared with those for Great Britain as a whole. Clearly the statistics for Great Britain include a wide variation from region to region. Northern Ireland is unlikely to be exceptional in terms of availability of alternatives, travel movements and price as a comparison with Great Britain's average suggests.

  3.1  Availability of recyclable materials—It is often argued that Northern Ireland is heavily dependent on primary aggregates because of the shortage of recyclable materials. This will equally be true for many parts of GB but this is not seen as a barrier to implementing the levy. It is worth noting that one reason that Northern Ireland is less well placed in terms of access to materials for recycling is a decidedly lax planning regime which requires a very low percentage of development on brown-field sites compared with Great Britain. By implementing policies which would bring about the renovation of the 35,000 empty properties in Northern Ireland and development on brown-field sites rather than green-field, a source of recyclable aggregates would be created and, very importantly, the demand for aggregates would be reduced.

  3.2  Travel movements—A great deal is also made of the very significant differences in average travel movements between Northern Ireland and the Great Britain average. While this is clearly an important point, there is no indication that such marked departures from the average do not occur elsewhere in the UK.

  3.3  Price of aggregates—Another argument refers to variations in prices between Northern Ireland and England and Wales. Again the average price of aggregates for England and Wales conceals a wide variation which may make the Northern Ireland price of £2.60/tonne unremarkable.

  It is important to mention that the Northern Ireland Departments appear to have relied heavily on statistics and arguments presented by the quarry industry. Friends of the Earth has seen no evidence of any attempt to actively seek the views of others. The Northern Ireland Departments may argue that there is a broad consensus against the Aggregates Levy but this is somewhat disingenuous.

  4.  The arguments about fiscal neutrality and the land border with the Republic of Ireland are particularly important. Friends of the Earth realises that these are areas of real concern especially in rural, border areas. If the migration of jobs is to be prevented and the employment benefits of the levy are to be realised these issues must be addressed.

  4.1  Fiscal neutrality—There is a clear imbalance between revenue raised by the Aggregates Levy and the amount returned to Northern Ireland through a cut in employers' National Insurance contributions and access to the Sustainability Fund via the Barnett Formula. While fiscal neutrality for devolved parts of the UK is not something the Treasury considers to be important, in the case of an ecological tax which aims for specific environmental and social benefits, the argument for achieving such neutrality is a powerful one. The Chancellor could establish a greatly enlarged Sustainability Fund for Northern Ireland under the control of the Northern Ireland Executive. The size of the fund would be set at around £28 million per annum, thus creating a fiscally neutral effect.

  4.2  The land border—Clearly the issues of job losses and the border with the Republic of Ireland are intimately related although it is not clear how many job losses are thought to derive from the effect of the levy on its own, or the effect of the levy combined with the existence of the border. It is only the latter which should be of concern as the former are part of the redistribution of employment which a tax like this seeks to bring about.

  Friends of the Earth accepts that concerns of job losses, particularly in border areas are real. A certain means of solving this problem would be the introduction of an equivalent of the Aggregates Levy in the Republic of Ireland. This is a matter which the Chancellor should pursue with the Minister of Finance, Mr McCreevy, at the earliest opportunity. It will not be necessary for such a tax to be implemented in the Republic on the same timescale as in Northern Ireland. A simple indication by the Government of Ireland that it is its intention to introduce a levy on aggregates would send a clear signal to the industry that restructuring itself on the basis of different tax regimes on either side of the border would be futile.

  4.3  Lack of research—Friends of the Earth agrees with the Quarry Products Association that the lack of research into the effects of the levy on Northern Ireland is a serious oversight by the Government. Friends of the Earth recommends that studies similar to that conducted in Great Britain by the DETR should be commissioned for Northern Ireland without delay. The findings of the research should be made publicly available well in advance of the date of implementation of the levy in April 2002 and used to inform the manner of its implementation. We would add, however, that if the DETRs research was an inadequate basis for implementing the levy in Northern Ireland then the arguments submitted by the quarry industry and supported by the Northern Ireland Departments are an inadequate basis for rejecting it.


  5.  Friends of the Earth believes that Northern Ireland should not be denied the potential economic, social and environmental benefits to be derived from the Aggregates Levy. We share the concerns of others, however, that inadequate research has been carried out into the impact of the Levy in Northern Ireland, given the existence of the land border with the Republic of Ireland. The results of research completed ahead of the Chancellor's budget statement in March 2002 could be used to inform the precise form and manner of implementation of the Levy in Northern Ireland in April 2002. Such research should be commissioned without delay. We do not believe that a case exists for delaying the implementation of the Levy.

  6.  We believe that the Chancellor has a duty to engage his counterpart in the Irish Government, Mr McCreevy, with a view to developing mechanisms for tackling problems posed by the existence of the border for the effective implementation of the Aggregates Levy. In our view the most effective option would be the application of a similar tax in the Republic.

  7.  Finally, we believe that the Chancellor should establish a means of ensuring that the Levy is broadly neutral in its fiscal effect on Northern Ireland.

October 2001

1   The Aggregates Tax in Northern Ireland, Friends of the Earth (Northern Ireland), Belfast, February 2001. Back

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