Memorandum submitted by Friends of the
Earth (Northern Ireland)
INTRODUCTION
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.
THE CASE
FOR THE
LEVY
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.
THE ARGUMENTS
MADE AGAINST
THE LEVY
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.
CONCLUSION
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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