Select Committee on Northern Ireland Affairs Minutes of Evidence

Examination of Witnesses (Questions 100 - 119)



  100. In 1997 the Government indicated in their statement of intent that they were looking for the principles set out in it to "encourage innovation in meeting environmental standards . . . and deliver a more dynamic economy". Are you confident that the levy reached that criteria?
  (Mr Woods) In Northern Ireland?


  101. Before you answer that question, will you say whether you agree with that Government statement on their general principles for environmental taxation?
  (Mr Woods) Yes. We might quibble with the odd word but broadly we are very much in tune with their thinking on that, if it were to be properly implemented. Obviously, proper implementation would depend on local research being carried out because as it stands at present, there are doubts about it. Encouraging quality of growth, not just its quantity, and shifting taxation from the "goods" to the "bads" would be important. You mentioned, Mr Tynan, a dynamic economy.That is particularly important in this context, assuming that it is in context. The DTI, in response to last year's sustainable development strategy, brought up the issue of a key economic indicator being waste arisings. I mention the DTI here rather than our own DETI; we do not yet have a sustainable development strategy for Northern Ireland yet, but clearly this is the direction in which Government thinking is going. They stated that a key economic indicator is waste risings; they spoke of a low-waste economy and of critically high levels of resource productivity combined with a strong innovation policy. Our fear is that if Northern Ireland is exempted from the aggregates levy it will find itself left behind in those terms. It will not have the incentives needed to develop the sort of technologies that will be needed globally to achieve sustainable resource use. Environmental regulation and environmental and ecological taxation drive innovation—we know this from examples from a number of countries. There is an opportunity to create jobs in new industries that have a future rather than just hanging on to jobs in clearly unsustainable enterprises. It is an opportunity for us to be swift on our feet economically in spotting new opportunities. Unfortunately, at the moment we seem to be fighting a rearguard action against the policies which drive innovation which, ultimately, is self defeating.

Mr Beggs

  102. The London Economics Environmental Cost and Benefits of Supply of Aggregates indicated in 1999 that of 5,030 persons surveyed about the environmental impact of quarrying, on on-site noise, 31 persons said in response that there was an impact: that is 0.6 per cent. On blasting noise and vibration, 32 persons out of 5,030 responded; this, again, is 0.6 per cent saving that there was impact. Sixty-seven people attributed cost arising from the impact of dust; this was 1.3 per cent. The highest response—175 people—attributed cost to the adverse effect of nature—this was 3.5 per cent. Sixty-one of the 5,030 said that there was cost arising from eyesore, from chlorane. Is not there too much playing up of this issue, in that such a small response from people living in close proximity to quarrying operations considered that there were serious actual environmental impacts? Is not this whole issue more about stealth tax?
  (Mr Woods) On the last point, I do not think that it is not about stealth tax, because it is aimed to be fiscally neutral, as all ecological taxes are. On the other points, I have not read the study but I can see that it might sound unconvincing. If it were compared with studies of other

  activities that people find distasteful, this might tell us a little more about what people usually say about something such as aircraft noise, for example. We might then discover an average response. There are bigger issues there than the immediate that people suffer in terms of dust and noise and so on. Obviously we must take into account the fact that a small number of people suffer a great deal from these, whereas we might find that most people of those 5,000 are only

  marginally affected, while others may be to a greater extent. My colleague mentioned long-term issues such as loss of landscape and habitat. Clearly, these affect us cumulatively: it would depend on the way in which the picture was portrayed to people in terms of how it might pan out in the long term in relation to amenity and so on.

Mr Pond

  103. While I accept the data that Mr. Beggs introduced, I am aware that flora and fauna

  were not polled. Had they been, the result would have been slightly different. Surely we have a duty to recognise the needs of the biodiversity of flora and fauna, which cannot respond to

  opinion polls.
  (Mr Allison) Quite so. There are also long-term implications. Quarrying is clearly fundamentally unsustainable. Effectively to lock local communities and economies into an

  unsustainable practice means that problems would arise in trying to find other things to do when the land that people once farmed has been quarried and they no longer have the land and the tourism facilities that they might have had. So there are also those long-term implications.
  (Mr Woods) I add a general note of scepticism about opinion polls in such situations in that they ask people straightforward questions but these are based on very little information, but they would often give very different answers had they been given different information and had the chance to deliberate on the problems and perhaps scrutinise some of the issues. Perhaps I am not entirely surprised about how low these results appear to be. We might uncover rather more disturbing findings if people were given an opportunity to discuss the issues.

Mr Bailey

  104. You stated in your memorandum that the levy would encourage innovation and new industries. Would you like to comment on how you think this would come about, in terms of new employment and of how loss of jobs can be compensated?
  (Mr Woods) My colleague may have something to add. As regards innovation, we mentioned Powerscreen, a company in Northern Ireland, which already is doing rather well producing equipment for the recycling aggregates industry. The industry generally is in its infancy at present so not much has been happening, but there are clearly opportunities there which will be achieved only if there is a driver there to pursue this aspect. You asked me about the possibility of job migration and job loss.


  105. Before you move from that to the specific answer that you just gave, may I ask whether you see any chance of an infant recycling industry developing after the aggregates tax has been imposed—assuming it is imposed in Northern Ireland—while cheap virgin aggregate is available 10 miles away across the border? Who would be able to afford to do that development?
  (Mr Woods) The cheap virgin aggregates imported will surely be taxed, will they not?

  106. But they would not pay the levy?
  (Mr Woods) Imports of aggregates will be taxed.

  107. Sorry. I used the wrong phrase. I meant to say imports of made-up goods. I beg your pardon. Imported materials.
  (Mr Woods) Imported materials—the secondary products—will compete fairly. So, will we have the opportunity to pursue an infant recycling industry? I am repeating your question to myself. It depends. Clearly, we do not know to what extent these cross-border transfers will take place. If they are enough to undermine the industry in secondary products in Northern Ireland completely, clearly that could be the case. But I doubt whether anyone is arguing at the moment that the whole industry will be undermined. The particular concerns are those along the border rather than in the whole industry. I think that there would still be an incentive although it still depends on a well-designed ta, and it is difficult now to have a well-designed tax without research having been done.

Mr Bailey

  108. The effective cost-benefit analysis arising from the imposition of this tax is such that something like almost half of Northern Ireland will have a financial advantage in moving across the border. Have you considered the potential impacts? Obviously there are the extra vehicle movements but they will not be only those of contractors importing added value aggregates; in addition, some employees may decide that in order to maintain their jobs, they will travel the appropriate distance to the newly relocated plants, which also will have an adverse environmental impact.
  (Mr Woods) I understand that such are the levels of wages in the industry that employees are unlikely to travel great distances. That would be an undesirable outcome which needs to be measured and assessed. We do not claim to have measured or assessed it. In terms of the industry moving, I understand the most likely scenario to be that virgin aggregates will continue to be extracted in Northern Ireland but will be moved across the border to be processed in the Republic and then re-exported free of tax to the north. This is where I come to the critical issue of the migration of jobs. The QPA figures—which I believe the DEFP accept—are that there are roughly 5,600 jobs in the industry, 3,000 of which are in quarries and pits, which I take to mean

  that they are in aggregates extraction, whereas 2,600 are in processing the secondary products—blocks, asphalt, etc.

  109. I cannot remember the exact figures but my recollection of the questions that we put to the industry were such that a relatively low proportion of the total employed arose from extracting virgin aggregates. The greater part was in manufacturing.
  (Mr Woods) There may be a different explanation. Figures that they published show that there are 1,360 people in production in quarries and pits and 1,300 people associated with that, in distribution. So that might explain what you have said. The actual extraction of virgin aggregates has 1,300 jobs but in fact there are a further 1,300 in the distribution of those. Those jobs will continue. The industry have said that it is likely that they will continue to extract in Northern Ireland and export to the south. So the jobs under threat would be the 2,600, and such of those as are situated close to the border, within whatever the critical radius would be—probably 25 miles.

Mr McGrady

  110. May I pursue that a little? I am a wee bit concerned about the details. You said several times regarding costings that you do not know the answer. You were quite up-front about it and I can understand why because it is an extremely complex issue some of which is very subjective. We have a parallel in that a considerable part of the industry that supplies fuels along the border—especially retail sites and petrol stations and so on—have simply closed down because of the differential in duties there. That is hard fact; it has happened. Many people will be concerned that it would also happen in this context because even for the totality of the job it is easier to manufacture and add on value at the site of extraction rather than transport from the site of extraction and manufacture on some other site. I have a great worry that not enough research has been done but you are not promoting this fact as a way of addressing the unanswered questions.
  (Mr Woods) I certainly agree that there is a problem and that with your parallel of the petroleum industry there is clearly a problem because of the border. At the moment I am trying to disaggregate the jobs threatened through the border effect and those threatened, as it were, by the overall effect of the tax. It has been argued that X thousand jobs are under threat across Northern Ireland. I am trying to work out precisely which of these are because of the border and which are though to be because of the tax itself. I understand that the Committee is particularly interested in the effect of the border. What I am arguing is that the border's existence will not affect those jobs which come from actually extracting primary aggregates and the distribution of them, but that jobs may well be lost—and we recognise fully that this is an issue;—amongst that proportion of the 2,600 jobs in secondary products which are located within a given distance of the border.


  111. At the previous evidence session, when Mr Murphy was asked about the perspective of employment, he said: "Due to the fact that exports of value-added products are not exempted in the same way as exports of virgin aggregate are, it has created a bizarre situation where you can export virgin aggregate to a plant in the south and carry out your value-added process there. As in every industry, the vast majority of jobs are involved in the value-added process, in some sectors you may have two, three or four people involved in extraction and maybe 20 or 25 involved in the value-added process". So it is very much the majority of jobs that are in the value added part of the industry. Would you argue with that?
  (Mr Woods) We are looking at their statistics, which do not explain it in the same way. I don't know whether he has given—

  112. Where do your statistics come from?
  (Mr Allison) This is from the Quarry Products Association's submission to the Northern Ireland Assembly.

  113. The Northern Ireland Assembly. I just wanted to get this clear because it needs to be looked into.
  (Mr Woods) That was my point. The border effect is problematic and I know that the Committee is trying particularly to get at the border effect. I am very keen to separate that from the overall arguments because the argument that the aggregates levy will lead to a loss of jobs in certain areas are equally valid for many parts of the United Kingdom, depending on the local structure of the industry.

  114. Will you justify that? What parts of the UK will be affected in the way that Northern Ireland will? The problem is that the lack of taxation south of a land border surely does not exist in the United Kingdom at all: it is the same for everyone in Great Britain.
  (Mr Woods) I did not make myself clear. It is clear that a number of jobs are threatened as a result of the border's existence. But there are also a number of the jobs that the industry says are threatened merely as a result of the tax overall. For example, the industry has said that the £1.60 tax on an existing product price of £2.60 or £3 is a very much higher percentage than any other GB average. We argue that the GB average is not a fair comparison. In particular parts of Great Britain we may well find that the price of aggregates locally is towards the levels

  in Northern Ireland. Am I making myself clear?

  115. Yes, but you are not answering the question which both Mr McGrady and Mr Bailey are getting at, which is that in Great Britain there is a level playing field—it is the same for everyone—and that there will be an effect on employment. Whether it is fiscally neutral or goes to good jobs as opposed to bad jobs—all the things that the Government watch—is one thing, but in Northern Ireland we are talking about an unlevel playing field created by an artificially created tax where there is a land border on the other side of which is a different regime. Therefore what all of us are seeking an answer to is, what is the extra penalty, and is it fair, in terms of jobs?
  (Mr Woods) I agree. The land border effect is unknown and the loss of jobs in the industry—which I think is 4,000—is not explicable by the existence of the land border. The industry is claiming that there are many other reasons for the loss of jobs—for example, because the industry will simply sell fewer products. Job losses in the industry will occur throughout the United Kingdom as a result of this tax but we should regard them as job transfers to more sustainable industries. Ecological taxation is designed to transfer jobs from an unsustainable activity into a

  more sustainable one. Many of the industry's arguments have been that these jobs are disappearing and will have gone whereas, in fact, there is a potential to transfer to other employment—which is the whole purpose of the tax.

  116. Well, what is your answer to the proposition—since you are Friends of the Earth, not Friends of the Earth (Northern Ireland)—that jobs are being transferred from one sustainable unecological area in Northern Ireland to the same unsustainable unecological jobs in the Republic?
  (Mr Woods) Clearly that would be futile, so we do not want it to happen. This may be a relatively small number of the total jobs lost. I believe that we do not know because we have not seen the results of the research—and we believe that research into the precise effect has not been undertaken.

Mr McGrady

  117. That was my point about research. I agree with you that the Treasury in London did not carry out any research in Northern Ireland prior to deciding in principle. It has now made soundings. Would you say that a proper and full inquiry should be undertaken, analysed and evaluated before the levy is introduced in Northern Ireland? Also, do you intend to undertake such an inquiry, based exclusively on Northern Ireland and, perhaps, submit it to the uninformed Northern Ireland Assembly Committee on the Dexter side of the argument?
  (Mr Woods) Yes, I believe that research should be done. We have said that we think it should be done very quickly. There are some months, and the methodologies exist so it should not be too difficult to complete the information before implementation of the levy. There is no time to lose, as we suggested to the Treasury as well. I know that the QPA want it done; perhaps it would rather it be done over a longer timescale. But we think that to dely the levy's implementation would be a mistake, in terms of our own research. I regret that my office comprises only four people: we work on a number of issues and we are severely constrained in our resources. We have to learn these issues pretty fast and to commission research on this would be difficult. I will certainly bring to bear my colleague Dr. Jenkins' wisdom in that we could offer his expertise to whoever undertakes the research.

  118. Finally, you stated that the Northern Ireland Assembly has been lobbied yard by the quarry industry and that it seems to have accepted the arguments against the levy without the benefit of a different view. You take that different view. Are you making a reasoned argument to the Assembly Committee or, indeed, to this Committee?
  (Mr Woods) I hope that we are making a reasoned argument to this Committee. We have put our argument to the Assembly's Agriculture Committee. We submitted evidence to three Committees and were asked to visit one of them.


  119. Mr Woods, I do not want to put words into your mouth. You have been very frank with us and you concede that there are difficulties because of a lack of research and information about the effect of the introduction of a UK-wide tax on Northern Ireland specifically—on its jobs and its economy—and that because of the ability of the people of Northern Ireland to go to get their aggregates and their value-added aspect a short distance away across a land border, there might not be an overall environmental benefit. Does that mean that you are cautioning that we should pause and look at this before we impose it, or do your demands remain that even if it does have those negative effects—that even if it does not do the good that you wanted it to do—it is better than nothing? I am trying to summarise what I think you have said because you have been very frank in stating that the argument is not one sided.
  (Mr Woods) I think that to say that there might not be an overall environmental benefit would not be strictly accurate.

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