Memorandum submitted by HM Treasury
1. The environmental rationale and the efficient
rate of an aggregates levy were established by independent economic
research, commissioned by the Department of Environment, Transport
and the Regions, and undertaken by London Economics.
2. Initial findings were published in April
1998. The Government invited an academic review of the first phase
of the study, "Environmental Costs and Benefits of the Supply
of Aggregates", in September 1998, which informed the second
round of research.
3. The study concluded that there were significant
environmental costs associated with quarrying, including noise,
dust, loss of visual amenity and damage to wildlife habitat, and
estimated the value of these costs on a conservative basis at
£1.80 per tonne. Phase two of the report can be found at
4. The aim of the aggregates levy is to
reduce these environmental costs and encourage the use and development
of recycled and alternative materials in place of virgin aggregate.
The levy will also encourage greater resource efficiency within
the construction industry. The Government has set the levy at
the cautious rate of £1.60 per tonne.
5. HM Customs and Excise initiated a consultation
in June 1998 on how an aggregates levy could operate. The aggregates
levy was announced in Budget 2000.
6. The levy was adopted in Finance Bill
2001, following usual Parliamentary discussion. This included
a whole day devoted to the levy in Committee of the Whole House,
ensuring thorough scrutiny. The levy will take effect from April
7. The Government has received and requested
a large amount of information about the impact of the aggregates
levy, both in Northern Ireland specifically and across the UK.
This has been a valuable resource that has helped the Government
carefully consider the arguments from all parties when designing
the aggregates levy. Information about a selection of some of
the evidence, data and views that the Government has received
from interested bodies is outlined below.
8. The quarrying industry, in particular
the main trade associations, has provided information about what
it believes the possible impacts of the levy will be, including
the Quarry Products association and
the Quarry Products Association Northern Ireland have provided
information and exchanged correspondence;
the British Aggregates Association
has provided "Aggregate Tax Impact Assessment", looking
at the forecast impact of the levy on prices, costs and demand,
and "UK Construction Materials and Import Substitution",
which detail the effects of the levy on the construction materials
industry and the implication for imports. The BAA has also commissioned
"Assessment of the likely
effects of the introduction of an aggregates tax", by BDS
Marketing and Research Ltd. This considered the market relationship
between GDP and aggregates production and the impact of a tax
on the rural community;
"Review of aggregates tax",
by Wardell Armstrong Consultants, which considered the aggregates
levy itself, the justification behind the levy, the reports commissioned
by the Government and other economic factors.
9. The pre-cast concrete manufacturing sector
has also supplied Government with information and been in correspondence,
including the following:
the British Pre-cast Concrete Federation
has provided papers including "Impact from the Aggregates
Levy upon the Pre-cast Concrete Industry". These provided
data on sectors of the pre-cast industry, including price and
market features. Their discussion of international trade covered
Northern Ireland and provided estimates of the impact on the economically
efficient distance that pre-cast products can be transported in
the presence of the levy;
Customs officials have corresponded
directly with the British Pre-cast Concrete Federation to exchange
data and check their analysis. The Financial Secretary corresponded
with the British Pre-cast Concrete Federation, resulting in a
series of letters providing more detailed information for officials
and the Financial Secretary to examine, for example, on the aggregate
composition of different pre-cast products, and price comparisons
between Great Britain and Northern Ireland.
10. The Government has also exchanged correspondence
and held meetings with officials from the Northern Ireland Executive,
including work on the impact of the exchange rate, the geographical
location of quarries around the border area and estimates of the
impact of the levy on the additional distance it is economic for
pre-cast products to be transported.
11. There has also been extensive work within
Government on the impact of the aggregates levy. The Government
has continued to discuss the details of implementation with the
aggregates industry. This includes particular contacts with Northern
Ireland given the fact that politicians and industry bodies have
drawn attention to their perceptions of problems with the levy
there. HM Treasury and HM Customs officials recently visited the
Northern Ireland Executive, and met representatives of the Northern
Ireland aggregates industry, while HM Customs officials also visited
border area quarries and discussed aggregates issues with representatives
of the industry during the summer. Officials continue to be in
contact with the Executive.
12. Industry contacts have also been maintained
through HM Customs' consultations with industry representatives
about the details of implementation of the levy.
13. Treasury ministers are actively considering
the issues surrounding the detailed implementation of the levy
as part of the ongoing Pre-Budget Report and Budget 2002 process.
14. The Government is fully aware of all
the issues relating to the levy and its implementation. There
has been comprehensive work on the potential impact of the levy,
including the impact on Northern Ireland. In addition to the evidence
and data provided from the sources described above, ministers
have also received representations from politicians and other
interested parties, which have been carefully considered.
15. Treasury Ministers have taken account
of a wide range of views as well as the extensive information
provided by both officials an the industry. The Government will
announce progress on issues concerning the implementation of the
levy in the Pre-Budget Report.
5 November 2001