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Session 2001- 02
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Delegated Legislation Committee Debates

Aggregates Levy (Registration and Miscellaneous Provisions) Regulations 2001 and Aggregates Levy (General) Regulations 2002

Fifth Standing Committee on Delegated Legislation

Monday 29 April 2002

[Mr. Edward O'Hara in the Chair]

Aggregates Levy (Registration and Miscellaneous Provisions) Regulations 2001

4.30 pm

Mr. Peter Luff (Mid-Worcestershire): On a point of order, Mr. O'Hara. I seek your guidance on whether it is possible to adjourn the Committee for a few days to give its members a better opportunity to acquaint themselves with the details of the regulations, as they are extremely complex. The official Opposition prayed against them to enable detailed scrutiny. The Committee of Selection met on Thursday—a day later than is usual, owing to the Humble Address to Her Majesty—and members of our Committee were not aware that they had been selected for it until the eleventh hour. I am sure that many of them would have appreciated more time to prepare for our proceedings.

If it were possible to adjourn the proceedings for a few days to enable better and more detailed scrutiny of the measures, the whole Committee would be in your debt, Mr. O'Hara.

Mr. David Heath (Somerton and Frome): Further to that point of order, Mr. O'Hara. You might like to take into account an additional factor, which is that on Budget day a press release from Her Majesty's Customs and Excise announced an amendment to the regulations—one that took effect from 1 April, and is therefore retrospective. Would it not be better if the Minister brought amended regulations before the Committee that we could then debate in a sensible way, rather than having a debate now and returning later to debate amendments?

Mr. Alex Salmond (Banff and Buchan): Further to that point of order, Mr. O'Hara. In statutory instrument No. 761, the relevant dates—when it was made, laid before the House and came into force—have been written in by hand. Does that not illustrate the rushed nature of the measure and the advisability of taking a little more time for consideration?

Kate Hoey (Vauxhall): Further to that point of order, Mr. O'Hara. May I voice my concern about how it seems as though the provisions are being rushed through? Since I was asked to serve on the Committee, I have not had time to absorb the various representations that I have received on the subject. I support the measure in principle, but there are problems, such as the way in which one of the measures was tabled only six days before the tax began, and the way in which legislation was changed after it had begun. I am not happy. If we are to serve on Committees such as this, we want to feel that we consider measures properly. Given the way that these regulations have been handled, that is not possible.

The Financial Secretary to the Treasury (Mr. Paul Boateng): I can respond to those points of order, and

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will deal first with the points made by my hon. Friend the Member for Vauxhall (Kate Hoey). These series of regulations have been subject to the most detailed discussion and consultation with the industry. The people who have written to her about the levy have been involved in detailed discussions with my officials, especially those who have written from the perspective of Northern Ireland, where there have been concerns about the impact of the levy. I have met officials of the Northern Ireland Executive and discussed the levy by telephone with Members of the Assembly.

The regulations are the embodiment of those discussions. There has been no attempt to pre-empt consultation—on the contrary, never has an environmental measure of such a nature been the subject of so much consultation and scrutiny. The Committee of the whole House considered it for eight and a half hours, and there were subsequently several days of examination at length by the High Court, examination in relation to state aid by the Commission, and individual and bilateral meetings with members of the Committee. I spent a very productive 45 minutes with the hon. Member for Banff and Buchan (Mr. Salmond)—

Mr. Salmond indicated dissent.

Mr. Boateng: Well, I felt they were productive. I fear that the hon. Gentleman is a difficult man to satisfy at the best of times. He might not be satisfied with the outcome of our discussion, but I think that even in his most churlish moments, of which there are a few, he would concede that ours was a productive meeting. We both explained our points of view and that expanded our consciousness. I found it helpful, as did my officials.

I now turn to the more frivolous objections. The hon. Member for Mid-Worcestershire (Mr. Luff) knows full well that before praying against regulations he has the opportunity—

The Chairman: I have heard the points of order, but I thought that before I responded it would be useful for the Committee to hear the Minister's observations, which have included explanations and cited extenuating circumstances. However, it is for the House to refer matters to the Committee, it is for the Committee to debate the issues, and it is for me to conduct an orderly debate. The appropriate place to raise a point of order about the time factor would have been on the Floor of the House. I rule that we should now proceed with the debate.

4.38 pm

Mr. David Lidington (Aylesbury): I beg to move,

    That the Committee has considered the Aggregates Levy (Registration and Miscellaneous Provisions) Regulations 2001 (S.I. 2001, No. 4027).

The Chairman: With this it will be convenient to consider the Aggregates Levy (General) Regulations 2002 (S.I. 2002, No. 761).

Mr. Lidington: First, I welcome you to the Chair, Mr. O'Hara. Having had the privilege of serving under your chairmanship before, I know that you will govern our proceedings with good humour, as well as with

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clear regard for the rules of order in parliamentary proceedings.

The two statutory instruments that we are debating this afternoon give effect to the aggregates levy, which was incorporated in the Finance Act 2001. It must be said that the rushed way in which arrangements have been made for this afternoon's scrutiny is similar to the way in which the Government have handled the tax throughout its development. It may indeed be the case, as the Minister said, that significant consultation has taken place behind the scenes between representatives of the aggregates industry and of Customs and Excise. However, it remains a fact that the actual text of the regulations was not laid until six days before they came into effect on 1 April 2002. That contrasts with the Government's guidance, issued by the Department of Trade and Industry, that the minimum implementation period for any new regulations should be 12 full weeks, and that a longer notice period should be allowed if the regulations are complex. It is the view of the entire aggregates industry that the regulations and the tax that they implement fall into the latter category—indeed, they are complex in the extreme.

The Government's declared objective for the aggregates levy has always been that it was intended to achieve environmental benefits. Every member of the Committee supports that objective, so it is a source of regret that the Government have never published details of their environmental aims, or benchmarks against which the environmental effectiveness of the tax could be judged. The Government's choice of tax was based on research carried out in 1997 and 1998 by a consultancy firm called London Economics. In 1998, however, the then Department of the Environment, Transport and the Regions published a review of that work by Professor David Pearce and Susana Mourato of University College London. Their review said that the estimates in the original research

    ''cannot be considered sufficiently robust to inform decisions about a possible aggregates tax.''

In its report on the levy's impact in Northern Ireland, the Select Committee on Northern Ireland Affairs made similarly cogent and trenchant criticisms of the Government's initial environmental analysis.

The industry's view is that the regulations will not deliver the environmental improvements that the Government seek. The Government have acknowledged that there remains a problem with secondary aggregates, which are the by-products of extracting a quarry's primary product. That is because secondary aggregates are sold very cheaply, for less than £1 per tonne, whereas the levy amounts to £1.60 per tonne. The question is, therefore, how economic will it be to sell such by-products for commercial use once the regulations take effect? I hope that the Minister will respond to that question.

Before Parliament approves the regulations, the Government must persuade us not only that they will meet their environmental objectives, but that the new burdens placed on British industry will be proportionate to those objectives. There remain differences between the Government's analysis—especially their regulatory impact assessment—and

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the analysis carried out by the industry, in particular the Quarry Products Association and the British Aggregates Association. There are differences about the effect the regulations will have on businesses' capacity to continue in profitable existence and to employ significant numbers of people, particularly in some remote rural areas of the United Kingdom.

The industry notes that its foreign competitors do not have to put up with either a tax burden of the magnitude that the levy is introducing, or with the degree of bureaucratic complexity that is spelled out in the detail of the regulations. Denmark's tax rate is 42p per tonne, France's is 6p per tonne, and in contrast to this country, where businesses have to pay £1.60 per tonne, Norway has no aggregates tax at all.

I shall focus mainly on the complexity. The levy taxes sand, gravel and rock; about 19 minerals are exempted, and there is a list of further exemptions for recycled aggregates, aggregates excavated during construction and so on. Tax relief can be obtained on 45 uses for aggregates, provided that the end user in each case provides the quarry operator with the paperwork necessary to make the appropriate claim from Customs and Excise. That leads to absurdities in practice, such as that of the quarry operator who supplies sand to Edinburgh university's sports grounds. The sand is taxable if it is used in the long jump pit, but eligible for tax relief if it is spread on the grass of the pitch. When we dig into the detail and into how the tax will impact on the working lives of real men and women—


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