Finance Bill

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Chris Grayling: I want to make a few remarks following on from my hon. Friend's comments. He raised some very important points about the measure. Most fundamental is the effect on many parts of our quarrying industry. Last week in the Chamber I had an exchange with the Chancellor of the Exchequer about a different industry but one on which the effects are likely to be similar. I pressed him again on the effect of the changes to North sea oil taxation. He started by defending the tax and its structure, but ended by asking how I proposed to raise the £500 million that the tax would raise.

The fundamental point is that, behind all of the window dressing, the Government are raising taxes from industry. They are taking £500 million from the North sea oil industry. In the case of the aggregates levy, they are taking millions of pounds from companies that are often key employers in remote parts of the country and thus fundamental to the survival of local communities. The Government cannot remove millions of pounds from an industrial sector without affecting its profitability and competitiveness, as well as its ability to play an active role in local communities and to follow good environmental practice and stewardship.

The Economic Secretary's response in the exchange a moment ago was lamentably weak. He had nothing to say about the Government's role in using the levy—if it must remain—to encourage good stewardship by companies that will continue, inevitably, to extract aggregates from the ground. The aggregates industry will not disappear and be replaced by a recycling service. If the Government wish to levy taxation on the industry, it is their responsibility to use the structure of the levy to encourage good environmental stewardship and performance. However, that is not happening. If the Government take millions of pounds out of remote communities in Scotland and recycle them in projects in other parts of the country, they provide no incentive whatever to companies to find the funds to put right some of the inevitable impact of aggregate extraction.

I would point the Economic Secretary in the direction of visible projects around the country. Gravel pits have been left in areas where sand and gravel have been extracted regularly for years, and the industry has turned those pits into some of our finest nature reserves. In many parts of the country—particularly the Cheshire countryside, which I know well—there are any number of high-quality reserves providing a valuable habitat for wild birds and other wildlife, which have resulted from investment put in by the aggregates industry after the extraction of minerals from a particular site.

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Inevitably, if taxation is levied from that industry, which is not structured in a way that encourages good environmental practice, and all that is done is recycle through a giant bureaucracy into projects that may have no relation whatever to the original source of the mineral extraction, the development of such projects in future will not be encouraged—it will probably be hampered.

The Government need to think again about the impact of the measure. They seem to believe that they can extract money from different industries without any impact on those industries' finances, the communities that they serve or the responsible works that many companies involved in the industries perform in their local communities for the good of people and the environment. The Government need to think again on the subject. My hon. Friend the Member for Christchurch is doing a valuable job for many communities in this country by highlighting the issue. I hope that the Government will think about what has been said in the Committee this morning.

Mr. Michael Jack (Fylde): I want to make one or two remarks following the excellent and cogent lines of argument of my hon. Friends the Members for Christchurch and for Epsom and Ewell.

No one would disagree with the need in many areas to be far more aware of the environmental impact that human activity has. In the context of aggregates and minimising the impact on the environment, I think that people would generally welcome the measure's objectives, but the Government have perhaps a schizophrenic approach to some of their environmental legislation. The objectives of the aggregates levy could have been achieved by a different route.

Had the Government settled down with the industry to negotiate some binding agreements about minimising the production of wastes and recycling existing materials, that would have been entirely supportable and laudable, and would, no doubt, have achieved the objective. I pray in aid of that argument the approach that the Government have taken with industries covered by the Intergovernmental Panel on Climate Change arrangements in the context of the climate change levy. Those industries were the subject of negotiated agreements on the reduction of energy usage.

If the Government can deploy in pursuit of reduced energy usage agreements that effectively bind people to achieve certain targets, surely in the context of aggregates they could do the same. It is right that people should be suspicious of the true motives that underpin that form of taxation, because the Government have chosen not to go down that route, but to use the levy as a source or revenue generation. Having been part of a Government who introduced new taxes, I know that it is never easy to do. Sometimes, it is hard to explain why one is doing something to raise revenue, but in this case the matter is highly focused. It deals with minimising the effect of the extraction of aggregate materials on the natural environment, and encourages the recycling of already used materials, both of which are to be entirely welcomed. However, the way in which that has been

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done shows that, in truth, it is really about raising money, rather than achieving an environmental objective.

John Healey: I shall deal first with the points put to me in debate, and then with the three new clauses in reverse order.

I regret that the hon. Member for Christchurch has belittled the sustainability fund, which will be worth £35 million in the first year. It is a new fund that has been designed to promote alternative uses of virgin aggregate, efforts to reduce the impact on local communities that suffer from the blight of nearby quarrying, and the environmentally friendly extraction techniques that the hon. Member for Epsom and Ewell returned to again in the debate.

Mr. Jack: Will the Economic Secretary give way?

John Healey: If I may finish this point, I will then certainly give way.

The sustainability fund will play a part in the encouragement of more environmentally friendly extraction techniques. If the hon. Member for Epsom and Ewell has suggestions for how, in addition to that, we might reinforce the operation of the levy to achieve that effect, I am very willing to look at them. I shall ensure that his proposal on encouraging members of the industry to be better stewards of the resources that they manage and exploit is put to the industry for discussion in our regular discussions with it.

Mr. Jack: In his remarks a moment ago, the Economic Secretary mentioned a number of arguments in favour of the aggregates levy. I wonder what plans the Government have to produce, on each anniversary of the introduction of the levy, an assessment of its impact and a commentary on how it is working.

John Healey: As an experienced Treasury Minister, the right hon. Gentleman will know that the Government keep the operation and impact of all taxation legislation under continuous review. The annual Finance Bill often becomes the point at which such matters can be examined and debated. I trust that that will be the case in the future.

Mr. Jack: I wonder if the Economic Secretary will give way.

John Healey: Again?

Mr. Jack: Again.

John Healey: By all means.

Mr. Jack: I am grateful to the Economic Secretary for his courtesy in giving way.

I accept entirely the Economic Secretary's first line of argument in response to my question, but he has put on record a series of tenets that he believes justify his position. So that Opposition Members and people outside might judge the robustness of his argument with even greater clarity, will the Treasury be kind enough to share with us the results of that continuous review exercise on the next anniversary of the introduction of the tax?

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John Healey: The right hon. Gentleman is very skilled at testing the robustness of my arguments and those of my hon. Friends, and I am sure that he will do so in future Finance Bills. On his second point, whether we should be considering for the aggregates levy something akin to the model of negotiated agreements that we have implemented for the climate change levy, if there is scope for such measures to help to achieve the purposes and objectives of this levy, we are indeed prepared to discuss them. That might be another item on the agenda for the next round of discussions that we hold regularly with the industry. I shall ensure that the right hon. Gentleman receives due credit for raising the point with me in Committee.

Chris Grayling: Does the Economic Secretary recognise that the difference between us, on the issues to which he referred a moment ago, is that the Government appear to believe that the sensible way to proceed is to levy a tax on the industry, put it into a fund and then allow people to bid for the fund for special projects? The approach that I would advocate is discussion with the industry, identification of possible ways of improving environmental stewardship, perhaps the provision of tax incentives to pursue those, then leaving the businesses with the job of carrying them out. That would be better than creating this convoluted, bureaucratic process where the money goes out, goes around through bureaucracy and then comes back in again.

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Prepared 25 June 2002