Memorandum from the British Aggregates
THE ENVIRONMENTAL IMPACT OF THE AGGREGATES LEVY
1.1 The British Aggregates Association (BAA)
was formed to represent and protect the interests of the UK's
independent aggregates producers, and now represents over sixty
independent and privately owned quarry companies. The association
is recognised by all the appropriate government departments and
is an essential part of their consultation process.
1.2 BAA members have expressed increasing
concern that the aggregates levy is proving unable to deliver
the environmental improvements promised; indeed compelling evidence
has emerged since its implementation in April 2002 that the levy
is instead causing environmental damage.
1.3 The aggregates levy has not delivered
real environmental improvements:
Prior to the introduction of the
levy, the quarrying industry already minimised its environmental
impact by conforming to extremely demanding environmental regulation.
There is very limited scope to replace
virgin primary aggregate with either recycled construction and
demolition waste or alternative materials. In any case, more sophisticated
and effective tools existed before the introduction of the levy
to promote the use of alternative materials (including recycled
wastes), where viable.
The Aggregates Levy Sustainability
Fund has failed to fulfil its remit.
1.4 The aggregates levy is causing environmental
It has created new, environmentally
intrusive spoil heaps by distorting localised aggregates markets.
It has caused a surge in the level
of unlicensed and highly environmentally damaging quarrying in
Northern Ireland, and elsewhere in the UK, by creating a significant
additional incentive for tax evasion.
1.5 The aggregates levy should be revoked
before further environmental damage is caused.
2. THE AGGREGATES
HM TREASURY HAD
2.1 The aggregates levy has had an enormous
and highly damaging impact in Northern Ireland.
2.2 Official aggregates sales figures in
Northern Ireland have declined, despite an increase in construction
activity (and therefore demand for aggregates).
The gap is being filled by aggregate smuggled from the Republic
of Ireland, and by aggregate from unlicensed, unregistered quarries.
This is a direct result of incentives created by the aggregates
2.3 The current market for "black market"
aggregates is estimated at up to 5 million tonnes per annum, based
on Department of Enterprise, Trade and Investment (DETINI) figures.
This is equivalent to 20% of official aggregates sales. The "black
market" is projected to increase still further since official
aggregates sales are continuing to decline.
2.4 Customs and Excise are unable to properly
enforce the levy. They lack the resources to tackle this problem,
and are inevitably focused on high priority, higher value goods
such as fuel, alcohol and tobacco. The penalties faced for tax
evasion, in the unlikely event of being found out, are small compared
to the gains to be made. To the BAA's knowledge, there have been
no prosecutions for aggregates smuggling or unauthorised quarrying
in Northern Ireland since the introduction of the levy. It may
ultimately prove impossible for Customs and Excise to enforce
the aggregates levy.
2.5 Increase in Unlicensed Quarrying
The levy is also acting as the incentive for
a massive increase in quarrying at small, unauthorised sites,
and in "black market" aggregates. This is the most environmentally
damaging form of aggregates extraction.
2.6 The 22% fall in sales in Antrim, at
some distance from the border, can only be explained by a dramatic
increase in "black market" aggregates from unlicensed
quarries. At least 38 illegal quarries have appeared in Northern
Ireland since the introduction of the levy.
2.7 It is particularly regrettable that
the border areas, where most of the region's quarrying is concentrated,
are worst affected by the loss of legitimate aggregates markets
- many are severely disadvantaged, and have been designated "Targeting
Social Need"" areas by the Government; jobs lost there
are extremely difficult to recover and the impact is being felt
2.8 Unauthorised, unlicensed quarries are
not controlled through the planning system. They do not observe
the stringent environmental regulations applied to the industry.
Neither are they likely to observe employment legislation, health
and safety procedures, or hold adequate insurance.
2.9 The increase in "black market"
aggregates attributable to the levy is not unique to Northern
Irelandexamples of unauthorised, unregistered aggregates
extraction can also be found in many parts of rural Scotland in
2.10 Minimal Scope for Alternatives to
There is very limited availability of unrecycled
"hard" construction and demolition waste (C&DW)
that could be recycled and substituted for aggregate in Northern
Ireland. Furthermore, any increase in recycling of C&DW in
Northern Ireland will be dependent on improvements in waste management,
in particular enforcement action against unauthorised waste disposal
sites and changes to specifications for construction materials
to allow the use of recycled C&DW.
2.11 This assessment is supported by the
Symonds Report, which found that even if conditions both encouraged
and facilitated the maximum use of non-traditional materials,
the contribution which they could make to overall aggregate supply
in Northern Ireland is quite modest.
2.12 Creation of Intrusive New Spoil
Where alternatives are available, they have
replaced low priced aggregates by-products (also referred to as
"secondary" or "low grade" aggregates) for
which the levy represents a high proportion of the selling price.
These low grade aggregates are unavoidably produced when extracting
higher grade materials. Reducing demand for low grade aggregates
whilst high grade aggregates must continue to be produced, since
there are no viable alternatives, has had the perverse effect
of turning low grade aggregate into "waste" (see section
2.13 Many BAA members are already reporting
large new stockpiles of these lower-grade products, and the Symonds
Report confirms that this is a problem in Northern Ireland.
These spoil heaps are highly visually intrusive. This problem
will become steadily worse, unless addressed.
2.14 Nailure of Aggregates Levy to Achieve
As the Minister noted, "the Symond's evidence
confirms that the specific circumstances in Northern Ireland mean
that we are unlikely to meet the environmental aims of the Levy,-
to increase the use of recycled or alternative materials to primary
aggregate and also to reduce the environmental impact of quarrying"
3. THE TREASURY'S
3.1 The Treasury has stated its intention
to introduce a revised relief scheme for the aggregates levy in
Northern Ireland, from April 2004, subject to State Aids clearance.
This follows the failure of the Treasury's original relief scheme
in Northern Ireland, introduced alongside the aggregates levy
in April 2002, to address the damaging impacts of the tax.
3.2 As the committee will be aware, the
details of the new relief scheme are, in outline:
The relief will be 80% of the full
rate of levy, which will apply for the duration of the new scheme,
until 31 March 2012. The aggregates levy will therefore be applied
at a rate of 32 pence per tonne in Northern Ireland, (based on
the current full level of £1.60 per tonne).
Eligibility will be conditional upon
claimants entering into and complying with the terms of a Negotiated
Agreement. These agreements will set targets for improvement in
environmental performance of quarrying operations; each agreement
will be individually tailored to the circumstances of the quarry,
taking into account, for example, current standards and scope
for improvement. The detail of the form and content of Negotiated
Agreements is still being discussed by the Department of Environment
Northern Ireland (DoENI) and industry representatives in Northern
Aggregate or products made from aggregate
sent from Northern Ireland to Great Britain will not be eligible
for the relief
3.3 The BAA broadly supports the Treasury's
proposed new relief scheme, and believes it may mitigate some
of the most damaging elements of the aggregates levy. However,
we are concerned that Negotiated Agreements could require expenditure
by SMEs that is far greater, proportionately, than that required
of larger companies.
3.4 A large proportion of Northern Ireland's
aggregates businesses are SMEs. If the new scheme did not significantly
reduce costs to them, the current incentives to source aggregate
from outside the scope of the levy would continue to exist, as
would the consequent environmental impacts. The BAA therefore
believes that SMEs should be able to claim additional relief
on the basis of the significant additional upfront costs incurred
in complying with Negotiated Agreements.
4. THE AGGREGATES
4.1 The environmental damage attributable
to the aggregates levy in Northern Ireland can also be seen across
the rest of the UK. The environmental impact of the aggregates
levy is explored in more detail below.
4.2 No study of whether the aggregates levy
is meeting its ascribed environmental aims has yet been published.
Given the evidence of environmental damage attributable to the
levy, outlined below, there is a strong case for an urgent
public review of the environmental impact of the aggregates levy
across the UK.
5. THE FAILURE
5.1 Fresh evidence has emerged that the
Aggregates Levy Sustainability Fund (ALSF), set up to address
the environmental impacts attributed by the Government to aggregates
quarrying and funded by the aggregates levy, has failed properly
to fulfil its remit. This is particularly significant since the
ALSF formed a crucial part of the Government's justification of
the aggregates levy.
5.2 When the Fund was announced in April
2002, resources were allocated to three broad objectives: to minimise
demand for primary aggregates; to promote environmentally friendly
extraction and transport; and to reduce the local effects of aggregate
5.3 An interim review of the ALSF's operation,
undertaken by DEFRA,
"A number of concerns were
raised by stakeholders about the relevance of research undertaken
with ALSF monies. There was a view that some of the funding was
duplicating existing research and that it might not always be
a significant proportion of the ALSF,
which was to deliver on the second objective (promoting environmentally
friendly extraction and transport), has not been allocated due
to problems with State Aid clearance
"there was general agreement
that the Fund has lacked strategic focus and coordination, the
involvement of local communities directly affected by quarrying
activities has been constrained and there has been no overarching
mechanism in place to measure programme impacts in terms of desired
5.4 The BAA is very concerned that the ALSF
is not achieving the environmental benefits intended. In particular,
many of the projects supported are not focused on aggregates,
contrary to the Fund's intentions. The inability of the ALSF to
identify potential environmental improvements at quarries results
from the industry taking all possible steps to minimise its impact.
5.5 Defra have admitted that, "as neither
the structure nor the resources required to monitor and evaluate
its performance against stated objectives were identified at the
time of the Fund's design, the scope of the evaluation has been
The operation of the ALSF should be subject to a comprehensive
public review as soon as possible.
6. A BLOT ON
6.1 Across the UK, new spoil heaps of unsold
aggregates by-products are becoming a serious environmental blight,
a problem which will continue unless and until the market distortions
caused by the levy are addressed. The £1.60 per tonne levy
has made aggregates by-products commercially unattractive and
unsaleable in many areas. Localised markets for `low grade' by-product
aggregates have been distorted by the levy, which are increasingly
being substituted by the by-products of other industries, such
as slate and china clay.
This raises obvious questions about the environmental benefit
of substituting spoil heaps in one extractive industry for spoil
heaps in another.
6.2 Aggregates by-products are unavoidably
produced when extracting and processing virgin aggregate to produce
a quarry's primary product. This has never been treated as "waste",
since it could be sold cheaply, for use in products such as concrete
blocks, or for use as a cheap "fill" material, for around
£1 per tonne, or in some cases even given away. Since there
are no viable alternatives to high grade primary products, the
levy has mainly affected demand for by-product aggregates instead
of significantly reducing extraction it has simply turned some
aggregates into "waste".
6.3 BAA members report that large new spoil
heaps of unsold by-products have been piling up since April 2002,
with clear detrimental effects on the local environment.
The size of this problem will become more obvious over the longer
term as the management in larger companies become aware of the
problems on the ground.
6.4 Turning by-products into waste clearly
contradicts the spirit of the Government's own Waste Strategy
2000. Waste problems in other industries are being solved, at
the expense of creating a waste problem for the aggregates industry.
The products replacing aggregate in this way are invariably extracted
in almost exactly the same way as aggregates. The levy may even
be creating a perverse incentive for industries with by-products
suitable for substitution for use as low-grade aggregate to continue
producing high levels of by-product rather than developing alternative
The aggregates levy has created, rather than solved, a waste problem.
6.5 Despite the efforts of both HM Treasury
and the aggregates industry, it has not been possible to identify
a workable solution to this problem. This is largely because of
the impossibility of constructing robust definitions of the difference
between the low-grade aggregates turned into "waste"
by the levy, and the low-grade extractive products that are not
subject to the levy (such as slate). Further new aggregates
spoil heaps will only be avoided through abolition of the aggregates
6.6 Furthermore, since the levy created
a significant new incentive for tax avoidance, unauthorised, unregistered
aggregates extraction have emerged in many parts of rural Scotland
in particular numerous examples have been reported to HM Customs
and Excise. These operations do not comply with the stringent
environmental regulations that minimise the environmental impact
of the rest of the aggregates industry. They frequently have a
very damaging impact on the landscape.
7.1 The aggregates levy's stated intention
was to create market incentives to encourage greater use of construction
and demolition waste, promote the use of alternative materials,
and promote greater efficiency in the use of virgin aggregate.
The aggregates levy has proven to be too blunt a tool to achieve
these aims in a complex industry.
Pre-existing cost incentives,
together with the development of highly mobile, relatively cheap
machinery to process hard wastes, led to a dramatic increase in
the level of recycling before the aggregates levy was implemented.
In addition, targets to recycle such materials are increasingly
being used; for example under Agenda 21 local authorities have
increased still further their recycling of hard waste. The aggregates
levy is, by comparison to these measures, a relatively ineffective,
not to say blunt, tool.
7.3 Recycling clearly has an environmental
impact: research commissioned by the Government attempting to
quantify the environmental impact of quarrying found that households
living near the recycling site surveyed would be willing to pay
£9.57 per tonne in a hypothetical situation in which the
site were closed.
Substituting recycled for virgin aggregate does not significantly
reduce the overall impact of construction on the environment.
7.4 Just 633,000 tonnes of hard waste per
year, clean or contaminated, was landfilled in England and Wales
prior to the introduction of the levy,
equivalent to less than 0.6% of UK aggregate production. In this
respect, the aggregates levy is a solution in search of a problem.
7.5 Promoting Alternatives to Aggregate
More powerful means of promoting the use of
alternative materials already existed before the introduction
of the aggregates levy. Tighter regulations on the disposal of
waste had already necessitated finding alternative uses for many
materials. For example, the EC Directive banning the landfill
of whole tyres by 2003, and shredded tyres by 2006, means that
waste tyres will be re-used and recycled whether or not there
is an aggregates levy. The main restraint on the use of such alternative
materials is the strict specification of materials for many uses,
rather than their cost.
7.6 Where the aggregates levy has promoted
alternatives to virgin aggregate, this has been by pricing aggregates
by-products out of many of their local markets. This has prevented
this virgin aggregate from being used efficiently and is thereby
creating new spoil heaps (see paragraph 6.2 above). It is notable
that most of the alternatives being substituted for aggregate,
such as the by-products of china clay and slate, are extracted
in a very similar way to aggregates - they have no less environmental
impact than aggregates. In this respect, the aggregates levy is
an inappropriate solution that has caused an additional problem.
The British Pre-cast Concrete Federation advise
us that imports of processed products containing aggregate are
This is because the aggregate in imported processed products such
as pre-cast concrete cannot be taxed, whereas the aggregate in
such products is taxed when they are manufactured in the UK. There
is no environmental benefit in simply exporting aggregates extraction
8. Quarrying and the Environment
8.1 Aggregates are vital to provide the
needs of society - schools, hospitals, roads, railways and housing.
The aggregates industry provides employment for up to 70,000 people,
mainly in rural communities, and contributes around £3 billion
in primary products to GDP.
8.2 Aggregates producers are strongly committed
to preserving the environment, and take their obligations seriously.
Aggregates companies have invested large sums in complying with
stringent environmental regulations, and have created numerous
Sites of Special Scientific Interest (SSSIs) and RSPB sites through
both the establishment and restoration of quarries. Very few complaints
are ever received about aggregates producing sites.
8.3 The aggregates levy was intended to
bring about additional environmental improvements to those already
achieved by the industry. The Treasury argued that it would result
in "reductions in noise and vibration, dust and other emissions
to air, visual intrusion, loss of amenity and damage to wildlife
habitats". Prior to the introduction of the levy, the quarrying
industry had already invested large sums in conforming to extremely
high environmental standards, such as the requirement to use the
"best available technology" to reduce environmental
8.4 Since the levy was proposed in 1999
environmental regulation has been tightened, and the performance
of quarries has improved still further. These changes include
the EU requirement for all new aggregates sites to undergo Environmental
Impact Assessments, and additional protection for SSSIs. Together
with the responsible approach of the industry, such requirements
have reduced the environmental impact of quarrying to the greatest
8.5 Once extraction has ceased at a site,
it can be put to numerous socially and environmentally beneficial
uses, including the creation of recreational amenity and sports
facilities, the creation of wildlife habitats and geological exposures,
the recovery of archaeological remains, and essential services
such as waste disposal or water storage. Over 50% of sites of
special scientific interest (SSSIs) have resulted from the restoration
of old quarries.
8.6 The environmental justification for
the levy is flawed. The research commissioned by the former Department
of the Environment, Transport and the Regions (DETR) ,
upon which both the decision to introduce the aggregates levy
and the level of the tax were based, used the controversial contingent
valuation technique to measure the alleged environmental impacts.
It is notable that only one in ten respondents were prepared to
pay anything to shut their local quarry, which means the levy
is based on the views of a vocal minority. It is also worth noting
that the impact of aggregate recycling was valued more highly
than that of the majority of quarries.
9.1 HM Treasury's Statement of Intent on
Environmental Taxation states that environmental taxes "must
be well designed to meet objectives without undesirable side-effects"
9.2 The aggregates levy is a blunt and inappropriate
tool applied to a complex industry. The levy is failing to meet
its environmental objectives, and its undesirable side effects
include numerous examples of environmental damage, as outlined
9.3 HM Treasury should recognise that this
particular environmental tax has failed. There is ultimately
no sensible and environmentally sustainable alternative to revoking
the aggregates levy.
1 The £1.60 fixed rate of the levy added 56%
to the £2.85 per tonne average price (ex-works, before VAT)
of aggregate in the region (data taken from the Geological Survey
of Northern Ireland). Back
Annual Minerals Statement 2002, Department of Enterprise, Trade
and Investment (Northern Ireland) Back
This figure is based on a survey of illicit quarrying activity
conducted by the Quarry Products Association Northern Ireland,
and presented to the Northern Ireland Affairs Committee on 16
September 2003. The Symonds Report confirms that unauthorised
quarries can easily be seen, without any special effort (Assessment
of the State of the Construction Aggregates Sector in Northern
Ireland, Report by Symonds Group, in association with WRc, for
HM Customs and Excise, October 2003, page iv). Back
(Assessment of the State of the Construction Aggregates Sector
in Northern Ireland, Report by Symonds Group, in association with
WRc, for HM Customs and Excise, October 2003, p vi). Back
The Symonds Report also confirms that unsold stockpiles of materials
are building up (Assessment of the State of the Construction Aggregates
Sector in Northern Ireland, Report by Symonds Group, in association
with WRc, for HM Customs and Excise, October 2003, p 43). Back
John Healey MP, Economic Secretary, HM Treasury in Uncorrected
Oral Evidence taken before the Northern Ireland Affairs Committee
on Wednesday 5 November 2003/ Back
The initial costs of implementing a negotiated agreement are
likely to be greater for a small quarry, as compared to a larger
quarry, because of the need to employ environmental consultants
(larger companies can use in-house resources at far lower cost).
The impact of this additional spend will be proportionately greater,
since the costs will of course be absorbed by a lower level of
aggregates sales. Back
Mid Term Evaluation of the Aggregates Levy Sustainability Fund,
DEFRA, published December 2003. Back
ibid, p ii. Back
For example, sales of aggregates by-products at Penmaenmawr Quarry
near Conwy are in competition with locally produced slate by-products.
Their sales have fallen by 60% since the introduction of the levy,
a development that has led to the redundancies of 25% of the workforce.
A similar situation is experienced by many quarry operators in
Southwest England, where china clay by-products are readily available
and have, since the introduction of the levy, made aggregates
by-products commercially worthless. (Clay can be, and is, used
as aggregate, for example in lining reservoirs or constructing
motorway embankments.) In one case, a large aggregates producer
based in Kent reports that slag is even being imported from the
continent and used locally in place of low-grade aggregates, leading
to the dumping of these aggregates as "waste". Back
British Aggregates Association Membership Survey "Aggregates
Levy-The First Year", (June 2003). The survey found that
65% reported a problem with unsold by-products; the producers
affected were only able to dispose of 33% of the material, half
the level immediately prior to the levy's introduction. The BAA
estimates that, even during the first year of the levy's operation,
between ten and fifteen million extra tonnes of "waste"
were created. Back
For example Spanish slate producers reclaim much of their by-product
by binding it with polymer resin, and pressing it with hydraulic
presses to produce roofing tiles. The UK imports a significant
amount of these reconstituted slates. Back
Construction and demolition waste costs around £1.50 per
tonne to recycle, and can be sold for around £5 per tonne.
Recycling construction and demolition waste costs around £1.50
per tonne, and saves £10 per tonne (£2 in landfill tax
plus at least a further £8 in tip charges, haulage and administration
charges). The aggregates levy is £1.60 per tonne. Back
London Economics, "The Environmental Costs and Benefits
of the Supply of Aggregates-Phase 2", (August 1999). Back
Symonds Group in association with WRc, "Survey of Arisings
and Use of Construction and Demolition Waste in England and Wales
2001: Executive Summary of the Final Report to the Office of the
Deputy Prime Minister" (DTLR/ODPM, October 2002), Table 1. Back
We understand that the British Precast Concrete Federation intend
to explore this point in more detail in their written evidence
to the Committee. Back
London Economics, "The Environmental Costs and Benefits
of the Supply of Aggregates", (May 1998), London Economics,
"The Environmental Costs and Benefits of the Supply of Aggregates-Phase
2", (August 1999). Back
London Economics, "The Environmental Costs and Benefits
of the Supply of Aggregates-Phase 2", (August 1999). Back
HM Treasury, Statement of Intent on Environmental Taxation, Budget