Memorandum submitted by the Quarry Products
Association, Northern Ireland
INTRODUCTION
1. This paper outlines the problems facing
the aggregates industry in Northern Ireland (NI) following the
introduction of the aggregates tax in April 2002. It highlights
a number of proposals that are designed to secure further amelioration
from the tax, over-and-above the measure already made by HM Treasury.
BACKGROUND TO
THE AGGREGATES
INDUSTRY
2. The nature of the quarrying industry
in NI is considerably different to that in Great Britain (GB).
For example, though employment levels in the industry are small
in comparison to other sectors they are still greater than in
GB[7].
Moreover, NI shares a land-border with the Republic of Ireland
(RoI) where there is no similar tax in operation. Prior to the
introduction of the Tax, data from the Geological Survey of Ireland
(GSI) and the Geological Survey of NI showed that the price of
aggregate was similar in both jurisdictions (on average, £2.86
in RoI and £2.85 in NI) but implementation of the tax in
NI has meant that competitive advantage is now with RoI producers.
Although HM Treasury (HMT) has acknowledged the uniqueness of
the NI quarrying industry relative to GB, the current measure
is insufficient in terms of scale and duration.
3. The Association welcomed the Pre Budget
Report (PBR, November 2001), which secured a temporary exemption
on aggregates used in processed products in NI. However, the experiences
of the industry during the initial 11 months of the tax indicate
that the measure falls short of what is required to secure the
long-term viability and competitiveness of the NI quarrying industry
and also fails to deliver the environmental objectives of the
tax.
4. As stated previously, the NI quarrying
industry is vastly different from that in mainland UK. Quarries
in the main are family owned and produce on average 200-300 thousand
tonnes per year, much less than many "super quarries"
in GB. NI quarries are rurally based, closer to the customer and
most processed products ie concrete, blocks and blacktop are made
within the quarry site thereby reducing average transport mileage
to between 12 and 15 miles, typically in GB this figure is 35
miles. The Environmental impact of quarrying in NI is much less
than that in mainland GB. Of the CO2 emissions generated by quarrying
(11 kilograms per delivered tonne) almost 50% of which is generated
in the transportation of aggregates when averaged throughout Great
Britain and N Ireland. In isolation N Ireland generates less emissions
on the transport element, as quarries are invariably closer to
their markets. The industry in NI takes its environmental performance
seriously. This is evident from statistics showing that the quarrying
sector has had the highest uptake of the Environmental Management
Quality Standard 1S014000 than any other industrial sector [Ref.
Invest NI Data]. In fact a number of smaller companieswithin our
membership are in the process of gaining accreditation and the
Association continues to actively encourage members to adopt Environmental
Management Systems. OPANI have received performance data from
the Industrial Pollution Control Inspectorate showing that in
2002 complaints halved from the number in the previous year. Also,
figures obtained from DOE Water Management Unit show a compliance
rate of 74%, higher than any other industrial sector in NI. Against
a Government target of 80% illustrates the excellent work and
investment being made by NI quarry companies in Environmental
Best Practice. The Environmental and Heritage Service (Department
of Environment) has confirmed that from a Water Order Perspective,
the quarry and quarry products sectors are outperforming other
sectors such as the food industry, with a compliance rate last
year of 74% compared to an overall industry average of 66%.
5. One of the aims of the aggregates tax
was to increase the use of recycled materials in construction.
However, there are a number of factors that combine to make this
difficult in NI. For example:
— Availability of quality recyclable
materials.
— Rurally based economy with limited
major development and urban regeneration
— Government specification and procurement
policy.
The Quarry Products Association welcomes recent
initiatives to begin to address these problems, notably the Strategic
Framework for the use of Recycled Materials in Construction, commissioned
by DOENI and the Construction & Demolition Waste Survey commissioned
by the Environment & Heritage Service. On the related issues
of Government specification and procurement policy, we look forward
to addressing these on a number of fronts, particularly through
direct liaison with Roads Service, Housing Executive and other
key stakeholders and through the proposed taskforce being set
up to take forward the recommendations of the Strategy Framework.
6. In supporting bullet point one above,
the executive summary of the Construction & Demolition Waste
Survey states: "The lack of availability of sufficient quantities
of waste in NI will therefore limit the potential for the use
of waste-derived aggregate" and further "due to the
limited quantities in the waste stream in NI, waste-derived aggregate
must be produced principally from construction and demolition
waste, glass and rubber."
In supporting bullet point 3, the aforementioned
report highlights "the need for government agencies to be
more proactive at specifying and encouraging the use of products
from the waste stream in the construction and road building industries."
IMPACT OF
THE AGGREGATES
TAX
7. The introduction of the aggregates tax
has negatively impacted on the industry, particularly with regard
to those quarries located close to the border. Though the scale
of impact has been difficult to determine, QPANI have sought to
develop a database from which conclusions could be drawn. We appreciate
that the information conveyed in this paper has already been passed
to Customs and Excise officials, it is important to stress that
together the surveys outline the seriousness of the situation.
CROSS-BORDER
TRANSPORTATION OF
AGGREGATE
8. QPANI commissioned the University of
Ulster to carry out a survey of border crossings in order to access
the movement of aggregate from the RoI to NI, something that rarely
happened prior to the introduction of the aggregates tax. The
report highlights a significant volume of aggregate being imported
to NI. Recent reports from member companies in the Londonderry
area have estimated that up to 90% of aggregate being used on
construction sites in Derry have come from RoI. At present QPANI
have initiated a survey to determine how many construction projects
are ongoing in the Londonderry area. We are then asking suppliers
of aggregate within a 20 mile radius of the city if, where and
what quantities they are supplying to construction sites in Derry.
Once this has been completed we will forward to C&E in order
to reinforce our evidence. This scenario is being repeated in
a number of border areas in NI, making life impossible for legitimate
NI quarry companies.
UNAUTHORISED QUARRY
EXTRACTIONS
9. Statistics from Planning Service in NI
have shown that from April 2002 to December 2002 there were 30
confirmed reports of unauthorised extraction operations, compared
to 17 in the same period the previous year when there was no aggregates
tax [Ref Geoff Harbinson Head of Minerals Unit NI Planning Service].It
is clear therefore that this "environmental tax" has
resulted in increased damage to the environment and is not fulfilling
the objectives that the Government intended.
QPA SURVEY OF
OUTPUT AND
EMPLOYMENT
10. The survey of monthly private stone
sales (September 2001-September 2002) was carried out by QPANI,
with 96 quarries and pits (58% of the total registered, however
representing approx 95% of aggregate production in NI.) included
in the survey. The results show a considerable drop in business
since April 2002 compared to the previous year. We expect this
to be confirmed by the statistics branch of the DETI (NI) when
they complete their figures for 2002. [This is information which
is gathered from industry and used as the basis of the NI Geological
Survey Annual Minerals Statement. This information will be available
by the end of March 2003].
11. Results from a survey of 28 quarrying
companies (member and non-members) showed that since April 2002,
52 people have been made redundant and it is expected that a further
58 will lose their jobs if the downturn continues. In a separate
survey, 10 aggregate processing companies located close to the
border have indicated their intention to relocate to the RoI with
the loss of 282 jobs if a further derogation is not secured. It
should be noted that all these jobs are located in areas designated
by Government as Targeting Social Need. These are initial statistics
and represent direct employees, however, if the tax is fully implemented
we will no doubt exceed the Department of Finances estimate of
1,000 job losses.
HEALTH AND
SAFETY
12. The Health and Safety Executive NI have
expressed concern (Ref. Dr Bryan Monson HSENI Chief Quarry Inspector)
that the increase in unauthorised extraction operations will result
in an increase in accidents. These unregulated rogue operators
will almost certainly be operating without adequate insurance
and will certainly not be adhering to safety procedures. These
unauthorised sites are also increasing the workload of the Planning
Service.
PROPOSAL
13. In order to secure the long-term competitiveness
and reduce the environmental impact of the quarrying industry
in NI we believe that the current measure can be replaced with
a more suitable alternative. We have outlined below two alternative
proposals that can deliver these environmental improvements with
minimal damage to the competitiveness of the industry. We are
also conscious of the need to keep within the confines of EU state
aid legislation.
Proposal (a)
Discount
As a result of the disproportionate impact which
the aggregates tax is having in NI, as outlined above, OPANI would
propose an 80% discount on all aggregate used within NI. The unspecified
approach would be easier to administer and give some relief to
quarries operating solely in virgin aggregate extraction.
Environmental Improvements—EPD
Individual quarries will deliver environmental
improvements specified in DOENI's proposed environmental compliance
scheme, which would monitor adherence to the environmental standards
prevailing in the UK with respect to issues such as dust, blasting,
noise and remediation. The targets in the proposed compliance
scheme would be implemented over a 3-year period from the scheme's
implementation date. compliance will be assessed on an annual
basis and failure to meet the necessary standards will result
in penal arrangements being applied. The nature of the penal arrangements
should form part of future discussions but the obvious measure
would be for the offending firm to be liable for the full aggregates
tax.
Recycling
DOENI commissioned two surveys that estimated
up to 800,000 tonnes of waste materials (Concrete, bricks, tiles,
ceramics, bituminous materials, glass and rubber) exist that could
be incorporated into processed products by the quarrying industry.
The QPA believe that the present level of recycling may be as
high as 80,000 tonnes, but have concerns regarding the accuracy
of this figure, given the limited data available.
With these figures in mind, the QPA proposes
the following target; "To increase the levels of recycled
materials which may now be as high as 10% of available material
in year 2003 to 20% by 2008, providing the effect of the aforementioned
barriers can be removed."
All exports of aggregate from NI to GB would
attract the full Tax.
Should proposal (a) fall short of the requirements
deemed necessary for EU state aid approval, we have outlined in
proposal (b) a specified measure that would give some further
amelioration over-and-above that already given by the Chancellor
in PBR 2001.
Proposal (b)
DISCOUNT
An 80% discount from the Aggregates Tax on all
aggregate used in processed products in NI and zero rating for
all processed products exported to the Republic of Ireland.
ENVIRONMENTAL IMPROVEMENTS
Each firm will deliver environmental improvements
specified in DOENI's proposed compliance scheme, which would monitor
adherence to the highest possible environmental standards prevailing
across the UK with respect to issues such as dust, blasting, noise
and remediation. In this instance, the targets in the proposed
compliance scheme would be implemented over an 8-year period from
the scheme's implementation date. compliance will be assessed
on an annual basis and failure to meet the necessary standards
will result in penal arrangements being applied. The nature of
the penal arrangements should form part of the future discussions
but the obvious measure would be for the offending firm to be
liable for the full aggregates tax.
[Again, QPA/DOE/HMCE will need to specify what
these targets are for the compliance scheme—lower than for
proposal A]
RECYCLING
AS STATED
IN PROPOSAL
(A)
With these figures in mind, the OPA proposes
the following target;
"To increase the levels of recycled materials
which may now be as high as 10% of available material in year
2003 to 20% by year 2008, providing the effect of the aforementioned
barriers is can be removed."
All exports of aggregate from NI to GB would
attract the full Tax.
Supporting Points
14. Enforcement—The success of any
regulation is dependent on how it is enforced. QPANI would want
to know what procedures HMCE are putting in place to ensure that
everyone coming within the scope of the tax pays and what penalties
will face companies who evade payment and act illegally.
15. Recycled Materials—QPANI would
propose that a working party between industry and Government is
set up, as soon as possible, to develop an infrastructure in NI
where procurement policy, specification and markets can be developed
to encourage the use of waste derived aggregate and work towards
a sustainable built environment. We would also welcome HMCE assistance
by informing the working party as to what structures have been
developed in GB, where there is a greater supply of waste derived
aggregate. QPANI would give an undertaking to participate in this
strategy, however, existing barriers must be removed.
16. Procurement Policy and Specification—At
present Government procurement policy rarely, if at all, specifies
recycled materials. Government is the largest customer of the
quarry and processed product sectors accounting for between 50
and 55% of all aggregates procured. Road Service specifications
always stipulate British Standard, when in many cases such a high
specification is not required eg footpath sub-base or glass as
a percentage of road base course material. If, as stated before,
specifications can be changed we are sure that economically viable
markets will develop.
17. Support from the Industry—HMCE
may ask the question, "How representative of the industry
are OPANI, and can we be assured of total industry support for
these proposals?" The membership of QPANI has grown significantly
in the past two years. In June 2001 the membership level stood
at 31 companies representing approximately 68% of aggregate production
in NI. Presently the membership stands at 70 companies representing
85% of aggregate production. In terms of processed products, representation
is higher, as can be seen from the database in appendix 5[8]
QPANI have excellent relations with other quarry companies, many
family owned, who simply do not want to join any group or association.
However, we have kept many of them informed about this strategy
and are confident they will wholeheartedly support it. QPANI have
also close relations with the British Aggregates Association,
who have three members in NI. We are confident that they will
support these proposals. It is our firm belief that if we achieve
a further derogation that QPANI membership will increase and that
influence and our ability to assist, encourage and develop members
procedures in best practice will be enhanced.
7 Employee jobs in "other mining and quarrying
and the manufacture of other non metallic minerals" (SIC
14 & 26) comprised 1.1% of total employee jobs in NI compared
to 0.6% in GB (2001). Back
8
Appendix is not printed. Back
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