Memorandum submitted by Tarmac Northern
Ltd
THE IMPACT OF THE AGGREGATE LEVY (PAYING
TO BE PUT OUT OF BUSINESS)
1. BACKGROUND
TO COMPANY
Tarmac Northern Limited operates a quarrying
and road contracting business in Northern Ireland with an annual
turnover of around £12 million.
The operation comprises of three operational
quarries, at Craigantlet, County Down, Hightown, Mallusk and at
Ederney, County Fermanagh as well as a road contracting business
throughout Northern Ireland.
The quarries produce aggregate, asphalt, macadam,
concrete and blocks. Employment is currently 65 direct Employees
with around 45 sub-contractors and hauliers.
The company is recognised amongst its competitors
as well as the statutory authorities as being leaders in the fields
of health and safety, and environmental standards within the industry.
Recently a CBI/Invest Northern Ireland Safety
and Environmental Audit known as Contour found our Craigantlet
Quarry to be "World Class" in these areas. All operations
comply with ISO 14001 Environmental Management. The high environmental
standards that we operate have been developing for a number of
years and are not as a result of the Aggregate Levy.
The company operate two recycling centres, one
at Hightown quarry, and one at Craigantlet quarry. These have
been up and running since January 2002, but with limited success.
Principally, the main obstacle is the lack of specifications for
recycled products.
2. THE IMPACT
OF THE
LEVY ON
THE COMPANY
The impact of the levy is totally negative on
our business, in that it has resulted in the loss of sales volumes
of virgin aggregate at all three operating quarries.
This volume loss is due to three basic reasons.
2a. Imports from ROI
Our Carn Quarry at Ederney, Co. Fermanagh, being
six miles from the Co. Donegal Border has lost volumes due to
unregulated imports.
In the last two weeks we noted an ROI company
from Ballintra, Co. Donegal delivering virgin aggregate to the
Forestry Service close to Irvinestown. When we queried with the
Forestry Service as to the validity of the ROI supplier (in terms
of levy payment), the Forestry Service personnel had no idea of
the procedures and had no idea whether or not the ROI supplier
was paying the levy.
It is clear to us that when we are (seven) miles
from the Forestry Service site and cannot be competitive with
an ROI supplier over 30 miles away, that a major problem exists
and in our view this is non-payment of the levy.
This is only one example of what we are up against
with respect to imports.
2b. Illegal (Unlicensed Operations)
There is a growing number of these quarries
opening up throughout Northern Ireland and operating without planning
consent, without environmental authorisation, or any semblance
of Health and Safety Standards.
They are particularly prevalent in the west
of the Province and in recent months several have been identified
in Fermanagh and West Tyrone to the HMCE via the Quarry Products
Association. Legitimate operations with high safety and environmental
standards such as ours simply cannot compete with these illegal
operations that not only avoid paying the levy, but also avoid
the costs associated with Good Safety and environmental practice.
In some instances these operations are or have
been supplying some public sector works indirectly through contractors.
2c. Levy avoidance by Licensed Operators
Prior to the introduction of the levy, the average
distance that virgin aggregate travelled in Northern Ireland was
11 miles. In Britain this figure would be nearer to 35 miles.
However, since the introduction of the levy
it is apparent that virgin aggregate is travelling much greater
distances and in many cases we have competitors travelling in
excess of 25 miles to deliver aggregate to sites on our doorstep.
In the highly competitive market within Northern
Ireland this was almost unheard of prior to the levy.
Our concern is that some operatives with regard
to their total production are not accounting for the levy and
this allows them to compete further from their base.
The overall impact of these factors has been
the reduction in sales volumes of virgin aggregates to external
clients. We estimate our sales volumes to have been reduced by
quarry as follows:
Carn Quarry, Ederney, Co. Fermanagh—16%
Craigantlet Quarry, Newtownards, Co. Down—22.5%
Hightown Quarry, Mallusk, Co. Antrim—23%
These figures are after adjustments for market
fluctuations. They also provide the evidence that the levy is
not just a border (import) issue.
Our response has been two fold, one to report
illegal actions where we see these happening through our association,
and, to increase our sales of added value products such as asphalt,
macadam, blocks, and concrete, where in year one of the levy,
the virgin aggregate was levy free.
3. THE FUTURE
3a. Added Value Sales
We are more dependant on these than ever before
to secure future profitability and the continuing uncertainty
regarding the "pegging" of the Levy at £0.32 per
tonne for virgin aggregate to added value products gives us a
lot of concern for the future of our business.
This, and the ongoing illegal operations and
imports has the immediate effect of calling into question our
investment plans in Northern Ireland and is also curtailing our
thinking on expansion.
3b. The Impact on Northern Ireland as a Community
We have given a detailed analysis of the impact
on our business, however we also recognise that for serious and
sincere minded people to take a holistic approach to this issue,
there is a need to look beyond the impact on one business to assist
the reader in forming an opinion. We would be of a strong opinion
ourselves that the Levy is having a detrimental impact on the
Northern Ireland community and we would particularly comment on
the following:
4. ENVIRONMENTAL
IMPACT
The Environmental Impacts are as follows:
4a. CO2 Emissions
Statistics available throughout DETI suggest
that for every tonne of delivered stone, 50% of the CO2 Emissions
involved in the production and delivery are due to transportation.
Given this fact it is clear that CO2 Emissions in Northern Ireland
have increased as a direct result of the Levy, in that parties
either avoiding the Levy or importing are hauling aggregate further.
4b. Visual Impact
The ever increasing opening of illegal quarries
and pits is creating additional scars on our landscape, and as
unlike legal operations who have restoration plans included in
their consents the illegal operations will be a permanent scar.
It is worth noting that when the landfill tax
was introduced, Northern Ireland suffered and still does from
fly tipping in holes in the ground which were described as "Land
Improvement". Now we have holes being dug in the side of
hills and it is being classed as "Land Improvement"!
4c. Increased Transport Movements
The obvious increase in road haulage movements,
particularly in Fermanagh and West Tyrone do nothing to attract
additional tourists to these areas.
5. ECONOMIC IMPACT
Somewhere in the region of £20-£35
million is being taken out of the Northern Ireland economy as
a direct result of the taxation depending on the level of the
illegal activities. In return, Northern Ireland will receive £0.9
million in sustainability funds.
5a. Enforcement Impact
Whilst the HMCE efforts are funded centrally,
the increased illegal operations has put an additional burden
on both the planning and environmental service which of course
comes out of the Executive Budget without compensation from the
Treasury.
5b. Roads Maintenance Impact
The increased cross border traffic and increased
travelling distance is putting additional wear and tear on Northern
Ireland's roads. This traffic would not exist if the Levy were
not in place. By nature of the problem, these are mainly border
roads and country roads, not designed for this increase in HGV
volume. The increased maintenance costs again comes out of the
Executive Purse.
5c. Social Impact
At a recent meeting of the Quarry Product Association
with Minister Ian Pearson, the writer pointed out his concern
that the levy would in time lead to injury or indeed the death
of people working in illegal operations, which have no health
and safety standards.
A few days later a couple were killed in the
Ballymoney area as a result of a collision with an alleged illegally
modified lorry carrying illegal fuel.
It is only a question of time before something
of this nature happens as a result of the aggregate levy.
The impact on jobs will begin to bite with respect
to legitimate companies. The impact of this goes beyond the quarry
gate. For example our Carn quarry, at Ederney in County Fermanagh
is the largest employer in the village and surrounding area. We
draw our employees from all social backgrounds, but mainly from
the farming community, where working in the quarry is seen as
a financial lifesaver. The area is designated a TSN area.
The writer's view on this is that with the plight
of the farming community, loss of industrial jobs, and jobs in
the fuel industry in Fermanagh, it certainly is an area of social
need, and most certainly central government are targeting it,
not to improve the social well-being but to social deprivation.
SUMMARY
The aggregate levy which was introduced as an
environmental taxation is having the opposite effect in Northern
Ireland, increasing CO2 emissions, destroying the landscape, and
having a negative impact on the social environment through existing
and future jobs losses, and increasing the burden of the NI Executive.
Of course it is not all doom and gloom. Two
parties are benefiting from the levy. The Treasury clearly are.
The other is those operating on the edge of lawful society in
Northern Ireland, exactly in the same way as is happening with
the smuggling of fuel.
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