Examination of Witnesses (Questions 29-39)
16 SEPTEMBER 2003
MR WILLIAM
MCNABB,
MR GORDON
BEST, MR
MATTHEW MURPHY,
MR PAT
LYONS AND
MR STEPHEN
ROBINSON
Chairman: Gentlemen, welcome and thank
you for coming to help us. We have a number of questions to put
to you, starting with Mr Roy Beggs.
Q29 Mr Beggs: Good morning and welcome.
In your submission you state that the scale of the impact of the
introduction of the levy has been difficult to determine. You
have also indicated that the aggregates levy has negatively impacted
on the industry, particularly in respect of those quarries located
close to the border. Can you outline the problems your Association
are having and give the Committee an indication of the size of
the problem in each case?
Mr Best: First of all, Chairman,
thank you very much for this opportunity to give evidence to the
Committee. As you will have seen from our evidence, which is quite
comprehensive, we have attempted to give you an indication of
the scale of the problems that as an industry we have encountered
since the introduction of the tax last April. Although all the
research that we did was never an exact science and that was alluded
to in the cross-border survey, they are indicators to a bigger
picture. The information all points in the one direction, that
is that the tax has had a detrimental effect not only on the industry
but on the environment within Northern Ireland. I would like to
take the Minerals Statement for 2002 first of all which showed
a downturn of 2.6 million tonnes. That also showed a drop in employment
of 200 people which is even greater than the figures that we had
estimated, and I believe the Symonds Report, which will be released
next week, will again back up that evidence. I think the obvious
impact when we put the Ordnance Survey map together was the main
concentration of illegal quarries in Antrim. I think the plain
and simple answer to that is they do not have access to aggregates
from over the border. As you have seen yourself, those illegal
extraction operations vary from the as-you-acquire-it to six full
scale screening and crushing operations. That has had a serious
effect on the lower value end of our industry, the people who
are not supplying into the added value market. I took a phone
call on Friday from a quarry owner just outside Dungannon. He
told me he had been to see his bank manager the day before to
extend his overdraft because of the tax that he had paid. I am
sure if you asked any of these gentlemen here they would tell
you that the amount of tax that the legitimate people have paid
to date far exceeds their profits. That gives you an indication
of the effect that it is having on our industry.
Q30 Chairman: Perhaps we should hear
from one or two the exact amounts of tax they have paid since
the levy came in. Would you like to tell us your experience since
it came in?
Mr Murphy: Our company is untypical,
the others could speak more about what their total bills are.
We deal primarily in value added product and the amount of unprocessed
material we produce is relatively small.
Mr Robinson: The amount of unprocessed
material makes up about 50% of our turnover which would be about
£1.5 million in value annually. In the first financial year
of the aggregates tax we paid Customs and Excise £535,000,
which is 30% of the turnover of our product. We trade within a
very tight radius of our plant in mid-Antrim; our average radius
is 14 miles from our depot. We have a very small community and
a small customer base. We have turned round and we have collected
that amount of money from those people within that area. I would
say that within the greater Ballymena or Larne area we would have
had to extract £500,000-worth of tax out of their pocket.
If I had turned round and decided to increase the turnover of
my business by about 30% over the space of a year that would have
been extremely difficult. What I see that does for those people
is it is more money out of their pocket. 30% of the turnover of
my product is now taxation.
Mr Lyons: In the last financial
year our company paid out just short of £1.2 million in aggregate
levy. We have a diverse operation centred around the Belfast area
and in the border area of County Fermanagh and the impact of the
levy I can describe in a number of ways. In the border area our
sales have dropped by something like 20-odd%—and I must
emphasise that that is our external sales to third parties—because
of imports from the Republic of Ireland. We can provide precise
evidence on imports where levies have not been collected, including
imports into the public sector in Northern Ireland. I would also
make the point that some people may be under the illusion that
all of the imports are taxable at the point of exploitation. In
fact a lot of imports are quite legally coming into Northern Ireland
without any tax applied to them. I will give you an example of
that and one which gives you an idea of the inadequacy of the
legislation and the problem Customs and Excise have. In Northern
Ireland there are quite a lot of single dwellings particularly
in the west of the province close to the border. A chap building
his own house can legally import aggregate from the Republic of
Ireland without paying the levy because that is not commercial
exploitation. As was said earlier on, if after three months his
wife says, "Get it finished by Christmas or you'll be living
in it on your own," and he employees a contractor to do it
and the contractor finishes the house, then it becomes taxable.
So it is a bit of a nonsense in that sense. Our sales have certainly
gone down and to survive that our business has had to do two things.
One, to focus on added value sales, concrete, coated material
and blocks because they are not particularly impacted by the levy
at this moment in time and that has helped us. The other thing
that has helped us is to sit at night and read and research all
the legislation and look for legitimate loopholes to avoid having
to pay the levy so that we can compete with the illegal operators.
The difficulty is that my company paid the Government £1.2
million in the last financial year for the privilege of being
gradually put out of business. We see no escape from it. The 42
illegal quarries that were alluded to surround our businesses.
These are 42 quarries that physically did not exist prior to the
introduction of the levy. Irrespective of how many illegal operations
existed before that, these are an additional 42.
Mr McNabb: If you take some of
the small quarry operators in Northern Ireland who do 150,000
tonnes per annum at an average selling price of £2.60, they
may be lucky to make 30p of profit, which is £75,000. So
we get £75,000 of profit but we have to pay Customs and Excise
£400,000 in aggregate tax. Then the fraudulent trader decides
he will have half of that £400,000 to himself and he is able
to retain the £75,000 plus £200,000, so the bona
fides disappear and we create an army of criminals.
Q31 Mr Beggs: Chairman, I take it
nobody wants to outline where the loopholes are! We understand
that the Association has sought to develop a database. Have you
put that in place, and have you been able to draw any conclusions
from the information on that database?
Mr Best: Sorry, the database on?
Q32 Mr Beggs: The database on illegal
quarrying.
Mr Best: We decided some months
ago that for any case to be successful we would have to produce
accurate figures. A number of companies, along with myself as
Regional Manager, decided to pick certain areas and gather information
on those sites. We took photographs which you have got copies
of. They are there, nobody can dispute that. In the past month
I have had meetings with Customs and Excise, the Planning Service,
the Water Management Unit and the IPC Inspectorate and the information
that we gave to the Committee, ie the map and photographs, was
given to them. I do not fault the individuals within the various
departments because certainly the Planning Service people are
running from pillar to post. The senior officer within the Minerals
Unit, at a meeting with Customs and Excise back in February in
Belfast, explained that his workload has doubled since the introduction
of the aggregates tax. One of the other points that we have made
and will be making to Angela Smith when we meet her in November
is that there seems to be a tendency within the local enforcement
agencies to target the bona fides, the legitimate companies.
If a report comes in of someone exceeding the consent limit they
are in the next day yet we have a backdrop of 38 illegal operations.
One of the points we made in the original inquiry was that we
did not believe that Customs and Excise had the resources to enforce
the tax. There was one operation in the Ballymena area that was
notified to them a year ago and that individual has only registered
within the last two weeks for the aggregate tax. It was also pointed
out to them that there was aggregates coming across from McDade's
quarry in Donegal (I think it is "D" on the map) on
the Greenisland-Magilligan ferry. I had a report last week of
lorries coming across and going up to a local housing development
in the Limavady area. That is what we are faced with.
Q33 Mr Tynan: Appendix 2 illustrates
the point that there were 409 people employed in 2001, 411 employed
in 2002 and 389 in March of this year. Are those figures correct?
Mr Best: That was actually taken
from the top ten returns to the Symonds Report to Customs and
Excise. It is not a comprehensive survey but it is an indicator
as to the impact on employment. Given the time factor we felt
that we would be better to survey the top ten producers.
Q34 Mr Tynan: So the 22 jobs lost
is not the total amount of jobs?
Mr Best: No.
Q35 Mr Tynan: So this is the top
ten companies within the area and their job losses?
Mr Best: Yes.
Q36 Mr Tynan: So the job losses of
52 that is mentioned in your evidence is for the other companies
involved, is it?
Mr Best: I think the survey that
we did back in September/October last year covered about 34 companies
within our membership.
Q37 Mr Tynan: Are these jobs all
attributable to the levy?
Mr Best: They would be, yes.
Mr Murphy: The levy has been introduced
at a time when public spending in the construction sector in Northern
Ireland is on the increase. Over the last year we have also seen
about a 7% increase in the value of the euro with respect to stirling.
Those two factors would be operating in favour of our industry
and should be producing a more beneficial effect on our industry.
Certainly the major negative impact that we see in the market
place at the minute is the aggregate tax. On the issue of illegal
operations, like anybody in business criminals get into crime
for financial gain and we have always had a certain amount of
illegal operations. As the Government increases the financial
incentive and the reward that can be obtained from operating an
illegal pit then obviously the more criminals will decide to operate
illegal pits. It seems to me it is an area where we have an opportunity
to operate within government or outside government, there is an
inefficiency here. The illegal pits are like mushrooms because
on the one side we have the Treasury feeding the mushrooms with
manure by giving them £1.69 in profit that we do not have
and on the other side we expect Customs and Excise to cut them
down. Why can they not attack the problem at the root and reduce
that huge incentive for people to adopt criminality rather than
try and attack these mushrooms that are, frankly, growing up everywhere.
Q38 Mr Tynan: Let us look at the
sales information for the year. You indicated that in 2002 it
was 2,643,559 and this year it was 1,154,000. Are those figures
comparable for the same period of time?
Mr Best: That is taken directly
from answers two and three of the Symonds Survey for Customs and
Excise, from 31 March to 1 April, for three years.
Q39 Mr Tynan: Is that the ten top
companies as well?
Mr Best: Yes.
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