Examination of Witnesses (Questions 40-56)
16 SEPTEMBER 2003
MR WILLIAM
MCNABB,
MR GORDON
BEST, MR
MATTHEW MURPHY,
MR PAT
LYONS AND
MR STEPHEN
ROBINSON
Q40 Mr Tynan: So the loss of 22 jobs
meant one million tonnes going missing, did it?
Mr Best: Yes, but I do not think
you can rate it as simply as that.
Mr Murphy: Speaking on behalf
of our company which has not been majorly impacted yet by the
levy because we are mostly in the processed market, I am trying
to represent the views of my neighbours who are largely in the
unprocessed market, at the minute to a large extent they have
suffered a large drop in production, but they are not laying off
workers because they are aware that the issue is still alive and
often our maintaining a presence in markets, albeit maybe even
at a small loss, is in the hope that committees like this one
may be able to do something that will enable them to stay in business.
The pain that they are experiencing at the minute may not necessarily
have been reflected already in job losses or in losses in production.
They are looking for some light at the end of the tunnel and we
are holding our breath to some extent.
Q41 Mr Clarke: You will forgive us
if some of our questions are repetitive in terms of those that
were asked earlier. The BBA told us their view as to the amount
of aggregate being imported from the Republic of Ireland and we
heard that there is a view that that was in the main virgin aggregate
and there was not a lot of processed aggregate coming across.
Could you give us your view on what you describe as "a significant
volume" in your evidence. How much are we talking about in
terms of volume of both virgin aggregate and processed product
coming across the border?
Mr Lyons: I can quote you one
example and it is taking up the border quarries point. The quarry
I am responsible for is about seven miles from the border and
prior to the levy it was selling 25,000 tonnes per month to the
external market, but we are now down to selling between 13,000-16,000
tonnes per month. The market itself has grown in terms of infrastructure
development, etcetera due to the money that is being spent on
Northern Ireland at the moment. The other market we had was the
farming community, but in the last six months the farming community
has started to get up off its knees and spend money, but they
are not spending it with us and they are certainly not spending
it with our neighbours' quarries, it is coming across the border.
It is very difficult to put a precise figure on it, but in the
area that I am in certainly tens of thousands of tonnes per month
is not out of the question.
Mr Murphy: We are really coming
to the crux of the matter here. We cannot put an exact figure
on it. We can survey half a dozen crossing points and we can count
so many dozen lorries crossing every day, but we have asked Customs
and Excise on several occasions how many million tonnes of imported
aggregate they expect there to be every year—they do not
know. We ask them how many million tonnes of imported aggregate
are they currently collecting aggregate on and how many are they
missing and they do not know that either. If they do not know
that how are they going to know where to target their resources?
If they cannot measure the problem how do we know how big the
problem is? The last time we presented evidence we said that there
would be a problem in establishing for Customs and Excise and
everybody else where aggregate comes from, because we do not have
green aggregates south of the border and blue aggregate north
of the border, it is traceability that is a great problem. If
the smuggling of aggregate does take place, tracing that aggregate
back to its origin and who is culpable is highly complex. It is
so complex that Customs and Excise would say privately that they
need something tantamount to an admission of guilt from the guilty
person. And to date, 18 months in, we are not aware of a single
prosecution for the smuggling of aggregate.
Mr Best: I think it is important
to recognise that bringing aggregate across the border is not
illegal, and this was one of the constraints on our survey. When
I talked to Chris Capper of the BBC, Chris was very reluctant
to take any photographs or do any filming of any lorries coming
across the border in case the owners would say we were accusing
them of bringing aggregate in illegally. We were constrained in
what we could do. It was an indicator of the bigger problem. Even
from the map of the illegal activities you can see the absence
of illegal activities in Derry and Tyrone. They have access to
the cross-border aggregates. I think if you go and talk to any
operator round the Londonderry/Strabane/Omagh area you will get
the same story about aggregates coming across the border. Customs
and Excise have given us an indication that they can work along
with the Revenue inspectors in the south of Ireland to trace aggregate,
but as yet I do not think there has been anything done on that.
Q42 Mr Clarke: Let me walk you through
a few figures. Obviously this is of huge cost both to the Exchequer
in terms of uncollected revenue and huge cost to the industry.
The BAA suggested to us in their evidence that the sale of aggregate
within Northern Ireland has decreased by about seven to eight
million tonnes. Would you agree with that?
Mr Best: No.
Q43 Mr Clarke: So it has not decreased
to that extent?
Mr Best: No.
Q44 Mr Clarke: This is the problem
we have in trying to ascertain exactly how much we are talking
about.
Mr Murphy: We know what we produce
but we do not know what the market sells. We would find it very
difficult to put an estimate on the black market.
Mr Best: Our estimate, given the
Minerals Statement and backed up by the assessment of the amount
of illegal activities from the cross-border survey, would indicate
it is around three million tonnes.
Q45 Mr Clarke: That is being imported?
Mr Best: Yes.
Mr Lyons: Perhaps I could step
away from the levy versus the impact on industry point for a moment
and talk about the fact that the intention of the levy was to
improve the environment for all the people of the United Kingdom
in terms of quarrying. What has happened in Northern Ireland is
appalling. There has been a complete reversal effect in terms
of illegal operations in County Antrim, one of our major tourist
travel areas. In the lakes of Fermanagh we have increased haulage
movement which was not there before. You talked about the impact
of the levy on the industry in terms of payment and the cost to
HMC if it is not collected, but it is not as simple as that. The
impact on the Northern Ireland and UK economies is a loss of levy
and a loss of income tax because these jobs have been lost in
legitimate companies whilst people are actually working in the
illegal quarries. There is a loss of income tax, national insurance
contributions, a loss of planning fees, a loss of environmental
fees and an extremely high risk that these people working these
illegal quarries will have serious injuries or die through fatalities
caused by the very low levels of health and safety compliance.
That is the big impact on the Northern Ireland population and
the economy.
Q46 Mr Clarke: We have got this figure
of possibly three million tonnes being imported and as you have
just rightly said, there are costs beyond simply the loss of levy.
Would you be able to make a guess in terms of the number of tonnes
imported before the levy against the number of tonnes imported
after the levy and what the cost is in pounds to the industry
in Northern Ireland?
Mr Lyons: I would say that the
strength of the environment economy and infrastructure development
in the Republic of Ireland was such in the last ten years prior
to the levy that there was only exports, not imports.
Q47 Mr Clarke: On this issue about
commercial exploitation meaning that the tax is paid, the point
is it is commercially exploited and that obviously means that
as producers in Northern Ireland importing into the Republic of
Ireland there is no levy paid by you on that.
Mr Lyons: No.
Q48 Mr Clarke: Do you see your business
as Ireland-wide?
Mr Murphy: We do pay tax on exported
product, value added product, which is ridiculous.
Mr Best: That was one of the points
we had in our proposal. When we discussed it with Customs and
Excise in Manchester in February the officials looked at each
other because this case had not arisen from a mainland point of
view, but in Fermanagh and Armagh our member companies are doing
it day and daily.
Mr Murphy: It is why Northern
Ireland is able to employ a disproportionately large number of
people in the quarrying industry, because we have such a highly
developed product range. We have many producers who can send products
all over Northern Ireland and it is something we are proud of.
For the Government to tax exported product where we have maximum
employment just goes beyond belief.
Q49 Mr Clarke: We heard earlier on
about the research that has been undertaken by the University
of Ulster and the spot checks on lorries. Do you take a similar
view, that it is just a snapshot, it cannot really provide reliable
data and it can give you an indication of the number of lorries
but nothing more than that? Is that fair?
Mr Best: Yes. I would go back
to the point I made about the constraints from a legal point of
view because it is not illegal to bring a lorry across the border
full of stone. That is why Customs and Excise got the Symonds
Report carried out, because if our Treasury is going to Europe
we have got to have something that is based on fact. The indication
we have been given is that the Symonds Report is going to show
certainly an economic impact as well as an environmental impact.
They were a number of officials over here for a week and the feedback
I was getting from them was that they were completely alarmed
at the lack of enforcement not only from an aggregate tax point
of view but from a waste management point of view.
Q50 Mr Clarke: It is a very difficult
thing to do in terms of proving the commercial exploitation rather
than simply the movement.
Mr Best: It goes back to our point
that we would be very surprised if anybody is ever prosecuted
for not paying the aggregate tax.
Q51 Mr Beggs: Have you any information
as to whether or not illegally imported aggregates are going on
to publicly funded projects?
Mr Lyons: Yes. I have had two
instances of this in the last six months. We tendered for the
supply of aggregate for the maintenance of roads in the Forestry
Service. We were successful in the previous two years in that
tender and this year we were not successful. We monitored the
situation very carefully and we found that the aggregate that
was being supplied through the tender was coming from 30 miles
away (our quarry was seven miles away) and across the border from
County Donegal. I contacted the Forestry Service and asked them
who was collecting the levy, were they paying it or were the suppliers
paying it and they did not know anything about the levy. After
two or three days of phone calls they came back to me and asked
me how they should deal with this and I said that the only way
they could deal with it was to refuse to pay the bill for the
aggregate until they had proof that the levy had been paid. Ultimately
the tender was withdrawn after X thousand of tonnes were supplied
and was reissued. The second time we were successful. I have got
another instance of this. A publicly funded school was carrying
out some capital works. It was not an import in this case, it
is coming from an illegal quarry. We are half a mile from the
school and we cannot compete with a quarry that is five miles
away because they are supplying the contract levy free. In both
instances I think all of us have worked diligently to provide
information and evidence to Customs and Excise on every possible
occasion and we have also approached the planners and the Environmental
Service because we do feel that it is not simply a battle for
Customs and Excise, it needs joined-up Government to sort these
people out.
Mr Murphy: We have spoken to some
public sector clients about the procurement of aggregate and tried
to investigate what we can do to ensure that aggregate that is
procured for public projects has the levy paid on it. When you
explore the issue in detail the legality becomes slightly grey
and the public clients are not sure if they would be able to put
in a detailed enough qualification with the tender that would
stand up in law.
Mr Best: A number of Government
departments including the Roads Service and Construction Service
have now got declarations in the tenders that all aggregate sourced
within Northern Ireland and outside using Government contracts
in Northern Ireland will come from a levy paid source, but whether
that is actually being effective on the ground is questionable.
Mr Murphy: The only belt and braces
solution is to ensure that every lorry load of stone and every
weighbridge docket is accounted for, that is the only way the
client can be sure that the levy has been paid on each lorry load
of stone, which is a bureaucratic nightmare and it is something
that they are certainly not prepared to look at.
Q52 Chairman: We have been hearing
all morning about the problems that Customs are having and all
of you have made it quite clear that it is a question of resources
as far as they are concerned not will. Is there more you would
like to see them doing?
Mr McNabb: There is only one thing
that they could do to solve this problem and that is put an individual
representative of Customs and Excise in every quarry in Northern
Ireland.
Q53 Chairman: How many quarries are
there?
Mr Best: It was 160 at the last
count.
Mr Murphy: That says nothing about
imported aggregate.
Q54 Chairman: That is an unrealistic
demand.
Mr Murphy: There comes a point
when the tail wags the dog.
Mr Lyons: The reality of the situation
is that financially and commercially the levy is a disaster for
Northern Ireland. If you look across the United Kingdom, you have
got 40-plus illegal quarries in Northern Ireland, an indication
that they are starting to appear in Scotland, an indication that
they are starting to appear in parts of Wales, but in the south
of England there is none and the reality of that is the economic
argument that £1.60 a tonne on the price of aggregate from
the south of England is nothing but it is a disaster in Northern
Ireland. Quite frankly, the way the industry is going, with the
aggregate levy amongst other things, it is rapidly becoming the
situation in Northern Ireland that there is no future for a person
wanting to make an honest living or for an honest business to
survive.
Mr Robinson: If Customs and Excise
or HM Treasury assisted us to remove the price differential the
problem would sort itself out.
Q55 Chairman: What differential?
Mr Murphy: The level of the tax
in relation to the market value of product.
Mr Robinson: That is really what
is fuelling the black market. I am attempting to sell my product
at 40% above product that is available in my area and that is
keeping that market alive and it is self-generating within that.
If that price differential of the product was removed the problem
would sort itself out.
Q56 Chairman: Have you had any response
from the Treasury on the alternative proposals that you have made?
Mr Best: Yes. We had a meeting
on 14 August with a number of officials in Belfast. Customs and
Excise had a meeting with European Commission officials on 16
July where they were basically putting their toe in the water
as to our proposal. I think it would be fair to say that although
originally there was a reluctance to accept proposal A, ie 32
pence across all aggregates who extract in Northern Ireland, there
is now a willingness to take that proposal forward. In the response
the European Commission, in the six or seven bullet points that
they made, made mention of the economic impact four times. That
is the only way they would accept any consideration of a further
derogation for Northern Ireland and this is where the Symonds
Report is pivotal to this proposal going forward. The Symonds
Report is due out on 23 September and that will really set the
scene for this proposal going forward. I believe there is a willingness
within Customs and Excise to solve the problem. Minister Boateng
was over in July and he visited Pat's quarry at Tarmac and he
gave an indication that it was an unforeseen problem, but they
now realise it is there and they want to get it sorted out.
Chairman: We shall await that report
with interest ourselves as well. Gentlemen, thank you very much
indeed.
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