Select Committee on Northern Ireland Affairs Minutes of Evidence


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.





 
previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2004
Prepared 17 March 2004