Examination of Witnesses (Questions 120-134)
25 FEBRUARY 2004
JOHN HEALEY
MP AND MR
KRIS ROMANSKI
Q120 Mark Tami: If you do support that,
what are you actually doing to stop them being trucked to landfill
sites or whatever? What are you doing to promote this on-site
process?
John Healey: Obviously, the Committee
has a particular concern about Northern Ireland. There is a difference
in the situation as far as we have been able to establish it so
far between Northern Ireland and Great Britain. The Symonds Report
confirmed that one of the weaknesses of the operation of the levy
and one of the reasons why it is not achieving the objectives
we set for it is that the scope for material, including demolition
waste, in Northern Ireland to be available for recycling is highly
limited. That is not the case in Great Britain. In Great Britain
what we are finding is that the introduction of the levy itself
is a dynamic in the system that means we are finding much greater
investment in recycling plant. We have seen over the last year
or so a big surge in the sales of crushing, sorting and recycling
equipment, and that appears to be, as far as the early evidence
indicates, working in the way that we wanted the levy to work.
Q121 Chairman: It has been suggested
that the use of combined quarrying and recycling centres offers
the most cost-effective and environmentally friendly way of disposing
of construction and demolition waste. Are you, together with the
Department of the Environment in Northern Ireland, exploring the
merits of such centres?
Mr Romanski: Whilst we are not
directly thinking about how it might be done, although your suggestion,
Mr Chairman, is certainly one way, one of the elements of the
new scheme will be, as part of the environmental agreements for
those quarries where it is appropriate, to include targets for
increased use of recycled material, and that sort of combined
operation might be a means of achieving those targets. Some processed
products are actually produced by the quarry companies. Some quarry
companies already use recycled material to mix in with their virgin
aggregate when they sell it, and in those cases there would be
targets in the environmental agreements for the increased use
of recycled material, so that incentive which the levy provides
is not lost with the lower rate.
John Healey: Can I just add what
might be a slightly cautionary caveat to Mr Romanski's comments
there, which is that whilst there may be scope within the environmental
agreements, and there may be scope within Northern Ireland, as
he says, for looking at this, I would not want the Committee to
believe that we are looking at being too dirigiste in this.
If you take one step back, part of the rationale and concept of
the levy was to try and make the market function more effectively,
principally by saying there are certain environmental costs at
the moment of quarrying that are not captured in the price in
the market. The levy itself, the levy on the virgin aggregate
in particular, therefore directly increases the value of recycled
aggregate—not in Northern Ireland because we have analysed
and seen how it does not apply in Northern Ireland in the way
it does in mainland UK. In mainland UK what is beginning to be
clear is that the levy itself is creating a dynamic in the market
that means companies are now prepared to make investments in recycling
plant and capacity which they were not necessarily prepared to
do before, and that the levy itself is a major element of that.
Mr Chairman, I was fortunate enough to open a new waste crushing,
sifting and recycling plant in my own constituency last month,
a £2 million investment with a capacity to recycle 2,500
tonnes a week, and the managing director, Martin Lynskey, said
to me that the aggregates levy was a major factor in the forecast
plan they put together in taking the decision to open their new
recycling plant in Wath-Upon-Dearne. There is a specific example
of how the levy has altered the dynamics of the market in precisely
the way that we designed it to try and do.
Q122 Mr Barnes: Earlier, Minister, you
said that there were 38 illegal or unauthorised quarry sites,
although a number of these have since registered. Does the proposed
new scheme contain any measures to address the damage to the environment
that the continuing unauthorised extraction sites are causing?
John Healey: The most effective
way, I suppose, of making sure that unauthorised sites create
minimal environmental damage is to make sure that they do not
continue to operate as unauthorised, illegal, non-levy-paying
sites and are brought within the scope of the environmental agreements
with the operators. The agreements will give us the capacity to
reduce the environmental impact. That would be the major way that
we would have to try and tackle the environmental damage caused
by the illicit sites.
Q123 Mr Barnes: I understand that Customs
went to the sites back in November and January, and that only
three of the sites registered. That leaves 35 from the figure
you gave earlier. Is action then taken in order to close down
all those operations?
John Healey: I have the details
here. In respect of those 38 quarries, one was found to be registered
already. Five were registered with a total outstanding levy liability
of £8,000, which is the point I was making to Mr Tynan earlier
on. With the other 32, the further assurance and checking work
has almost been completed. Five of the sites of the remainder
were derelict and not in use, nine were not liable to register
for the levy for various reasons, and with nine of the sites it
is proving very difficult either to locate the site accurately
or to locate the principals that are responsible for the activity—because
we must be clear that this is in large part illicit activity while
it is going on; they do not work 9-5 shifts, and making sure that
we can catch them at it is not always straightforward.
Q124 Mr Barnes: So the number of 38 seemed
to shrink down to nine by the analysis that you have put forward
to us, but what action can then be taken for the nine in terms
of any unauthorised activity that they are engaged in?
John Healey: Some may be unregistered
in planning terms, some may be unregistered for aggregates levy,
and, as long as we can identify the people responsible, we can
ensure that they do not continue the operations unless they conform
with both the regulatory and the fiscal framework.
Q125 Mr Barnes: Does the levy itself
produce a problem in pushing them to continue illegal operations?
John Healey: The levy itself,
as any tax does, creates some incentive for some people to try
and avoid it. Once we have got hold of them, the liability to
pay the levy and the potential to pay a penalty on top, creates
a sanction system that could be applied by Customs as part of
enforcement activity.
Q126 Mr Beggs: We acknowledge the Government's
intention to replace the present scheme with a new scheme rather
than attempt to run two schemes in parallel. However, for those
businesses which cannot afford either the cost of environmental
compliance or to pay the levy in full, you are effectively forcing
them out of business. Is this an acceptable consequence of introducing
a new scheme?
John Healey: The assessment and
the estimates that we have done, working with the industry, suggest
that there is likely to be in most cases a minor cost benefit
to operating under the new scheme compared to the current scheme,
but in the end the decision about whether or not to enter into
an environmental agreement as part of the new relief scheme has
to be down to the owner and operator of the site itself, and they
will have to weigh up whether or not they wish to participate
in the relief scheme and therefore attract what we hope will be
the 80% level of relief, set against their other option, which
will be to pay the levy in full.
Q127 Mr Beggs: Has any estimate been
made of the number of businesses that will be unable or unwilling
to sign up to the new scheme?
John Healey: The short answer
is no, because (a) the scheme has not been finalised yet; (b)
the decision that each operator will take, the 140 or so registered
for the levy at present in Northern Ireland, will depend on a
variety of factors, and it is difficult to anticipate; (c) whilst
I am aware that some people are running what I would regard as
scare stories, given that we have not fully designed the scheme
yet and nobody can be confident how it is going to work, that
somehow these are going to be driven out of business, I think
it is not possible to make that sort of assessment at present.
Q128 Mr Beggs: But you will monitor the
situation?
John Healey: Of course we will
monitor the situation, just as we were wanting to monitor and
then evaluate as best we could the operation of the relief scheme
that we have in place at the moment.
Q129 Mr Beggs: Looking to the future,
the proposed scheme, if it is accepted, would freeze the rate
of aggregates levy relief at 80% until 2012. What measures have
been considered for Northern Ireland after that date?
John Healey: The honest answer
is that we have not worked that far ahead. We have not got the
scheme in place yet and we have not got our State aid clearance
in place yet, but it would be open to us, as we approach that
2012 date, to return to the Commission to look for an extension
or indeed potentially a reform of the relief scheme for Northern
Ireland at that point.
Q130 Mr Swire: Of the £29.3 million
distributed from the Sustainability Fund in its first year of
operation, how much was spent on the environment, heritage and
access projects in Northern Ireland?
John Healey: I cannot give you
that information, Mr Swire. It may be that the Department in Northern
Ireland could give you some indication of that. The particular
difficulty in Northern Ireland is that with the division of the
Sustainability Fund funding, according to the Barnett Formula,
with that comes a devolution to Northern Ireland, Scotland and
Wales about how they choose to treat that and, as far as I understand,
in Northern Ireland there has not been a decision yet to set up
a ring-fenced or specific aggregates sustainability fund. That
is not to say that some of what would have been resources which
would have been transferred to Northern Ireland as part of that
Barnett Formula division of the Sustainability Fund would not
have been spent on aggregates-related projects, but I simply am
not in a position to give you that information as I do not have
it and I draw your attention to the fact that, unlike in Wales
and Scotland, there has not yet been a decision to ring-fence
it in Northern Ireland.
Q131 Mr Swire: Perhaps if there was some
more information as to how much money has been spent, that would
be made available to the Committee in due course.
John Healey: I am certainly happy,
Mr Chairman, to make those enquiries on the Committee's behalf
if the Committee would like me to do so rather than approaching
the Department of Environment in Northern Ireland yourselves.
Q132 Mr Swire: My next question was going
to be on the estimated expenditure for the current and future
years, but that is rather answered by your first answer.
John Healey: Well, you mentioned
a figure for the Sustainability Fund in the first year. In the
following year our estimate for the money going out of the Sustainability
Fund is £35 million and that would be then divided up according
to the established Barnett Formula.
Q133 Mr Swire: You will have heard the
accusation that the aggregates levy was introduced in Northern
Ireland without due regard to the "unique and special circumstances"
in Northern Ireland. Is the Government now prepared to learn from
this process in order to ensure that such an oversight in the
future will not occur again when introducing legislation that
impacts specifically on Northern Ireland?
John Healey: I would certainly
hope so and I would trust in the role of this Committee to help
make sure that the Government does that. What I think we have
demonstrated is that we have, certainly over the last 18 months
or so, been very ready to monitor and to take on board the assessment
and views from the industry of the impact of the levy and then
commission, if we needed to do, a proper study which the Symonds
Group carried out for us which was able to provide the hard evidence
that we required in order to judge whether or not this was a policy
and a levy which could work in Northern Ireland. Clearly it does
not and I hope that the Committee would at least recognise that
if we did not get the formula for the relief scheme right in the
first place, we have been pretty quick off the mark in trying
to devise a better relief scheme which I hope we will be able
to put in place, subject obviously to the State aids clearance,
without further delay.
Q134 Chairman: Just to reinforce that,
having been critical of the fact that Northern Ireland got overlooked
in the original plan, I think it is highly commendable that you
and your team have made the efforts you have made to get the scheme
revised and I think I speak on behalf of all the Committee when
I say that we wish you well in your efforts in combating the Commission,
and "combating" is probably the wrong word, but never
mind. I think it is also appropriate to say, Minister, that the
aggregates levy in Northern Ireland is probably not the major
thing across your desk as the Economic Secretary of the United
Kingdom Treasury and I, for one, and I am sure the rest of the
Committee have been very impressed indeed with your grasp of the
brief and your knowledge in this rather abstruse subject which
I hope we have helped to bring to your attention. Thank you very
much indeed for coming and for helping us with our inquiry.
John Healey: Can I just in return
say to you, Chairman, and to the members of the Committee that
our work in trying to get to the bottom of the problem and map
out a different form of relief scheme has certainly been assisted
by the interests and expertise the Committee has brought to it.
Your response on behalf of the Committee when I last came before
you on November 5 where you essentially gave the support, critical,
constructive and certainly scrutinising support, was, nevertheless,
important and it was a spur to us in government and I hope it
has been so also to industry which has certainly helped us in
the work we have been doing.
Chairman: Thank you very much indeed.
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