Draft Landfill Tax (Material from Contaminated Land) (Phasing out of Exemption) Order 2008

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Justine Greening: My right hon. Friend makes some interesting comments. Is it not ironic that although we have such detail, when it came to the retrospective aspect of vehicle excise duty, apparently no assessment was made, although the amount would have been in the millions?
Mr. Redwood: My hon. Friend makes a good tangential point. Indeed, I see no impact assessment of the £5 billion loss on buying bank shares at today’s market prices, which the Government seem to want to do. That might be a good thing to analyse, but we are charged today with looking at this policy shift from one preferred method of dealing with contaminated land to another preferred method, and the tax changes that the Treasury is proposing. For parliamentary scrutiny to mean something, and for Ministers to reach wise judgments about policy options, one has to start with as much evidence as one can possibly amass. I thus urge the Minister to think again because I simply do not believe that this set of figures is up to the task, because there are many big gaps, and when some of the gaps have been filled in, the figures are difficult to believe.
4.49 pm
Mr. Nick Raynsford (Greenwich and Woolwich) (Lab): I shall not detain the Committee for long, but I want to bring us back to fundamental issues about the direction of policy. I represent a constituency that has a large amount of formerly contaminated land, much of which has been decontaminated, but where—I am thinking of the Greenwich peninsula in particular—a very high proportion of the highly polluted land has had to be transferred away from site to landfill. Just across the river from the Olympic site, to which the hon. Member for Southport referred, there has been, absolutely correctly, a strong emphasis on remediation on site. That has not only ensured a far more environmentally appropriate solution, but drastically reduced the external implications arising from vehicles on the roads transporting waste to landfill sites and damage to the wider environment. It is because those externalities are difficult to measure that it is probably quite hard for my hon. Friend the Minister to give a fully accurate assessment of the benefits. However, I have absolutely no doubt that the direction of travel is correct, and I note that only in recent years has there been a real shift towards remediation on sites, such as on the Olympic site.
Dr. Pugh: I hope that the right hon. Gentleman can enlighten me on this. Is it possible, with all contaminated land, to engage in remediation techniques on site?
Mr. Raynsford: The hon. Gentleman raises an issue that the hon. Member for Putney also mentioned, which I was about to address. At the Olympic site, exemplary results have been achieved in extremely difficult circumstances against a very tight project management timetable to deliver an enormous amount of work by 2012. Most of the people who have looked at that site have been surprised by what has been achieved there. If remediation is possible in such circumstances, I suspect that it will be possible in most, provided that there is the will to do it. We should send the message that that will should be there, rather than give succour, perhaps unintentionally, to those who say that it is all too difficult and cannot be done, and that we will have to go on doing things as we did in the past—by transporting contaminated land to landfill elsewhere.
I have only one question for the Minister on this issue: when will the land remediation relief be extended? Her policy involves phasing out the current exemption, and I am interested to know when the extended relief will be phased in so that there is a financial incentive to ensure that people do the right thing.
4.52 pm
Angela Eagle: My right hon. Friend has hit the nail on the head in his short contribution to the debate. He rightly emphasised that there has been a great deal of progress since the introduction of the landfill tax on ways of dealing with contaminants on site, such as the development of soil washing. That is a way of treating contaminated soils on site, and rescuing the soil by taking the contaminants out of it and disposing of them, which has to be better than carting tonnes of material to landfill and not being able to take out contaminants, thereby leaving problems on both the site being cleaned and the landfill site. Such developments are due partly, I suspect, to the landfill tax and partly to the increased interest in decontaminating brownfield sites. That interest, in turn, has been caused partly by the Government’s policy of incentivising development on brownfield sites, which has brought about positive developments in this area. My right hon. Friend is right to point that out.
In some cases, it is not possible to do all the decontamination on site, but we are interested in continuing to incentivise research and development in that area, so that we can reduce to the absolute minimum the amount of material that has to be physically removed from the site for it to be cleaned. Asbestos is an obvious example of something that one would not wish to remain on a contaminated site. I hesitate to mention Japanese knotweed, but it is another example. If it is dumped, it tends to grow at and affect the site at which it is dumped. There are various contaminants that it is undesirable to leave in situ, but an increasing number of those that tend to be found on brownfield sites are treatable on site. The shift from a policy developed in the ’90s to one that recognises that changes have taken place is welcome.
The hon. Member for Putney agrees with our approach with regard to what we are trying to do. She was right to say that on-site decontamination was not always possible. She asked about numbers of sites. It is not possible to know in advance how many sites might require off-site transport to deal with contaminants, because we cannot always know in advance what will be found. However, the trend mentioned by my right hon. Friend the Member for Greenwich and Woolwich has continued. Fewer sites now need to be dealt with by a dig-and-dump approach, and we hope that that will continue to be the case. I cannot give the hon. Member for Putney an exact number of sites involved because it is impossible to know.
The hon. Member for Southport and the right hon. Member for Wokingham wondered how the switch had been signalled. It was announced and consulted on during the 2007 Budget. The 2007 pre-Budget report announced our intention to proceed and published a consultation. In December we published the responses to that. In the 2008 Budget we published the consultation responses and confirmed the timetables. We shifted the final date for phasing out the scheme from 2010 to 2012 as a response to consultations that we held with those who were most affected.
My right hon. Friend the Member for Greenwich and Woolwich asked when the other part—the positive part—of this will come into law. That will happen on 1 April 2009 as part of the Budget process. That is when the two shifts essentially balance each other out. The date of 30 November will bring to an end the final applications for exemption under this part of the scheme. This process has been in the public domain for over a year, and it would be hard for the industry to argue that it had not been made aware that it was going on or that that date was in the frame.
The hon. Member for Putney asked what responses were produced by the consultation. The main concerns expressed were about how long the phase-out period would last, and we responded by extending it for two years. Few people, if any, suggested that it was not correct to move away from the regime put in place in 1996 and shift to a corporation tax-related relief. We feel that we have the right approach.
The hon. Member for Southport was right when he said that there are uncertainties about what the precise figures and behaviours should be, how the scheme will work out and whether there will be progress. He also asked whether there was consultation prior to introduction. Yes there was—it was extensive and has been ongoing for over a year. Of course we will keep an eye on how the switch of regimes affects behaviour, whether we need to do anything to refine incentives and whether there are any unexpected consequences. If such unexpected consequences appear, of course we will consider a change to the regime.
Mr. Redwood: Does the Minister agree that careful control is needed when cleaning up on site to avoid nasty materials from leaching into the water courses?
Angela Eagle: Of course I agree. Soil washing must be done in a way that is consistent with public safety and with minimising the chances that such a thing might happen.
Dr. Pugh: On the uncertainties, clearly when the contractors were consulted they were given a choice between land remediation on site, which was offset by land remediation relief, or dumping which was offset by exemption. Neither the exemption nor the offset from LRR would significantly account for all their costs, so it would still be the case that the total cost to the developers of one option was greater than the total cost of the other. Presumably, had the developers thought that, they would have said it. I assume, as the Minister is nodding, that they did not say that—that was not their view.
Angela Eagle: The consultation demonstrated that there was general agreement that the shift was desirable, partly because of the change in approach and the new techniques that have become available since the original process was developed with the landfill tax itself. Obviously, we will keep these issues in mind and keep an eye, with the industry, on the effects of the changes. We discerned no major disagreements in principle to the changes on which we consulted.
The hon. Member for Putney asked about CO2 changes. The reduction in carbon emissions is principally due to reduced emissions from the transportation of waste to landfill sites; that is the 5,000 tonnes of CO2 resulting from reduced transportation that is included as a benefit in the cost-benefits.
The right hon. Member for Wokingham had a series of questions on the impact assessment. The £3,000 is the one-off cost for those who have to accelerate projects slightly to meet the 30 November and the December deadline if they wish to register a site for the exemption. The right hon. Gentleman will notice, I hope, that there is no requirement for that to be accompanied by every piece of information that HMRC would need to put the exemption into effect—it is to register a particular site for interest. He is right, as is the hon. Member for Southport, that these sites can sometimes take a number of years to develop and clean. Therefore, we try to be as flexible as possible in the way in which the current system will be phased out without having a cliff edge. That has been generally welcomed.
The right hon. Member for Wokingham commented on the £7,200 figure—that is £8 per company that would have to fill in an application for an exemption. Last year, 850 companies applied for the scheme in that manner. It is simply a small administrative issue. We are confident that we have done the work to estimate as far as possible the effects of administrative burdens. There is something called the standard cost model. It is an activity-based costing methodology that considers the activities that businesses need to engage in to comply with their legal obligations and estimates the cost of such activity in running an efficient business. In practice, some businesses may face higher costs if they are not operating fully efficiently. It was using this standard cost method that the administrative burden of applying for the exemption certificate was placed at roughly £8. Only a limited number of companies are involved in this area. They have been well used to applying for the exemptions, and this is our best estimate as to the likely administrative burdens of making a shift. We take our obligations to fill in the cost assessments seriously and, in sometimes uncertain areas, we try to make the best guess that we can using standard models. There is more method to it than perhaps the right hon. Gentleman was willing to allow in his contribution, but he is right to keep looking, to check that we get it right.
With those reassurances, and knowing that there is wide acceptance that this is the right kind of shift to make, I hope that the Committee will be happy with the statutory instrument.
Justine Greening: The other key question that the Minister has not addressed involves the additional £40 million tax revenue. I have a number of questions. Who would bear that burden? What assessments are being done? What is the overall impact on landfill duty versus corporation tax that nets off to £40 million? Can the Minister provide the Committee with any additional details as to how the £40 million was arrived at?
Again, I hope that with those reassurances, the Committee will be happy to agree to the statutory instrument.
Question put and agreed to.
That the Committee has considered the draft Landfill Tax (Material from Contaminated Land) (Phasing out of Exemption) Order 2008.
Committee rose at seven minutes past Five o’clock.
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Prepared 28 October 2008