Written evidence submitted by British
Aggregates Association
The British Aggregates Association is the representative
association of independent UK quarry companies. We have
seventy operating companies as members twenty of which are located
in Scotland. BAA members operate some two hundred sites including
asphalt, ready-mix concrete, pre-cast concrete and recycling facilities.
We welcome the opportunity to comment on the Scotland
Bill and the Calman Commission's recommendations published as
the White Paper Strengthening Scotland's Future.
THE AGGREGATES
LEVY
The British Aggregates Association is strongly opposed
to the Aggregates Levy and has been since its introduction in
2002 at £1.60 per tonne. It is now set at £2.00 per
tonne. We do not regard the Levy as being an environmental instrument
as it takes no account of the environmental performance of operating
quarry companies. For the record UK quarries have an excellent
record of environmental protection which is unsurpassed elsewhere
in the world. Indeed, very few environmental complaints are actually
received about sand, gravel or rock quarries, unlike opencast
coal sites and waste disposal. The UK already had the highest
recycling rate in Europe before the Levy and there has been no
discernible increase since as virtually all available construction
and demolition waste was already being recycled.
In 2002 the BAA made a legal challenge to the Levy
as it involves illegal State Aid and distorts the market. The
case is currently before the European General Court with judgment
likely by the middle of this year. We also issued a legal challenge
to the derogation in Northern Ireland. This was successful and
the N.I. derogation was withdrawn on 1 December 2010. In short
the Levy is almost certain to be found unlawful in the near future,
the Treasury is aware of this and we suspect that is precisely
why it has not been devolved.
There is much that is wrong with the Aggregates Levy:
1. It is a hugely complex piece of legislation
which was still being added to on its introduction in 2002. Since
then a large number of further changes have been made.
2. It gives unfair advantage to certain aggregate
sources, such as shale and slate which are in direct competition
to taxed aggregates.
3. It taxes the by-products of the aggregates
industry whilst exempting the by-products of slate, china clay
and coal. All of which have a much larger environmental impact
than sand, gravel or rock quarries.
4. It causes the by-products of exempt industries
to be transported further and causes a build up of by-products
in aggregate quarries.
5. It stimulates imports as aggregate importers
are free to dispose of their by-products in other countries which
do not have a levy.
6. It stimulates illegal quarrying and the use
of unlicensed sites.
Other key points:
— Scotland
produces around thirty million tonnes per annum of virgin aggregate
and we believe that in the current recession 70% of this tonnage
will be going to the public sector in the form of rail, roads,
schools, hospitals and housing. That means Scottish public authorities
are paying Westminster £42 million per annum in Aggregates
Levy. Scotland gets only £3 million back in the form of "Climate
Change" grants, a poor bargain indeed.
— The
Levy is a complicated and expensive way for Government to move
money from one "pocket" to another and given the extensive
and damaging nature of its side effects and unintended consequences,
it produces a negative effect on the economy.
This Association commissioned a report by BDS Marketing
which demonstrates clearly that the Levy has not achieved its
Environmental Objectives and has instead become a tax on the infrastructure
and its maintenance. The findings of the BDS Report are confirmed
by the European Environmental Agency's own report "Effectiveness
of environmental taxes and charges for managing sand, gravel and
rock extraction in selected EU countries".
Quotes:
Country Studies—UK—Page 28
— "Analysis
undertaken by the Quarry Products Association (QPA) shows that
the impact of introducing the aggregate levy has been most marked
in reducing sales of low quality crushed rock, which they estimate
to have fallen by six million tonnes. This has resulted in the
substitution of lower quality taxed aggregates by waste streams
from other non-taxed extracted minerals such as shale, slate and
china clay.
The QPA argue that much of this additional china clay and slate
extraction would have taken place without the levy, as the by-product
of premium china clay and slate production, and, as such, is not
a substitution. They estimate that one million tonnes of these
materials would have been extracted with or without the levy,
so that the 'substitution' attributed to the levy is in the range
of two to three million tonnes."
— "Neither
government nor the industry have provided any evidence to show
that the aggregate tax has resulted in reductions of the following:
noise and vibration; dust and other emissions to air; visual intrusion;
loss of amenity and damage to wildlife habitats. This is despite
the tax being underpinned by a contingent valuation study that
estimated the total external costs of aggregates extraction in
the region of EUR 558 (or GBP 380 million) per year."
Country Comparisons—Pages 44 & 45
— Table
5.9 Effect of tax in relation to national objective: reduce demand
for aggregates and encourage recycling
Objective: to reduce demand for aggregates and encourage recycling
United Kingdom Analysis undertaken by
HM Revenue and Customs indicates a slight reduction in aggregate
sales following the introduction of the aggregate tax. However,
there was a lack of data to show a significant result. Industry
research shows a modest substitution to alternative "untaxed"
secondary waste materials eg slate, shale, china sand. Research
undertaken by the Waste Resources Action Programme provides evidence
of an increase in recycling activity which they predicted to continue
to expand in the future.
— Table
5.10 Unintended effects of tax
Unintended effects
United Kingdom Claims by industry that
secondary aggregate waste materials not subject to tax eg shale,
waste slate, china sand have been transported over longer distances.
Industry complained about stockpiles of aggregate waste material
build up on site, which impacts on landscape. Northern Ireland
experienced aggregate materials trade distortion across the border,
due to no tax in Ireland.
Report conclusions—Page 47
— The
effects of the tax in relation to the national objective provided
mixed results
There was not any clear evidence in Italy
or the United Kingdom to show that the objective of reducing environmental
externalities had been achieved.
BAA Conclusions
The Aggregates Levy is a revenue raising measure
which was unsuccessfully disguised as an environmental or Eco
tax. It was claimed to be revenue neutral with a 0.1% point decrease
in National Insurance Contribution. However NIC was shortly thereafter
increased by 1% or ten times the earlier decrease. The Levy does
not protect the environment, it was not designed to protect the
environment and it most likely damages the environment. Scotland
has lost nothing by the retention of the Levy by London, in fact
it will probably benefit by not becoming enmeshed in the myriad
of complications associated with a highly complex, bureaucratic
and expensive money-go-round.
January 2011
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