Supplementary Memorandum by the Department
for Environment, Food and Rural Affairs (Defra)
The Committee asked to know more about the
allocation of landfill tax monies and requested an additional
memorandum explaining what ring-fencing arrangements had originally
been agreed when the landfill tax was first introduced, and in
subsequent years. The Committee also requested to know what ring-fencing
was agreed for both waste management and waste reduction initiatives,
and what the rest of the landfill tax money had been allocated
for.
BUSINESS WASTE
1. Budget 2003 announced that the standard
rate of landfill tax, which applies to active wastes, would increase
by £3 per tonne in 2005-06 and by at least £3 per tonne
in subsequent years on the way to a medium to long-term rate of
£35 per tonne. The Government committed to introduce the
increases in a way that was revenue-neutral to business as a whole.
2. In line with this commitment, the Spending
Review 2004 announced that the additional revenues would be ringfenced
and spent on programmes to improve businesses' resource efficiency.
In England, the Business Resource Efficiency and Waste (BREW)
Programme established a package of resource efficiency initiatives
to assist business. The programme distributed £284 million
of landfill tax receipts over three years between April 2005 and
March 2008. £50 million of landfill tax escalator receipts
were returned to the Devolved Administrations for similar programmes
to BREW. Finally, approximately £50 million of landfill tax
escalator receipts were retained for Enhanced Capital Allowances
for advanced waste disposal technology.
3. Approximately two-thirds of the total
funding allocated to the BREW Programme provided for waste management
and waste reduction initiatives, and the remainder funded projects
involving water and energy reduction.
MUNICIPAL WASTE
4. There have not been any ringfencing arrangements
in relation to landfill tax revenues from local authorities. The
Spending Review 2004 announcement included the return of revenues
from the Landfill Tax Escalator to local authorities, via Formula
Grant, fulfilling the Chancellor's commitment to keep landfill
tax increases resulting from the Escalator revenue-neutral to
local authorities overall.
5. As part of Comprehensive Spending Review
2007, the Government looked at the overall pressure on waste management
services, including increases in landfill tax, along with the
extent to which those pressures could be mitigated. The Government
provided local authorities with an overall annual average increase
in Government grant over the CSR07 period of 1.5 per cent above
inflation. This takes into account local government's landfill
tax liability, including the increased costs resulting from the
rise in the standard rate escalator from 2008-09, and allows local
authorities to deliver effective services including in the area
of waste management.
July 2008
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