Government rejects 'New Deal' in favour of an Aggregates Tax

BY rejecting the 'New Deal', the Government has missed the opportunity to work with the quarrying industry to achieve significant and continuing environmental advancements.

That was the message from the Quarry Products Association following the Government's decision to introduce an aggregates tax as a way of tackling the 'environmental costs' of quarrying and encouraging 'greater use' of recycled materials.

In his March Budget Chancellor Gordon Brown announced that a flat-rate levy of £1.60 a tonne will be applied to sand, gravel and crushed rock extracted in the UK and its territorial waters from 1 April 2002.

To protect the UK's international competitiveness, the tax will be levied on imports but not on exports. Recycled aggregates will also not be subject to the levy.

Nor will the tax be applied to other quarried or mined products such as coal, clay, shale, slate, dimension stone, limestone (for the production of lime or cement), metals and metal ores, gemstones or semi-precious stones, and industrial minerals. Limestone and silica sand used in prescribed industrial or agricultural processes (ie glass-making or fertilizers) will receive tax relief.

Expressing the QPA's extreme disappointment at the decision to introduce a tax on aggregates, director general Simon van der Byl said: 'There has never been any clear justification or rationale for a tax and the government research on which the tax is predicated is thoroughly unreliable.

'In contrast, the industry's New Deal contained 30 clear and substantiated measures for delivering huge environmental improvements.'

The QPA had hoped that recent revisions to its 30-point plan together with a measure of support for a voluntary code from the all-party Environmental Audit Committee (EAC) would stave off the introduction of the tax.

While still supporting the principle of a levy on aggregates, the EAC's report accepted the QPA's view that a negotiated agreement would be a better environmental solution than taxation and recommended that companies participating in an approved voluntary scheme should be exempt from the tax.

QPA economist Jerry McLaughlin commented: 'We thought we had reached agreement on the New Deal with the Department of the Environment, Transport and the Regions but it seems the Treasury pulled the plug at the last minute.'

Robert Durward, director of the newly formed British Aggregates Association, also condemned the Government's decision, claiming that it would have serious implications not only for the quarrying industry, but also for all construction projects.

'At a time when schools and hospitals are crumbling and the road network badly needs upgrading, it does not make a lot of sense to introduce this additional burden,' he said.

The BAA is particularly concerned about how the tax will impact on small firms in rural areas, where the average sales price is often less than £4.00 a tonne.

'In these areas the new tax will represent a 40% rise,' said Mr Durward. 'Many small companies will be unable to cope with the added burden of bureaucracy and will go under.

'However, we do not believe the fight is yet lost and the BAA will be continuing its campaign. There are many valid reasons why this tax should not be introduced and we are hopeful that the two-year moratorium will allow common sense to prevail.'

The aggregates tax is expected to raise £380 million a year but the Treasury says there will be no net gain to the Exchequer, as all revenues will be returned to business through a 0.1% cut in employers' National Insurance contributions and a new sustainability fund which will deliver environmental benefits to local communities affected by quarrying.

The Government has said it will be consulting on how the new sustainability fund can best be used to deliver local environmental benefits.

Perhaps the only comfort the industry can draw from this long-running saga is the fact that the Government has decided to adopt a relatively cautious approach, introducing the levy at a rate 20p a tonne lower than its own research suggested and giving the industry two years to plan for its introduction. Had the industry not argued its case so forcefully, a far stiffer tax might have been imposed much earlier.