QPA identifies 30% cut in key environmental programme for local
communities as government breaks pre-budget report commitment
The Quarry Products Association has learnt that DEFRA is to cut
financing for the Aggregates Levy Sustainability Fund (ALSF) for
the coming year (2004/5) by a third, directly contradicting a
commitment made by the Chancellor in the December 2003 Pre-Budget
report.
The main purpose of the Fund, which was introduced in April 2002
and is financed entirely by the Aggregates Levy, is to support
community and environmental improvement schemes in areas affected
by aggregates extraction.
Government has acknowledged that the Fund is the key environmental
benefit of the controversial Aggregates Levy, and so the 30% cut
further undermines the environmental credibility of the Levy.
DEFRA is reducing the ALSF from £29.3 million in 2003/4
to £20 million in 2004/5 in order to cover funding gaps
elsewhere in the department. The Aggregates Levy generates around
£350 million of revenue for Government per annum.
Simon van der Byl, QPA Director General said “The QPA
remains opposed to the Aggregates Levy, but in favour of the Aggregates
Levy Sustainability Fund as long as the Levy operates. It has
become increasingly obvious that the Aggregates Levy isn’t
working environmentally, is causing significant economic damage
and has self-evidently failed the Government’s own Tests
of Good Environmental Taxation. The Fund is supposed to be the
main means by which the Levy brings environmental benefits to
local communities. By reducing the fund by 30% we can only assume
that that there will be a commensurate reduction in benefits to
local communities in spite of the continuing Levy burden on aggregates
producers. We are also concerned that new DEFRA rules will increasingly
restrict the ability of the Fund to support worthwhile projects
in local quarrying communities.”
This view is validated by the findings of DEFRA’s own ‘Mid
Term Evaluation of the Aggregates Levy Sustainability Fund’
(September 2003) which states ‘…On the basis of this
analysis a strong economic case can be made for the ALSF. It compensates
for the Aggregate Levy’s imprecision in targeting the externalities
of aggregates extraction. For this reason the Fund should continue
to operate whilst the Aggregates Levy remains in place…’
Simon van der Byl continues “This news is further evidence
that the Aggregates Levy is driven by revenue requirements rather
than environmental considerations; its validity has now been further
undermined. The Government is already in the process of significantly
changing the Levy regime in Northern Ireland because it has not
produced environmental benefits. As a matter of urgency, Government
needs to announce that it will now conduct a comprehensive environmental
review of the Levy for the rest of the UK, with the emphasis on
transparent analysis, and that it will reverse its decisions to
cut the ALSF and restrict the use of the Fund in local community
projects.”
The Quarry Products Association is the
principal trade association representing the UK aggregates industry.
In England our members produce over 90% of aggregates extracted
- sand and gravel and crushed rock as well as other non aggregate
minerals such as silica sand, agricultural and industrial lime
including limestone, chalk, clay and shale for cement.
- The Aggregates Levy was announced
in the March 2002 Budget, legislation was included in the
2001 Finance Act, and the Levy of £1.60 per tonne implemented
in April 2002. The Levy is planned to generate £385
million per annum, although actual revenue is probably around
£350 million per annum. In order to support environmental
initiatives and improvements for local communities in quarrying
areas, and also to finance recycling initiatives, DEFRA was
given £29.3 million in both 2002/3 and 2003/4 to finance
the Aggregates Levy Sustainability Fund in England. ALSF funding
for local community and environmental improvements is channeled
through three national organizations, English Nature, The
Countryside Agency and English Heritage and through direct
funding allocations to three counties with significant quarrying
activity (Derbyshire, Leicestershire and Somerset County Council).
These organizations now face substantial cuts in their ALSF
allocations next year.
- December 2003 Pre-Budget Report,
paragraph 7.68: ‘DEFRA has completed a review of the
Aggregates Levy Sustainability Fund. This concluded that there
are strong economic arguments to support the continuation
of the Fund as a targeted intervention to address the environmental
costs of aggregates extraction. In its first year, the Fund
distributed £29.3 million to help finance over 200 environment,
heritage and access projects. The Fund will therefore be continued
for a further three years with the current level of funding,
with a review to be carried out in the final year. The existing
bodies will be used for distributing the Fund for 2004-05
and the option of additional organizations for future years
will be considered further.’
- Reference to DEFRA report ‘Mid
Term Evaluation of the Aggregates Levy Sustainability Fund’
September 2003 (published on December 10 2003).
- Prior to Government’s original
decision to introduce the Aggregates Levy, the QPA had proposed
as extensive package of voluntary and regulatory environmental
proposals as a more environmentally effective alternative
to the proposed Levy. The QPA proposals were rejected by Government
in favour of the Levy. In its decision to significantly reduce
the rate of Levy in Northern Ireland in return for an environmental
agreement with the industry Government has in effect acknowledged
that the original Levy decision was wrong.
- The QPA report reaches the following
conclusions:
a. The introduction of the levy as a new environmental tax
was accompanied by no detailed environmental objectives, targets,
benchmarks nor measurement criteria, other than very general
policy aims, an issue which clouds any levy assessment.
b. The levy has failed the Government’s own Tests of
Good Environmental Taxation. Most critically, these tests
state that:
“Economic instruments must deliver real environmental
gains cost-effectively” and
“Environmental policies must not threaten the competitiveness
of UK business.”
In practice, it is highly questionable if the levy has delivered
net environmental gains (this assessment suggests not), it
has demonstrably not been cost-effective, it has already damaged
the competitiveness of UK business and threatens to inflict
further damage. The levy is a bad environmental tax.
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