06 April 2009

MPA Calls for Freezing of the Aggregates Tax

MPA has called on Government to freeze the rate of the aggregates tax and not to implement the planned 2009/10 increases.

The tax is planned to increase by 5p per tonne from £1.95p to £2.00p per tonne, which would increase industry costs by up to £10 million in 2009/10.

In a meeting with Treasury Minister Angela Eagle MP held on 31 March representatives of the MPA and MPA member companies highlighted the dire market conditions facing the industry and construction.

MPA Executive Director Simon van der Byl said “there could not be a worse time than this to increase the tax burden on industry, and we have therefore urged the Treasury not to implement the planned aggregates levy increase.  Market conditions deteriorated sharply in August 2008 and in recent months aggregates sales volumes have been running over 30% lower than a year previously.  The scaling down of economic and construction forecasts indicate that markets will continue to decline during 2009. We’ve already lost over 6000 jobs, and there is a danger of that figure increasing significantly. In these circumstances government should be looking to support and not penalize our industry. £10 million may not sound a lot, but at the current time Government must avoid measures which could have a disproportionate marginal effect on the industry.
“There is no economic or environmental justification for any increase in the tax now.

In the longer term it remains the view of the MPA that there is limited evidence that the tax has achieved claimed environmental benefits - but even if it has these dividends have been realized and increasing the tax would not generate any further benefits. We believe that the case for any future increases in this ‘environmental tax’ cannot be made.”

ENDS

Notes to Editors

 Has the Aggregates Levy been an environmental success?

In the 2008 Budget the Government claimed that there was ‘strong evidence’ that the levy is achieving its environmental objectives.

Government Objective:  ‘The Aggregates Levy was introduced in 2002 to ensure that the external costs associated with the exploitation of aggregates are reflected in the price of aggregate, and to encourage the use of recycled aggregate.’

Government evidence:  “Between 2001 and 2005 sales of virgin aggregates in Great Britain reduced by around 18 million tonnes, with an estimated increase in the use of recycled aggregates in England of nearly 6 million tonnes.”

BUT:

• The research commissioned by Government to calculate the environmental cost of aggregates supply was deeply flawed and the results were then manipulated by Government to ‘justify’ the initial £1.60 levy rate. For example the “analysis” assumed that quarry restoration to nature had zero environmental benefit.
• Sales of primary aggregates did fall in 2002 and remained broadly flat between 2003 and 2007.  Sales volumes fell significantly between mid 2008 and present.  However, the extent to which this pattern of demand can be attributed to the aggregates levy is unclear.
• Based on available research data commissioned by Government, the MPA estimates that sales of recycled and secondary materials for use in aggregates markets increased from 32 million tonnes in 1989 to 60 million tonnes in 2001.  We estimate that sales subsequently increased to 71 million tonnes in 2007, but have declined since mid 2008.  The fact that sales of recycled and   secondary materials doubled in the decade to 2001 (pre aggregates levy) and this growth continued at a similar trend rate between 2001 and 2007 (post aggregates levy) does not suggest that the introduction of the aggregates levy in 2002 has led to a significant increase in this market.

The latest Government commissioned research (CDEW Survey of Arisings and Use of Alternatives to Primary Aggregates in England, 2005 – DCLG) indicates that changes in the production of recycled aggregates were not statistically significant between the 2001, 2002 and 2005 surveys.

Government Objective:  ‘Reduction in noise and vibration, dust and other emissions to air, visual intrusion, loss of amenity and damage to wildlife habitats’.

Government Evidence:  No evidence has been presented by Government to support the statement that the levy has generated the environmental improvements listed in successive Budgets.

BUT:

• The European Environment Agency 2008 report (‘Effectiveness of environmental taxes and charges for managing sand and gravel, and rock extraction in selected EU countries’) concluded ‘no quantitative data available to show any improvement due to a lack of any measures in place.  Neither Government nor industry provided any evidence to show that the aggregates tax resulted in reductions in nose and vibration, dust and other emissions to air, visual intrusion, loss of amenity and damage of wildlife habitat
• The aggregates sector has continued to seek and implement improvements in environmental performance, regardless of the aggregates levy.  Indications of the industry’s commitment include:

• MPA Sustainable Development reporting introduced in 2004 (data year), including extensive stakeholders engagement regarding issues and priorities
• Nature after Minerals (NAM) initiative.  Research carried out by Natural England and RSPB identified major industry contribution to biodiversity and current NAM project aims to maximize the industry’s future contribution to biodiversity
• MPA’s annual Restoration Awards Scheme has continued to highlight high quality restoration of industry sites.
• Production of Responsible Sourcing Guidance for the concrete industry in late 2008.

The evidence quoted by Government in support of the claims that the aggregates levy has generated significant environmental benefits are not justified by available evidence.  As confirmed by the European Environment Agency, Government has published neither clear environmental objectives nor benchmarks for the aggregates levy.

Conclusion.
The operation of the aggregates market and the performance of aggregates businesses have changed significantly in recent years regardless of the introduction of the aggregates tax. It is questionable if there have been any significant environmental benefits attributable to the levy.

Please contact Simon van der Byl or Jerry McLaughlin on T 020 7963 8000, M 07775 894285 info@mineralproducts.org
020 7963 8000, simon.vanderbyl@mineralproducts.org or jerry.mclaughlin@mineralproducts.org