Wednesday, 23 April 2014

Let’s not forget why the Aggregates Levy was introduced

When Labour took office in 1997, they set out their plans on environmental taxation and - according to this House of Commons briefing paper - the possibility of a tax on quarrying:
The tax system sends critical signals about the economic activities that a society wishes to promote and deter... We are determined that our tax system and economic policies as a whole encourage the good and discourage the harmful. The extraction of aggregates - inc. stone, sand and gravel - involves significant environmental costs and damage to the landscape, which may go beyond that recognised in the scope and level of the landfill tax.
After consultation, it was announced in the 2001 Budget that an Aggregates Levy would be introduced in April 2002 at £1.60 per tonne for virgin sand, gravel and crushed rock:
The levy will ensure that the environmental impact of aggregates extraction are more fully reflected in prices and encourage a shift in demand away from primary aggregate towards alternatives such as recycled construction and demolition waste and china clay waste. It will also encourage the more efficient use of all aggregates, greater resource efficiency in the construction industry, and the development of a range of other alternatives including the use of waste glass and tyres in aggregate mixes.
The Levy, balanced by a cut in employers’ National Insurance contributions, was taxation-neutral on the industry, and set at a level based on the "average amount that people are willing to pay for the environmental benefits obtained from early enclosure of a quarry”, not a level that would necessarily promote maximum use of waste material as aggregates. However, by 2005 it was clear that the Levy had been successful in its aims of reducing primary and increasing the use of secondary aggregates:
...sales of primary aggregates in Great Britain fell by 8% between 2001 and 2003… against a backdrop of buoyant construction activity… Between 2001 and 2004 china clay waste sold as aggregate in the UK increased by 14% to 2.5 million tonnes...
The Levy was intended to rise in line with inflation, but has been held at £2 per tonne since 2010, following lobbying by the industry. Now, with the Levy exemption on secondary materials such as china clay waste temporarily withdrawn while industry allegations of state aid are investigated by the EU, the UK is moving even further away from the Levy's original aims.

As the Institute for Public Policy Research wrote in 1996:
The proverbially useless job-creation scheme is one in which some people dig holes in the ground and others come along and fill them in again. This is being done every day, on a macro-scale, with the quarrying and waste disposal industries (often the same companies operate in both sectors). Aggregates companies create the holes by extracting rock, sand and gravel, which they then sell very cheaply. Because primary aggregates are so cheap, there is little demand for recycled ones. So demolition waste – rock, sand, gravel – is mostly sent to landfills, to fill in the holes. During this pointless cycle, some people get very rich, and many more suffer serious disamenity. There is damage to landscapes, often in beauty spots, resulting from quarrying.
Many people now think it's clear that the Levy on primary aggregates must be increased over time, not just to a level which reflects the environmental impact of quarries, but to a level which does far more to encourage waste materials - china clay waste, slate, broken glass, tyres, demolition waste - to be used as aggregate instead of virgin material. As other industries move towards more sustainable materials, so too must the minerals industry; with an ever increasing population we cannot simply keep digging up green fields for basic sand and gravel aggregate.

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