Introduction of the Aggregates Levy in Northern Ireland: One Year On

House of Commons Northern Ireland Affairs Committee

Introduction of the Aggregates Levy in Northern Ireland: one year on

Third Report of Session 2003–04

Report, together with formal minutes, oral and written evidence

Ordered by The House of Commons to be printed 10 March 2004

HC 395 [Incorporating HC 1101-i & ii, Session 2002-03] Published on 12 March 2004 by authority of the House of Commons London: The Stationery Office Limited £14.50

The Northern Ireland Affairs Committee

The Northern Ireland Affairs Committee is appointed by the House of Commons to examine the expenditure, administration, and policy of the Northern Ireland Office (but excluding individual cases and advice given by the Crown Solicitor); and other matters within the responsibilities of the Secretary of State for Northern Ireland (but excluding the expenditure, administration and policy of the Office of the Director of Public Prosecutions, Northern Ireland and the drafting of legislation by the Office of the Legislative Counsel).

Current membership Mr Michael Mates, MP (Conservative, East Hampshire) (Chairman) Mr Adrian Bailey, MP (Labour / Co-operative, West Bromwich West) Mr Harry Barnes, MP (Labour, North East Derbyshire) Mr Roy Beggs, MP (Ulster Unionist Party, East Antrim) Mr Tony Clarke, MP (Labour, Northampton South) Mr Iain Luke, MP (Labour, Dundee East ) Mr Eddie McGrady, MP (Socialist Democratic Labour Party, South Down) Mr Stephen Pound, MP (Labour, Ealing North) Mr Peter Robinson, MP (Democratic Unionist Party, East Belfast) Rev Martin Smyth, MP (Ulster Unionist Party, Belfast South) Mr Hugo Swire, MP (Conservative, East Devon) Mr Mark Tami, MP (Labour, Alyn & Deeside) Mr Bill Tynan, MP (Labour, Hamilton South)

Powers The Committee is one of the departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in SO No 152. These are available on the Internet via www.parliament.uk.

Publications The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the Internet at www.parliament.uk/parliamentary_committees/northern_ireland_affairs.cfm. A list of Reports of the Committee in the present Parliament is at the back of this volume.

Committee staff The current staff of the Committee are Elizabeth Hunt (Clerk), Hugh Farren (Attached Clerk), Aileen O’Neill (Committee Specialist), Tony Catinella (Committee Assistant), Camilla Brace (Secretary).

Contacts All correspondence should be addressed to the Clerk of the Northern Ireland Affairs Committee, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 2172/3; the Committee’s email address is [email protected]

Contents

Report Page

1 Introduction 3

2 History of the Committee's involvement with the aggregates levy 3

3 The need for a follow-up inquiry 3

4 Government proposal to amend the levy relief scheme 4

5 European State Aid approval 4

6 Conclusions 5

Formal minutes 6

Witnesses 7

List of written evidence 8

Reports from the Northern Ireland Affairs Committee since 2002 9

1 Introduction

1. The aggregates levy was announced by the Government in Budget 2000, and came into effect from 1 April 2002. The levy was designed as a ‘green tax’ to promote recycling of waste aggregates and to mitigate the environmental costs of aggregate consumption. The levy is charged at a universal rate of £1.60 per tonne of aggregate extracted in the UK, whether the aggregate consists of sand, gravel or crushed rock. The levy is also charged on imported virgin aggregates, but not charged on imported processed aggregates such as ready mixed concrete. 2 History of the Committee's involvement with the aggregates levy

2. Our current inquiry follows our work in the 2001–02 session of Parliament. We began our initial inquiry into this subject in October 2001 after concerns were raised about: x The effectiveness of the levy as an environmental instrument; x The impact of the levy on the balance of competition between Northern Ireland and the Republic of Ireland where no levy exists; and x The cost of the levy to public sector construction.

3. Our investigation revealed that the research on which the levy was built had failed to take account of the distorting effect on the operation of the levy caused by the land border between Northern Ireland and the Republic of Ireland. In our Report, we recommended that the Government postpone any introduction of the levy into Northern Ireland, until a fully-informed decision has been reached as to its effects.1

4. As a result of representations from this Committee and from the aggregates industry in Northern Ireland, the Government agreed to phase in the introduction in Northern Ireland of the levy over 5 years2. The concession would apply only to processed products such as asphalt in order to allow the aggregates and construction industries in Northern Ireland time to adjust to the impact of the levy.3 3 The need for a follow-up inquiry

5. It became apparent to us that the levy was not bringing about the environmental improvements sought by the Government and that enforcing the levy was proving difficult. Concerns were also raised that the levy was encouraging the illegal use of untaxed

1 Northern Ireland Affairs Committee, First Report of Session 2001–02, Introduction of the Aggregates Levy in Northern Ireland, HC 333 2 HM Treasury, Pre-Budget Report, November 2002, Cm 5664, page 144, paragraph 7.73 3 The phased-in introduction of the levy will result in the amount of levy relief reducing by 20 per cent each year, starting with 20 per cent of the levy on 1 April 2002 (32p a tonne) with the full levy payable on 1 April 2007 (£1.60 per tonne)

aggregate and had led to a significant increase in unauthorised quarry sites in Northern Ireland.

6. We took evidence on three occasions in the period from September 2003 to February 2004. We would like to thank all those who gave evidence in this inquiry. We are grateful for the time and effort afforded us in understanding the complexities of the aggregates industry and the impact the levy has had on it. 4 Government proposal to amend the levy relief scheme

7. We took oral evidence from the Economic Secretary to the Treasury on 5 November 2003. In his opening statement, the Economic Secretary acknowledged that the levy was unlikely to meet its environmental aims and would not reduce the environmental impact of quarrying in Northern Ireland. As a result he said the Treasury was now prepared to look at alternatives to, or further reform of, the present scheme of levy relief.4

8. In the Pre-Budget statement on 10 December 2003, the Chancellor of the Exchequer announced details of a proposed new scheme designed to address the concerns raised by this Committee.

9. The new proposal for Northern Ireland would continue to cover aggregates used in processed products and the relief would be extended to cover virgin aggregate. The Government hoped the new scheme would come into effect on 1 April 2004, freezing the current rate of levy relief at 80 per cent until 31 March 2012. In return quarry operators would need to sign up to environmental improvements that would be regularly monitored and reviewed. Enforcement activity would also be stepped up.5 5 European State Aid approval

10. In order for the new scheme to be implemented, State Aid approval is required from the European Commission. After receipt of the UK Government’s State Aid application, the Commission have three months in which to consider the application. If further information is sought by the Commission then the 3 month time period is extended. Other interested parties (including other Member States) may submit comments; this procedure can delay the application by 12 months or more.

11. The Government’s State Aid application was submitted to the European Commission on 5 January 2004.6

12. In evidence to us on 25 February 2004, the Economic Secretary to the Treasury was unsure whether or not the introduction date of 1 April 2004 could be met but stressed that every effort was being made to assist the Commission in meeting this target.

4 Q 86 5 HM Treasury, Pre-Budget Report, December 2003, Cm 6042, page 163, paragraph 7.67 6 Ev 58

13. We are concerned about the effect any delay in introducing the new scheme might cause. If the new scheme is not in place by 1 April 2004 then under the present levy relief scheme the relief is set to reduce by a further 20 per cent on this date to 60 per cent. Subsequent introduction of the new scheme later in the year may necessitate the refunding of this additional 20 per cent—assuming that the new scheme can be applied retrospectively—back to 1 April 2004.

14. Under either scenario many businesses in Northern Ireland would be subjected unnecessarily to increased costs in the coming months. The Treasury told us that planning for late introduction of the new scheme, and development of a procedure for returning overpayments to those businesses, was not currently its priority.7

15. It was also apparent that, should the new scheme be rejected by the Commission, the Treasury was unsure of the future of the aggregates levy in its current form either in relation to Northern Ireland or the UK as a whole. 6 Conclusions

16. We are grateful to the Minister for listening to our concerns about the problems associated with the aggregates levy in Northern Ireland because of its land border with the Republic of Ireland. In these circumstances we welcome the steps recently taken by H M Treasury, together with the Department of the Environment in Northern Ireland, to secure the environmental improvements sought through the levy by the introduction of a new Code of Practice and Compliance Framework.

17. We urge the European Commission to consider urgently the UK Government's case for an extension of the levy relief scheme. While this will probably appear small by comparison with many of the Commission's other concerns the levy has proved a significant obstacle to the aggregates and construction industries in Northern Ireland, and by extension to the regeneration of the region's infrastructure, and its economic development, to which the European Commission commits substantial funding by other means.

18. We hope that the Commission and the UK Government together will find a way to agree and implement this proposed new scheme by 1 April 2004 so that additional burdens on the industry—which would otherwise come into effect on that day—can be avoided.

7 Qq 96–101

Formal minutes

Wednesday 10 March 2004

Members present:

Mr Michael Mates, in the Chair

Mr Adrian Bailey Mr Steve Pound Mr Roy Beggs Mr Martin Smyth Mr Tony Clarke Mr Mark Tami Mr Eddie McGrady Mr Bill Tynan

The Committee deliberated.

Draft Report (Introduction of the Aggregates Levy in Northern Ireland: one year on), proposed by the Chairman, brought up and read.

Ordered, That the Chairman’s draft Report be read a second time, paragraph by paragraph.

Paragraphs 1 to 18 read and agreed to.

Resolved, That the Report be the Third Report of the Committee to the House.

Ordered, That the Chairman do make the Report to the House.

Ordered, That the provisions of Standing Order No. 134 (Select Committees (reports)) be applied to the Report—(The Chairman.)

Several papers were ordered to be appended to the Minutes of Evidence.

Ordered, That the Appendices to the Minutes of Evidence taken before the Committee be reported to the House.—(The Chairman.)

[Adjourned till Wednesday 31 March at 3.30 pm

Witnesses

Tuesday 16 September 2003 Page

Mr John Baxter and Mr Richard Bird, British Aggregates Association Ev 10

Mr William McNabb and Mr Gordon Best, Quarry Products Association Ev 36 Northern Ireland, Mr Matthew Murphy, Balfour & Sons, Mr Pat Lyons, Tarmac Northern, and Mr Stephen Robinson, Robinson Quarry Masters

Mr Nigel Lucas, Construction Employers’ Federation Northern Ireland Ev 48

Wednesday 5 November 2003

Mr John Healey MP, Economic Secretary to the Treasury, and Mr Kris Romanski, HM Customs & Excise Ev 56

Wednesday 25 February 2004

Mr John Healey MP, Economic Secretary to the Treasury, and Mr Kris Romanski, HM Customs & Excise Ev 61

List of written evidence

1 British Aggregates Association Ev 1 2 British Aggregates Association, Supplementary memorandum Ev 4 3 British Aggregates Association, Supplementary memorandum Ev 13 4 Quarry Products Association Northern Ireland Ev 14 5 Quarry Products Association Northern Ireland, Supplementary memorandum Ev 17 6 J R Robinson & Sons Limited Ev 32 7 Tarmac Northern Ltd Ev 33 8 Quarry Products Association Northern Ireland, Letter to the Chairman Ev 41 9 Quarry Products Association Northern Ireland, Supplementary memorandum Ev 41 10 Construction Employers’ Federation Northern Ireland Ev 46 11 HM Treasury and HM Customs & Excise Ev 51 12 HM Customs & Excise, Supplementary memorandum Ev 53 13 HM Customs & Excise, Supplementary memorandum Ev 55 14 HM Customs & Excise, Supplementary memorandum Ev 58 15 Planning Service, Department of the Environment Northern Ireland Ev 69 16 Health & Safety Executive Northern Ireland Ev 70 17 Federation of Small Businesses Northern Ireland Ev 72 18 Royal Institution of Chartered Surveyors Northern Ireland Ev 73 19 National Joint Utilities Group Ev 74 20 Friends of the Earth Ev 74

List of unprinted written evidence

An additional paper has been received and has been reported to the House but to save printing costs it has not been printed and a copy has been placed in the House of Commons library where it may be inspected by members. Another copy is in the Record Office, House of Lords and is available to the public for inspection. Requests for inspection should be addressed to the Record Office, House of Lords, London SW1. (Tel 020 7219 3074) Hours of inspection are from 9:30am to 5:00pm on Mondays to Fridays.

Quarry Products Association (Appendices) British Aggregates Association (E-mail correspondence) HM Customs & Excise (Symonds’ Group Report)

Reports from the Northern Ireland Affairs Committee since 2002

The following reports have been produced by the Committee since the start of the 2002 Parliament.

Session 2003–04 First Report The Committee’s work in 2003 HC 146 Second Report The separation of paramilitary prisoners at HC 302 HMP Maghaberry Third Report Introduction of the Aggregates Levy in Northern HC 395 Ireland: one year on First Special Report Government Response to the Committee’s Eighth HC 180 Report on The Illegal Drugs Trade and Drug Culture in Northern Ireland, Session 2002–2003

Session 2002–03 First Report The Impact in Northern Ireland of Cross–Border Road HC 105–I Fuel Price Differentials: Three years on Second Report Annual Report 2002 HC 271 Third Report The Police (Northern Ireland) Bill HC 233 Fourth Report The Control of Firearms in Northern Ireland and the HC 67–I draft Firearms (Northern Ireland) Order 2002 Fifth Report Forensic Science Northern Ireland HC 204 Sixth Report The Illegal Drugs Trade and Drug Culture in Northern HC 353–I Ireland: Interim Report on Cannabis Seventh Report Peace II HC 653–I Eighth Report The Illegal Drugs Trade and Drug Culture in Northern HC 1217–I Ireland First Special Report Government Response to the Committee’s First HC 412 Report: The Impact in Northern Ireland of Cross– Border Road Fuel Price Differentials: Three Years On Second Special Report Government Response to the Committee’s Third HC 555 Report: The Police (Northern Ireland) Bill Third Special Report Government Response to the Committee’s Second HC 583 Report: Annual Report 2002 Fourth Special Report Government Response to the Committee’s Fourth HC 677 Report on the Control of Firearms in Northern Ireland and the Proposed Draft Firearms (Northern Ireland) Order 2002, HC 67–I, Session 2002–03 Fifth Special Report Government Response to the Committee’s Fifth HC 722 Report on Forensic Science Northern Ireland Sixth Special Report Government Response to the Committee’s Sixth HC 935 Report on the Illegal Drugs Trade and Drug Culture in Northern Ireland: Interim Report on Cannabis Seventh Special Report Government Response to the Committee’s Seventh HC 1077 Report on Peace II

Session 2001–02 First Report Introduction of the Aggregates Levy in Northern HC 333 Ireland Second Report The Financing of Terrorism in Northern Ireland: HC 628 Interim Report on the Proceeds of Crime Bill Third Report Introduction of the Aggregates Levy in Northern HC 713 Ireland: The Government’s Response Fourth Report The Financing of Terrorism in Northern Ireland. HC 978–I Volume II of this Report (HC 987–II) includes the Government Response to the Second Report, Session 2001–02, The Financing of Terrorism in Northern Ireland: Interim Report on the Proceeds of Crime Bill, HC 628 First Special Report Government Response to the Committee’s Fifth HC 332 Report, Miscellaneous Financial Matters, Session 2000–01, and the Government Response to the Committee’s Third Report, The Northern Ireland Office 2000 Departmental Report, Session 1999–2000 Second Special Report Government Response to the Committee’s Fourth HC 400 Report, Legal Aid In Northern Ireland, Session 2000– 01 Third Special Report Government Response to the Committee’s Second HC 401 Report, The Parades Commission, Session 2000–01 Fourth Special Report Government Response to the Committee’s Third HC 461 Report, Relocation Following Paramilitary Intimidation, Session 2000–01 Fifth Special Report Government Response to the Committee’s Third HC 1118 Report, Introduction of the Aggregates Levy in Northern Ireland, Session 2001–02

9437101014 Page Type [SO] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Northern Ireland Committee: Evidence Ev 1 Oral evidence

Taken before the Northern Ireland Affairs Committee

on Tuesday 16 September 2003

Members present:

Mr Michael Mates, in the Chair

Mr Adrian Bailey The Reverend Martin Smyth Mr Roy Beggs Mr Hugo Swire Mr Tony Clarke Mark Tami Mr Peter Robinson Mr Bill Tynan

Memorandum submitted by the British Aggregates Association

1. Introduction 1.1 The British Aggregates Association (BAA) was formed to represent and protect the interests of the UK’s independent aggregates producers. — The association is recognised by all the appropriate government departments and is an essential part of their consultation process. — Small, independent aggregates producers face enormous diYculties in dealing with new regulatory and ﬁscal measures. — Northern Ireland has a particularly large proportion of small, independently owned quarries. 1.2 The aggregates levy is having a hugely damaging impact in Northern Ireland. — Since the introduction of the levy, there has been a massive decline in reported sales. Demand for aggregates is instead being satisﬁed through a massive increase in smuggling and the “black market”. Customs and Excise are unable properly to enforce the levy. — Legitimate quarry operators face severe, ongoing problems as a result. — The aggregates levy is proving unable to deliver real environmental improvements; it may overall be causing environmental damage. 1.3 There is an overwhelming case for the complete revocation of the aggregates levy within Northern Ireland, at the earliest possible opportunity.

2. Quarrying in Northern Ireland 2.1. The £1.60 ﬁxed rate of the levy represents a far higher proportion of the selling price of aggregates in Northern Ireland than in other regions of the UK. It adds 56% to the £2.85 per tonne average price of aggregate in Northern Ireland1, compared to the approximately 16% increase to prices of £10 and over in South East England. This diVerence has caused the levy to have a far more damaging impact in Northern Ireland than in the rest of the UK. 2.2 The fall in reported sales across Northern Ireland since the introduction of the levy varies between 20% and 40%, depending on the county. All counties have been severely hit, although the impact has been worst in the border areas. 2.3 The long border with the Republic makes transporting cheaper industrial aggregates and concrete products from the Republic into Northern Ireland very easy. This problem is exacerbated by the concentration of quarries in the border area. Many areas in these border counties are severely disadvantaged and have been designated as “Targeting Social Need” areas by the Government. The eVects of the loss of industry and jobs are acutely felt. 2.4 Most of Northern Ireland’s quarries are relatively small, independently owned concerns. They have little ﬂexibility to absorb the aggregates levy, and its administrative costs, and are facing severe problems due to the fall in sales. These smaller quarries return a great deal to the communities they serve by way of much needed local employment and with a relatively small environmental impact.

1 Data taken from the Geological Survey of Northern Ireland. £2.85 was the average ex-works price of aggregate, before VAT, prior to the introduction of the aggregates levy. 9437101001 Page Type [E] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Ev 2 Northern Ireland Committee: Evidence

3. Cross Border Transportation of Aggregate 3.1 Research carried out by the University of Ulster found that aggregate has been imported across the border from the Republic at a rate of 2 million tonnes per annum since the levy began, equivalent to more than 11% of border counties’ aggregate production2. Prior to the introduction of the levy, the level of imports was negligible, since prices were virtually the same in Northern Ireland and the Republic. 3.2 The nature of the border, with numerous minor, rural crossing points, makes evasion relatively easy—as has been demonstrated with fuel smuggling. This point has long been acknowledged by Customs and Excise. 3.3 Smuggled aggregates are seriously undermining legitimate aggregates businesses in Northern Ireland, particularly in the border counties, where a large proportion of quarrying is concentrated.

4. “Black Market”Aggregates 4.1 “Black Market” aggregates are responsible for a large proportion of the decline in oYcially reported sales. The drop in reported sales is far greater than that attributable to imported aggregates above, varying between approximately 20% and 40%, by county. This represents an approximately 7–8 million tonnes decrease compared to the previous average annual aggregate sales of 26 million tonnes per annum, before the levy was introduced. It is notable that construction activity, and demand for aggregates, has not decreased. 4.2 With 2 million tonnes of the decrease in sales accounted for by imports, an estimated 5–6 million tonnes of aggregate is being sold on the “black market”. Given that the levy was, until April 2003, only applied to aggregates not used in added value products (asphalt, ready mix concrete etc), this tonnage represents a high proportion of taxable aggregates. This is in addition to any aggregates that were part of the “black market” prior to the introduction of the levy. 4.3 The “black market” is supplied by two distinct types of operation: — The unauthorised quarry. — The established operator supplying on a “cash in hand” basis. 4.4 Unauthorised quarries are not controlled through the planning system. They do not observe the stringent environmental regulations applied to the industry. Neither are they likely to observe employment legislation, health and safety procedures, or hold adequate insurance. 4.5 The massive increase in the “black market” in Northern Ireland is endangering legitimate quarry operators. Many are simply unable to compete, and are therefore experiencing signiﬁcantly reduced sales.

5. Enforcement 5.1 On the evidence above, Customs and Excise are clearly unable to enforce the levy. This failure is causing enormous diYculties for legitimate quarry operators throughout Northern Ireland. 5.2 Customs and Excise face well-publicised diYculties with enforcement in Northern Ireland; it is unrealistic to assume that proper policing of the aggregates levy can be achieved without a massive increase in their resources. 5.3 Given that the lost excise duty on a tanker of fuel is in the region of £12,000, compared to £35 lost when a lorry load of stone is smuggled, it seems unlikely that Customs and Excise will prioritise the enforcement of the aggregates levy. 5.4 Those prepared to illegally smuggle aggregate, or sell it on the “black market” therefore have a clear and signiﬁcant advantage over legitimate aggregates businesses. The penalties they would face for tax evasion, in the unlikely event of being found out, are small compared to the gains to be made. 5.5 Smuggled and “black market” aggregates evade not only aggregates levy, but also VAT. This amounts to a signiﬁcant loss to the Treasury. 5.6 Industry representatives have discussed enforcement issues numerous times with Customs and Excise, but have neither received a satisfactory response, nor seen any improvement on the ground.

6. The Environment 6.1 The aggregates levy was justiﬁed by the Government as an environmental tax, which would deliver real environmental gains. However it has failed to deliver environmental improvements, and is worsening the impact of some environmental problems. 6.2 A key Government claim for the levy was that it would “encourage the use of construction and demolition waste which is currently landﬁlled”.

2 Independent survey commissioned by the Quarry Products Association Northern Ireland and carried out by the University of Ulster. The survey was carried out at six diVerent locations along the border. 9437101001 Page Type [O] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Northern Ireland Committee: Evidence Ev 3

6.2.1 Very little construction and demolition waste is landfilled in Northern Ireland. There is less construction and demolition activity compared to the rest of the UK. 6.2.2 In any case, suYcient incentives to recycle the “arisings” that are available already existed before the aggregates levy was implemented. Not only was construction and demolition waste already cheaper than aggregate, it was also subject to £2 per tonne landfill tax unless it was recycled or re-used. Indeed, the main barrier to increasing recycling was, and still is, materials specifications that do not allow the use of recycled aggregates for many purposes. 6.3 The Government also claimed that the levy would “promote greater eYciency in the use of virgin aggregate”. 6.3.1 The levy is actually causing less eYciency in the use of virgin aggregates, by pricing the by-products (or so-called secondary aggregates) of legitimate producers out of the market. Many BAA members are already reporting large new stockpiles, particularly of lower-grade by-products which have incurred proportionately the greatest price increases. This situation is mirrored throughout the UK, and can only worsen as comprehensive evidence continues to emerge over the coming months. 6.4 The Government also claimed that the levy was necessary to achieve “reductions in noise and vibration, dust and other emissions to air, visual intrusion, loss of amenity and damage to wildlife habitats”. 6.4.1 The quarrying industry in Northern Ireland has invested a great deal in complying with the strict demand for “best available technology” (BAT), an environmental requirement which is regularly revised upwards through Integrated Pollution Prevention and Control. These regulations, and the responsible attitude of the industry itself, ensure that everything possible is already done to reduce the environmental impact of quarrying. 6.4.2 Quarrying is a transitory activity, and once extraction has ceased at a site numerous beneficial uses result, including the creation of recreational amenity and sports facilities, and geological exposures. A large number of Sites of Special Scientific Interest (SSSIs) have resulted from quarry restorations. 6.5 The aggregates levy is however proving damaging to the environment in a number of ways. 6.5.1 The cross-border transportation of aggregates from the Republic of Ireland has significantly increased the environmental damage caused by the road haulage of aggregate. 6.5.2 The levy has caused a massive increase in unauthorised quarrying, which is not subject to planning controls and is unlikely to conform to environmental regulations. From April 2002 to December 2002, following the introduction of the aggregates levy, there were 30 confirmed reports of unauthorised quarrying, compared to 17 in the same period the previous year3. 6.5.3 The levy has priced cheaper aggregates by-products out of the market, as outlined in paragraph 6.3.1 above. This has created huge stockpiles of unsold by-products, which are highly visually intrusive. 6.5.4 Any increase in aggregates recycling may in fact cause environmental damage. Like quarrying, recycling causes noise, dust and other emissions to air, as well as requiring a significant amount of power. It is notable that the survey commissioned by the Government to quantify the environmental costs of quarrying found that recycling sites imposed a greater environmental cost than quarrying itself4.

7. Long Term Effects of the Aggregates Levy in Northern Ireland 7.1 There is little realistic prospect of Customs and Excise being in a position to enforce the aggregates levy in Northern Ireland in the foreseeable future. 7.2 In the long term, many quarry operators in Northern Ireland are likely to face a choice between either going out of business, or breaking the law. 7.3 The situation will now become even worse, as the levy begins to be applied to aggregates used in processed products. 7.4 A signiﬁcant amount of the production of virgin aggregates has, in eVect, transferred to businesses in the Republic of Ireland, with millions of tonnes of aggregate now crossing the border annually. Without a derogation from the levy for aggregates used in processed products, at least 10 aggregates processing businesses located close to the border also intend to relocate to the Republic of Ireland. 7.5 Signiﬁcant job losses have already occurred; more are expected. A survey of 28 quarrying companies showed that, since the levy was introduced in April 2002, 52 workers have been made redundant, with a further 58 expected to lose their jobs if the downturn continues5. Ten of these companies have indicated they intend to relocate their processing operations to the Republic, with the loss of 282 jobs, if an exemption for aggregates used in processed products cannot be secured. Since these are initial statistics and only represent direct employees, the eventual job losses will be far greater. Many of the jobs lost will be in the border counties, in areas designated as “Targeting Social Need”; their impact will be felt acutely.

3 Statistics from Planning Service in Northern Ireland. 4 London Economics, “The Environmental Costs and Beneﬁts of the Supply of Aggregates—Phase 2”, (August 1999). 5 QPANI survey of 28 companies, both members and non-members, Spring 2003. 9437101001 Page Type [E] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Ev 4 Northern Ireland Committee: Evidence

7.6 The levy is not achieving environmental beneﬁts, and will in the long term damage the environment, through increased road haulage, increasing stockpiles of unsold “secondary” aggregates, and increased numbers of unauthorised, unregulated quarries.

8. Conclusion 8.1 The Government claims that the aggregates levy is in line with the Treasury’s Statement of Intent on Environmental Taxation, which said, “environmental taxation must meet the general tests of good taxation. It must be well designed, to meet its objectives without undesirable side-eVects; it must keep deadweight compliance costs to a minimum; the distributional impact must be acceptable; and the implications for international sectoral competitiveness must be taken into account”6. The aggregates levy fails to meet the tests of good taxation. 8.2 The problems caused by the levy have become insurmountable due to Customs and Excise’ inability to enforce it. It is unacceptable that law-abiding quarry operators have been placed in the impossible position of being undercut by a massive amount of smuggled and “black market” aggregates. 8.3 These problems cannot be addressed within the current legislative framework. The BAA therefore believes the levy should be completely revoked within Northern Ireland. 8.4 The BAA urges the Committee to do all it can to prevent the imminent crisis facing the quarrying industry in Northern Ireland. May 2003

Supplementary memorandum submitted by the British Aggregates Association I refer to your recent correspondence and our subsequent telephone conversations on the aggregates levy and in particular the forthcoming meeting of The Committee to be held at Storemont on 16 September 2003. You have asked for papers outlining the British Aggregates Association’s legal challenge against the levy in order that you can brief Members prior to the meeting on 16 September. To this end I have enclosed four short papers which I trust will help to acquaint Members with the position as we see it. These papers are: — A brief background to the BAA legal challenge. — Facts and anomalies surrounding the levy that have arisen in the ﬁrst year of implementation. — An internal e-mail outlining the key issues of the Construction Products Association to the DTL, concerning the aggregates levy, including factors concerning Northern Ireland. — A BAA paper entitled—Aggregates Levy: A Good Tax or Bad Tax?

BACKGROUND TO THE BAA’S LEGAL CASE AGAINST THE AGGREGATES LEVY When the Government first proposed the introduction of a tax on aggregates, both trade associations, The Quarry Products Association and The British Aggregates Association voiced their opposition. The Government stated that the reasons for the imposition this new tax was on environmental grounds and to sustain what is a natural asset. No evidence to suggest that there was an environmental problem from quarries or that there was likely to be a shortfall in reserves of natural aggregates in the foreseeable future was put forward to justify these claims. The Government (Treasury) instigated what is seen in the trade as a spurious consultation process by an organisation known as London Economics who have subsequently been wound up. London Economics set out to justify the imposition of a tax by foul or fair means. At one stage they tried to justify the costs of a tax by quoting a monetary figure that people would pay to get quarries moved away from their area, if in fact there was quarry there in the first place. Despite a lack of any substantial evidence gained from this consultation and the objections and concerns raised by the industry, the Government refused to have a new consultation carried out saying that they had already spent £600,000 on the consultation and that was it! The QPA subsequently proposed a policy whereby those quarries that adopted a stnngent environmental audit should be allowed to trade without the imposition of the levy. The BAA strongly objected to this on the basis that it was unfiiir to smaller enterprises who did not have the staV or means to carry out, or meet these so called environmental audits. The Government accepted the BAA’s point of view that this was unfair to SME’s and this so-called “green quarries” idea was dropped.

6 HM Treasury, Budget 1997. 9437101003 Page Type [O] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Northern Ireland Committee: Evidence Ev 5

(Note: The idea of an environmental audit for Northern Ireland quarries has, been put forward by QPANI as a basis for a reduced levy for Northern Ireland Quarries and in order for that reduced levy to comply with EU rules.) At the onset of the Aggregate Tax the BAA legally challenged the imposition of this tax on the grounds that it had been imposed selectively and not fairly across the board. The Government stated that the tax was a tax on “virgin aggregates”. (We assume they mean the extraction of rock out of the ground). However, china clay, slate and shale are not taxable although almost 3 million tonnes per year of china clay aggregates for construction purposes are put on the market. According to their website McAlpine Slate in north Wales produce more than 600,000 tonnes per year of construction aggregates from slate. Both these operations are having a severe eVect on the businesses of normal aggregate quarries in those areas where this takes place. (Note: In Northern Ireland the aggregate quarries there have the same problem with shale aggregate that is also not subject to tax.) The Government stated that the tax is an environmental tax, a tax on so called holes in the ground. However, china clay pits, slate quarries, cement quarries, opencast coal sites and pits for clay are all holes in the ground, but their products (whether used as construction aggregates or not) are not liable for the levy. Furthermore, it should be pointed out that for every 3 million tonnes of china clay produced every year, 24 million tonnes of material is put to waste. For every 3 tonnes of roofing slate manufactured, approximately 90 tonnes is put to waste. The Government says it is a tax on use. However, slate aggregates, slag aggregates and sand from china clay have all been used as aggregates for construction purposes for over 40 years, yet these particular materials are not taxed?? The Government says the tax is to encourage more use of recycled materials such as demolition, waste (broken concrete and brick known as CD waste). There is no evidence to suggest that there is a problem with marketing recycled aggregates. In London and Manchester there is a thriving business in recycled demolition materials. It needs no financial support, as there are simply no quarries in the city centres. Crushing broken concrete will always cheaper than winning virgin rock and turning it into construction aggregates. The problem with CD waste is simply the supply of materials from demolition sites. It is linked to how many buildings get knocked down. In rural areas such as Northern Ireland, one must conclude that the supply of demolition waste is severely limited, therefore, the supply of raw materials for construction in Northern Ireland has to depend on the quarries that supply construction aggregates. With all this talk of environmental constraints on aggregate quarries and this being the reason for the tax, the following should be pointed out. As a direct result of “unfair competition” from untaxed or exempt aggregates, a major environmental problem is being created across the country. Because many quarries cannot now market their “secondary products” such as quarry scalpings or crushed fines; million of tonnes of these materials are being stockpiled in quarries throughout the land and this could lead to blots on the landscape, where before there were no blots, or even likely to be any blots. The instigators of the aggregates tax failed to realise that if you produce quality aggregates such as 20 millimetre aggregates for concrete, or 60 millimetre aggregates for rail ballast, then the quarry processing/ crushing system will inevitably produce crushed fines or scalpings (known as secondary aggregates) as a result of producing the so called quality “primary aggregates”. In the past, these “secondary aggregates” could be sold oV cheaper and there was no problem with so called “waste materials”. There simply was no waste, everything got sold. Now, with the addition of £1.60 of aggregate tax, these materials cannot get sold and so a new “waste” problem is starting to emerge.

The above points are the basis of the legal BAA’s legal challenge against the imposition of the aggregate tax The initial case was heard in the High Court early in 2002. The BAA main complaint was that those exempt materials, as outlined above, amounted to illegal State Aid and asked that the UK Government (HMG) be ordered to apply to the EU Competition Directorate for State Aid Approval. Although the BAA was not successful in the High Court. it was clear that this had been a diYcult decision for the judge, that it was far from clear-cut and that he had either not read or had not understcod our main submission. He gave us leave to appeal, which was in itself quite unusual and HMG did not seek to oppose our application to lodge an appeal. The case is now waiting to be heard in the Court of First Instance in Brussels and we anticipate that this will be in the early part of next year.

THE AGGREGATE TAX—SOME FACTS AND ANOMALIES THAT HAVE ARISEN IN THE LAST YEAR OF IMPLEMENTATION An aggregate quarry in Cornwall has shale beds that amount to 40% of the rock content. The shale portion of production is sold without the aggregate levy of £1.60 simply because shale is an exempt material, whilst production of the other rock types carries the levy. 9437101003 Page Type [E] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Ev 6 Northern Ireland Committee: Evidence

It could be argued that shale is exempt because normally shale is a waste material arising from the processing of other minerals. For example the shale spoil heaps of central Scotland that arose after the processing of oil from the shale beds many years ago. Tlus exemption was never meant to apply to aggregate quarries.

The result of this anomaly is a threat to jobs at nearby quarries where the tax applies to all aggregates sold. Furthermore, this leads to the creation of waste heaps at other quarries who cannot sell secondary products, or quarry scalpings, because of unfair competition from the so called shale aggregates.

Another anomaly concerning shale is as follows. Clay or soil, which overlies an igneous rock extrusion, is altered by the heat of molten magma at the time of the volcanic action. The soil is “cooked” hard and is known as shale. Many igneous rock quarries are overlain by a metre or two of shale. This is a particularly common occurrence in igneous quarries of Northern Ireland. It is normal to sell this shale overburden very cheap as a ﬁll material simply to remove it from the quarry face. Since the advent of the aggregates levy, quarries with shale overburden have been able to sell this material easily because as shale, it is not subject to the levy. However, those quarries whose overburden or quarry waste cannot be termed shale cannot sell it because it is subject to the levy. The result is a growth of waste heaps at quarries throughout the land as a direct result of the aggregates levy.

Northern Ireland quarries are also suVering because of the large volume of aggregates being brought in from south of the border which have not had the tax paid simply because the problem is too big to police eVectively. Then there are the farmers who are selling untaxed material on the pretence that the excavations are part of a “farm restitution programme”. There is the threat that the tax is about to cause more unemployment by forcing concrete and blacktop producers to relocate south of the border. This means that value added products can be brought back into Northern Ireland and not be subject to the levy, even though the aggregate ingredients were quarried in the north in the ﬁrst place. This creates another environmental anomaly in that more lorry miles have been created to deliver the product.

Silica Sand from the extraction of china clay in both Cornwall and Devon is another material that is exempt from the levy. Like the example above, this too has had an adverse eVect on the Market and the environment. Well over one million tonnes per annum of this material is being processed for aggregate purposes in the south west of England. This has meant many more truck miles by hauling the material greater distances simply because the material has a massive sales price advantage by being exempt from the levy as well as having minimal production costs because it is a result of china clay production and not the usual extraction costs. Like the shale above, a waste problem in the form of heaps of unsold crushed dust and quarry scalpings is starting to emerge in the Southwest.

In west Wales some operators have opened up so called slate quarries to supply the construction market with cheap ﬁll or road bases.

Like shale and sand from china clay, slate is exempt from the aggregate tax. However, this exemption was meant to apply to the rooﬁng slate quarries of north Wales. By actually naming slate as an exempt material means that any operator can sell slate rock at an unThir advantage over regular aggregate quarries and thus create another waste problem and more lorry miles onto the roads. The fact that this kind of slate has no connection with rooﬁng slate is not brought into question.

The aggregate tax does not apply to dimension stone as such, but it does apply to the cut oVs from dimension stone production. However, it does not apply to those cut oVs from SLATE production. In north Wales there is an example of a quarry that has tens of thousands of tonnes of cut oVs of GRANITE in a waste heap that was formed over 100 years ago from the hand processing of stone (before the days of electricity in quarries). The quarry cannot sell this material because it is uncompetitive against the local slate cut oVs even though the granite material is nearer to the market. Slate is exempt from the levy but granite is not.

Until recently it appeared that ground limestone for animal feed stuV was only exempt from the levy if it was used for agricultural purposes such as cattle feed or chicken grit. If the limestone was an ingredient of pet food or food for race horses, then it was not exempt. It would seem that the authorities have relaxed this interpretation by adopting the principle that if the material is not for “aggregate purposes” (ie construction aggregate or as bulk in construction aggregates). This more common sense approach is welcomed, however, it does beg the question that if exempt materials, eg slate and sand from china clay, are used strictly for aggregate purposes, then should they not pay the levy in line with similar aggregates who simply have a diVerent geological name but have the same end use?

Another anomaly has to be the exemption of cement from the aggregate tax. This material is largely quarried from limestone and it ends up with aggregates to be used in construction. Cement is quarried from limestone rock but it is not taxed. 9437101003 Page Type [O] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Northern Ireland Committee: Evidence Ev 7

More and more complaints are being aired about the poor state of maintenance of our roads. By increasing the cost of a tonne of aggregates by £1.60, then the cost of road maintenance has increased. No doubt this has to be a factor for the reasons for the lack of repairs. How many major construction jobs have been postponed indeﬁnitely because of increased cost brought about by the aggregates tax. Peterhead Harbour breakwater scheme is one. It is rumoured that it may never go ahead now. Then there are sea defence schemes in East Anglia that have been put on temporary hold. The armour stone for this work is mainly imported from Norway but it is still subject to the tax. 15 May 2003

E-MAIL CORRESPONDENCE BETWEEN PETER HUXTABLE AND BOB DURWARD We spoke on Thursday about this when you asked for an update on the key issues from the industry in order to inform your own Budget Briefing. I have spoken to both OPA and BAA. QPA are updating their briefing in advance of their own budget submission, but are clear about the key issues and I have incorporated these below. Similarly, BAA do not have a summary of their position, but on 11 July they did publish the results of a survey of their members which compared company experience during the first 12 months of the levy against the same period in 2001–02. A copy of their survey results is attached.

As you said on the telephone, there are two clear issues that the industry is pressing for. (i) No increase in the rate of the levy. This was not a tax introduced in order to raise money for the Exchequer, but rather to try to change behaviour in a more environmentally-friendly way. The only justification for any increase would be if it was believed that a higher rate of tax would help meet whatever environmental objectives the government has set (which the industry would strongly dispute—see below). There is therefore no justification for raising the tax in order to try to help in addressing government budget shortfalls. (ii) There is an urgent need to review the tax and assess whether it is meeting its environmental objectives. One of the problems with this is that the environmental objectives are pretty vague (which industry has regularly criticised in the past), but this should not stop government reviewing this. Indeed, we understand from both Sir Robert Culpin (Managing Director of the Tax side of the Treasury) when he came to our Trade Association President’s meeting in October last year, and Martin O’Neill (Chairman of the Trade and Industry Select Committee) that this was something the government would do on all tax measures such as this. In addition to assessing whether the tax is meeting its environmental objectives, the Review would need to address some of the serious adverse impacts of the tax, including; — The build up of waste from quarries which previously could used beneficially because of its low/ nil value, but which now has to be taxed, removing any prospect of it being commercially viable to use much of this. There is undoubtedly an adverse environmental impact here. Perversely, other low grade waste which is not being taxed is being used as an alternative, but any environmental benefit from this is more than oVset by the distance that this waste is being transported across the country eg china clay waste from Cornwall. — The Northern Ireland problem, with product moving across the border from the Republic, major enforcement problems, and a situation that can only get worse as the current temporary concessions wind down. Does Government think that this is consistent with its own “sustainability” agenda? — Increased distortion of the market in favour of imported concrete products that contain untaxed imported aggregate which gives an unfair advantage to our near European neighbours. I understand the concrete industry if facing increasing imports of this kind of product into the south east of England. — Cash flow problems, particularly for smaller operators. In some ways this is a problem of industry payment mechanisms, but it would be wrong of Government not to acknowledge the added burden that this tax is placing on small businesses at a time when they are introducing a whole range of other initiatives to encourage them to be more competitive.

It would be wrong not to acknowledge that some substitution of virgin aggregates by recycled product has taken place as a result of the tax, but the level of recycling in the industry was already mature before the tax was introduced and the there has only been a small incremental change in behaviour which may well have happened anyway irrespective of the tax. What this review therefore needs to do is to establish whether there is evidence that the tax has net environmental beneﬁts that justify the cost to industry, in both tax raised and the administrative burden it imposes on businesses of all sizes. 9437101003 Page Type [E] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Ev 8 Northern Ireland Committee: Evidence

You mentioned that you may well have to present your arguments on this and other budget issues to the Dli Tax Group on 10 September. Both QPA and BAA would be more than happy to meet you shortly before that to answer any points you may have on this, and to add supporting evidence to the points above if you felt this would be helpful. In the meantime, if there is anything further you would like at this stage, please let me know. Michael G Ankers Chief Executive Construction Products Association

AGGREGATES LEVY: A GOOD TAX OR A BAD TAX? Ever since the idea of a tax on aggregates was ﬁrst put forward by New Labour in 1997, the concept has come in for a great deal of criticism. The quarry industry pointed out that it was already subject to the strictest environmental legislation in Europe, few complaints were received about quarries and in any event, the scheme provided no incentive for further environmental improvement. It was also pointed out that the UK led the way, in Europe, on recycling. There was no signiﬁcant problem with the quarry industry it was a perceived problem as a result of lobbying by green pressure groups such as the Council for the Preservation of Rural England and Friends of the Earth. However, Government was not to be dissuaded and the Aggregates Levy came into force, 1 April 2002.

Government Used a Great Deal of Rhetoric to Justify its Actions “Environmental taxation is not simply an excuse for raising revenue. How and what a government taxes ends a clear signal about the economic activities which it wants to encourage or discourage, and the values it wishes to entrench in society. Over time the Government aim is to shift the burden of tax from ‘goods’ such as labour and capital to ‘bads’ such as pollution But, in line with the Government’s Statement of Intent on Environmental Taxation, published in July 1997, any environmental taxes should meet the tests of good taxation.”

The 1997 Treasury Statement on Environmental Taxation: “Environmental taxation must meet the general tests of good taxation. It must be well designed, to meet objectives without undesirable side-eVects; it must keep deadweight compliance costs to a minimum; distributional impact must be acceptable, and care must be had to implications for international competitiveness.” These conditions are clearly sensible yet the levy has generated a great deal of criticism: — Widespread and detailed criticism from the quarry and construction industry. — Criticism from the Environmental Audit Committee about the absence of any sort of recognition of or stimulus for environmental improvement. — Numerous criticisms from the Northern Ireland AVairs Committee, most of which were equally relevant to the mainland. — Calls for a delay and a rethink by two Labour Ministers and the CEI. — Several parliamentary motions and a large number of parliamentary questions. —TheoYcial opposition praying against the regulations. — A three day High Court Judicial Review, also critical. — Complaints to the EU Competition Directorate. With very few people, apart from the Green pressure groups and Treasury, continuing to defend this levy, we consider whether or not Government is adhering to its stated policy.

“Environmental taxation must be well designed,” The aggregates levy has defeated the best minds of Treasury and industry alike with its inability to be reﬁned and has become an enormously complex piece of legislation.

“Able to meet objectives” Government claims that, “noise, dust and visual intrusion are costs of quarrying, not accounted for by existing taxation, and that the levy will reduce the amount of virgin aggregate used and increase the use of recycled aggregate.” However, UK quarries comply with the strictest legislation in Europe, few complaints are received, demand for virgin aggregate is determined by other factors, little if any increase in recycling has occurred and the levy provides no stimulus for environmental improvement. 9437101003 Page Type [O] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Northern Ireland Committee: Evidence Ev 9

“Avoid undesirable side-eVects” The levy stiﬂes competition, has a disproportionate eVect on SME’s, is already creating new waste tips within quarries, will drive up imports, stimulate marine dredging, cause material to be transported further, precipitate job losses in the rural economy, drain funds from overdue road building and repairs and trigger increases in council taxes and business rates with the public sector accounting for almost 40% of all aggregates used.

“Must keep deadweight compliance costs to a minimum” Compliance costs high due to mind numbing complexity, the need to apply diVerential amounts of levy to diVerent products, cash ﬂow problems and the failure of Section 43 of the 2001 Finance Act to provide ﬁscal protection for contracts or relief for bad debts relating to added value products such as concrete and asphalt. (50% of all sales)

“Distributional impact must be acceptable” The £1.60 levy represents a 30% increase in the regions and a 12% increase in the South East. The “per capita” use of aggregate is higher in the regions (6 tonnes England v 12 tonnes NI ) but the reduction in NIC gives greater beneﬁt to more prosperous, industrialised areas. This is further exacerbated by the Sustainability Fund which derives revenue from tonnage, hitting the regions harder, but distributes revenue using the Barnett formula, based on population.

“Care must be had to implications for international competitiveness” Levy will severely damage our international competitiveness: — Importers will only bring in saleable sizes with overseas producers able to dispose of by-products, tax free, within existing markets. — Levy is not charged on imported ﬁnished products made with aggregates. — Levy is not relieved on exported ﬁnished products made with aggregates. — The UK levy at £1.60 is four times higher than the most expensive EU country, Denmark at 36p. Most EU countries have no levy at all and in France it is only 6p. — Due to the high cost of fuel, restrictive driver hours regulations and the increasingly congested nature of our roads, it is often now cheaper to ship aggregates in bulk from countries like Norway than to deliver by road from our own rural quarries.

Conclusion The levy fails to meet Government’s given tests for a “good” tax. Therefore, the accusation that it is a stealth tax has merit. The budget increase in employers MC rate of 1% (10 times higher than the 0.1% refund claimed to be a result of the levy) and only 9% of revenue going to the Sustainability Fund supports this view. It is diYcult to avoid the conclusion that the Aggregates Levy is not just a bad tax, it is a profoundly bad tax. May 2002 9437108001 Page Type [E] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Ev 10 Northern Ireland Committee: Evidence

Witnesses: Mr John Baxter, Technical Consultant, Mr Richard Bird, Executive OYcer, British Aggregates Association, examined.

Q1 Chairman: Mr Baxter, Mr Bird, good morning Mr Baxter: Yes. and thank you for coming to help us look at the aggregates levy one year on. Perhaps you could tell Q3 Chairman: And then a black market has us something of the scale of the problem to start developed which was not there at all or not there in with. Can you give the Committee an indication of such quantity? the amounts of virgin aggregates and processed Mr Baxter: I cannot say. I am not familiar enough aggregate products used in Northern Ireland? with the situation pre aggregates levy to say that it Mr Baxter: The source for that, Chairman, is the was not there before. I suspect it was there to some DoE statistics, the Government statistics. I think the extent. The levy has certainly made it grow most recent set, which are for the year 2002, show a significantly. I have had members point out to me market down from 26 million tonnes in 2001 to 23.5 fields that quite clearly have just recently been million tonnes, that is some 10% down on the opened up. This is not just a question of not being previous year. I think those particular statistics registered for the aggregates levy, they are being cover a very much more complex underlying exploited without any authorisation at all, whether situation. Anecdotal evidence suggests that the it be planning, environmental or whatever. market was quite busy up to the end of the financial year in 2002 and then there were very serious Q4 Chairman: What is the actual cost to the declines in the second half of the year. The market’s industry of aggregate extraction, both in virgin verbal message suggests that in some particular aggregates and processed aggregate products so far, companies and some counties the market was and what are your predictions during the phasing- backed by as much as 40%. That is the basis of the in period? calculation we did to come up with this black market Mr Baxter: What do you mean by cost? of around seven million tonnes—two million coming over the border and five million within the province itself. I think the situation has probably got Q5 Chairman: The actual cost to the industry of the slightly better since the dark days of September last extraction and the levy you are paying for it. Mr Baxter: year and that probably reflects the fact that there If you mean the cost of extraction, that had been a pre-selling before the end of the financial varies significantly from site to site and type of year and that was balanced by this huge decline in aggregate, but the cost for extraction of sand and the third quarter. The market has got cleverer. The gravel would be significantly less than hard rock. As legitimate operators have learned probably better a very broad guess I would say you are talking than other regions in the United Kingdom how to figures of £2 a tonne plus depending on the site. exploit the loopholes in the Finance Act, because they have a much greater incentive to do so. The Q6 Chairman: You say to us that the sale of eVect of the levy in the province is far greater than aggregates within Northern Ireland has decreased anywhere else in the United Kingdom and because by seven to eight million tonnes. of that they have been ahead of the game in Mr Baxter: As I explained in my earlier answer, that Northern Ireland at finding loopholes in the Finance was based on the anecdotal information coming out Act and exploiting them. That has had a reverse from the second and third quarters of 2002. eVect, in other words they have been able to identify those parts of the quarry which, within the fine Q7 Chairman: And you think all of this will be definitions of the Finance Act, are not subject to the revealed at the end of September, do you? levy and that probably marginally helped the Mr Baxter: I think there will be an improvement. legitimate operator to take back a little bit of market share and stabilise his position, but it is still Q8 Chairman: What were their terms of reference, extremely severe. The diYculty in judging the size of do you know? the problem is reflected in Customs and Excise’s Mr Baxter: I do not know. They were given by the decision to commission Symonds to research the Treasury and Customs and Excise. whole question in much more detail, and I think all Chairman: That is something we must find out. of us in the quarrying industry await with considerable interest the Symonds Report which we understand will be published on 25 September. In Q9 Mr Bailey: You have talked about the reduction fairness, at that point we will stop guessing. My in legitimate sales and the black market sales. I figures are based on contact with our members, on believe you have estimated the black market sales to market discussions within the industry and you be something like five to six million tonnes. Do you cannot say that they are absolute for that reason. think that is all unauthorised quarrying or is there another explanation for that? Mr Baxter: I think it is substantially unauthorised quarrying. I believe my friends who will be following us will have better and more detailed evidence than I do. If you have a formal authorisation and a formal Q2 Chairman: In very brief summary, you think planning consent then it is very diYcult not to people pre bought to avoid the tax and stockpiled, register properly for the levy in terms of the do you not? Finance Act. 9437108001 Page Type [O] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Northern Ireland Committee: Evidence Ev 11

16 September 2003 Mr John Baxter and Mr Richard Bird

Q10 Mr Bailey: On the issue of unauthorised quarry only just been aVected. It is the aggregates which are sites, in 1998–99 there were 22 and now it is easiest to produce and that require the minimum estimated that there are 38 so it has obviously been amount of processing which have been given this a problem pre aggregates tax. Why do you think huge advantage of over 50%. I do not need to point unauthorised quarry sites existed before then? out that the guy who is not paying the levy is Mr Baxter: I can only speculate and I am not sure probably not paying the VAT as well and so the that that would be useful. There are people that are chances are that the actual advantage is significantly much more familiar with the historical situation greater than the 50-odd% that we are talking about. than I am. I really do not know the answer. There is a certain amount of unauthorised exploitation Q14 Mr Tynan: It was 38 unauthorised quarry sites throughout the rural parts of the United Kingdom. and you say it may be nearer 50 now. Is that a job My impression is that they are rather more prevalent creation scheme? in Northern Ireland than they are in northern Mr Baxter: It is also a job destruction scheme Scotland. because I think the evidence from the DoE statistics is that they lost 200 jobs in the oYcial market. The Q11 Mr Bailey: On the surface it would look as actual reduction in employment between 2001 and though there has been a significant increase. 2002 was 200 people. Interestingly, it was 22 in 1989–90, it went down to 11 the following year and it has subsequently gone Q15 Mr Tynan: I had understood it was 52 that had up to 38. I think it would be interesting to have some been made redundant with an expected 58. sort of assessment of why these fluctuations have Mr Baxter: That is the evidence that they [Quarry taken place. Products Association Northern Ireland] put out. If Mr Baxter: It could be a question of advantage. I you actually look at the Government’s own understand there are now over 50 or something like statistics, the number is 200. Total employment in that. There has been an interesting situation in the the quarrying industry in 2001 was 1,600 people; in aggregates industry generally since about 1996 when 2002 it was 1,400 people. the landfill levy was introduced and that really provided a huge incentive to recycle. The reaction to that was a little bit slow in coming through from the Q16 Mr Tynan: How many people would be plant manufacturers. It was really not until about employed in these unauthorised quarry sites, have you any idea? 2000 that you began to get light, highly mobile, Mr Baxter: relatively cheap plant for processing aggregate albeit You are talking about maybe two loading shovel operators and an attendant who are initially for recycling, it was going to be used for V virgin aggregate and so the cost of entry into probably not too fussed about weighing stu out at particularly the bottom end of the quarrying market the weighbridge, so maybe two or three people. became very much less. Combine that with the introduction of a tax—forgetting the VAT element, Q17 Mr Tynan: So a very small number? it represents something like 56% of the selling price Mr Baxter: Yes. of the material—and you create a huge incentive for people to enter that particular, albeit grey, market. Q18 Mr Tynan: You have indicated your support Then there is the whole question of enforcement and for the research by the University of Ulster. Have control and here in Northern Ireland there seems to you been able to identify the amounts of virgin be a particularly grave problem in the control and aggregates and processed product crossing the enforcement of regulations concerning quarrying border? and the Quarrying Act. Mr Baxter: My guess is that they are all virgin aggregates coming across the border. One of the Q12 Mr Bailey: Quarries are not things that you can problems with recycled aggregates particularly in a hide easily. You would have thought enforcement largely rural environment is where is the feed coming and control would be a relatively simple task for any from. You have to be knocking things down and government. Has there been any co-ordinated rebuilding things on a fairly massive scale to get the attempt to check and to close unauthorised quarries? incentive to recycle material in the first place and Mr Baxter: My impression is none whatsoever. One that does not happen on any large scale in Ireland. of the comments that I get back from our members It might happen in Dublin, it might happen in is why cannot the guys who are doing the planning Belfast, but it is not going to happen on a huge scale enforcement or the environmental enforcement be anywhere else. That is one of the fundamental connected up because they are really dealing problems with this whole concept of recycling eVectively with the same problem. materials, it works great in the urban environment but when you get to the rural environment you do Q13 Reverend Smyth: Is the increase in not have the risings available to sustain investment unauthorised quarrying solely as a result of the levy in the necessary plant. or are there other factors that might impinge on it? Mr Baxter: My opinion is that it is solely as a result Q19 Mr Tynan: So your view is it would only be of the levy. The levy, £1.60, is at the bottom end of virgin aggregates coming across the border? the product range. The more sophisticated Mr Baxter: I would be totally amazed if it was aggregates which go into added value products have anything other than that. 9437108001 Page Type [E] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Ev 12 Northern Ireland Committee: Evidence

16 September 2003 Mr John Baxter and Mr Richard Bird

Q20 Mr Tynan: Do you think the survey was required. That might be improved if we went back to comprehensive enough to come to conclusions? the point of having a joined-up approach. In our Mr Baxter: I think the feeling generally, hence the contact with them they said that the three people Treasury’s commissioning of the Symonds Report, that I have been able to identify on the ground are was that the sort of evidence that we have been able actually backed up by people doing VAT and stuV to turn up within the industry was not robust enough like that. The other factor is that you are actually to come to firm conclusions. What we could do with talking about quite a complex market. I have been what we have available is give you signposts/pointers involved with the aggregates levy from the initial about what is happening. As I understand it the contact point when the Treasury and Customs and University of Ulster did spot checks at various Excise came to the industry and said they would like points along the border. Statistically you have got to to set up a contact unit to discuss what was question just how valid is that, but I think it is a good happening. They told us straight up they would not signpost. necessarily do what we suggested because they had firm ideas of their own. I think we both realised by Q21 Mr Tynan: They did it between the hours of the second meeting that what they thought was a nine o’clock in the morning and five o’clock and the very simple subject, ie a stone is a stone, was very point has been made that much of the traYc is often much more complex and I think that has been borne at nighttime, but I understand there was no survey out now. It is the classic situation where if you turn done during the night. up the magnification it gets a lot more problematic. Mr Baxter: It is a signpost rather than a firm One of the real problems that I think Customs and statistic, it is a picture. Excise oYcers have is understanding a very complex market. It is not just a question of playing numbers, Q22 Mr Tynan: There was no indication either, was it is also a question of educating the people on the there, of the cargo that the lorries were carrying? ground, ie when they are looking at something do Mr Baxter: No, but it is diYcult. I think it clearly they recognise what they are looking at. It takes very identified it was aggregates. It is not going to be the educated petrologists to look at a stone and see higher processed aggregate, it is going to be the sub- whether it is shale or greywacke. based, the filter material, the sort of thing they would do to build a road on a housing estate or something Q26 Chairman: Or what? like that. Mr Baxter: Gritstone.

Q23 Mr Tynan: That is really an assumption you Q27 Mr Swire: Given your remarks about are making because there is no deﬁnite proof that it Customs, would you say that it was possible or was aggregate. necessary for Customs to track the aggregates from Mr Baxter: I happen to know the people that did the the Republic of Ireland to the point at which they are survey and they are quite knowledgeable. They are commercially exploited? not cloistered academics, they are guys who are very Mr Baxter: No, they only need to identify the point practical and they are fairly familiar with the of commercial exploitation, that is the Act. I am not industry. One of the gentlemen that led on this is a lawyer and I am not going to pretend to be, but all Secretary to the Institute of Quarrying in Northern the comment I get is it is a brilliant piece of legal Ireland. So I think they probably can identify what writing hence, to avoid it being a cross-border tax, it is an aggregate truck and what is not. is the point about exploitation—

Q24 Mr Tynan: Would you accept it is only a Q28 Mr Swire: How easy would you say it was for random snapshot? Customs to distinguish virgin aggregate from Mr Baxter: Yes, hence the need to get down to base processed product or recycled material when they rock, if I can put it that way, the need for the are monitoring imports? Symonds Report and hopefully that will be a Mr Baxter: I am afraid there is not a simple answer deﬁning piece of evidence. I would be very surprised to that. It depends on the product. If it is a recycled if it does not support the general indications that you aggregate in the form of crushed concrete it is quite are hearing from me now. easy for somebody that is familiar with the trade. If it is a type one subbase, that is the support layer at Q25 Mark Tami: Turning to Customs and Excise, the bottom of a road that has been dug up and re- you are very critical of the way they are trying to screened and recycled, it is probably almost enforce the levy. What is preventing them from impossible for anyone, even an expert. doing that and what should they be doing? Chairman: Mr Baxter, Mr Bird, thank you very Mr Baxter: I think it falls into two categories. One is much. We will now go local. Please feel free to stay a lack of resources. I do not think they have anything and listen to what the others have to say if you would like the resources they need to do the job that is like to do so. 9437101004 Page Type [O] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Northern Ireland Committee: Evidence Ev 13

Supplementary memorandum submitted by the British Aggregates Association

Thank you for your letter inviting this Association to submit further evidence to the Committee and in particular seeking our views on the Code of Practice & Compliance Framework document.

The HELM Report vas publish in mid December and we commissioned Wardell Armstrong, a well known company of engineering and environmental consultants, to review the proposals on our behalf. On the basis of Wardell Armtrong’s conclusions we conﬁrmed our total opposition to the aggregates levy but recommended to our members that, short of the complete removal of the levy, these proposals were the best deal available to them.

Wardell Armstrong advised that the Code of Practice and Compliance Framework proposals had merit but identiﬁed a particular weakness, and I quote from their Executive Summary: “An unfortunate result of the scheme, assuming that not all aggregates producers elect to join, would be that a two-tier system of environmental control would be established within Northern Ireland. Furthermore, since the quantum of tax saved is linked to tonnage produced rather than the actual cost of any necessary upgrading works, it is likely that the greatest impact will fall on the smallest aggregate producers. We consider that the Code of Practice and Compliance Framework has some merit and, if a further tax concession for the costs of initial consultancy and upgrading was oVered, we would endorse the proposals”.

We at the British Aggregates Association (BAA) consulted our members and more widely, within the industry, in Northern Ireland, and concluded that there was very little likelihood of producers not adopting the proposals. However, we became concerned that there was a risk that the small producers, who as Wardell Armstrong pointed out, will bear proportionately greater costs, would attempt to prepare the necessary environmental improvement schemes themselves in order to avoid the “up-front” consultancy costs. This would risk subsequent failures at the audit stage and thus create the undesirable two-tier system as foreseen by Wardell Armstrong.

Jointly with the Quarry Products Association Northern Ireland (QPANI), the BAA have therefore submitted proposals to the Environmental Taxation Division of HM Customs & Excise recommending that SME’s be given additional support to cover consultancy costs and suggesting ways how this might be achieved.

As you are aware, in July 2002 the BAA brought an action before the Court of First Instance of the European Communities (CFI) against the European Commission, seeking annulment of their decision that the aggregates levy in the United Kingdom did not constitute state aid within the meaning of the Article 87(1) EC. This action remains before the Court and we have, therefore, advised our lawyers of the UK Government’s latest proposals for additional relief in Northern Ireland.

Our legal team have reviewed the Government’s latest proposals and have recently advised us that the proposals may also be illegal. Furthermore, they recommend that, in line with our long standing action at the CFI, the BAA lodge a complaint to the Commission requesting that the Commission initiate a Formal Investigation Procedure.

The BAA remains sympathetic to the very serious problems facing quarry operators in Northern Ireland and acknowledges that the proposed new relief scheme may mitigate some of the damaging elements of the aggregates levy in that part of the UK. Furthermore we recognise that a complaint to the Commission could have the eVect of delaying or stopping the implementation of the proposed relief for Northern Ireland. Nevertheless, we believe that it would not be in the wider interests of all our members to risk prejudicing our legal argument that the levy does nothing to protect the environment, and distorts the market in ways that are leading to signiﬁcant environmental damage throughout the whole of the United Kingdom not just in Northern Ireland. The BAA therefore has continued to seek further opportunities to engage constructively with the Government. To this end we wrote two letters (on 19 December and 27 January) to the Economic Secretary to the Treasury, John Healey MP, requesting a meeting. Unfortunately we received no response by 9 February 2004 and were obliged by that time to lodge a complaint with the Commission.

The matter of these proposals is a complex issue, which cannot be covered adequately in the context of this letter. Should the Committee wish us to elaborate on any of the points noted, we will be pleased to submit further written evidence or present a specialist representative for examination. 12 February 9437101005 Page Type [E] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Ev 14 Northern Ireland Committee: Evidence

Memorandum submitted by the Quarry Products Association, Northern Ireland

Introduction 1. This paper outlines the problems facing the aggregates industry in Northern Ireland (NI) following the introduction of the aggregates tax in April 2002. It highlights a number of proposals that are designed to secure further amelioration from the tax, over-and-above the measure already made by HM Treasury.

Background to the Aggregates Industry 2. The nature of the quarrying industry in NI is considerably diVerent to that in Great Britain (GB). For example, though employment levels in the industry are small in comparison to other sectors they are still greater than in GB7. Moreover, NI shares a land-border with the Republic of Ireland (RoI) where there is no similar tax in operation. Prior to the introduction of the Tax, data from the Geological Survey of Ireland (GSI) and the Geological Survey of NI showed that the price of aggregate was similar in both jurisdictions (on average, £2.86 in RoI and £2.85 in NI) but implementation of the tax in NI has meant that competitive advantage is now with RoI producers. Although HM Treasury (HMT) has acknowledged the uniqueness of the NI quarrying industry relative to GB, the current measure is insuYcient in terms of scale and duration. 3. The Association welcomed the Pre Budget Report (PBR, November 2001), which secured a temporary exemption on aggregates used in processed products in NI. However, the experiences of the industry during the initial 11 months of the tax indicate that the measure falls short of what is required to secure the long- term viability and competitiveness of the NI quarrying industry and also fails to deliver the environmental objectives of the tax. 4. As stated previously, the NI quarrying industry is vastly diVerent from that in mainland UK. Quarries in the main are family owned and produce on average 200–300 thousand tonnes per year, much less than many “super quarries” in GB. NI quarries are rurally based, closer to the customer and most processed products ie concrete, blocks and blacktop are made within the quarry site thereby reducing average transport mileage to between 12 and 15 miles, typically in GB this figure is 35 miles. The Environmental impact of quarrying in NI is much less than that in mainland GB. Of the CO2 emissions generated by quarrying (11 kilograms per delivered tonne) almost 50% of which is generated in the transportation of aggregates when averaged throughout Great Britain and N Ireland. In isolation N Ireland generates less emissions on the transport element, as quarries are invariably closer to their markets. The industry in NI takes its environmental performance seriously. This is evident from statistics showing that the quarrying sector has had the highest uptake of the Environmental Management Quality Standard 1S014000 than any other industrial sector [Ref. Invest NI Data]. In fact a number of smaller companieswithin our membership are in the process of gaining accreditation and the Association continues to actively encourage members to adopt Environmental Management Systems. OPANI have received performance data from the Industrial Pollution Control Inspectorate showing that in 2002 complaints halved from the number in the previous year. Also, figures obtained from DOE Water Management Unit show a compliance rate of 74%, higher than any other industrial sector in NI. Against a Government target of 80% illustrates the excellent work and investment being made by NI quarry companies in Environmental Best Practice. The Environmental and Heritage Service (Department of Environment) has confirmed that from a Water Order Perspective, the quarry and quarry products sectors are outperforming other sectors such as the food industry, with a compliance rate last year of 74% compared to an overall industry average of 66%. 5. One of the aims of the aggregates tax was to increase the use of recycled materials in construction. However, there are a number of factors that combine to make this diYcult in NI. For example: — Availability of quality recyclable materials. — Rurally based economy with limited major development and urban regeneration — Government specification and procurement policy. The Quarry Products Association welcomes recent initiatives to begin to address these problems, notably the Strategic Framework for the use of Recycled Materials in Construction, commissioned by DOENI and the Construction & Demolition Waste Survey commissioned by the Environment & Heritage Service. On the related issues of Government specification and procurement policy, we look forward to addressing these on a number of fronts, particularly through direct liaison with Roads Service, Housing Executive and other key stakeholders and through the proposed taskforce being set up to take forward the recommendations of the Strategy Framework. 6. In supporting bullet point one above, the executive summary of the Construction & Demolition Waste Survey states: “The lack of availability of suYcient quantities of waste in NI will therefore limit the potential for the use of waste-derived aggregate” and further “due to the limited quantities in the waste stream in NI, waste-derived aggregate must be produced principally from construction and demolition waste, glass and rubber.”

7 Employee jobs in “other mining and quarrying and the manufacture of other non metallic minerals” (SIC 14 & 26) comprised 1.1% of total employee jobs in NI compared to 0.6% in GB (2001). 9437101005 Page Type [O] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Northern Ireland Committee: Evidence Ev 15

In supporting bullet point 3, the aforementioned report highlights “the need for government agencies to be more proactive at specifying and encouraging the use of products from the waste stream in the construction and road building industries.”

Impact of the Aggregates Tax 7. The introduction of the aggregates tax has negatively impacted on the industry, particularly with regard to those quarries located close to the border. Though the scale of impact has been diYcult to determine, QPANI have sought to develop a database from which conclusions could be drawn. We appreciate that the information conveyed in this paper has already been passed to Customs and Excise oYcials, it is important to stress that together the surveys outline the seriousness of the situation.

Cross-Border Transportation of Aggregate 8. QPANI commissioned the University of Ulster to carry out a survey of border crossings in order to access the movement of aggregate from the RoI to NI, something that rarely happened prior to the introduction of the aggregates tax. The report highlights a signiﬁcant volume of aggregate being imported to NI. Recent reports from member companies in the Londonderry area have estimated that up to 90% of aggregate being used on construction sites in Derry have come from RoI. At present QPANI have initiated a survey to determine how many construction projects are ongoing in the Londonderry area. We are then asking suppliers of aggregate within a 20 mile radius of the city if, where and what quantities they are supplying to construction sites in Derry. Once this has been completed we will forward to C&E in order to reinforce our evidence. This scenario is being repeated in a number of border areas in NI, making life impossible for legitimate NI quarry companies.

Unauthorised Quarry Extractions 9. Statistics from Planning Service in NI have shown that from April 2002 to December 2002 there were 30 conﬁrmed reports of unauthorised extraction operations, compared to 17 in the same period the previous year when there was no aggregates tax [Ref GeoV Harbinson Head of Minerals Unit NI Planning Service].It is clear therefore that this “environmental tax” has resulted in increased damage to the environment and is not fulﬁlling the objectives that the Government intended.

QPA Survey of Output and Employment 10. The survey of monthly private stone sales (September 2001–September 2002) was carried out by QPANI, with 96 quarries and pits (58% of the total registered, however representing approx 95% of aggregate production in NI.) included in the survey. The results show a considerable drop in business since April 2002 compared to the previous year. We expect this to be conﬁrmed by the statistics branch of the DETI (NI) when they complete their ﬁgures for 2002. [This is information which is gathered from industry and used as the basis of the NI Geological Survey Annual Minerals Statement. This information will be available by the end of March 2003]. 11. Results from a survey of 28 quarrying companies (member and non-members) showed that since April 2002, 52 people have been made redundant and it is expected that a further 58 will lose their jobs if the downturn continues. In a separate survey, 10 aggregate processing companies located close to the border have indicated their intention to relocate to the RoI with the loss of 282 jobs if a further derogation is not secured. It should be noted that all these jobs are located in areas designated by Government as Targeting Social Need. These are initial statistics and represent direct employees, however, if the tax is fully implemented we will no doubt exceed the Department of Finances estimate of 1,000 job losses.

Health and Safety 12. The Health and Safety Executive NI have expressed concern (Ref. Dr Bryan Monson HSENI Chief Quarry Inspector) that the increase in unauthorised extraction operations will result in an increase in accidents. These unregulated rogue operators will almost certainly be operating without adequate insurance and will certainly not be adhering to safety procedures. These unauthorised sites are also increasing the workload of the Planning Service.

Proposal 13. In order to secure the long-term competitiveness and reduce the environmental impact of the quarrying industry in NI we believe that the current measure can be replaced with a more suitable alternative. We have outlined below two alternative proposals that can deliver these environmental improvements with minimal damage to the competitiveness of the industry. We are also conscious of the need to keep within the conﬁnes of EU state aid legislation. 9437101005 Page Type [E] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Ev 16 Northern Ireland Committee: Evidence

Proposal (a)

Discount As a result of the disproportionate impact which the aggregates tax is having in NI, as outlined above, OPANI would propose an 80% discount on all aggregate used within NI. The unspeciﬁed approach would be easier to administer and give some relief to quarries operating solely in virgin aggregate extraction.

Environmental Improvements—EPD Individual quarries will deliver environmental improvements speciﬁed in DOENI’s proposed environmental compliance scheme, which would monitor adherence to the environmental standards prevailing in the UK with respect to issues such as dust, blasting, noise and remediation. The targets in the proposed compliance scheme would be implemented over a 3-year period from the scheme’s implementation date. compliance will be assessed on an annual basis and failure to meet the necessary standards will result in penal arrangements being applied. The nature of the penal arrangements should form part of future discussions but the obvious measure would be for the oVending ﬁrm to be liable for the full aggregates tax.

Recycling DOENI commissioned two surveys that estimated up to 800,000 tonnes of waste materials (Concrete, bricks, tiles, ceramics, bituminous materials, glass and rubber) exist that could be incorporated into processed products by the quarrying industry. The QPA believe that the present level of recycling may be as high as 80,000 tonnes, but have concerns regarding the accuracy of this figure, given the limited data available. With these figures in mind, the QPA proposes the following target; “To increase the levels of recycled materials which may now be as high as 10% of available material in year 2003 to 20% by 2008, providing the eVect of the aforementioned barriers can be removed.” All exports of aggregate from NI to GB would attract the full Tax. Should proposal (a) fall short of the requirements deemed necessary for EU state aid approval, we have outlined in proposal (b) a specified measure that would give some further amelioration over-and-above that already given by the Chancellor in PBR 2001.

Proposal (b)

Discount An 80% discount from the Aggregates Tax on all aggregate used in processed products in NI and zero rating for all processed products exported to the Republic of Ireland.

Environmental Improvements Each firm will deliver environmental improvements specified in DOENI’s proposed compliance scheme, which would monitor adherence to the highest possible environmental standards prevailing across the UK with respect to issues such as dust, blasting, noise and remediation. In this instance, the targets in the proposed compliance scheme would be implemented over an 8-year period from the scheme’s implementation date. compliance will be assessed on an annual basis and failure to meet the necessary standards will result in penal arrangements being applied. The nature of the penal arrangements should form part of the future discussions but the obvious measure would be for the oVending firm to be liable for the full aggregates tax. [Again, QPA/DOE/HMCE will need to specify what these targets are for the compliance scheme—lower than for proposal A]

Recycling

As stated in proposal (a) With these ﬁgures in mind, the OPA proposes the following target; “To increase the levels of recycled materials which may now be as high as 10% of available material in year 2003 to 20% by year 2008, providing the eVect of the aforementioned barriers is can be removed.” All exports of aggregate from NI to GB would attract the full Tax. 9437101005 Page Type [O] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Northern Ireland Committee: Evidence Ev 17

Supporting Points 14. Enforcement—The success of any regulation is dependent on how it is enforced. QPANI would want to know what procedures HMCE are putting in place to ensure that everyone coming within the scope of the tax pays and what penalties will face companies who evade payment and act illegally. 15. Recycled Materials—QPANI would propose that a working party between industry and Government is set up, as soon as possible, to develop an infrastructure in NI where procurement policy, specification and markets can be developed to encourage the use of waste derived aggregate and work towards a sustainable built environment. We would also welcome HMCE assistance by informing the working party as to what structures have been developed in GB, where there is a greater supply of waste derived aggregate. QPANI would give an undertaking to participate in this strategy, however, existing barriers must be removed. 16. Procurement Policy and Specification—At present Government procurement policy rarely, if at all, specifies recycled materials. Government is the largest customer of the quarry and processed product sectors accounting for between 50 and 55% of all aggregates procured. Road Service specifications always stipulate British Standard, when in many cases such a high specification is not required eg footpath sub-base or glass as a percentage of road base course material. If, as stated before, specifications can be changed we are sure that economically viable markets will develop. 17. Support from the Industry—HMCE may ask the question, “How representative of the industry are OPANI, and can we be assured of total industry support for these proposals?” The membership of QPANI has grown significantly in the past two years. In June 2001 the membership level stood at 31 companies representing approximately 68% of aggregate production in NI. Presently the membership stands at 70 companies representing 85% of aggregate production. In terms of processed products, representation is higher, as can be seen from the database in appendix 58. QPANI have excellent relations with other quarry companies, many family owned, who simply do not want to join any group or association. However, we have kept many of them informed about this strategy and are confident they will wholeheartedly support it. QPANI have also close relations with the British Aggregates Association, who have three members in NI. We are confident that they will support these proposals. It is our firm belief that if we achieve a further derogation that QPANI membership will increase and that influence and our ability to assist, encourage and develop members procedures in best practice will be enhanced.

Supplementary memorandum submitted by the Quarry Products Association Northern Ireland

Introduction Founded in Northern Ireland in 1998 the Quarry Products Association now represents 87% of aggregate production in the Province. Our membership includes major, medium and smaller sized companies. The Association represents companies engaged in the supply of primary aggregates; the processing of recycled and secondary materials; the production of down stream processed products such as asphalt, lime, mortar, ready-mixed concrete and precast and road surfacing contracting. QPANI have been campaigning since its inception in 1998 against the idea of an Aggregates tax in Northern Ireland due to the fact we share a land border with another state where there is no tax. In addition to this point we have always pointed out that Northern Ireland was never included in the initial London Economics pre levy research commissioned by the British Government. Due to the joint lobbying by QPANI and our political representatives, from all shades of political opinion in Northern Ireland, the Chancellor recognised the unique set of circumstances in Northern Ireland and announced a partial exemption for Northern Ireland in the Pre Budget Statement of 27 November 2001. The Association welcomed the Chancellor’s proposal to exempt aggregates used in processed products in Northern Ireland for 2002–03 as a small step in the right direction. However the phasing in of the levy over a period of up to ﬁve years does not go far enough to ensure the long-term security of jobs within the industry and the competitiveness of Northern Ireland companies. We based the above belief on the following concerns: 1. The full tax of £1.60/tonne will still apply to virgin stone thus putting Northern Ireland quarries at a competitive disadvantage to their counterparts in the Republic of Ireland. 2. The exemption on aggregates used in processed products is not permanent. 3. Investment decisions are made over ﬁve to 10 year periods, sometimes more. This proposal does not help companies plan for future development. 4. The Chancellor suggests that the phasing in of the levy will give the industry time to prepare. We would suggest it will give them time to relocate to the southern side of the border.

8 Appendix is not printed. 9437101006 Page Type [E] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Ev 18 Northern Ireland Committee: Evidence

5. The levy will result in little or no environmental improvement with the likelihood of unauthorised operations appearing in numerous locations along the border and other areas. This likely scenario will have a severe impact on legitimate businesses unless Customs & Excise and Planning enforcement are given additional resources. Indeed, the fuel tax situation provides evidence on the ground that a “national tax” can have a perverse impact in NI. The perverse impact is a negative environmental impact in that a large number of transport users, both commercial and private, actually ﬁnd it economical to drive in excess of 20 miles to buy fuel in the RoI, thereby increasing C02 emissions in NI. Precisely the same impact will take place as a result of the aggregate tax. The population in NI is therefore exposed to greater environmental risk as a direct result of Treasury policy. 6. In ﬁve years after “phasing in” is completed, the fundamental problem—our 500 mile land border with another EU member state where there is no tax—will still be there. The Quarry Products Association welcomes this opportunity to submit up-to-date additional evidence to the Committee showing the detrimental impact that the aggregates levy has had on the quarry products sector and the wider Northern Ireland environment.

Impact of Levy—1 Year on! The quarry industry in Northern Ireland has now lived with the aggregates levy of £1.60/tonne on virgin stone for almost 17 months now. The levy of 32p/tonne on aggregate content of processed products has been in place since 1 April 2003. Evidence of the impact that the tax has had on stone sales can be seen in Annex 4 of our evidence submitted in May 2003. We are pleased to include further evidence to support these figures. In annex 1 of this submission we have attached a copy of the 2002 minerals statement from the DETINI that shows a drop 2,688,000 tonnes in annual production compared to 2001. In Annex 2 we have shown the results of the QPANI internal survey of our top 10 producers as per the replies to the Symonds Survey, carried out on behalf of Customs and Excise recently. Again this has shown a significant downturn in crushed rock sold as aggregate and crushed rock/scalpings sold or given away as fill. The downturn in production as shown in the minerals statement 2002 is somewhat puzzling as infrastructure construction value as stated in the Construction Bulletin from Central Survey Unit of the DFPNI (See annex 3) shows an increase in the value of infrastructure construction work from 220,854,503 in 2001 to 293,157,658 in 2002, an increase of almost 30%. The answer to this question can be found by turning to the accompanying ordinance survey map on which we have marked and numbered 38 unauthorised extraction sites. These sites have all appeared since the introduction of the aggregates levy in April 2002. It gives QPANI no satisfaction to say “we told you so” as stated above in our introduction (point number 5). Also marked on the map are 24 legal quarries in the Republic of Ireland, within 10 miles of the border, where customers have access to imported stone. It is noticeable from the map that the greatest concentration of illegal sites is in County Antrim. This is due to the fact that there is no access to cross border aggregates in the County and all the more alarming when one remembers that the Glens of Antrim are designated an Area of Natural Beauty. The sites listed (see annex 4) vary in size from small, supply when required sites to large sites with mobile crushing and screening equipment. Fortunately some of them have now been stopped due to the vigilance of legitimate operators and close liaison between OPANI and Planning Service. Unfortunately a number of the larger illegal operators continue to act with impunity and put the two fingers up at the regulatory agencies. One operator in Co. Antrim has been operating since the levy came in and to date, 20 August 2003 has still not registered for aggregates levy. Local operators have estimated the volume extracted since April 1 2002 to be approximately 100,000 tonnes. Basically this operator is being subsidised by the Government. The fact that examples like this one and aggregates coming across on the Greencastle to Magillan ferry on lorries were notified to Customs and Excise one year ago supports the claim, made by our Association, that due to lack of resources and higher priorities such, as fuel smuggling, Customs and Excise would find it diYcult to enforce the levy. The number of illegal sites, 38, represents almost 25% of the total number of registered quarries and pits in Northern Ireland. They also represent a threat to public safety, for a number of reasons; — No weigh-bridges, therefore the high possibility of overloading vehicles exists. — The use of unlicensed vehicles for transporting aggregate. — No site safety ie fencing, safety signs etc. The current situation, as illustrated above, has been caused by the fact that the aggregates levy in Northern Ireland represents a 56% tax therefore giving a huge incentive for any illegal operator. The advantage that these illegal operators have through non payment of levy, VAT and other taxes is dragging the industry down as well as undermining the very good work that organisations like QPANI are doing in trying to raise standards in Health and Safety and Environmental Practice within our industry. Recently QPANI have met with all the enforcement agencies, Planning Service, Environment and Heritage Service, Industrial Pollution Inspectorate and Customs and Excise. All relevant information that we have gathered on these illegal sites has been passed on to the above agencies. 9437101006 Page Type [O] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Northern Ireland Committee: Evidence Ev 19

As a result of all our Consultations with the agencies it is clear that resources need to be directed into “beefing up” enforcement powers in order to create a level playing field where legitimate business can flourish and standards can be raised. In the coming months QPANI will be lobbying Ministers in Northern Ireland to have legislation amended which will mean planning service will be able to stop illegal extraction operations immediately. Again, QPA would call for mechanisms to be put in place that will facilitate the creation of level playing fields in not only extraction of aggregates but also in the procurement of them by Government.

Update on Current Discussions with Customs and Excise (Treasury) June and July have seen a lot of activity relating to the Associations campaign and lobbying to highlight the impact of the tax and to have it reduced to a realistic level. The HMCE survey, being carried out by the Symonds Group, into quarry output and possible supply of construction and demolition waste material for use in recycled products in Northern Ireland is complete. The Association has been informed that responses from quarries, landfills and demolition companies has been good and that the level of response is over 50%. Indications are that the responses are confirming what QPANI and others have been saying about the impact of the tax. The information received in the survey will be used as supporting evidence in the proposal that will be put to the EU Commission later this year. Customs and Excise sought the views of the EU Commission at the end of June on their likely reaction to a future State aid application in respect of a new relief scheme designed around the QPANI’s proposals, should the UK Government decide to put forward such a case. The Commission convened a meeting with Customs and Excise OYcials on 16 July to discuss the issues and the key points of the meeting are summarised below. Overall, not surprisingly the Commission considered that details were too sketchy at this stage for them to provide a clear opinion on the acceptability of the proposed scheme; however, they had a number of points/ questions which, they suggested, would need to be addressed if the UK made a formal State aid application. The Commission’s first concern related to the legality of a revised scheme. Paragraph 51(2)(b) of the Community guidelines on State aid for Environmental Protection stipulates that an environmental State aid scheme must have been decided on at the same time as the fiscal measure to which it relates was introduced. A State aid scheme can only be introduced subsequently where economic circumstances change significantly after the introduction of the fiscal measure. Therefore, given that by 1 April 2004 (the date you have requested for a revised scheme to come into eVect) two years would have passed since the introduction of the levy, the Commission considered that it could not be argued that the new derogation had been decided on when the tax was introduced. This, the Commission argued, led to some important conclusions: — Given there is no provision for a new scheme for an existing tax under paragraph 51 of the above Community guidelines, the UK would have to argue that their proposals were changing the existing scheme (which has implications for the timescale of the scheme—see below). — The UK must be able to demonstrate that economic conditions have indeed changed significantly ie that this is not a relaxation and does not provide any over compensation but is a scheme designed to bring about additional environmental benefits which the existing scheme does not deliver. — It would be very diYcult to argue that any extension to the scheme (to cover virgin aggregate) was not a new scheme. Similarly it would be diYcult to justify increasing the amount of the relief currently being oVered (ie above 80% reduction in the levy). Therefore, the Commission argued that it would be particularly crucial to demonstrate that the economic conditions had changed if the UK decided it wished to extend the scope. With regard to amount of relief that may be acceptable to them under the new scheme, the Commission said that was likely to depend on the economic evidence put forward. The Commission made it quite clear that, were they to give approval to a revised scheme, they would expect its duration to be reduced by the period that the existing scheme had been in place; so, rather than the 10 years you have proposed, any new scheme would run for eight years from 1 April 2004 (ie 10 years from 1 April 2002). Clearly we jointly need to assess the implications of the above on the proposals and agree a way forward. Therefore, a meeting was been convened of the stakeholder group, made up of representatives of QPANI, Customs and Excise (Treasury), Department of Finance and DOE (Environment and Heritage Service) on the 14 August at the CEF in Belfast. This meeting went extremely well. The programme of work set out for each stakeholder is going well and it would not be an exaggeration to say that we have convinced C&E of the benefits of option A, an 80% relief at 32p right across the board. 9437101006 Page Type [E] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Ev 20 Northern Ireland Committee: Evidence

The Commission’s view that any State aid scheme can only be introduced subsequently where economic circumstances change significantly after the introduction of the fiscal measure the Association believe will not raise any barriers to us achieving our objective. The Association is confident that the HMCE survey will show a significant economic and environmental impact on the industry and the wider Northern Ireland community. In other related activities the Helm corporation are currently formulating the DOENI’s compliance scheme for the Code of Good Environmental Practice for quarries. OYcials for HELM have been involved in consultation with the OPANI, individual quarries and pits and relative Government agencies. There is a considerable volume of research and information on environmental impacts for mineral workings available. The proposed methodology for formulating the compliance scheme is therefore to research and collate the most relevant and recent guidance on eVects and compile this within a concise, up to date, code of practice for the Northern Ireland aggregates industry. The intention is to provide the code as a series of short notes on each environmental issue identifying the types of impacts that may be caused and the scope of mitigation measure that may be employed to control these. Where relevant standards and guidance exist these will be referenced within the code. The code will include social provision such as the development of complaint procedures on site and the set up of community liaison groups to allow eVective communication with the communities most aVected by any specific development. This is considered a vital part of any code, as impacts on local communities are usually the most significant eVects arising from operational aggregate quarries. In developing the code not only will the literature search be conducted but a selection of quarries has been visited. The aim of the visits was to determine the nature of the quarrying being undertaken and to identify any key environmental issues that may arise. Interviews with quarry managers also provided an insight into the current approach to environmental issues at these sites. Sites were targeted to provide a cross section of operational types from quarries run by major national companies to small scale local one pit operations. The Helm Corporation are to submit their first draft of the compliance scheme this week (w/c 18/8/03) to DOENI. The Association will be in regular contact with the Department and will keep members updated. On Monday 4 August the Central Procurement Directive, under the leadership of John McMillen, held an Aggregates Workshop in the Ramada Hotel Belfast. This workshop was held in association with QPANI with the purpose being to gain an understanding of what recycled, or alternative, aggregates may be used by the public sector in Northern Ireland as a means of promoting environmental sustainability with due regard to the wider economic issues. The objectives of the workshop were: 1. To identify what recycled/alternative aggregates might be used for by the public sector. 2. To identify examples of good practice. 3. To identify what standard specifications for recycled aggregate uses are available. 4. To consider the potential for the development of a more environmentally sustainable market within the public sector in Northern Ireland for these products. 5. To begin to explore the economics (costs/benefits) of using recycled aggregates. The event was attended by representatives of QPA, DRD, EHS, Water Service, Housing Executive, DFPNI, Construction Service (CPD), Energy Division DETINI, Rivers Agency, Waste Resource Action Programme. A healthy debate ensued which resulted in the topic being discussed switching from aggregates tax to the enforcement of waste management regulations. The general consensus was that enforcement of waste management regulations and the landfill directive NOT the aggregates tax will drive the development of markets for recycled materials. Many of the oYcials from the various Government agencies highlighted the apparent lack of information on specifications on recycled and secondary aggregates. John Barritt of WRAP made a presentation on the work that his organisation carry out and services they oVer. WRAP has a website www.aggregain.org.uk that is a free and comprehensive web-based service for sourcing sustainable aggregates. Other issues that were discussed included Government Department’s duty of care in checking that products and services procured and disposed of came from and went to registered and legal sites. Also the possible setting up of an “Aggregates Forum” within Northern Ireland to facilitate the development of a recycled aggregates market and insure quality and research development to enhance the existing virgin aggregate industry. The forum will also ensure that all stakeholders are aware of all relevant information available, relating to the use of aggregates, and where to access it. The Association will be meeting with the Environment Minister, Angela Smith, in early November to discuss the evidence on the CD Rom. We will also put our proposals to her on how, we believe, the various Government Departments, HSENI, EHS Water Management, EHS IPC Inspectorate and Planning Service can work closer together with the legitimate industry to prevent rogue operators working. 9437101006 Page Type [O] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Northern Ireland Committee: Evidence Ev 21

In addition to this QPANI will relay the growing frustration with many of our main companies, many who have spent hundreds of thousands of pounds on Health and Safety and Environmental procedures, that they are easy targets and that enforcement departments do not focus enough attention on rogue operators and those who bend the rules. Unfortunately in Northern Ireland the legislation to back up enforcement oYcers, particularly in relation to rogue operators illegally extracting aggregate is toothless and in no way protects the legitimate industry. Our Association would like to see tougher powers for Minerals Unit to enable them to immediately close down illegal operations. This is an issue that we will put to the Minister and get her view on what can be done through legislation change to enable it to happen.

Conclusion The Quarry Products Association NI welcomes this second opportunity to submit evidence to the Northern Ireland AVairs Committee. Unlike the ﬁrst enquiry when we were in somewhat of “Confrontational Mode” with Treasury and Customs and Excise we are now in “Consultation Mode” through our recent consultations on the proposal put in February of this year. The QPANI proposal is a common sense approach to solve this problem and has the overwhelming support of the quarry products industry. The level of 32 pence per tonne levy would certainly reduce the incentive for illegal operators and evasion of levy on imported stone from the Republic of Ireland. The OPANI believe that not only is the proposal the solution but also that it needs to go hand in hand with more rigorous enforcement from the Government agencies. QPANI thanks the Committee for their interest in this very serious issue and we look forward to our oral submission on 16 September in Belfast.

ANNEX 1

ANNUAL MINERALS STATEMENT 2002

Table 1

MINERAL PRODUCTION IN NORTHERN IRELAND 2002 (Mined under the Mines Act 1969 and the Quarries (NI) Order 1983)

Quantity Selling Value at Mine or Mineral (Thousand Tonnes) Quarry (£’000) 2002 2001 2002 2001 Basalt and Igneous Rock 6,681 6,448 21,472 18,158 (other than Granite) Sandstone 6,574 8,070 22,892 24.217 Limestone 4,514 4,746 11.685 11,543 Sand and Gravel 5,512 6,194 17,179 19,129 Others 242 753 1,294 1,773 Total 23,523 26,211 74,522 74,820

Table 2 (See Note 3)

NUMBER OF PERSONS EMPLOYED AT MINES AND QUARRIES IN NORTHERN IRELAND 2001 AND 2002

Inside Pit Outside Pit Management Total or or and Employed Mineral Excavation Excavation Administration 2002 2001 Basalt and hrneous Rock 104 140 109 353 368 (other than Granite) Sandstone 133 113 90 336 347 Limestone 71 61 80 212 173 Sand and Gravel 93 83 190 366 427 Others 2 102 9 113 286 Total 403 499 478 1,380 1,601 9437101008 Page Type [E] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Ev 22 Northern Ireland Committee: Evidence

MINERAL PRODUCTION IN NORTHERN IRELAND 2002

Basalt and Igneous Rock (other than Granite) Tonnage Value (£s) Co Antrim 3,745,270 12,950,594 Co Armagh 652,109 1,708,994 Co Down — — Co Fermanagh 10,000 50,000 Co Londonderry 1,792,543 5,045,715 Co Tyrone 481,141 1,717,085 Total 6,681,063 21,472,388

Sandstone Tonnage Value (£s) Co Antrim Co Armagh 969,741 2,995,143 Co Down 5,598,128 19,896,586 Co Fermanagh — — Co Londonderry — — Co Tyrone 6,400 0 Total 6,574,269 22,891,729

Limestone Tonnage Value (£s) Co Antrim 198,024 1,278,724 Co Armagh 306,899 1,026,036 Co Down — — Co Fermanagh 3,263,331 7,970,702 Co Londonderry 58,143 205,675 Co Tyrone 687,399 1,203,540 Total 4,513,796 11,684,677

Sand & Gravel Tonnage Value (£s) Co Antrim 1,369,062 4,501,654 Co Armagh 177,857 1,011,418 Co Down 142,237 389,599 Co Fermanagh 143,060 379,240 Co Londonderry 1,362,079 4,170,967 Co Tyrone 2,318,070 6,726,334 Total 5,512,365 17,179,212

Others Tonnage Value (£s) Co Antrim 3,093 30,927 Co Armagh 15,878 14,290 Co Down 134,886 1,076,395 Co Fermanagh 8,500 24,500 Co Londonderry 19,030 38,690 Co Tyrone 60,400 109,324 Total 241,787 1,294,126

NOTES FOR GUIDANCE 1. Production figures for rock salt, chalk, diatomite, fireclay and granite have been combined into “others” to avoid disclosure of confidential information. 2. 174 quarries were contacted. Of these 11 are no longer in production and 17 are inactive at present. 3. The people employed “inside” and “outside” the pit are directly involved with extraction. Lorry drivers and road teams etc are excluded. The number of management and administration staV cannot be broken further. 9437101010 Page Type [O] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Northern Ireland Committee: Evidence Ev 23

ANNEX 2

EFFECT ON EMPLOYMENT LEVELS

Year Year Year to 31 to 31 to 31 March March March Company Site Measure 2003 2002 2001 Lagan Group Blackmountain Full-time managers/employees in the 12 15 15 quarry Lagan Group Blackmountain Part-time managers in the quarry 0 0 0 Lagan Group Blackmountain Full-time managers/employees in 4 4 2 associated activities (concrete plants, blacktop etc) Lagan Group Blackmountain Part-time managers/employees in 0 0 0 associated activities (concrete plants, blacktop etc) Lagan Group Whitemountain Full-time managers/employees in the 5 6 7 quarry Lagan Group Whitemountain Part-time managers in the quarry 0 0 0 Lagan Group Whitemountain Full-time managers/employees in 0 0 0 associated activities (concrete plants, blacktop etc) Lagan Group Whitemountain Part-time managers/employees in 0 0 0 associated activities (concrete plants, blacktop etc) Lagan Group Ballystockart Full-time managers/employees in the 14 14 14 Quarry quarry Lagan Group Ballystockart Part-time managers in the quarry 0 0 0 Quarry Lagan Group Ballystockart Full-time managers/employees in 3 4 4 Quarry associated activities (concrete plants, blacktop etc) Lagan Group Ballystockart Part-time managers/employees in 0 0 0 Quarry associated activities (concrete plants, blacktop etc) Lagan Group Temple Quarry Full-time managers/employees in the 9 9 9 quarry Lagan Group Temple Quarry Part-time managers in the quarry 0 0 0 Lagan Group Temple Quarry Full-time managers/employees in 1 1 1 associated activities (concrete plants, blacktop etc) Lagan Group Temple Quarry Part-time managers/employees in 0 0 0 associated activities (concrete plants, blacktop etc) Acheson & Sand Pit Full-time managers/employees in the 5 5 5 Glover quarry Acheson & Sand Pit Part-time managers in the quarry 0 0 0 Glover Acheson & Sand Pit Full-time managers/employees in 1 1 1 Glover associated activities (concrete plants, blacktop etc) Acheson & Sand Pit Part-time managers/employees in 0 0 0 Glover associated activities (concrete plants, blacktop etc) Acheson & Creenahoe quarry Full-time managers/employees in the 6 6 6 Glover quarry Acheson & Creenahoe quarry Part-time managers in the quarry 0 0 0 Glover Acheson & Creenahoe quarry Full-time managers/employees in 6 6 6 Glover associated activities (concrete plants, blacktop etc) Acheson & Creenahoe quarry Part-time managers/employees in 0 0 0 Glover associated activities (concrete plants, blacktop etc) 9437101010 Page Type [E] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Ev 24 Northern Ireland Committee: Evidence

Year Year Year to 31 to 31 to 31 March March March Company Site Measure 2003 2002 2001 Acheson & Crievehill quarry Full-time managers/employees in the 6 6 6 Glover quarry Acheson & Crievehill quarry Part-time managers in the quarry 0 0 0 Glover Acheson & Crievehill quarry Full-time managers/employees in 6 6 6 Glover associated activities (concrete plants, blacktop etc) Acheson & Crievehill quarry Part-time managers/employees in 0 0 0 Glover associated activities (concrete plants, blacktop etc) RJ Maxwell All Sites Full-time managers/employees in the 33 32 33 quarry RJ Maxwell All Sites Part-time managers in the quarry 2 2 2 RJ Maxwell All Sites Full-time managers/employees in 39 43 43 associated activities (concrete plants, blacktop etc) RJ Maxwell All Sites Part-time managers/employees in 0 0 0 associated activities (concrete plants, blacktop etc) P Clarke & Son Slushill Quarry Full-time managers/employees in the 9 9 9 quarry P Clarke & Son Slushill Quarry Part-time managers in the quarry 0 0 0 P Clarke & Son Slushill Quarry Full-time managers/employees in 50 50 50 associated activities (concrete plants, blacktop etc) P Clarke & Son Slushill Quarry Part-time managers/employees in 0 0 0 associated activities (concrete plants, blacktop etc) Readymix Banbridge Full-time managers/employees in the 7 9 9 quarry Readymix Banbridge Part-time managers in the quarry 1 1 0 Readymix Banbridge Full-time managers/employees in 0 0 0 associated Activities (concrete plants, blacktop etc) Readymix Banbridge Part-time managers/employees in 0 0 0 associated activities (concrete plants, blacktop etc) Readymix Carrowdore Full-time managers/employees in the 10 12 12 quarry Readymix Carrowdore Part-time managers in the quarry 0 0 0 Readymix Carrowdore Full-time managers/employees in 0 0 0 associated activities (concrete plants, blacktop etc) Readymix Carrowdore Part-time managers/employees in 0 0 0 associated activities (concrete plants, blacktop etc) Readymix Aughrim Full-time managers/employees in the 3 5 6 quarry Readymix Aughrim Part-time managers in the quarry 1 1 0 Readymix Aughrim Full-time managers/employees in 0 0 0 associated activities (concrete plants, blacktop etc) Readymix Aughrim Part-time managers/employees in 0 0 0 associated activities (concrete plants, blacktop etc) Readymix Ballynahaye Full-time managers/employees in the 4 4 5 quarry Readymix Ballynahaye Part-time managers in the quarry 0 0 0 9437101010 Page Type [O] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Northern Ireland Committee: Evidence Ev 25

Year Year Year to 31 to 31 to 31 March March March Company Site Measure 2003 2002 2001 Readymix Ballynahaye Full-time managers/employees in 0 0 0 associated activities (concrete plants, blacktop etc) Readymix Ballynahaye Part-time managers/employees in 0 0 0 associated activities (concrete plants, blacktop etc) Readymix Greencastle Full-time managers/employees in the 6 7 7 quarry Readymix Greencastle Part-time managers in the quarry 0 0 0 Readymix Greencastle Full-time managers/employees in 0 0 0 associated activities (concrete plants, blacktop etc) Readymix Greencastle Part-time managers/employees in 0 0 0 associated activities (concrete plants, blacktop etc) Readymix Kellys Pit Full-time managers/employees in the 7 8 8 quarry Readymix Kellys Pit Part-time managers in the quarry 0 0 0 Readymix Kellys Pit Full-time managers/employees in 0 0 0 associated activities (concrete plants, blacktop etc) Readymix Kellys Pit Part-time managers/employees in 0 0 0 associated activities (concrete plants, blacktop etc) J Robinsons Glenwherry Full-time managers/employees in the 37 35 35 quarry J Robinsons Glenwherry Part-time managers in the quarry 0 0 0 J Robinsons Glenwherry Full-time managers/employees in 13 12 12 associated activities (concrete plants, blacktop etc) J Robinsons Glenwherry Part-time managers/employees in 0 0 0 associated activities (concrete plants, blacktop etc) J Boyd & Sons Carnmoney Full-time managers/employees in the 30 35 33 quarry J Boyd & Sons Carnmoney Part-time managers in the quarry 0 0 0 J Boyd & Sons Carnmoney Full-time managers/employees in 0 0 0 associated activities (concrete plants, blacktop etc) J Boyd & Sons Carnmoney Part-time managers/employees in 0 0 0 associated activities (concrete plants, blacktop etc) W J H Crozier Armagh Full-time managers/employees in the 14 14 14 quarry W J H Crozier Armagh Part-time managers in the quarry 0 0 0 W J H Crozier Armagh Full-time managers/employees in 2 2 2 associated activities (concrete plants, blacktop etc) W J H Crozier Armagh Part-time managers/employees in 0 0 0 associated activities (concrete plants, blacktop etc) Tarmac Craigantlet Full-time managers/employees in the 12 14 14 quarry Tarmac Craigantlet Part-time managers in the quarry 1 1 1 Tarmac Craigantlet Full-time managers/employees in 2 2 2 associated activities (concrete plants, blacktop etc) Tarmac Craigantlet Part-time managers/employees in 0 0 0 associated activities (concrete plants, blacktop etc) 9437101010 Page Type [E] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Ev 26 Northern Ireland Committee: Evidence

Year Year Year to 31 to 31 to 31 March March March Company Site Measure 2003 2002 2001 Tarmac Carn Quarry Full-time managers/employees in the 12 15 15 quarry Tarmac Carn Quarry Part-time managers in the quarry 0 0 0 Tarmac Carn Quarry Full-time managers/employees in 3 3 3 associated activities (concrete plants, blacktop etc) Tarmac Carn Quarry Part-time managers/employees in 0 0 0 associated activities (concrete plants, blacktop etc) Tarmac Hightown Quarry Full-time managers/employees in the 8 8 8 quarry Tarmac Hightown Quarry Part-time managers in the quarry 2 2 2 Tarmac Hightown Quarry Full-time managers/employees in 2 2 2 associated activities (concrete plants, blacktop etc) Tarmac Hightown Quarry Part-time managers/employees in 1 0 0 associated activities (concrete plants, blacktop etc) Totals 389 411 409 9437101011 Page Type [O] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Northern Ireland Committee: Evidence Ev 27 31 March 2003 31 March 2002 31 March 2001 Distance aggregate farming aggregate production, road construction, bulk fill aggregate production, road construction, bulk fill aggregate production, road construction, bulk fill aggregate production, road construction, bulk fill aggregate aggregate aggregate aggregate production, road construction, bulk fill aggregate production, road construction, bulk fill SALES INFORMATION FOR THE YEAR JUST ENDED, AND FOR THE TWO YEARS PREVIOUS attach.) aggregate Quarry aggregate J Robinsons Glenwherry Crushed rock sold as 396,521 383,933 402,066 Road building, house construction and 14 radial miles Readymix Kellys Pit Sand and gravel 218,000 258,000 253,000 Concrete production 0–10 miles Readymix Greencastle Sand and gravel 201,000 253,000 242,000 Concrete production 0–10 miles Readymix Ballynahaye Sand and gravel 128,000 151,000 148,000 Concrete production 0–10 miles Readymix Aughrim Crushed rock sold as 291,445 327,100 332,935 Concrete production, concrete block 11–20 miles Readymix Carrowdore Crushed rock sold as 366,947 379,617 305,345 Concrete production, concrete block 10–20 miles Readymix Banbridge Crushed rock sold as 145,511 186,794 204,887 Concrete production, concrete block 10–20 miles P Clarke & Son Slushill Quarry Crushed rock sold as 135,743 181,989 156,374 Concrete production, concrete block 0–15 miles RJ Maxwell All Sites ( see Crushed rock sold as 625,544 711,797 779,739 Coated roadstone, concrete production 0–15 miles Acheson & Glover Crievehill quarry Crushed rock sold as 91,000 112,000 108,000 Graded aggregate 0–10 miles Acheson & Glover Creenahoe quarry Crushed rock sold as 115,000 152,000 145,000 Graded aggregate 10–20 miles Acheson & Glover Sand Pit Sand and Gravel 7,000 4,000 8,000 Graded aggregate 0–10 miles Lagan Group Temple Quarry Crushed rock sold as 287,554 247,019 345,752 Aggregate for coated roadstone 6 miles Lagan Group Ballystockart Crushed rock sold as 290,365 297,942 267,449 Aggregate for coated roadstone 6 miles Lagan Group Whitemountain Crushed rock sold as 184,656 203,623 313,332 Concrete production, concrete block 1 to 10 miles CompanyLagan Group Site Blackmountain Crushed rock sold as Material 365,718 342,149 471,861 Concrete production, concrete block Year to Year to 0 to 10 miles Year to Main uses Typical Delivery 9437101011 Page Type [E] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Ev 28 Northern Ireland Committee: Evidence continued 31 March 2003 31 March 2002 31 March 2001 Distance aggregate aggregate asaggregate concrete blocks aggregate blocks aggregate farming SALES INFORMATION FOR THE YEAR JUST ENDED, AND FOR THE TWO YEARS PREVIOUS— Totals 4,918,160 6,067,003 6,413,435 Tarmac Hightown Quarry Crushed rock sold as 36,289 166,948 211,187 Private and commercial development 11 miles Tarmac Carn Quarry Crushed rock sold as 42,954 160,792 160,667 Roads, forestry, added value products 15 miles Tarmac Craigantlet Crushed rock sold 161,913 427,300 615,841 Exports to England, coated roadstone, 11 miles W J H Crozier Armagh Crushed rock sold as 227,000 240,000 242,000 Type 3 sub-base, coated roadstone, concrete 0–10 miles CompanyJ Boyd & Sons Site Carnmoney Crushed rock sold as Material 600,000 880,000 700,000 Year to Road building, house construction and Year to Year to 10 miles Main uses Typical Delivery 9437101011 Page Type [O] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Northern Ireland Committee: Evidence Ev 29 Year to Year to Year to 1,154,819 2,643,559 2,277,337 SALES INFORMATION FOR THE YEAR JUST ENDED, AND FOR THE TWO YEARS PREVIOUS TOTALS Tarmac Hightown Quarry Crushed rock/scalpings sold (or given away) as fill 10,263 17,188 164,239 Tarmac Carn Quarry Crushed rock/scalpings sold (or given away) as fill 9,186 56,763 72,493 Tarmac Craigantlet Crushed rock/scalpings sold (or given away) as fill 15,536 76,260 80,282 WJH Crozier Armagh Crushed rock/scalpings sold (or given away) as fill 30,000 32,000 44,000 J Robinsons Glenwherry Crushed rock/scalpings sold (or given away) as fill 73,208 50,215 48,153 RJ Maxwell All Sites (see attach.) Crushed rock/scalpings sold (or given away) as fill 807,465 1,515,146 1,368,659 Lagan Group Temple Quarry Crushed rock/scalpings sold (or given away) as fill 31,797 101,120 78,995 Lagan Group Ballystockart Quarry Crushed rock/scalpings sold (or given away) as fill 92,564 150,449 48,787 Lagan Group Whitemountain Crushed rock/scalpings sold (or given away) as fill 32,550 29,449 28,632 Company Site Material 31 March 2003 31 March 2002 31 March 2001 Lagan Group Blackmountain Crushed rock/scalpings sold (or given away) as fill 52,250 614,969 343,097 9437101011 Page Type [E] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Ev 30 Northern Ireland Committee: Evidence

ANNEX 3

Value of Work (£) Year Quarter Infrastructure 2001 1 62,148,044 2 41,618,278 3 51,744,535 4 65,343,646 Total 220,854,503 Average 55,213,626

2002 1 67,703,195 2 66,791,502 3 81,413,966 4 77,248,995 Total 293,157,658 Average 73,289,415

N.B. * The data shown above is calculated from the Northern Ireland Quarterly Construction Enquiry. * The Northern Ireland Quarterly Construction Enquiry is a statutory survey of over 600 GB/NI construction ﬁrms involved in the construction industry in Northern Ireland. * Please note that estimates of the total value of construction output should be treated with caution since they are derived from a sample survey. These estimates will be subject to both sampling and non-sampling error. * The survey data is a grossed up estimate of the total value of construction output for Northern Ireland. * The base year for the survey is 1995. Estimates of construction output are expressed in constant prices (1995%100) and comparisons with output trends in other industrial sectors can be made.

ANNEX 4

Photo Site No Site Location Grid Ref Available 1 Cargan Road—Tandragee—Gilford Road—(Very small site, using some N material himself) 2 Markethill—Hamiltonsbawn Road—LHS about 200m from 30mph sign Y 3 Main Street—Hamiltonsbawn—Manor Bawn Housing Estate— Y (pit behind small hill at rear of site huts) 4 Main Newtownhamilton—Armagh Road—Corran Road—about 400m Y on LHS 5 As above but oV Main Road, past Markethill junction towards N Newtownhamilton on LHS (Very small operation) 6 Derrynoose Road, Keady—Carryhugh Road (unable to photograph) N 7 Slate Rock Road Y Armagh—Newtownhamilton Road—Armaghbeague Road to right— Slate Rock Road to left 8 McBrides Industrial Complex Y Temple—Saintfield Road—turn left at first crossroads—then take first left—two Lions on pillars (small operation) 9 Magorran—Middle Road, Saintfield. Oppostite No 50 (Lillians Catering) Y (large operation) 10 Drumsnade Road—just oV main Ballynahinch/Newcastle Road. Just past Y Drumaness Chapel on LHS 11 Main Tempo Fintona Road Y 12 Quarry between Dromore and Trillick, operator unknown Y 13 Lack operator unknown, photo taken from a distance Y 14 Boa island operator unknown photo supplied Y 15 McNallys—ESKRA, Co Tyrone, Altenavaragh Road Y 16 Dunorea Hill, Drumquinn Y 17 Quarry at Glen Road, Drumquinn Y 9437101012 Page Type [O] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Northern Ireland Committee: Evidence Ev 31

Photo Site No Site Location Grid Ref Available 18 Carnalea Road North, Ballyclare Y This was a green ﬁeld which is owned by a local farmer but was let out to a contractor who operates with fastracs and dumpers 19 Glenhead Road, Glenwherry Y This was a green ﬁeld drumlin operated by the Contractor mentioned in 18, however land owned by a diVerent farmer The tree line to the top of the photograph is Ballyboley Forest with the A36 Shanes Hill Road just in front of it. This we believe is on AONB 20 Ballylig Quarry, Ballylig Road, Broughshane Y This had been a redundant working reinstated May 2002. The owner purchased ground adjacent to the old quarry and I believe they are working in this without planning permission As can be seen on the photographs the quarry is extensively planted and they operate six tipper trucks. At the start of June 2003 they still had not lodged an aggregates levy application with Elaine Crawley or registered for IPC with Michael Megarr 21 Killyless Road, Cullybacke Y Little information is available here but we have had reports of material being extracted 22 Mullin Road, Raskarkin Y This was photographed from the Duneaney Road Glarryford Pit we believe is operated by the owner 23 Mullin Road, Rasharkin Y Operated by contractor who we understand is extracting the rock from here and taking to an address on the Tullaghans Road Dunloy for crushing 24 Killagan Road, Glarryford Y Being operated at back of farm by owner adjacent to John Bell & Son Gravel 25 Ballyeamon Road, Cushendall Y Glen Ballyeamon, Glens of Antrim—Site was servicing construction projects in Cushendall 26 Gaults Road, Cushendall Y Glen Ballyeamon, Glens of Antrim—Site again servicing local building sites in Cushendall and district 27 Ballyvoy, Ballycastle Y We understand this site is operated by local contractor. This site is extensively kitted out with crushing and screening equipment 28 Ballypatrick, Ballycastle Y Few details are available on this site 29 White Park Road, Ballycastle Y Materials from this site are being used to service building sites in Ballycastle 30 Carmegrim Road, Portglenone N (Photograph unavailable owned by farmer who has been extracting weathered rock at the rear of his farm, servicing sites in Portglenone and Bellaghy districts. A planning application NO G/2003/0346 ballymena has been lodged in June 2003 for “Removal of stone to reclaim land for arable agricultural land” 31 Gillestown Road, Ahoyhill N (Photograph unavailable owned by agricutural contractor who has been extracting weathered rock at rear of his farm and servicing local sites by tractor and dumper 32 Glenshane Pass operator unknown, an number of enforcement notices Y have been issued by Planning Service. Material being used for small sites around Maghera Area 33 Newtownstewart Plumbridge Road Sand and Gravel operation operator unknown 34 Vow Road Finvoy Co Antrim formerly Pinkertons quarry Y 35 Ballyholme Road, Portrush Unknown operator in Taggarts old quarry is Y supplying sites in Portstewart 36 Quarry in Killeter area—operator unknown Y 9437101012 Page Type [E] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

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Photo Site No Site Location Grid Ref Available 37 Skeltons Cut—Take Blackscull Road out of Donacloney and go to Y Ashﬁeld. Turn right in Ashﬁeld onto Upper Guilly Road. Turn right onto Mull A Fernaghan Road. Go 300 yards approx and Skeltons Cut is on the left 38 Lisbane Road Tandragee Y (Behind Emersons Quarry)

Operators with Mobile crushing and screening equipment

Southern Quarries (Within 10 miles of the border) A — Cassidy Quarry B — McDades Quarry C — Unknown Operator (Quarry was dormant up until beginning of July 2003) D — McDades Quarry E — Slate Quarry (City Industrial Waste) F — P Gilday & Sons Quarry G — Sweeneys Quarry H — Church Hill Quarry I — Mountain Top Quarry J — CRH Ballintra K — Trotters Manor L — J Nulty and Sons M — J.J. Flood and Sons N — Mount Nugent—Roadstone O — Waterson Concrete—Emyvale P — Wright Brothers—Swans Cross Q — Between Newbliss and Cootehill. Co Monaghan R — Scotts Town Road. Clones (ROI) S — McNallys T —DuVys U — McSloys—(Dundalk Quarry Products) V — Brannigans Quarry W — Roadstone X —McCaVrey’s Ballintra

Memorandum submitted by J Robinson & Sons Limited (Quarry Owners) Our Industry and business is facing its greatest single threat since its formation in1968. As predicted with the introduction of Aggregates Tax we have seen in the border regions an inﬂux of materials from Republic of Ireland and the opening of a massive black market supplying quarry materials in other regions. These markets are being fuelled daily by a public hungry for low cost and economic products and is growing in strength weekly as news spreads of alternative sources of materials, rather than through bona ﬁde operators who can oVer only expensive tax laden products. Northern Ireland is a very rural economy with each town and hamlet now having their own black market oVering non-tax products. The Aggregates levy was “sold” by the government as an Environmental Tax designed to regulate and consolidate the quarry industry thereby reducing environmental damage. The reverse of this is now evident as the black market is being serviced by new and ever-increasing unregulated extraction points opening province-wide. Our business has grown and worked with all the government bodies over the years in meeting the needs of Health and Safety Executive, Environment and Heritage Service on Industrial Pollution Control, Planning Service, Water Quality Consents. We make provision for all training requirements for our personnel and accommodate almost weekly updates in employment legislation. Our company has invested huge sums of money over the years to ensure we use the most up-to-date equipment, low emission road trucks and fuel 9437101014 Page Type [O] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

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eYcient quarry plant. To maintain our own competitiveness and “green values”, we have become a more eYcient environmentally friendly company, better for the environment, better for our personnel and better for the community. The meeting of all these requirements comes at considerable cost for which we make provision and budget for annually. Now with the addition of Aggregates Tax and compliance to all other government policies we have created a huge cost umbrella under which unregulated, untaxed sources of aggregates can operate eVectively without added costs of taxation. The aggregate tax alone has increased the price of quarry products by at least 40% and has been the impetus for rogue traders, now trading on the value of the tax. We implore the government to review its policy on the Aggregates Tax as we see its continuation being certain to destroy our business and decimate the quarry industry in Northern Ireland. 20 May 2003

Memorandum submitted by Tarmac Northern Ltd

THE IMPACT OF THE AGGREGATE LEVY (PAYING TO BE PUT OUT OF BUSINESS)

1. Background to Company Tarmac Northern Limited operates a quarrying and road contracting business in Northern Ireland with an annual turnover of around £12 million. The operation comprises of three operational quarries, at Craigantlet, County Down, Hightown, Mallusk and at Ederney, County Fermanagh as well as a road contracting business throughout Northern Ireland. The quarries produce aggregate, asphalt, macadam, concrete and blocks. Employment is currently 65 direct Employees with around 45 sub-contractors and hauliers. The company is recognised amongst its competitors as well as the statutory authorities as being leaders in the ﬁelds of health and safety, and environmental standards within the industry. Recently a CBI/Invest Northern Ireland Safety and Environmental Audit known as Contour found our Craigantlet Quarry to be “World Class” in these areas. All operations comply with ISO 14001 Environmental Management. The high environmental standards that we operate have been developing for a number of years and are not as a result of the Aggregate Levy. The company operate two recycling centres, one at Hightown quarry, and one at Craigantlet quarry. These have been up and running since January 2002, but with limited success. Principally, the main obstacle is the lack of speciﬁcations for recycled products.

2. The Impact of the Levy on the Company The impact of the levy is totally negative on our business, in that it has resulted in the loss of sales volumes of virgin aggregate at all three operating quarries. This volume loss is due to three basic reasons.

2a. Imports from ROI Our Carn Quarry at Ederney, Co. Fermanagh, being six miles from the Co. Donegal Border has lost volumes due to unregulated imports. In the last two weeks we noted an ROI company from Ballintra, Co. Donegal delivering virgin aggregate to the Forestry Service close to Irvinestown. When we queried with the Forestry Service as to the validity of the ROI supplier (in terms of levy payment), the Forestry Service personnel had no idea of the procedures and had no idea whether or not the ROI supplier was paying the levy. It is clear to us that when we are (seven) miles from the Forestry Service site and cannot be competitive with an ROI supplier over 30 miles away, that a major problem exists and in our view this is non-payment of the levy. This is only one example of what we are up against with respect to imports. 9437101015 Page Type [E] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Ev 34 Northern Ireland Committee: Evidence

2b. Illegal (Unlicensed Operations) There is a growing number of these quarries opening up throughout Northern Ireland and operating without planning consent, without environmental authorisation, or any semblance of Health and Safety Standards. They are particularly prevalent in the west of the Province and in recent months several have been identiﬁed in Fermanagh and West Tyrone to the HMCE via the Quarry Products Association. Legitimate operations with high safety and environmental standards such as ours simply cannot compete with these illegal operations that not only avoid paying the levy, but also avoid the costs associated with Good Safety and environmental practice. In some instances these operations are or have been supplying some public sector works indirectly through contractors.

2c. Levy avoidance by Licensed Operators Prior to the introduction of the levy, the average distance that virgin aggregate travelled in Northern Ireland was 11 miles. In Britain this figure would be nearer to 35 miles. However, since the introduction of the levy it is apparent that virgin aggregate is travelling much greater distances and in many cases we have competitors travelling in excess of 25 miles to deliver aggregate to sites on our doorstep. In the highly competitive market within Northern Ireland this was almost unheard of prior to the levy. Our concern is that some operatives with regard to their total production are not accounting for the levy and this allows them to compete further from their base. The overall impact of these factors has been the reduction in sales volumes of virgin aggregates to external clients. We estimate our sales volumes to have been reduced by quarry as follows: Carn Quarry, Ederney, Co. Fermanagh—16% Craigantlet Quarry, Newtownards, Co. Down—22.5% Hightown Quarry, Mallusk, Co. Antrim—23% These figures are after adjustments for market fluctuations. They also provide the evidence that the levy is not just a border (import) issue. Our response has been two fold, one to report illegal actions where we see these happening through our association, and, to increase our sales of added value products such as asphalt, macadam, blocks, and concrete, where in year one of the levy, the virgin aggregate was levy free.

3. The Future

3a. Added Value Sales We are more dependant on these than ever before to secure future proﬁtability and the continuing uncertainty regarding the “pegging” of the Levy at £0.32 per tonne for virgin aggregate to added value products gives us a lot of concern for the future of our business. This, and the ongoing illegal operations and imports has the immediate eVect of calling into question our investment plans in Northern Ireland and is also curtailing our thinking on expansion.

3b. The Impact on Northern Ireland as a Community We have given a detailed analysis of the impact on our business, however we also recognise that for serious and sincere minded people to take a holistic approach to this issue, there is a need to look beyond the impact on one business to assist the reader in forming an opinion. We would be of a strong opinion ourselves that the Levy is having a detrimental impact on the Northern Ireland community and we would particularly comment on the following:

4. Environmental Impact The Environmental Impacts are as follows:

4a. CO2 Emissions

Statistics available throughout DETI suggest that for every tonne of delivered stone, 50% of the CO2 Emissions involved in the production and delivery are due to transportation. Given this fact it is clear that CO2 Emissions in Northern Ireland have increased as a direct result of the Levy, in that parties either avoiding the Levy or importing are hauling aggregate further. 9437101015 Page Type [O] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Northern Ireland Committee: Evidence Ev 35

4b. Visual Impact The ever increasing opening of illegal quarries and pits is creating additional scars on our landscape, and as unlike legal operations who have restoration plans included in their consents the illegal operations will be a permanent scar. It is worth noting that when the landﬁll tax was introduced, Northern Ireland suVered and still does from ﬂy tipping in holes in the ground which were described as “Land Improvement”. Now we have holes being dug in the side of hills and it is being classed as “Land Improvement”!

4c. Increased Transport Movements The obvious increase in road haulage movements, particularly in Fermanagh and West Tyrone do nothing to attract additional tourists to these areas.

5. Economic Impact Somewhere in the region of £20–£35 million is being taken out of the Northern Ireland economy as a direct result of the taxation depending on the level of the illegal activities. In return, Northern Ireland will receive £0.9 million in sustainability funds.

5a. Enforcement Impact Whilst the HMCE eVorts are funded centrally, the increased illegal operations has put an additional burden on both the planning and environmental service which of course comes out of the Executive Budget without compensation from the Treasury.

5b. Roads Maintenance Impact The increased cross border traYc and increased travelling distance is putting additional wear and tear on Northern Ireland’s roads. This traYc would not exist if the Levy were not in place. By nature of the problem, these are mainly border roads and country roads, not designed for this increase in HGV volume. The increased maintenance costs again comes out of the Executive Purse.

5c. Social Impact At a recent meeting of the Quarry Product Association with Minister Ian Pearson, the writer pointed out his concern that the levy would in time lead to injury or indeed the death of people working in illegal operations, which have no health and safety standards. A few days later a couple were killed in the Ballymoney area as a result of a collision with an alleged illegally modiﬁed lorry carrying illegal fuel. It is only a question of time before something of this nature happens as a result of the aggregate levy. The impact on jobs will begin to bite with respect to legitimate companies. The impact of this goes beyond the quarry gate. For example our Carn quarry, at Ederney in County Fermanagh is the largest employer in the village and surrounding area. We draw our employees from all social backgrounds, but mainly from the farming community, where working in the quarry is seen as a ﬁnancial lifesaver. The area is designated a TSN area. The writer’s view on this is that with the plight of the farming community, loss of industrial jobs, and jobs in the fuel industry in Fermanagh, it certainly is an area of social need, and most certainly central government are targeting it, not to improve the social well-being but to social deprivation.

Summary The aggregate levy which was introduced as an environmental taxation is having the opposite eVect in Northern Ireland, increasing CO2 emissions, destroying the landscape, and having a negative impact on the social environment through existing and future jobs losses, and increasing the burden of the NI Executive. Of course it is not all doom and gloom. Two parties are beneﬁting from the levy. The Treasury clearly are. The other is those operating on the edge of lawful society in Northern Ireland, exactly in the same way as is happening with the smuggling of fuel. 9437108002 Page Type [E] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Ev 36 Northern Ireland Committee: Evidence

Witnesses: Mr William McNabb, Chairman, Mr Gordon Best, Regional Manager, Mr Matthew Murphy, Balfour & Sons, Mr Pat Lyons, Tarmac Northern, and Mr Stephen Robinson, Robinson Quarry Masters, Quarry Products Association, Northern Ireland, examined.

Chairman: Gentlemen, welcome and thank you for Mr Robinson: The amount of unprocessed material coming to help us. We have a number of questions makes up about 50% of our turnover which would to put to you, starting with Mr Roy Beggs. be about £1.5 million in value annually. In the first financial year of the aggregates tax we paid Customs Q29 Mr Beggs: Good morning and welcome. In and Excise £535,000, which is 30% of the turnover of your submission you state that the scale of the our product. We trade within a very tight radius of impact of the introduction of the levy has been our plant in mid-Antrim; our average radius is 14 diYcult to determine. You have also indicated that miles from our depot. We have a very small the aggregates levy has negatively impacted on the community and a small customer base. We have industry, particularly in respect of those quarries turned round and we have collected that amount of located close to the border. Can you outline the money from those people within that area. I would problems your Association are having and give the say that within the greater Ballymena or Larne area Committee an indication of the size of the problem we would have had to extract £500,000-worth of tax in each case? out of their pocket. If I had turned round and Mr Best: First of all, Chairman, thank you very decided to increase the turnover of my business by much for this opportunity to give evidence to the about 30% over the space of a year that would have Y Committee. As you will have seen from our been extremely di cult. What I see that does for evidence, which is quite comprehensive, we have those people is it is more money out of their pocket. attempted to give you an indication of the scale of 30% of the turnover of my product is now taxation. the problems that as an industry we have Mr Lyons: In the last financial year our company encountered since the introduction of the tax last paid out just short of £1.2 million in aggregate levy. April. Although all the research that we did was We have a diverse operation centred around the never an exact science and that was alluded to in the Belfast area and in the border area of County cross-border survey, they are indicators to a bigger Fermanagh and the impact of the levy I can describe picture. The information all points in the one in a number of ways. In the border area our sales direction, that is that the tax has had a detrimental have dropped by something like 20-odd%—and I eVect not only on the industry but on the must emphasise that that is our external sales to environment within Northern Ireland. I would like third parties—because of imports from the Republic to take the Minerals Statement for 2002 first of all of Ireland. We can provide precise evidence on which showed a downturn of 2.6 million tonnes. imports where levies have not been collected, That also showed a drop in employment of 200 including imports into the public sector in Northern people which is even greater than the figures that we Ireland. I would also make the point that some had estimated, and I believe the Symonds Report, people may be under the illusion that all of the which will be released next week, will again back up imports are taxable at the point of exploitation. In that evidence. I think the obvious impact when we fact a lot of imports are quite legally coming into put the Ordnance Survey map together was the main Northern Ireland without any tax applied to them. I concentration of illegal quarries in Antrim. I think will give you an example of that and one which gives the plain and simple answer to that is they do not you an idea of the inadequacy of the legislation and have access to aggregates from over the border. As the problem Customs and Excise have. In Northern you have seen yourself, those illegal extraction Ireland there are quite a lot of single dwellings operations vary from the as-you-acquire-it to six full particularly in the west of the province close to the scale screening and crushing operations. That has border. A chap building his own house can legally had a serious eVect on the lower value end of our import aggregate from the Republic of Ireland industry, the people who are not supplying into the without paying the levy because that is not added value market. I took a phone call on Friday commercial exploitation. As was said earlier on, if from a quarry owner just outside Dungannon. He after three months his wife says, “Get it finished by told me he had been to see his bank manager the day Christmas or you’ll be living in it on your own,” and before to extend his overdraft because of the tax that he employees a contractor to do it and the contractor he had paid. I am sure if you asked any of these finishes the house, then it becomes taxable. So it is a gentlemen here they would tell you that the amount bit of a nonsense in that sense. Our sales have of tax that the legitimate people have paid to date far certainly gone down and to survive that our business exceeds their profits. That gives you an indication of has had to do two things. One, to focus on added the eVect that it is having on our industry. value sales, concrete, coated material and blocks because they are not particularly impacted by the Q30 Chairman: Perhaps we should hear from one or levy at this moment in time and that has helped us. two the exact amounts of tax they have paid since the The other thing that has helped us is to sit at night levy came in. Would you like to tell us your and read and research all the legislation and look for experience since it came in? legitimate loopholes to avoid having to pay the levy Mr Murphy: Our company is untypical, the others so that we can compete with the illegal operators. could speak more about what their total bills are. We The diYculty is that my company paid the deal primarily in value added product and the Government £1.2 million in the last financial year amount of unprocessed material we produce is for the privilege of being gradually put out of relatively small. business. We see no escape from it. The 42 illegal 9437108002 Page Type [O] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Northern Ireland Committee: Evidence Ev 37

16 September 2003 Mr William McNabb, Mr Gordon Best, Mr Matthew Murphy, Mr Pat Lyons and Mr Stephen Robinson quarries that were alluded to surround our Q33 Mr Tynan: Appendix 2 illustrates the point businesses. These are 42 quarries that physically did that there were 409 people employed in 2001, 411 not exist prior to the introduction of the levy. employed in 2002 and 389 in March of this year. Are Irrespective of how many illegal operations existed those figures correct? before that, these are an additional 42. Mr Best: That was actually taken from the top ten Mr McNabb: If you take some of the small quarry returns to the Symonds Report to Customs and operators in Northern Ireland who do 150,000 Excise. It is not a comprehensive survey but it is an tonnes per annum at an average selling price of indicator as to the impact on employment. Given the £2.60, they may be lucky to make 30p of profit, time factor we felt that we would be better to survey which is £75,000. So we get £75,000 of profit but we the top ten producers. have to pay Customs and Excise £400,000 in aggregate tax. Then the fraudulent trader decides he Q34 Mr Tynan: So the 22 jobs lost is not the total will have half of that £400,000 to himself and he is amount of jobs? able to retain the £75,000 plus £200,000, so the bona Mr Best: No. fides disappear and we create an army of criminals. Q35 Mr Tynan: So this is the top ten companies Q31 Mr Beggs: Chairman, I take it nobody wants to within the area and their job losses? outline where the loopholes are! We understand that Mr Best: Yes. the Association has sought to develop a database. Have you put that in place, and have you been able Q36 Mr Tynan: So the job losses of 52 that is to draw any conclusions from the information on mentioned in your evidence is for the other that database? companies involved, is it? Mr Best: Sorry, the database on? Mr Best: I think the survey that we did back in September/October last year covered about 34 Q32 Mr Beggs: The database on illegal quarrying. companies within our membership. Mr Best: We decided some months ago that for any case to be successful we would have to produce Q37 Mr Tynan: Are these jobs all attributable to accurate figures. A number of companies, along with the levy? myself as Regional Manager, decided to pick certain Mr Best: They would be, yes. areas and gather information on those sites. We took Mr Murphy: The levy has been introduced at a time photographs which you have got copies of. They are when public spending in the construction sector in there, nobody can dispute that. In the past month I Northern Ireland is on the increase. Over the last have had meetings with Customs and Excise, the year we have also seen about a 7% increase in the Planning Service, the Water Management Unit and value of the euro with respect to stirling. Those two the IPC Inspectorate and the information that we factors would be operating in favour of our industry gave to the Committee, ie the map and photographs, and should be producing a more beneficial eVect on was given to them. I do not fault the individuals our industry. Certainly the major negative impact within the various departments because certainly the that we see in the market place at the minute is the Planning Service people are running from pillar to aggregate tax. On the issue of illegal operations, like post. The senior oYcer within the Minerals Unit, at anybody in business criminals get into crime for a meeting with Customs and Excise back in financial gain and we have always had a certain February in Belfast, explained that his workload has amount of illegal operations. As the Government doubled since the introduction of the aggregates tax. increases the financial incentive and the reward that One of the other points that we have made and will can be obtained from operating an illegal pit then be making to Angela Smith when we meet her in obviously the more criminals will decide to operate November is that there seems to be a tendency illegal pits. It seems to me it is an area where we have within the local enforcement agencies to target the an opportunity to operate within government or bona fides, the legitimate companies. If a report outside government, there is an ineYciency here. comes in of someone exceeding the consent limit The illegal pits are like mushrooms because on the they are in the next day yet we have a backdrop of one side we have the Treasury feeding the 38 illegal operations. One of the points we made in mushrooms with manure by giving them £1.69 in the original inquiry was that we did not believe that profit that we do not have and on the other side we Customs and Excise had the resources to enforce the expect Customs and Excise to cut them down. Why tax. There was one operation in the Ballymena area can they not attack the problem at the root and that was notified to them a year ago and that reduce that huge incentive for people to adopt individual has only registered within the last two criminality rather than try and attack these weeks for the aggregate tax. It was also pointed out mushrooms that are, frankly, growing up to them that there was aggregates coming across everywhere. from McDade’s quarry in Donegal (I think it is “D” on the map) on the Greenisland-Magilligan ferry. I Q38 Mr Tynan: Let us look at the sales information had a report last week of lorries coming across and for the year. You indicated that in 2002 it was going up to a local housing development in the 2,643,559 and this year it was 1,154,000. Are those Limavady area. That is what we are faced with. figures comparable for the same period of time? 9437108002 Page Type [E] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Ev 38 Northern Ireland Committee: Evidence

16 September 2003 Mr William McNabb, Mr Gordon Best, Mr Matthew Murphy, Mr Pat Lyons and Mr Stephen Robinson

Mr Best: That is taken directly from answers two we have asked Customs and Excise on several and three of the Symonds Survey for Customs and occasions how many million tonnes of imported Excise, from 31 March to 1 April, for three years. aggregate they expect there to be every year—they do not know. We ask them how many million tonnes Q39 Mr Tynan: Is that the ten top companies as of imported aggregate are they currently collecting well? aggregate on and how many are they missing and Mr Best: Yes. they do not know that either. If they do not know that how are they going to know where to target their resources? If they cannot measure the problem Q40 Mr Tynan: So the loss of 22 jobs meant one how do we know how big the problem is? The last million tonnes going missing, did it? time we presented evidence we said that there would Mr Best: Yes, but I do not think you can rate it as be a problem in establishing for Customs and Excise simply as that. and everybody else where aggregate comes from, Mr Murphy: Speaking on behalf of our company because we do not have green aggregates south of which has not been majorly impacted yet by the levy the border and blue aggregate north of the border, it because we are mostly in the processed market, I am is traceability that is a great problem. If the trying to represent the views of my neighbours who smuggling of aggregate does take place, tracing that are largely in the unprocessed market, at the minute aggregate back to its origin and who is culpable is to a large extent they have suVered a large drop in highly complex. It is so complex that Customs and production, but they are not laying oV workers Excise would say privately that they need something because they are aware that the issue is still alive and tantamount to an admission of guilt from the guilty often our maintaining a presence in markets, albeit person. And to date, 18 months in, we are not aware maybe even at a small loss, is in the hope that of a single prosecution for the smuggling of committees like this one may be able to do aggregate. something that will enable them to stay in business. Mr Best: I think it is important to recognise that The pain that they are experiencing at the minute bringing aggregate across the border is not illegal, may not necessarily have been reflected already in and this was one of the constraints on our survey. job losses or in losses in production. They are When I talked to Chris Capper of the BBC, Chris looking for some light at the end of the tunnel and was very reluctant to take any photographs or do we are holding our breath to some extent. any filming of any lorries coming across the border in case the owners would say we were accusing them Q41 Mr Clarke: You will forgive us if some of our of bringing aggregate in illegally. We were questions are repetitive in terms of those that were constrained in what we could do. It was an indicator asked earlier. The BBA told us their view as to the of the bigger problem. Even from the map of the amount of aggregate being imported from the illegal activities you can see the absence of illegal Republic of Ireland and we heard that there is a view activities in Derry and Tyrone. They have access to that that was in the main virgin aggregate and there the cross-border aggregates. I think if you go and was not a lot of processed aggregate coming across. talk to any operator round the Londonderry/ Could you give us your view on what you describe as Strabane/Omagh area you will get the same story “a significant volume” in your evidence. How much about aggregates coming across the border. are we talking about in terms of volume of both Customs and Excise have given us an indication that virgin aggregate and processed product coming they can work along with the Revenue inspectors in across the border? the south of Ireland to trace aggregate, but as yet I Mr Lyons: I can quote you one example and it is do not think there has been anything done on that. taking up the border quarries point. The quarry I am responsible for is about seven miles from the border Q42 Mr Clarke: Let me walk you through a few and prior to the levy it was selling 25,000 tonnes per figures. Obviously this is of huge cost both to the month to the external market, but we are now down Exchequer in terms of uncollected revenue and huge to selling between 13,000–16,000 tonnes per month. cost to the industry. The BAA suggested to us in The market itself has grown in terms of their evidence that the sale of aggregate within infrastructure development, etcetera due to the Northern Ireland has decreased by about seven to money that is being spent on Northern Ireland at the eight million tonnes. Would you agree with that? moment. The other market we had was the farming Mr Best: No. community, but in the last six months the farming community has started to get up oV its knees and spend money, but they are not spending it with us Q43 Mr Clarke: So it has not decreased to that and they are certainly not spending it with our extent? Mr Best: neighbours’ quarries, it is coming across the border. No. It is very diYcult to put a precise figure on it, but in the area that I am in certainly tens of thousands of Q44 Mr Clarke: This is the problem we have in tonnes per month is not out of the question. trying to ascertain exactly how much we are Mr Murphy: We are really coming to the crux of the talking about. matter here. We cannot put an exact figure on it. We Mr Murphy: We know what we produce but we do can survey half a dozen crossing points and we can not know what the market sells. We would find it count so many dozen lorries crossing every day, but very diYcult to put an estimate on the black market. 9437108002 Page Type [O] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

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16 September 2003 Mr William McNabb, Mr Gordon Best, Mr Matthew Murphy, Mr Pat Lyons and Mr Stephen Robinson

Mr Best: Our estimate, given the Minerals from a mainland point of view, but in Fermanagh Statement and backed up by the assessment of the and Armagh our member companies are doing it day amount of illegal activities from the cross-border and daily. survey, would indicate it is around three million Mr Murphy: It is why Northern Ireland is able to tonnes. employ a disproportionately large number of people in the quarrying industry, because we have such a Q45 Mr Clarke: That is being imported? highly developed product range. We have many Mr Best: Yes. producers who can send products all over Northern Mr Lyons: Perhaps I could step away from the levy Ireland and it is something we are proud of. For the versus the impact on industry point for a moment Government to tax exported product where we have and talk about the fact that the intention of the levy maximum employment just goes beyond belief. was to improve the environment for all the people of the United Kingdom in terms of quarrying. What Q49 Mr Clarke: We heard earlier on about the has happened in Northern Ireland is appalling. research that has been undertaken by the University There has been a complete reversal eVect in terms of of Ulster and the spot checks on lorries. Do you take illegal operations in County Antrim, one of our a similar view, that it is just a snapshot, it cannot major tourist travel areas. In the lakes of Fermanagh really provide reliable data and it can give you an we have increased haulage movement which was not indication of the number of lorries but nothing more there before. You talked about the impact of the levy than that? Is that fair? on the industry in terms of payment and the cost to Mr Best: Yes. I would go back to the point I made HMC if it is not collected, but it is not as simple as about the constraints from a legal point of view that. The impact on the Northern Ireland and UK because it is not illegal to bring a lorry across the economies is a loss of levy and a loss of income tax border full of stone. That is why Customs and Excise because these jobs have been lost in legitimate got the Symonds Report carried out, because if our companies whilst people are actually working in the Treasury is going to Europe we have got to have illegal quarries. There is a loss of income tax, something that is based on fact. The indication we national insurance contributions, a loss of planning have been given is that the Symonds Report is going fees, a loss of environmental fees and an extremely to show certainly an economic impact as well as an high risk that these people working these illegal environmental impact. They were a number of quarries will have serious injuries or die through oYcials over here for a week and the feedback I was fatalities caused by the very low levels of health and getting from them was that they were completely safety compliance. That is the big impact on the alarmed at the lack of enforcement not only from an Northern Ireland population and the economy. aggregate tax point of view but from a waste management point of view. Q46 Mr Clarke: We have got this ﬁgure of possibly three million tonnes being imported and as you have Q50 Mr Clarke: It is a very diYcult thing to do in just rightly said, there are costs beyond simply the terms of proving the commercial exploitation rather loss of levy. Would you be able to make a guess in than simply the movement. terms of the number of tonnes imported before the Mr Best: It goes back to our point that we would be levy against the number of tonnes imported after the very surprised if anybody is ever prosecuted for not levy and what the cost is in pounds to the industry in paying the aggregate tax. Northern Ireland? Mr Lyons: I would say that the strength of Q51 Mr Beggs: Have you any information as to the environment economy and infrastructure whether or not illegally imported aggregates are development in the Republic of Ireland was such in going on to publicly funded projects? the last ten years prior to the levy that there was only Mr Lyons: Yes. I have had two instances of this in exports, not imports. the last six months. We tendered for the supply of aggregate for the maintenance of roads in the Q47 Mr Clarke: On this issue about commercial Forestry Service. We were successful in the previous exploitation meaning that the tax is paid, the point two years in that tender and this year we were not is it is commercially exploited and that obviously successful. We monitored the situation very means that as producers in Northern Ireland carefully and we found that the aggregate that was importing into the Republic of Ireland there is no being supplied through the tender was coming from levy paid by you on that. 30 miles away (our quarry was seven miles away) Mr Lyons: No. and across the border from County Donegal. I contacted the Forestry Service and asked them who Q48 Mr Clarke: Do you see your business as was collecting the levy, were they paying it or were Ireland-wide? the suppliers paying it and they did not know Mr Murphy: We do pay tax on exported product, anything about the levy. After two or three days of value added product, which is ridiculous. phone calls they came back to me and asked me how Mr Best: That was one of the points we had in our they should deal with this and I said that the only proposal. When we discussed it with Customs and way they could deal with it was to refuse to pay the Excise in Manchester in February the oYcials bill for the aggregate until they had proof that the looked at each other because this case had not arisen levy had been paid. Ultimately the tender was 9437108002 Page Type [E] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

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16 September 2003 Mr William McNabb, Mr Gordon Best, Mr Matthew Murphy, Mr Pat Lyons and Mr Stephen Robinson withdrawn after X thousand of tonnes were supplied Mr Lyons: The reality of the situation is that and was reissued. The second time we were financially and commercially the levy is a disaster for successful. I have got another instance of this. A Northern Ireland. If you look across the United publicly funded school was carrying out some Kingdom, you have got 40-plus illegal quarries in capital works. It was not an import in this case, it is Northern Ireland, an indication that they are coming from an illegal quarry. We are half a mile starting to appear in Scotland, an indication that from the school and we cannot compete with a they are starting to appear in parts of Wales, but in quarry that is five miles away because they are the south of England there is none and the reality of supplying the contract levy free. In both instances I that is the economic argument that £1.60 a tonne on think all of us have worked diligently to provide the price of aggregate from the south of England is information and evidence to Customs and Excise on nothing but it is a disaster in Northern Ireland. Quite every possible occasion and we have also frankly, the way the industry is going, with the approached the planners and the Environmental aggregate levy amongst other things, it is rapidly Service because we do feel that it is not simply a becoming the situation in Northern Ireland that battle for Customs and Excise, it needs joined-up there is no future for a person wanting to make an Government to sort these people out. honest living or for an honest business to survive. Mr Murphy: We have spoken to some public sector Mr Robinson: If Customs and Excise or HM clients about the procurement of aggregate and tried Treasury assisted us to remove the price diVerential to investigate what we can do to ensure that the problem would sort itself out. aggregate that is procured for public projects has the levy paid on it. When you explore the issue in detail Q55 Chairman: What diVerential? the legality becomes slightly grey and the public Mr Murphy: The level of the tax in relation to the clients are not sure if they would be able to put in a market value of product. detailed enough qualification with the tender that Mr Robinson: That is really what is fuelling the black would stand up in law. market. I am attempting to sell my product at 40% Mr Best: A number of Government departments above product that is available in my area and that including the Roads Service and Construction is keeping that market alive and it is self-generating Service have now got declarations in the tenders that within that. If that price diVerential of the product all aggregate sourced within Northern Ireland and was removed the problem would sort itself out. outside using Government contracts in Northern Ireland will come from a levy paid source, but Q56 Chairman: Have you had any response from whether that is actually being eVective on the ground the Treasury on the alternative proposals that you is questionable. have made? Mr Murphy: The only belt and braces solution is to Mr Best: Yes. We had a meeting on 14 August with ensure that every lorry load of stone and every a number of oYcials in Belfast. Customs and Excise Y weighbridge docket is accounted for, that is the only had a meeting with European Commission o cials way the client can be sure that the levy has been paid on 16 July where they were basically putting their toe on each lorry load of stone, which is a bureaucratic in the water as to our proposal. I think it would be nightmare and it is something that they are certainly fair to say that although originally there was a not prepared to look at. reluctance to accept proposal A, ie 32 pence across all aggregates who extract in Northern Ireland, there is now a willingness to take that proposal forward. Q52 Chairman: We have been hearing all morning In the response the European Commission, in the six about the problems that Customs are having and all or seven bullet points that they made, made mention of you have made it quite clear that it is a question of the economic impact four times. That is the only of resources as far as they are concerned not will. Is way they would accept any consideration of a there more you would like to see them doing? Mr McNabb: further derogation for Northern Ireland and this is There is only one thing that they could where the Symonds Report is pivotal to this do to solve this problem and that is put an individual proposal going forward. The Symonds Report is due representative of Customs and Excise in every out on 23 September and that will really set the scene quarry in Northern Ireland. for this proposal going forward. I believe there is a willingness within Customs and Excise to solve the Q53 Chairman: How many quarries are there? problem. Minister Boateng was over in July and he Mr Best: It was 160 at the last count. visited Pat’s quarry at Tarmac and he gave an Mr Murphy: That says nothing about imported indication that it was an unforeseen problem, but aggregate. they now realise it is there and they want to get it sorted out. Q54 Chairman: That is an unrealistic demand. Chairman: We shall await that report with interest Mr Murphy: There comes a point when the tail wags ourselves as well. Gentlemen, thank you very much the dog. indeed. 9437101016 Page Type [O] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

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Letter from the Quarry Products Association Northern Ireland to the Chairman of the Committee As you are by now no doubt aware the Chancellor of the Exchequer, Gordon Brown, announced in his Pre-Budget Statement that following discussions with stakeholders and evidence from a Government- commissioned study, subject to state aid approval, the Government intends to extend the scope and length of the current relief for aggregates in Northern Ireland. This is on condition that any aggregates business in Northern Ireland that wishes to beneﬁt from the extended relief agrees to sign negotiated agreements committing them to implement environmental improvements to their operations. The relief will continue to cover aggregate in processed products and be extended to cover virgin aggregate, coming into eVect during 2004 and ﬁxed at the current level of 80% of the full rate until 31 March 2012. The full rate of levy on aggregate exploited in the UK is currently £1.60 per tonne. If this remains unchanged in Budget 2004, relieved aggregate in Northern Ireland would be liable at 20% of that rate, ie 32 pence per tonne. The environmental improvements that quarry operators will need to sign up to will be regularly monitored and reviewed and enforcement activity will be stepped up. Since Budget 2003, the Government and the aggregates and construction industries in Northern Ireland have worked hard to improve the analysis of the operation of the levy and the aggregates market in the Province, including an independent study, Assessment of the State of the Construction Aggregates Sector in Northern Ireland that the Government commissioned, which has just been published. The QPANI have been campaigning since its inception in 1998 against the idea of an aggregates tax in Northern Ireland due to the fact we share a land border with another state where there is no tax. In addition to this point we have always pointed out that Northern Ireland was never included in the initial London Economics pre levy research. Due to the joint lobbying by QPANI, our political representatives from all shades of political opinion, other organisations such as the CBI, Construction Employers Federation and the Federation of Small Businesses, the Treasury have now recognised the unique set of circumstances in Northern Ireland and announced this relief from the aggregates tax. May I on behalf of not only the member companies of the Quarry Products Association NI, but the 5,000 plus employees within the industry in Northern Ireland, thank you and the members of the Select Committee for your eVorts in highlighting to central Government the detrimental impact of the aggregates tax in Northern Ireland. December 2003

Supplementary memorandum submitted by the Quarry Products Association Northern Ireland Thank you for your letter of 2 February seeking the views of the Quarry Products Association NI (QPANI) on the Code of Practice and Compliance Framework document produced by the Department of Environment Northern Ireland (DOENI). As you may be aware it was the QPANI who put forward the idea and the ﬁrst draft of an Environmental Code and presented it to the Treasury in February 2003. This initiative was industry driven and wherein, we believe, lies its strength. On 26 January 2003 QPANI representatives met with Customs and Excise, DOENI and the Department of Finance oYcials to discuss progress on the application to the EU for state aid approval for the further derogation on aggregates tax in Northern Ireland. In what was as a workmanlike meeting Customs oYcials informed the Association that the application to the EU had been made immediately after the Christmas break. Everyone was now hopeful that the approval will come in time for introduction on 1 April 2004. QPANI informed the Government oYcials that at present the Association was conducting a survey of members on the possible impact of the Code of Good Environmental Practice and Compliance Scheme. To date all responses have been positive although there are a number of technical issues relating to blasting and some clariﬁcation being sought as to timetables and auditing procedures. These issues, and any other areas of concern, will be raised by QPANI in what will be a very comprehensive response to the current consultation paper. The consultation process closes on 5 March 2004. Our views to date are as follows:

1. Code of Good Environmental Practice Aggregates are amongst the essentials of life, as important to us in their own way as the food from our farms. Aggregates can only be won where nature has placed them. Through their products, quarries give us places to live, places to work, places to play and much more. They literally underpin our society. Quarrying does, however, have environmental implications. Recognising this, the Northern Ireland industry aims to adopt a responsible approach to its work and a considerate attitude to its neighbours. 9437101017 Page Type [E] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

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The Industry in Northern Ireland is an integral part of the Community and with this in mind formulated this Code of Good Environmental Practice that will be a guideline for companies and a reassurance to the Community that quarrying can and will be carried out in a environmentally responsible manner. This Code of Good Environmental Practice deals with the environmental eVects of surface mineral working and keeping emissions within acceptable limits without imposing unreasonable burdens on the minerals operator. The Quarry Products Association NI believe that the Code sets out procedures that all companies involved in aggregate extraction should adhere to for the following reasons: 1. Protect the Environment. 2. Improve Health and Safety 3. Good Environmental Practice makes good commercial sense. 4. It will improve the perception that many have of the industry. 5. Improved employee morale. 6. Reduced labour turnover. 7. It will improve the chances of success in planning applications. 8. Operating Quarries can double up as highly important environmental sites. 9. Quarres with good environmental practice can encourage nature/wildlife.

2. The Compliance Framework The implementation of the scheme is based on the conduct of compliance audits of all quarry and aggregates operations within Northern Ireland which choose to join it. The Association believe, and have made our views known to both Customs and Excise and DOENI, that in many areas of the compliance scheme, we do not need to redesign the wheel. There are a number of Government agencies that regulate the quarry industry in Northern Ireland — Planning Service—minerals unit. — Water Management Unit. — Industrial Pollution Inspectorate. — Customs and Excise. — Health and Safety Executive. — Waste Management Unit QPANI would suggest that all of these agencies should communicate through some sort of database to facilitate the collation of data relating to compliance on the relevant issues. Planning Service would, we suggest, take the lead by the planning conditions that they set on each operation and compliance to those conditions can easily be assessed. The other agencies’ compliance figures can also be assessed annually and be collected together to form the basis of an overall compliance figure for a company. In the response to the DOENI Consultation Paper on the Code and Compliance Scheme there are a number of technical issues relating to blasting and some clarification being sought as to timetables and auditing procedures. These issues, and any other areas of concern, will be raised by the QPANI in what will be a very comprehensive response to the current consultation paper. The consultation process closes on 5 March 2004. Overall the Quarry Products Association NI is happy with the proposed compliance scheme and view it as fair, rewards good practice and promotes continuous improvement. The adoption of this scheme however must go hand in hand with beefed up enforcement and increased penalties for illegal quarry operators if people are to see the benefit of joining the scheme and adopting the Code. The QPANI will also be making a strong argument to have compliance with the Code linked to the right to supply Government Contracts with materials, Government Departments should be ensuring that a products they procure come from legitimate companies who carry out their operations in a safe and environmentally responsible way. Our Association believes that this incentive-based system will work more eVectively in the application of any laws than the use of regulatory power.

3. Partial Regulatory Impact Assessment The impact of doing nothing (ie continued phasing in of the aggregates tax) is in our view not an option. The reasons for this have been highlighted in our two previous submissions to the Committee. The compliance scheme however aims to provide a system for improvement in environmental performance across the industry without signiﬁcantly aVecting the existing economics of the industry. Without implementation of the Code environmental performance is unlikely to improve signiﬁcantly across the industry. It could even lead to a reduction in environmental performance in order to reduce costs to cope 9437101017 Page Type [O] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

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with the aggregate tax and more importantly competition from illegal operators selling stone without VAT and the aggregate tax. QPANI believe that impIementation of the Code will provide direction to the industry and signiﬁcantly raise the awareness of environmental issues. The implementation of the Code and Compliance scheme is, at this stage, the best option. As we have stated above it is fair, promotes best practice and encourages continuous improvement. OPANI believe that in order to achieve as high a compliance rate and adoption of the Code as possible Government need to assist organisations such as QPANI in educating and informing the smaller micro size companies on best practice and where to go in order to receive support and grant aid. There are a number of ways this support could be delivered and there is existing grant aid and support programmes such as that delivered by Invest NI. Invest Northern Ireland delivers a range of initiatives to help Northern Ireland companies improve environmental and business performance. Support programmes oVered include:

Environmental Audit Support Scheme (EASS) All businesses can benefit from minimising their environmental impacts in an integrated way. Many use formal Environmental Management Systems (EMS) such as ISO 14001. The EASS, a financial assistance scheme, can help businesses take the first step towards developing an EMS by providing 66.66% grant, up to a maximum of £5,000, towards the cost of carrying out an environmental audit or baseline review of environmental performance.

Environmental Enquiry Point (EEP) Invest Northern Ireland delivers a range of initiatives to help Northern Ireland companies improve environmental and business performance. Support programmes oVered include:

Green Technology Initiative (GTI) This scheme, which provides interest free loans of up to £50,000, aims to help Northern Ireland businesses implement environmental technologies and reduce operating costs. The scheme supports projects requiring capital investment, thereby helping to promote the local, environmental technology sector.

Water and EZuent Advice Centre The centre oVers impartial, authoritative advice, information and consultancy services in the ﬁeld of water conservation and eZuent treatment. Free services to Northern Ireland companies include on-site assessments of water usage and eZuent disposal practices and advice on measures required to reduce the cost of water and/or eZuent treatment. Analysis and testing of water and eZuents can also be undertaken on a fee-paying basis.

Envirowise Invest NI is a contact point for Envirowise, a Government-funded programme which helps companies to cut costs by increasing eYciency and reducing waste at source. Envirowise publishes guides and case studies of best practice in action. Smaller companies can beneﬁt from a one-day fast track waste minimisation visit from an Envirowise advisor. www.envirowise.gov.uk or Sam McCloskey 028 9070 6000.

Biowise This national programme aims to help companies reduce business costs, improve product quality and/or reduce environmental impact through the use of Biotechnology. The programme oVers free, independent and practical advice in a range of formats including publications and seminars. www.biowise.gov.uk or Diane Moore 028 9070 6000.

Northern Ireland Waste Exchange Bureau (NIWEB) NIWEB, supported by Invest NI, is an internet-based trading site for the exchange of wastes. The service is free to all Northern Ireland businesses and facilitates the cost-eVective sourcing and supply of waste and redundant material normally destined for landﬁll. Visit www.niweb.net for more information. The Quarry Products Association NI have also produced a guidance document for our smaller companies on how to take the ﬁrst steps on setting up an Environmental Management System, see attached. It is essential that Government assist the industry by helping raise the awareness of smaller companies about the availability of these support programmes. 9437101017 Page Type [E] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

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If this additional assistance is not oVered there is a serious risk that schemes will fail through lack of proper information and preparation at the outset and of course the actual cost of delivering the improvements will still be borne by the operator concerned. The requirement for all operators to achieve certiﬁcation to a recognised Environmental Management Standard is we believe premature and too big a step for much of the industry to take at present. However QPANI view the adoption of a third party accredited environmental management scheme as a process that will evolve and become part of Government procurement policy as each Department moves towards accreditation to an EMS themselves. For example Water Service in Northern Ireland have achieved accreditation to 1SO 14001 and other Departments, we are informed, will follow their example. As part of any Environmental Management System your procurement and waste disposal policy are audited. It therefore is the view that rather than Government OYcials running around acting as policemen to check where materials are coming from or going to the Department should be buying materials and services from third party accredited companies. That third party accreditation is the guarantee to Government that products and services are being procured from and disposed of to legal sources.

Quarry Products Association NI Proposal on the Development of a Recycled Aggregates Industry in Northern Ireland The issue of Recycled and Secondary aggregates is not a straightforward one as unfortunately it is not within the gift of the quarry industry alone to deliver a substantial increase in the use of these materials. The general view within the industry is that we stand ready and willing to embrace and fully participate in the development of markets for recycled and secondary aggregates in Northern Ireland. The industry realises that the development of such markets will complement our core products, not threaten them, and at the same time the quarry industry will play their part in utilising a waste stream that presently goes to landfill, of which we are running out rapidly in the Province. The Symonds Report, recently commissioned by Customs and Excise, estimates that at present the total production of recycled aggregate in Northern Ireland to be no more than 280,000 tonnes, 1.2% of total aggregate production. They estimate, although this is based on pro rata figures that the total in NI could be in the region of 1.28 million tonnes, 5.5% of total aggregate production. The Symonds Report highlighted the lack of regulation of the landfill sector in Northern Ireland. Observation in NI shows that there are unlicensed and uncontrolled waste disposal sites to which predominantly inert construction, demolition and excavation waste is taken. In section 6.31 page 46 of the Symonds Report they set out four tests of whether a country or region has a prospect of developing an aggregate recycling industry. Having studied these four tests QPANI are more than confident that Northern Ireland potentially stands on the threshold of developing an eVective aggregates recycling industry. The Second major barrier to recycling is Government procurement. In Northern Ireland Government agencies and Departments purchase approximately 50%–55% of all products produced by the quarry products sector. QPANI are aware of, and have been involved in, high level discussions on the role of procurement in developing an aggregate recycling industry in Northern Ireland. The active participation of organisations like WRAP (Waste Resource Action Programme) will help facilitate and encourage this ongoing development. At present QPANI have a number of members who have taken the proactive step of putting in place recycling facilities at their quarries. To date there has not been much payback for them due to the problems and barriers I have mentioned above. However I have no doubt as markets develop their investment will be rewarded. Indeed QPANI are confident that many others will follow their example and put in place facilities to handle C and D waste from their local communities. The Association’s firm belief is that with proper regulation and the new landfill directive construction companies will, rather than pay £30–£40 landfill tax, approach their local quarry which has the space and the equipment to process C and D waste into a valuable recycled aggregate for a cost of a fraction of landfill tax. Combined Quarry and Recycling centres are, in the QPANI view, the most cost eVective and environmentally friendly option. We see the options as follows: Northern lreland Recycling, What can be done? Work in partnership with client bodies to: — Change specifications. — Secure construction waste stream. — Develop recycling centres. — Develop genuine partnerships with government bodies to take recycling to a higher level. Recycling Alternatives—(Construction Waste): — On site reprocessing and use. — Stand alone recycling centres. — Combined quarry and recycling centres. 9437101017 Page Type [O] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

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Recycling Alternatives—(On site recycling): — Most environmentally eVective. — No transport requirement. — Successfully carried out in NI. Already. HOWEVER, — Very limited scope. — Does not recover added value raw materials. — Virtually no opportunities outside Belfast and Londonderry. Stand Alone Recycling Centres: — Increases truck movements. — Duplication of eVort (processing/overheads). — Increases CO2 emissions. — Not cost eVective (reflected in high prices which does not attract potential clients.) Combined Quarry/Recycling Centres: — Minimises transport movements. — Reduces CO2 emissions. — No duplication of infrastructure/overheads. —CosteVective. — Compliance with stringent Environmental legislation. — Allows recovery/reuse of high value materials such as macadams (bitumen). — Attractive to end-users due to eYciency of transport and labour management. As you can see the Combined Quarry/Recycling Centres along with on site recycling are the best environmental options. Following ongoing discussions in London between the Highways Agency, WRAP, QPA and the Environment Agency there are hopeful signs that one of the major barriers to developing a viable recycled and secondary aggregates industry in Northern Ireland will be removed. An announcement from the Environment Agency is imminent to the eVect that where clean C and D waste is processed inline with the factory and production control as set down in the new European Aggregates standard for recycled aggregates and the operator provides related data that their enforcement oYcials will view the material as “recovered”. This step will remove recovered material from duty of care and waste licensing requirements. The Association welcomes this positive move and have already had discussions with DOENI to ensure that local waste licensing enforcement oYcials adopt a similar stance. It is vitally important that HM Treasury and the Northern Ireland AVairs Committee use their undoubted influence with Environmental Policy Division within the DOENI to ensure that a pragmatic view is taken as regards recycling of Construction and Demolition Waste in order to remove barriers to the creation of a viable recycled aggregate industry in Northern Ireland. QPANI fully support the promotion and development of a recycled aggregates industry that will complement the core products of the sector. As the Code of Good Practice Compliance scheme is developed we suggest that targets are put in place for utilising C and D Waste. We believe that given the existing levels of recycling estimated in the Symonds report and the potential level that could be acheived we would propose that a target should be set for individual quarries to have achieved a level of use of C and D Waste of 5% of their annual extraction figures by the end of the three-year derogation. This information for the use of C and D Waste could be gathered in the annual minerals statement currently collected by the Geological Survey for Northern Ireland for DETINI. In relation to the level of consultation with the aggregates industry and its representative bodies the Quarry Products Association NI are delighted with the openness and co-operation the Economic Secretaries oYcials have shown. As Regional Manager of QPANI I would like to mention in particular the work that Kris Komanski, Andy Biscombe and Dave Fitzgerald have done in co-ordinating the work between Customs, DOENI, DFPNI and the industry representatives in Northern Ireland. This level of partnership between industry and Government to solve an evident problem can we hope be a template for the future. 8 February 2004 9437101018 Page Type [E] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Ev 46 Northern Ireland Committee: Evidence

Memorandum submitted by the Construction Employers’ Federation Northern Ireland

Introduction The construction industry in the Province employs some 45,000 operatives. The industry has an annual turnover of £2.4 billion per annum, and makes a contribution of 8% to Northern Ireland’s Gross Domestic Product. The Construction Employer’s Federation (CEF) is the representative body for the Construction Industry in Northern Ireland. The CEF represents some 500 individual construction ﬁrms, who collectively account for over 80% of all construction work in the Province. We welcome the opportunity to provide further comment on the eVects of the introduction of the Aggregates Tax in Northern Ireland. The CEF fully supports the alternative proposals that have been put forward by the Quarry products Association in Northern Ireland.

Background The Aggregates Tax was introduced on 1 April 2002. The levy applies to all virgin rock sand and gravel, which is subject to commercial exploitation in the UK. It is charged at £1.60 per tonne. HM Treasury announced a phased introduction over five years of the tax on processed products containing aggregates at 32p per annum. The first 32p per tonne increment was introduced on 1 April 2003. The levy does not apply to recycled aggregates or to certain specified secondary aggregates. Imported virgin aggregates are subject to the levy when first sold or used in the UK, but imported downstream aggregate’s products are exempt.

The Northern Ireland Market The Northern Ireland Quarrying Industry is unique within the United Kingdom in terms of location, scale and economy. — Northern Ireland is the only part of the UK that has a land border with another EU State. — The majority of quarries in Northern Ireland are small family run businesses, producing less than 300,000 tonnes per annum. — The average ex-quarry price for aggregate in Northern Ireland is under £2.80 per tonne (excluding taxes). By comparison, the market in Great Britain is totally diVerent. — Great Britain has no land border with any other EU State. — Most quarries in Great Britain produce well in excess of 600,000 tonnes per annum. — The average ex-quarry price for rock in Great Britain is in excess of £6 per tonne (excluding taxes). The majority of quarries in Northern Ireland, are located along the border with the Republic of Ireland and are therefore much closer to their customer base, thus minimising environmental damage from transportation.

Cross Border Haulage and Unauthorised Extraction We understand that the Planning Service in Northern Ireland has noted a significant increase in the number of unauthorised aggregates extraction operations in the Province. (From April 2002–December 2002, there were 30 confirmed reports of unauthorised extractions, compared to 17 in the same period in the previous year when there was no Aggregates tax. Source: DOE NI Planning Service Minerals Unit). The introduction of the tax therefore appears to have created a “black market” for the extraction of unauthorised aggregates. The QPA in Northern Ireland commissioned the University of Ulster to carry out a survey of border crossings to assess the movement of aggregate from ROI to NI. The University of Ulster report highlights a significant volume of aggregate being imported to Northern Ireland. This was something that rarely happened prior to the introduction of the tax and the University estimates that the loss in Aggregates Tax along the border equates to some £1.2 million per annum. 9437101018 Page Type [O] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Northern Ireland Committee: Evidence Ev 47

Capital Infrastructure Programmes The introduction of the Aggregates tax is having a significant eVect on public infrastructure projects. The total value of output in the Construction Industry in Northern Ireland is approximately £2.4 billion per annum. This equates to total aggregate sales of some 22 million tonnes per annum. The total “tax take” raised on 22 million tonnes of aggregate, would be £35 million per annum (22 million tonnes x £1.60). The public sector accounts for some 60% of construction output, therefore the tax take from the public sector would be 60% of £35 million per annum or £21 million per annum. In other words, around £21 million per annum is being lost from the public sector infrastructure programme each year, because of the Aggregates tax. In December 2002, Ian Pearson, the Department Finance Minister announced an additional £2 billion package for infrastructure works that are urgently needed to begin to redress the £6 billion infrastructure deficit in the Province. This package will lose around £21 million per annum purely as a result of the Aggregates tax. This equates to the entire annual “Structural Maintenance” budget for the Roads Service or, the total cost of building a new large water treatment works, such as Culmore in the North West of the Province. (Urgently needed to meet EU Water Quality Standards). Impact on Employment While output in the construction industry is not buoyant as a result of the additional infrastructure expenditure, it is diYcult to assess the eVect of employment on the mainstream construction industry resulting from this tax. It is more objective, therefore, to concentrate on the eVects on capital infrastructure programmes as highlighted above. Recycling Government is the largest customer of the construction industry. At present, however, government procurement policy provides very little opportunity for the use of recycled materials. One of the main objectives of the Aggregate tax was to increase the use of recycled materials in construction. There are however, a number of factors that combine to make this diYcult to achieve in Northern Ireland. These include: — The lack of availability of quality recyclable materials. — Northern Ireland is a rural based economy with limited major development and urban regeneration, thus reducing the opportunity to use recycled materials. The CEF believes that government agencies need to be more proactive at specifying and encouraging the re-use of products from construction and demolition waste. Proposed Alternatives to the Aggregates Tax The Quarry Products Association has had detailed discussions with HM Customs & Excise and the Department of Finance & Personnel regarding proposals to alleviate the eVects that the tax is having on the quarrying sector in Northern Ireland. The CEF fully supports those proposals. Specifically: (a) An 80% discount on the tax for all aggregate used within Northern Ireland. This would be relatively easy to administer and would give assistance to those quarries that operate solely with virgin aggregates. In return the quarrying sector will commit to delivering environmental improvements as specified by the Department of the Environment. Failure to meet those targets would result in the tax being applied in full on those quarries that do not meet the targets. Recycling levels would also be increased to 20% of available material by 2008. If this proposal is not accepted, an alternative might be: (b) An 80% discount on the tax for all aggregate used in processed products in Northern Ireland and zero rating for all processed products exported to the Republic of Ireland. Again each quarry would commit to deliver environmental improvements as agreed with DOE. The targets to be implemented over an eight-year period Recycling levels would again be increased to 20% by 2008. All exported aggregate from Northern Ireland to Great Britain would attract the full tax. We understand these proposals are under discussion and have the full support of the British Aggregates Association. The CEF would therefore reaYrm its full support for these proposals. 9437108003 Page Type [E] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Ev 48 Northern Ireland Committee: Evidence

Witness: Mr Nigel Lucas, Deputy Secretary, Construction Employers’ Federation, Northern Ireland, examined.

Q57 Chairman: Mr Lucas, thank you for coming to around £20 million, was in doubt. Therefore, help us look into this problem. In your submission although the Culmore plant has recently announced you say that the total value of output in the the funding is now secure, the analogy is that if you construction industry is approximately £2.4 billion look at the amount of tax taken out of the economy per annum and this means total aggregates sales of at a time when these water treatment plants or other about 22 million tonnes. Are you able to tell the projects are vitally needed, then it is obviously going Committee how much of that is virgin aggregates, to put some of these projects in doubt. recycled or processed products? Mr Lucas: No, Chairman, I would not have a detailed break down of that1. Q60 Mr Tynan: You say that your organisation represents 500 individual construction firms in the Q58 Chairman: Who would? province and that is 80% of all construction work. Mr Lucas: Probably my colleagues in the QPANI How does your organisation view the unauthorised might be able to give an indication. extraction of aggregates? Do you advise your members to verify the origin of the aggregates that is Q59 Chairman: So we are asking the wrong person used in construction? Mr Lucas: the question. We must try and find that figure by First of all, we are as concerned about other means. What eVect has this levy had here so far unauthorised and illicit operations as our colleagues and how much more do you think that impact will in the QPA sector. The Construction Employers’ be felt as the phasing in of this goes on year by year? Federation is an organisation that promotes and Mr Lucas: Chairman, our submission tends to represents best practice in the industry. Obviously a concentrate more on the eVects on the economy and lot of our members who are legitimate operators are on the construction industry itself rather than on facing competition from the unlawful or unlicensed detrimental eVects on the quarrying sector. operations and that is creating an unlevel playing However, I may return to that point in a moment. As field in the industry. As far as advice to members the submission points out, the construction industry goes, you have already heard that some of the public here makes a significant contribution to Northern sector clients are now asking for declarations to be Ireland’s GDP and thereby its local economy. The signed and we have already given advice to our industry supports around 45,000 operatives directly members that they must ensure that these and indirectly. We are facing a time of substantial declarations are signed. increase in infrastructure spend in Northern Ireland. The Finance Minister, Ian Pearson announced Q61 Mr Tynan: Do you advise your companies that earlier this year a package of around £2 billion of they should verify the origin of the aggregate they additional spend. This is to address an infrastructure use? backlog that has arisen over the last 30 years. It is Mr Lucas: Where the declarations exist we do, yes. crucial to the construction industry’s ability to maintain and meet this challenge in the increase in infrastructure spend that we have a vibrant Q62 Mr Tynan: What about where there is no aggregates supply market and if the aggregates declaration? supply market is suVering through the eVects of the Mr Lucas: While we can give best practice advice to tax then obviously it will have a significant knock-on put that into practice, we have no control over that. eVect on the construction industry’s ability to meet this increase in infrastructure spend. In my submission I draw an analogy to the financial cost to Q63 Mr Tynan: How do you think we should the industry. The “tax take” out of a £2.4 billion address the problem? Should it be done through the turnover equates to approximately £35 million per individual companies that you represent or should annum. We also draw attention to an example where there be another way? the public sector represents some 60% of Mr Lucas: I think it is a combination of matters. construction output, therefore the 60% of the £35 First of all, as you say it is a question of the million of “tax take” is around £21 million out of individual companies ensuring that as bona fide public sector spending. That as an analogy equates operators the aggregates have come from legitimate to the entire maintenance programme for the Roads operations, but it is also a question of compliance Service for a full year. Another example is in the and enforcement. I think that both the Planning north-west of the province where there is a large Service and Customs and Excise are significantly water treatment works project that has recently been under-resourced to ensure that the tax is being announced called Culmore. At the time of writing applied in a fair way. this submission the funding was in some doubt. This is one of the 56 hot-spots for water treatment plants in Northern Ireland that will have to be put in place Q64 Mr Tynan: If 80% of the construction business to meet the EU Compliance Directive on the quality in the province decided to operate on those of water treatment by 2005. At the time of writing guidelines would that not ensure that legitimate this submission the funding for the Culmore plant, producers of aggregate were able to continue as they are? 1 The witness subsequently informed the Committee that on Mr Lucas: If it was a perfect world I think that advice from the QPANI the split is about 50:50. would be correct. 9437108003 Page Type [O] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Northern Ireland Committee: Evidence Ev 49

16 September 2003 Mr Nigel Lucas

Q65 Mr Tynan: But it is not. Mr Lucas: Yes. I think recycling and the whole issue Mr Lucas: Correct. of waste management is something that lies fully within the control of Government here. The Central Q66 Mr Tynan: We have asked this question before. Procurement Directorate that has recently been In your view are the imports mostly processed or is established I believe should be at the forefront of it virgin aggregates? driving this issue of recycling and waste Mr Lucas: Again I would have to refer to the management in Northern Ireland forward and the evidence provided by my colleagues in the QPA and way to do that is simply through specifying it in its say I think it is a combination of both, but procurement documents. identifying them is an extremely diYcult exercise. Q74 Reverend Smyth: Your first answer would have Q67 Mr Tynan: So at present there are no measures implied that it is the lack of quality recycled products in place to monitor and verify the use of imported here that would be a greater hindrance than high aggregates to your knowledge? specifications. Mr Lucas: Not to my knowledge. Mr Lucas: I would say it is both issues. There is no doubt a lack of opportunities to recycle but there Q68 Mr Tynan: Should there be? must also be a greater lead taken by Government in Mr Lucas: I think it would help to address the issue. its procurement documentation to oVer incentives to recycle. Q69 Mr Tynan: Is there any way we could bring that about? Q75 Mark Tami: You have touched on some of Mr Lucas: You could probably do it through these points with the previous question. You have enhanced enforcement and compliance. talked about what the Government should be doing, but what are you doing as an industry to encourage Q70 Mr Bailey: Earlier on you said that public the use of recycled materials? sector construction projects were losing £21 million. Mr Lucas: There is very little that can be done Have you noticed any reduction in the level of public individually to encourage recycling. I think the best sector construction projects arising from this? way to promote this is through procurement Mr Lucas: No. I mentioned earlier that we have policies. The industry is beginning to look at issues actually had announcements about increasing the of best practice and of environmental management. enhancement of the public sector through the programme, but my earlier comments referred to the Q76 Mark Tami: Are you lobbying the fact that the “tax take” obviously will increase. That Government to say that they should do so in public will mean less in the capital budgets to address some sector projects? of the backlog in the infrastructure programmes. Mr Lucas: Oh, I beg your pardon. Yes, we have had a number of meetings with the recently established Q71 Mr Bailey: Is there not an element of Central Procurement Directorate and again the circulation here in that the £21 million goes out but procurement aspect of their policies on recycling has it could well be incorporated in the extra level of been one of the subjects that we have talked about spending? on a number of occasions. Mr Lucas: That is precisely the point. Q77 Mark Tami: So you would stress to them that Q72 Reverend Smyth: We are living in an age of they should say X% from recycled material? recycling, the Government and local authorities are Mr Lucas: That is right. encouraging people to recycle, but is it not a fact that in procurement policies the Government rarely, if at all, encourages recycling in the construction Q78 Mark Tami: Is that falling on deaf ears? industry? Mr Lucas: No, it is not. It has been welcomed. It is Mr Lucas: In Northern Ireland I would endorse that an issue that has to be developed and explored 100%. If you look at most of the large industrial further, but I have to say that the Procurement cities in Great Britain, Leeds, Manchester, Directorate have been most willing to listen to what Liverpool, there are lots of opportunities for we have to say to them. recycling, knocking down old buildings, recycling products. Northern Ireland is essentially a rural Q79 Mark Tami: The Government requires major economy, an agriculture based economy. Belfast public sector projects to certify that they do comply and Londonderry would probably be the largest of with the levy. Do you think this should be widened the developed cities and there simply are not enough out to all non-government projects and how would opportunities and recycled material to make this an you see that operating? eVective policy. Mr Lucas: If we could achieve that then it would obviously level the playing field. I think in the Q73 Reverend Smyth: Is it not equally true that private sector it would be very diYcult to apply that there is a place for changing the specifications in without actually having some kind of a compliance some cases to allow that which is available to be oYcer inspecting every single scheme which in used? reality would not happen. 9437108003 Page Type [E] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Ev 50 Northern Ireland Committee: Evidence

16 September 2003 Mr Nigel Lucas

Q80 Mr Swire: We heard earlier from the Quarry Q82 Chairman: So you are leaving it to them to Products Association how they had had discussions make the case but you are right behind them, is back in August with Customs and Excise and the that correct? Department of Finance and Personnel and with the Mr Lucas: Yes, that is correct. EU Commission in July. You say in your submission that the aggregates levy fails to meet the test of good Q83 Chairman: Do you agree with their alternative taxation which is clearly set out in the Treasury proposals? Statement of Intent. What discussions have you had Mr Lucas: We do. with Government regarding the impact of the levy in Northern Ireland? Mr Lucas: The Construction Employers’ Federation Q84 Chairman: But you have not examined them has not had detailed discussions with the Treasury. critically. I am not trying to put words in your We have actually left it to our colleagues in QPANI mouth. What you are actually saying is there is much to pursue this activity albeit that we support them. more of a problem for them than for you, is it not? Mr Lucas: That is correct, yes. We have had joint Q81 Mr Swire: Why? discussions with them and we are agreed that they Mr Lucas: Because it has a more direct eVect on the would take the case forward. employment prospects in their own economic businesses than it would do on mainstream Q85 Mr Swire: And they are happy with that? construction. At the end of the day in mainstream Mr Lucas: Yes, they are. construction, in contracting or in private sector Chairman: Thank you very much indeed, Mr Lucas. housing development, the eVect of the tax is the same It has been a very helpful session. As you know, we as the introduction of any other tax, it is a ﬁnancial are going to take more evidence. We are going to burden which will have to be absorbed or passed on, ﬁnish up seeing the Economic Secretary to the whereas this tax has a much more direct and Treasury again and we will report in due course. devastating eVect on the QPA sector. Thank you very much indeed. 9437101019 Page Type [O] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Northern Ireland Committee: Evidence Ev 51

Wednesday 5 November 2003

Members present:

Mr Michael Mates, in the Chair

Mr Adrian Bailey Mr Stephen Pound Mr Harry Barnes The Reverend Martin Smyth Mr Roy Beggs Mr Hugo Swire Mr Tony Clarke Mark Tami Mr Iain Luke Mr Bill Tynan

Memorandum submitted by HM Treasury and HM Customs

ASSURANCE OF AGGREGATES LEVY IN NORTHERN IRELAND

Background 1. Aggregates levy is an environmental tax on the commercial exploitation in the UK of virgin aggregate (rock, sand and gravel) and was introduced across the UK on 1 April 2002 at a rate of £1.60 per tonne (this rate remained unchanged in Budget 2003). The objective of the levy, in line with the Government’s statement of intent on environmental taxation, is to address the environmental costs associated with quarrying operations (noise, dust, visual intrusion, loss of amenity and damage to biodiversity) and reduce the demand for virgin aggregate, encouraging the use of re-cycled and alternative materials (such as recycled construction and demolition waste). 2. The levy was designed following extensive consultation with the industry over a period of nearly four years. It is a specific, one stage, nondeductible tax and its administration mirrors, as far as possible, landfill tax and climate change Ievy regimes. Anybody who commercially exploits aggregate in the UK is liable to register and account for the levy to Customs and Excise. Exports of aggregate from the UK are relieved and imported aggregates taxed on first sale or use in the UK. 3. There is a range of exemptions for other quarried or mined products such as coal, clay, metal ores, industrial minerals, etc and for limestone used in the production of lime or cement. Blocks of dimension stone or building stone, and any rock, sand or gravel used in a prescribed industrial or agricultural process (ie a non-aggregate use), are relieved from the levy. Recycled aggregate previously used for construction purposes is not taxed. Many materials are also exempt because they are by-products of other processes, provide useful alternatives to virgin aggregates and their use is encouraged by the Government’s Mineral Planning policies. Examples include colliery spoil, slate waste, china clay waste and metallurgical slags. 4. As the aggregate content of processed products (concrete blocks, concrete pipes, ready mix concrete and coated roadstone) imported from the Republic of Ireland is not taxable and aggregate in such products exported to the Republic is, there was a risk that products from the Republic could undercut those manufactured in Northern Ireland. Recognising the need for special consideration to be given to processed product manufacturers in Northern Ireland, the Government introduced relief on aggregate used in processed products from the start of the levy (following EU State aid clearance) to allow the industry five years to adjust to the eVects of the levy. This relief applied at 100% in 2002–03, is currently 80%, and will apply at 60%, 40% and 20% for the next three financial years respectively. It is due to come to an end on 31 March 2007. Virgin aggregate that is not used for processing is liable to the full rate of aggregates levy.

Impact of Aggregates Levy in Northern Ireland 5. There are a number of threats to the aggregates levy yield which can potentially undermine the legitimate aggregates industry: (a) Users of aggregate may import their own aggregate from the Republic of Ireland and not account for aggregates levy when they use it (crossing the Republic of Ireland/Northern Ireland border does not create a charge to tax, but the aggregate becomes taxable when sold or used in Northern Ireland). (b) Users may buy aggregate that has been imported from the Republic (with no levy being paid at point of sale) and not account for the levy when they use it. 9437101019 Page Type [E] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Ev 52 Northern Ireland Committee: Evidence

(c) Quarry operators may fail to register with Customs for the levy and supply aggregates without accounting for it. Such operators may also be in breach of environmental regulations. (d) Users of aggregate may buy aggregate from such quarry operators and fail to account for the levy when they use it. (e) Quarry operators may falsely claim reliefs to which they are not entitled (eg by mis-describing aggregates as materials to which aggregates levy does not apply; by claiming that some aggregate has been put to a use that is relieved from the levy; or by accounting for some sales to businesses as exports). (f) Quarry operators may suppress a proportion of their sales by diverting material around the weighbridge. Although only the ﬁrst two threats are unique to Northern Ireland, there is nevertheless some evidence that in practice the risks from some of the other threats are greater in Northern Ireland than in Great Britain.

Action by Customs and Excise

6. Action is on two fronts: examining policy options and responding to the operational risks. On both fronts, Customs have held discussions with the industry to obtain a clearer view of their concerns. 7. On the policy front, Customs are exploring with the industry possibilities for a wider, longer lasting relief in exchange for a commitment from the industry to sign up to a package of environmental improvement measures. Ministers have given an undertaking to the Northern Ireland aggregates industry that it will consider the industry’s detailed proposals. Any scheme would need to be consistent with the environmental objectives of the tax but in reaching its decisions, the Government will also take account the views of industry, the Committee and others on other factors, such as the overall impact on the economy, the eVect on employment and the practicalities of operating the scheme both for the industry and Customs. To help assess whether such an extended relief scheme is justified, and to obtain data about the impact of the levy to date and the potential for recycling of aggregates in the province, Customs have commissioned further specific research, with the full co-operation of the aggregates/construction industries. The study is expected to report in the autumn. 8. Customs are addressing the operational risks in a number of ways and have increased the resources available for levy work in the province. The Department is also currently considering enhancing intelligence gathering to support and better target its assurance activity. On specific operational issues, Customs: — have established links with the Revenue Commissioners in the Republic of Ireland to support cross-border co-operation on aggregates sales and evasion of aggregates levy and VAT in Northern Ireland, and of VAT in the Republic; — have arranged publicity in the trade press in Northern Ireland and more is planned. This highlights that using aggregate on which the levy has not been paid is not someone else’s problem. End users could have to register and account for the levy; — have arranged for information exchange between the planning authorities in Northern Ireland and our local staV there and are currently in further discussion with the planning authorities to assess whether there is anything more that can be done bilaterally to restrict operations that are not licensed with these authorities; — have completed a programme of visits to about 140 construction sites close to the border with the Republic. Four registrations were secured as a result. The levy liability from those four businesses currently stands at £40,000. Under phase two of this exercise, Customs plan to conduct fewer but more in-depth visits, starting in October, when new staV will have completed their training; and — are addressing the risk that quarry operators may falsely claim reliefs to which they are not entitled through a UK-wide exercise (also due to begin in October) aimed at users of aggregate who are completing certificates where the aggregate they are using is being put to a use which is relieved from the levy.

Conclusion

9. The Customs Minister, the Economic Secretary John Healey MP, will be providing oral evidence on 5 November and the Committee may wish to discuss issues raised in this paper with the Minister at that time. 12 September 2003 9437101020 Page Type [O] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Northern Ireland Committee: Evidence Ev 53

Supplementary memorandum submitted by HM Customs and Excise

ASSURANCE OF AGGREGATES LEVY IN NORTHERN IRELAND Customs and Excise submitted a memorandum to the Committee on 12 September about the assurance of the aggregates levy in Northern Ireland. The Committee has asked a number of follow up questions which are addressed in turn in this supplementary memorandum. Each question posed by the Committee is set out in full in italic sub-headings, with Customs’ response following on directly from it.

1. The basis of the threat and any evidence in support of each of the items a to e listed in paragraph 5 of your memorandum The items listed in paragraph 5 of our memorandum are included because we have anecdotal evidence that the legitimate aggregates industry is losing business to unscrupulous operators (whether quarries or construction businesses) who are evading the levy. The list 5 simply covers the main means by which such evasion could be eVected.

2. An assessment of the scale of the problem and the associated cost to both the Exchequer and the industry of the introduction of the Aggregates Levy in each of the ﬁnancial years 2002–03 to 2007–08 or if this is not possible an explanation as to why For a number of reasons it is not possible to quantify, or forecast, the revenue loss or cost to the industry in such precise terms. We do not have a separate revenue forecast for aggregates levy in Northern Ireland because some of the aggregate extracted there will be accounted for on returns sent from businesses based wholly in NI, while the remainder is consolidated into returns that are sent from businesses based in Great Britain. (It is also possible that some aggregate extracted in Great Britain is being consolidated into returns sent from Northern Ireland.) However, the cost to the Exchequer of the current relief scheme in Northern Ireland was published at the time the relief was introduced and was estimated to be £10 million in 2002–03, falling to £5 million in 2004–05. In 2002–03 the levy raised £247 million across the UK (Financial Statistics, August 2003), and is forecast to raise £0.3 billion across the UK in 2003–04 (see Table C8 in Financial Statement and Budget Report 2003). All the revenue raised by the levy is recycled back to business, primarily through a 0.1 percentage point cut in employer national insurance contributions introduced at the same time as the levy. Revenue from the levy is also being used for the new Sustainability Fund which will, among other things, deliver environmental beneﬁts to local communities aVected by quarrying. The cost to the industry is even more diYcult to ascertain year-by-year, as investment decisions are made looking over the medium term. We are aware, for instance, of some businesses that made structural changes between the announcement of the levy and its introduction. In addition, if a particular business were to close, citing the levy for its failure, this could well mask the fact that there were other factors at work. DiVerent parts of the industry could be aVected in diVerent ways: some negatively and some positively. We will continue to monitor and evaluate the impact the levy has on Northern Ireland (as well as Great Britain). For Northern Ireland, the information from the Symonds’ Report (see question 5 below) will be key to improving the quality of the data we have. This should make us better placed to evaluate the impact of the levy in the Province.

3. Details of the options available for extending the relief on the levy in exchange for environmental improvement measures, and any consequences at a European level; including the extent of the environmental improvements sought Paragraph 48 of the Commission’s state aid environmental guidelines acknowledges that provision may need to be made to exempt certain firms temporarily from new environmental taxes, because of the absence of harmonisation at European level or because of the temporary risk of a loss of international competitiveness. Where a decision to introduce a tax is autonomous, action to allow firms that may have diYculty in adapting rapidly to the new tax burden is permitted. This may justify a temporary exemption enabling certain firms to adapt to the new situation. The tax measures in question should make a significant contribution to protecting the environment and the exemption must not undermine the general objectives pursued. The guidelines for environmental aid allow provision for exemptions from autonomous taxes to be: — at a flat rate for a 10-year period—if tied to negotiated agreements (paragraph 51(1)(a) of Community guidelines); — for 10 years without a negotiated agreement if the firms still pay a significant proportion of the national tax (paragraph 51(1)(b) of Community guidelines); 9437101020 Page Type [E] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Ev 54 Northern Ireland Committee: Evidence

— for five years where the aid reduces over time. The relief can be 100% in the first year but must fall in a linear fashion to zero by the end of the fifth year (paragraph 45 of Commission guidelines); or — for five years without a negotiated agreement and no reduction over time, if the aid is limited less 50% of the additional costs (paragraph 46 of Commission guidelines). The aggregates industry has proposed that a scheme under the first bullet should be sought, but we should emphasise that Treasury Ministers have given no commitment at this stage that a State aid application will be sought. Under such a scheme, beneficiaries would be required to sign agreements, committing them to make significant quantifiable and measurable improvements in environmental performance over the term of the relief over and above those that would be achieved in the normal course of events. The agreements for environmental improvements would ensure that the relief scheme would remain consistent with the aims and objectives of the aggregates levy. As part of the process of examining the QPANI’s proposals, the Government commissioned extensive research to help inform the setting of targets for environmental performance, particularly with regard to increased use of alternative and recycled aggregate materials. The Department of the Environment Northern Ireland has recently consulted on possible environmental improvement measures and their findings would be important in formulating a package that would be put to the industry and the European Commission for agreement. No decisions have yet been taken and it is therefore not possible to provide the Committee with details of the environmental improvements that would be required should an extended scheme be sought.

4. How this will address the problem of processed products from the Republic of Ireland undercutting processed product produced in Northern Ireland after relief ends

We will continue to monitor the position carefully during the life of the current relief scheme or, if appropriate, any extended relief scheme, to assess the impact that the levy is having, both generally and speciﬁcally on the issue of processed products from the Republic undercutting those in Northern Ireland. The work of the Symonds’ Report (see question 5 below) will provide a useful starting point. The position after the relief ends will be inﬂuenced by numerous factors and it is not possible to anticipate at this stage what view the Government will take in 2007, if the relief is not extended, or subsequently if it is.

5. Details of the scope of the further speciﬁc research you have commissioned and from whom, along with a copy of the research as soon as it is available

We commissioned a report from the Symonds’ Group in late May 2003 with the aim of: — ﬁlling in certain important information gaps on the production and use of primary, secondary and recycled aggregates in Northern Ireland; and — using the information obtained to assess the current and potential future eVects of the aggregates levy there. The Symonds’ Report is not yet ﬁnalised but I will ensure that a copy is sent to the Committee after it is.

6. A fuller explanation of the measures outlined in paragraph 8 of your memorandum, giving details of how each measure is to be implemented and of those enforcement agencies directly involved in each case — We are working with the Revenue Commissioners of the Republic of Ireland to exchange information so as to identify where aggregates levy and VAT are not being properly accounted for in Northern Ireland or VAT is not being properly accounted for in the Republic of Ireland. — Initial publicity is aimed at changing the mindset among purchasers of aggregate, many of whom think it is someone else’s problem. We want them to understand that they are liable for the levy if they use aggregate on which the levy has not been paid. We hope to follow this with publicity about actual cases where people have been forcibly registered, assessed for signiﬁcant amounts of levy or prosecuted. — We aim to secure a Memorandum of Understanding (MoU) with the planning authorities, so as to speed up exchange of information. — We have established links with Revenue Commissioners of the Republic of Ireland (as above), the Department of Environment Northern Ireland (for the above MoU), and Roads Service (to ensure certiﬁcates of aggregates levy paid are obtained for public sector contracts, leading to similar undertakings for contracts let by the Water Service, Health Estates Agency, Northern Ireland 9437101020 Page Type [O] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Northern Ireland Committee: Evidence Ev 55

Housing Executive and the Construction Service). In addition, our oYce in Northern Ireland can now deal directly with other departments or agencies that deal in aggregate to obtain contact information. This both allows us to give quick and appropriate advice to the right people and also enables us to address queries to the appropriate purchasing oYce (some departments have purchasing sections on a regional basis). — There is no further information that we could usefully give in relation to the exercises, save to say that the liability from the four registrations referred to in the previous memorandum now stands at £57,000. 28 October 2003

Supplementary memorandum submitted by HM Customs and Excise

ASSURANCE OF AGGREGATES LEVY IN NORTHERN IRELAND Customs and Excise submitted a memorandum to the Committee on 12 September about the assurance of the aggregates levy in Northern Ireland. The Committee asked a number of follow up questions which were addressed in a supplementary memorandum submitted on 28 October. The Committee subsequently asked for further information, as follows: — details of the membership and background of the Symonds Group; — their full terms of reference; — some background on the reasons behind this particular choice; and — an indication of when the research will be available.

Membership/Background of the Symonds Group

The Symonds Group Limited is an industry leader in providing consultancy, management and design services. They are an independently owned and operated company with an annual fee turnover in excess of £40 million. It has over 850 employees working directly for the company. Further information is available from Symonds website: www.symonds-group.com

Terms of Reference

The Government announced in Budget 2003 that it was continuing to review the impact of the phasing- in of the levy in Northern Ireland (paragraph 7.58 of the Budget report). The Economic Secretary asked Customs to commission some speciﬁc research which, in view of their experience, the Symonds Group were selected to undertake. Agreement between Customs and Symonds on the scope and nature of the Symonds study was reached in May. It was agreed that the study would focus on: — total demand for aggregates in Northern Ireland, for example, how it is broken down by “use”, how it is met by primary, secondary and recycled aggregates; and — the potential for using non-traditional (secondary and recycled) materials as substitutes for primary quarried aggregate in Northern Ireland. It was agreed that the study would distinguish between potential uses in manufactured products (eg concrete, coated roadstone and surface dressing) and “lower grade” uses (eg as ﬁll material and in unbound applications).

Reasons for Choosing Symonds Group

Symonds Group are specialist consultants in the quarrying and construction sectors. Customs received very favourable recommendations on their work from the Waste and Resources Action Programme (Aggregates) and the OYce of the Deputy Prime Minister, who have engaged them for similar work on a number of occasions. Examples of their recent work are set out in the Annex to this memorandum. 9437101021 Page Type [E] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

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Availability of Research It was agreed that Symonds Group would work closely, as they have done, with the industry in Northern Ireland in conducting their research. The Symonds Group’s report is currently being ﬁnalised. It will be sent to the Committee when completed. 30 October 2003

Annex

EXAMPLES OF SYMONDS’ RECENT WORK In reverse chronological order: — The Sustainable Use of High Specification Aggregates (OYce of the Deputy Prime Minister) (2003) — The Impact of Planning Controls on the Use of Secondary and Recycled Aggregates (DTI/WRAP) (2002–03) — Planning for the Supply of Building and Roofing Materials. (OYce of the Deputy Prime Minister) (2002–03) — 2001–02 Survey of Secondary Materials used as Aggregates (OYce of the Deputy Prime Minister) (2002) — 2001–02 Survey of Construction and Demolition Waste (OYce of the Deputy Prime Minister) (2002) — Comparative Environmental Assessment of Land and Marine Sand and Gravel (Welsh Assembly Government) (2001–02) — Appraisal of Land-Based Sand and Gravel Resources in SE Wales (National Assembly for Wales) (2000–01) — 1999 Survey of Construction and Demolition Waste (Environment Agency and DETR) (1999) — Quinquennial Review of the Minerals, Land Instability and Waste Planning Research Programme, 1994–95 to 1998–99 (DETR) (1999) — Reducing The EVects of Surface Mineral Workings on the Water Environment (DETR) (1996–98) — Environmental Geology in Land Use Planning (DETR) (1996–98) — Aggregates Advisory Service: Trial Action Research Study (DETR) (1996–2000) — High Specification Aggregates for Road Surfacing Materials (DoE) (1992–93)

Witnesses: John Healey, a Member of the House, Economic Secretary, HM Treasury; and Kris Romanski, Head of Environmental Tax Development, HM Customs & Excise, examined.

Q86 Chairman: Minister, thank you very much for Northern Ireland Executive in September of last coming, as your predecessor did, to help us over this year that I would consider seriously any proposals rather knotty problem of the Aggregates Levy and put forward by the industry in Northern Ireland for its eVect in Northern Ireland. I gather you would like reforming further the Aggregates Levy in Northern to make a short opening statement. Ireland. I received those in March this year. In May John Healey: Mr Mates, if I may, and, with the short I had Customs commission an independent team of indulgence of the Committee, introduce Kris experts, the Symond’s Group, to gather the detailed Romanski who is Head of this part of environmental data, evidence and analysis that we still had not tax policy at Customs whom I think the Committee assembled from the material that the industry had has met before. Can I say thank you for the produced. That report is being finalised for invitation to come and give evidence. I welcome the completion now, but the main conclusions and the opportunity to do that and I welcome the timing of main findings are clear and I am certainly willing, this evidence session and this second inquiry that the Chairman, if the Committee wishes, to brief your Committee is mounting. The Committee obviously members on those main findings. Based on these, I will wish to explore questions with me that require wished at the outset, as I thought it might be helpful, answering from the other evidence, but from my to explain the position we have now reached which point of view it is an opportunity to update members is that, having listened, consulted and commissioned of the Committee first on the progress, particularly this research, the Symond’s evidence confirms that the progress since my undertaking to the former the specific circumstances in Northern Ireland mean 9437108004 Page Type [O] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

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5 November 2003 John Healey and Kris Romanski that we are unlikely to meet the environmental aims John Healey: Quite. of the Levy—to increase the use of recycled or alternative materials to primary aggregate and also Q88 Chairman: So if that is convenient to you, that to reduce the environmental impact of quarrying. is what I would like to do now. Now we have, therefore, turned our attention to John Healey: Of course, Chairman, I am entirely in options for further reform and relief of the Levy in your hands, although I should say that I have always Northern Ireland, although of course final decisions been clear that I am prepared to consider proposals will be taken in the context of the Pre-Budget Report put forward by the industry and having had the and the Budget. Our main concern is to meet the evidence and analysis that I think we now need, that environmental aims of the policy which is the is what I am doing. purpose of the Levy itself. My main caveat is that Chairman: Sure, and it is all very welcome and we can talk about it rather more constructively than we any plans that we put in place for further reform might have done had there been no change in your would need state aids clearance from the European position. Commission. Now, the Northern Ireland industry, as the Committee knows, has suggested detailed The Committee suspended between 4.36 pm and 4.58 options. At the heart of these is the proposal that the pm for a division in the House industry agree to deliver environmental gains—the environmental gains that the Government wants to Q89 Chairman: Minister, I wish to make a short see. In fact, as it happens, negotiated agreements statement. We announced this second inquiry into rather than a levy was originally our first preference the Aggregates Levy in Northern Ireland because it policy, but at the time, three or four years ago, the was clear to us that the Levy was not achieving its industry were not prepared to make agreements environmental aims in Northern Ireland or enabling which would deliver suYcient environmental the eVective regulation of the industry so that it benefits, hence we introduced the Levy in April 2002 could continue to survive and prosper. We were instead. So as the Chancellor and I consider the concerned and alarmed at reports of the Levy’s options in the run-up now to the Pre-Budget Report, eVects in Northern Ireland and, therefore, had a I see the onus now on the industry because their series of questions about its eVects which we degree of commitment to an approach based on intended to put to you. Given your frank negotiated agreements will be decisive. The strength acknowledgement that some of the Levy’s stated of any agreements to achieve the environmental aims are not being achieved and that you are looking at the Levy again with a view to alleviating the gains that we need to see is also likely to be decisive V in the view that the European Commission takes negative e ects it has produced in Northern Ireland, we have decided that we wish only to say this: first, over any future question of state aids clearance. we are delighted with the news you have given us; That, Chairman, is the current position and I wanted and, second, we wish to encourage you warmly to the opportunity, which I am grateful for, first to be proceed with negotiations with the industry and the able to brief the Committee on that. European Commission as constructively and as quickly as possible and we have, therefore, decided to suspend this inquiry until the Government is in a position to make a substantive announcement and we understand the reasons why you cannot do that Q87 Chairman: Well, we are very grateful to you for now. We would urge strongly all of those concerned making that statement and I am sure all concerned with the Levy both within Northern Ireland and in Great Britain, those in the aggregates industry and will be grateful to know that the Treasury’s mind is V not closed as it appeared to be a year ago. Now, what those concerned with the e ects of the Levy, to co- you have said has some very important ramifications operate fully with the Government to find a way to ensure that the environmental and other aims are and, in particular, reflects on the questions we were met. Therefore, we have cancelled the questions we going to put to you because we were going to put were going to ask you and unless you want to say questions to you on the basis that there was to be no anything else to us, I propose to suspend this sitting. change in government policy in the light of some of John Healey: Chairman, just simply can I welcome the facts which have been discovered. We have a the Committee’s decision and welcome in particular problem in that we are voting in about ten minutes’ your statement. Can I say that I look forward to the time. If it is convenient to you, what I would like to role that I think the Committee will be able to play do is to suspend the Committee now and resume in resuming your inquiry after the substantive after the vote which will give the Committee ten announcement that we may be able to make at the minutes or so to digest what you have just said and Pre-Budget Report and if the Committee wishes, decide how we would like to proceed because we then I look forward also to returning to give obviously do not want to plough through a whole set evidence in due course. of prepared questions for a changed situation. Chairman: Mr Healey, thank you very much. 9437101022 Page Type [E] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

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Wednesday 25 February 2004

Members present:

Mr Michael Mates, in the Chair

Mr Adrian Bailey Mr Stephen Pound Mr Harry Barnes The Reverend Martin Smyth Mr Roy Beggs Mr Hugo Swire Mr Tony Clarke Mark Tami Mr Bill Tynan

Memorandum by HM Customs and Excise

NORTHERN IRELAND AGGREGATES LEVY RELIEF SCHEME Further to the Chancellor’s Pre-Budget Report announcement about the proposed extension of the current aggregates levy relief scheme in Northern Ireland, the Northern Ireland AVairs Committee requested, in the Clerk’s letter of 12 December 2003, full details of the scheme and how it would diVer from current policy. The questions the Committee asked are covered in turn in this memorandum. Each question posed by the Committee is set out in full in italic sub-headings, with the Government’s response following.

1. What is the state of play regarding state aid and the EU? The tax relief which the Government intends to make available to quarry operators in Northern Ireland under the new scheme is a form of State aid and, therefore, in accordance with European Treaty obligations, the UK must obtain European Commission approval before implementing the scheme. To implement the scheme without this approval would almost certainly result in the Commission taking Infraction proceedings against the UK. The Government’s State aid application was submitted to the European Commission on 5 January 2004.

2. When exactly will the new proposals come into eVect in 2004? The Government aims to implement the new scheme on 1 April 2004, subject to EU State aid approval having been received by this date. This date would be when relief under the current scheme falls from 80% to 60%; as the Government’s intention under the new proposals is, among other things, to ﬁx the rate of relief at 80% until 2012, it is desirable that the new scheme is introduced by 1 April 2004. The Commission have three months from the date of receipt in which to consider State aid applications. However, if, during that period, the Commission asks questions of the applicant Member State about the detail of their application, the 3 month “clock” is stopped and reset upon receipt of answers to those questions from the Member State. The Commission might also invoke the procedure for inviting interested parties to submit comments, as provided for by Article 88(2) of the Treaty establishing the European Community; this procedure can take 12 months or more to complete. The Government therefore acknowledges that the target date is ambitious but not impossible to achieve. The Government will do all it can to ensure that this date is achieved. However, if State aid approval has not been granted by 1 April 2004, the current relief scheme will continue to operate until such time as the necessary approval is received from the Commission. This means that the current relief would fall to 60% from 1 April 2004 but would be increased back to 80% following State aid approval.

3. Details of the new stringent environmental improvements that will be required and how exactly compliance will be monitored and/or measured This information is contained in the Code of Practice and Compliance Scheme public consultation document, summarised at Annex A. 9437101022 Page Type [O] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

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4. How enforcement is to be stepped up and the resource implications this will have for Customs and Excise Customs and Excise have allocated three additional enforcement staV and redirected staV engaged in the assurance of other environmental taxes to focus on the issue of aggregates levy evasion. Customs have, in eVect, increased their capacity for aggregates levy assurance in Northern Ireland from three to seven since 1 April 2003, with the new staV trained and fully operational from November 2003. A further increase is planned for 2004–05 but details are still being ﬁnalised. Customs’ priority is to register those who commercially exploit aggregate without properly accounting for it and to assess for levy due. This relates both to those who extract and sell aggregate at unregistered quarries and those who use aggregate from such quarries or import it from the Republic of Ireland. An exercise completed by Customs in early 2003, which targeted users of aggregate in the construction industry, gave rise to 4 new registrations, with the extra revenue raised from them currently standing at around £100,000. Customs are now planning a second phase of more in-depth visits to construction businesses (including some of those visited in the ﬁrst phase). In support of this, Customs are in the process of agreeing a system of exchange of information with the Revenue Commissioners in the Republic of Ireland to identify where aggregates levy and VAT are not being properly accounted for in Northern Ireland, or where VAT is not being properly accounted for in the Republic. Customs also began visits to around 40 unregistered quarry operations in November 2003. This visit programme will be completed by the end of January 2004. To date, Customs have visited most of these sites, resulting in three new registrations; follow up action is being taken in respect of a further twelve sites, so more registrations are expected in the near future. In respect of the remainder, either registration action is not appropriate or more information is needed. Further action is being considered for these, mainly small, sites.

Information Gathering Customs oYcers working in other disciplines in Northern Ireland (around 60 law enforcement oYcers) have been briefed to gather information relevant to the levy. For example, when oYcers undertake oils checks on lorries carrying aggregates, they note vehicle details and question the drivers about the source and destination of loads. They also note details of quarrying activity when a site does not appear to be permanent (it may have limited signs of identiﬁcation or poor access roads) or there are any other indications that it might not be registered for the levy. This information is fed back and used by aggregates levy assurance oYcers. Customs are also working on a system to make eVective use of VAT visits to relevant businesses trading in, transporting or using aggregates.

Action Across Government (Purchasing) About 60% of construction work in Northern Ireland relates to the public sector, which equates to around 13 million tonnes of the 21 million tonnes or so of aggregate quarried there. So, ensuring that all aggregate purchased by Government departments and agencies in Northern Ireland is from a levy-paid source would significantly reduce the scope for exploitation of aggregate without payment of the levy. Customs have held discussions with the Northern Ireland Roads Service about aggregate used in their contracts, following which they put in place measures, in the form of a certification system, to ensure that only levy-paid aggregate is used. The Water Service, the Health Estates Agency, the Housing Executive and the Construction Service in Northern Ireland also intend to operate a similar certification process for their contracts. Contractors and suppliers who do not fulfil their obligations relating to the levy or other taxes may be ruled ineligible to tender for future contracts under Public Procurement Regulations. Customs are following this through to ensure that all Government, whether national, devolved or local, purchasers of aggregate in Northern Ireland have measures in place to ensure that only levy-paid aggregate is appropriated to their contracts and that this is enforced all the way down through each organisation. Customs have arranged a high level conference in early February 2004 for around 70 Government purchasing organisations in Northern Ireland. The goal is to ensure that, by 31 March 2004, aggregates levy is properly accounted for in relation to existing public sector purchasing contracts and that all aggregate purchased in Northern Ireland under new contracts is from a verified levy-paid source.

Action Across Government (Enforcement Agencies) A particular feature of environmental taxes is that those who evade them sometimes also breach other environmental regulations at the same time. So, for example, unregistered quarry businesses may also be extracting aggregate without planning permission. This means that the best results are often obtained by Government agencies acting in concert to ensure that businesses seek proper authorisation or are closed down. 9437101022 Page Type [E] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

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Customs have put in place a Memorandum of Understanding (MoU) with the Department of the Environment in Northern Ireland (DoENI) in relation to planning permissions for mineral extraction. Under the MoU, Customs and DoENI have agreed to exchange information, quarterly or on request, about quarries that may be operating without proper planning permission and without registering for the levy. They have also agreed to inform each other of planned action against unauthorised sites, and the timetable for such action, in order that this may be co-ordinated. In addition, Customs already inform the DoENI about details of registration applications for the levy. Aside from Customs, bodies within the DoENI carry out most other enforcement functions relating to the supply of aggregate. The Health and Safety Executive for Northern Ireland has responsibility for the Health and Safety Quarry Inspectorate, and the Police Service of Northern Ireland for the control of explosives. Customs have arranged a second conference in early February 2004 with these bodies, with a view to co-ordinating enforcement action against those who are operating quarries or sand and gravel pits without proper authorisation. The overall aims of the conference are to share information about the roles of each organisation and to identify opportunities for co-ordinated and eVective enforcement action.

5. What will happen to those organisations who either cannot or will not sign up to the new environmental measures? Businesses which choose not to adopt the new scheme will not receive relief and will be liable to pay the full rate of levy. This policy provides a strong incentive for all quarrying businesses to join the scheme and reﬂects the importance the Government places on encouraging quarrying businesses in Northern Ireland to improve their environmental performance. However, the Government acknowledges that some operators may consider that the costs of improving the environmental performance of their quarry outweigh the advantages of tax relief; that is a commercial assessment that only those businesses should have the scope to make. The Government therefore does not plan to make adoption of the new Northern Ireland levy relief scheme compulsory. The levy remains an eVective mechanism for internalising the negative environmental costs of the price of aggregate and therefore, even though some businesses may choose not to join the scheme, the cost to them and to the consumers of the aggregate they produce will reﬂect associated environmental costs.

6. The implications for (a) HMCE and (b) the quarrying and construction industries of operating two separate and substantially diVerent relief schemes in Northern Ireland The Government’s intention is to replace the present scheme with the new scheme, not to run two schemes in parallel. The Government has accepted Quarry Products Association Northern Ireland and British Aggregates Association claims that the current scheme oVers insuYcient time and protection to processed product businesses which are adapting to the new market conditions brought about by the levy and no protection to businesses that deal solely in unprocessed virgin aggregate. Moreover, the Government has concluded that the current scheme will not allow the levy to achieve its environmental aims in Northern Ireland. Therefore, it would not be appropriate to continue to run the current scheme alongside the new scheme. 13 January 2004

Annex A

SUMMARY OF CODE OF PRACTICE AND COMPLIANCE SCHEME The Code of Practice and Compliance Scheme (COPCS) for the quarry industry in Northern Ireland comprises a robust code of environmental practice, addressing key areas of environmental risk and, through the compliance scheme, measures to be taken to ensure the sound management and improvement of environmental performance. In addition to addressing the current regulatory requirements in Northern Ireland, the COPCS incorporates a range of environmental issues to deliver further benefits. A compliance framework has been established to enable the Department of Environment Northern Ireland to monitor and assess the performance of individual operators through a schedule of environmental audits. Operators who contract to join the Compliance Scheme will, in return for (a) initial compliance with a set of environmental standards and (b) a commitment to continuous improvement with specific targets, receive 80% relief from the aggregates levy. Initial compliance and continuing improvement will be achieved by a rolling programme of audit and mitigation. Primary audits, by the Department of Environment Northern Ireland or its agent, will establish the current level of environmental risk at each quarry site. Where appropriate, mitigation notices will be issued, identifying risks or adverse environmental impacts which are unacceptable and the period of time allotted to make the necessary improvements. A further mitigation audit will then establish whether the necessary steps to ameliorate the risks or impacts have been satisfactorily completed. At this time certification of compliance will be granted or withheld. Operators will only be able to claim the relief from the levy when they have a valid certificate of compliance. 9437101022 Page Type [O] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

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Fifteen major environmental risks are categorised within the compliance framework, then subcategorised to address individual processes; these are: — Air quality — Archaeology and geodiversity — Biodiversity — Blasting — Community — Dust (excluding blast dust, which is covered by “blasting”) — Energy eYciency — Groundwater — Landscape and visual — Noise and vibration — Oil/chemical storage and handling — Restoration and aftercare — Surface waters — Transport (oV-site eVects) — Waste management. Each category is sub-categorised to deal with individual processes, for example oil and chemical storage and handling (a category recognised to have been the cause of around one-sixth of all pollution incidents in Northern Ireland). Within this category nine separate processes of storage and handling are examined and audits will require a high environmental standard in each sub-category to establish overall compliance. Annex 1 of the COPCS shows the proposed audit protocol, denoting the 15 categories, their sub categories, and setting out the standards required to meet compliance with the Code of Practice. The Department of Environment in Northern Ireland does not intend to be prescriptive or suggest exactly how mitigation measures will be carried out to reach the required environmental standard; each operator will decide how to address the risks in a manner best suited to the individual site. However, the Department of Environment in Northern Ireland will require a commitment to a high and continually improving standard of environmental management and will seek tangible evidence of such improvements before certifying compliance.

Witnesses: John Healey, a Member of the House, Economic Secretary to the Treasury, and Mr Kris Romanski, Head of Environmental Taxation Development, HM Customs & Excise, examined.

Q90 Chairman: Minister, thank you for coming back want answered, which we are due to go back to them to us. The last time you were here very briefly very shortly on. I have asked oYcials to try and because, as the Committee will recall, we adjourned follow that up with a face-to-face meeting with the because of the good news you brought us; we may Commission to see what we can do to accelerate detain you a little longer this time. Can we get two progress and the process of getting the State aid bits of good news in a row from the Treasury? Let us application clearance that we need. try. The new scheme which you said you aimed to implement on 1 April: leaving aside any delays that Q91 Chairman: When do you think that meeting may occur once the application has been received by may happen? Is it in diaries? the Commission, in order to ensure that State aid John Healey: It is not in dairies yet, but our next approval is in place by 1 April, the application formal step is to supply the Commission with the needed to be submitted by 1 January. It was not in information that they have formally asked for. We fact submitted until 5 January. As details of the will do that very shortly, and at the same time we will proposed new scheme were announced in the pre- be looking to fix a date in the diaries when the Budget statement on 10 December, why was this discussion that may sweep up any outstanding issues not possible? can take place. John Healey: I remain at the moment quite pleased with the progress we are making with the Q92 Chairman: Are you confident that the proposed Commission. The contact that we had with the extension will ultimately be accepted by the Commission did not start after the pre-Budget Commission? report’s confirmation of the policy change in the John Healey: It is a rash UK Minister that makes scheme that we were seeking to put in place. We had any confident predictions about the way the done a reasonable amount of groundwork in the Commission works or the speed at which it works, latter half of 2003 with the Commission, so they were but I believe, based on the initial conversations and prepared and well primed when we submitted our discussions we had last year, on the fact that we have 41-page State aid application and have subsequently a sound case, with good empirical evidence that we come back with a series of factual questions they can derive from the Symonds Report—and some 9437108005 Page Type [E] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

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25 February 2004 John Healey MP and Mr Kris Romanski from this Committee and other sources—we have processed products, which of course is diVerent to good evidence, a sound case and strong arguments the detail of the scheme that we are seeking for the and, on that basis, if the process is rational and fair, future, which would be an 80% relief on processed we should be set with a fair wind. products and on aggregates as well.

Q93 Chairman: Obviously, there has to be Q97 Chairman: That is fully understood, but the consultation with the other representatives of the craziest situation of all would be if you put it up to Member States. Speaking for myself, I can only see 60% on 1 April because you do not have final one other Member State that would want to have approval—which you will not get, let us face it. You any form of input, and that is the Irish. Did we talk are not expecting final approval by 1 April; nothing to the Irish government about it in the process of in the Commission moves at that speed. trying to assess with the Commission the likelihood John Healey: Expectations or confidence is a diYcult of success? call in dealing with the Commission but, as I said John Healey: We have had quite a lot of dealings earlier to the Committee, I think the quality of the with the Irish government in terms of the groundwork, the nature of the evidence, and the implementation and some of the enforcement issues strength of our case means that we are set fair and, that this Committee has also been very concerned all other things being equal, I am reasonably about, so the Irish government is pretty well versed confident that we should be able to clinch this. with the regime that we have introduced in the UK, with the current relief scheme in Northern Ireland Q98 Chairman: If you do it in time, that is fine, but and with the proposals that we are now looking to our concern is that if you do not, the bureaucracy try and put in place with this new relief scheme involved in moving it to 60% on 1 April and back to specifically for Northern Ireland. 80% some months later would make the whole thing completely crazy. Q94 Chairman: They have not given any signs of John Healey: It would be less than desirable. In a trying to block it in the Commission? sense, it underlines the reason that we are making John Healey: I have had no information or such eVorts at the moment to try and secure it. indication that they are likely to have a problem with it. Q99 Chairman: I understand all of that, but presumably, if you were to freeze it, the Commission Q95 Chairman: Mr Romanski, who is an old friend, cannot actually stop you doing it pending the final can reply about technical matters at any stage. Have answer, can they, any more than they were able to you been involved in the consultation with the Irish? stop you giving the derogation of the relief last year? Mr Romanski: No, but there has been no suggestion John Healey: We could only give the derogation of that the Irish government would want to intervene. the relief last year because we obtained specific legal clearance through the State aid application process Q96 Chairman: The other concern we have is the from the Commission. If we were to breach the terms delay that there will be in introducing the new of the scheme that they agreed and gave us the State scheme which might be caused by waiting for EU aid clearance upon, then I guess technically we State aid approval. As we understand it, the way you would be breaking the legal rules that the European agreed to a phased introduction was that there Commission set and that we as a Member State have would be only 20% imposed this year, going up signed up to, so we do not have that degree of annually, and therefore it is due to go up on 1 April. freedom of action or decision, regrettably, in these Are you still planning to do that? circumstances. John Healey: As you say, Mr Chairman, the design and the operation of the scheme, without any changes, will mean that on 1 April the 80% relief— Q100 Chairman: In that case, have you already made the 20% level—will be moved to 60% relief and a clear to the Commission that if they cannot get their 40% level. I quite understand the concern the act together—and I do not mean that pejoratively— Committee has, and it is shared by the Government by 1 April, you would want the figure frozen for the and the industry. We want to try and settle this very sensible reasons that you and I have just agreed? matter of State aid clearance for the new scheme as Is that a fallback position that you have sought to negotiate with the Commission? quickly as we can, and before, to allow us to have a John Healey: seamless transition, because the level of the relief To be quite frank, Chairman, I have that we are looking for under the new scheme is at not wanted to encourage the Commission to 80%, which is of course the current level. If we get an consider a timescale that might stretch beyond 1 indication that the State aid clearance will not be April at the moment, so our major focus has been on forthcoming in time, or will not be confirmed in the preparation of the case and in preparing the time, what I plan to do is to seek permission from the factual answers that the Commission now wants to Commission to freeze the current relief scheme as it four or five aspects of the decision they are going is at the moment, but I should be clear with the to take. Committee that that does have State aid implications of its own. It would require such a Q101 Chairman: You have not looked into what the decision from the Commission, and of course, it cost would be to the industry and to the Government would be a freezing of the 80% relief only on of collecting surplus levy and then refunding it? 9437108005 Page Type [O] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

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25 February 2004 John Healey MP and Mr Kris Romanski

John Healey: There would clearly be a degree of cost there is to import aggregate from the Republic of in complying with that, and that would be a very Ireland and illegally not pay tax on it. The undesirable and unnecessary administrative burden. assessment is that it would help with the current I do not have a ﬁgure, and I have not put a ﬁgure on problem in Northern Ireland and, on processed that. This is at the moment not the area of policy products, prevent it from getting worse, because work and analysis that we have given the most there is not a problem currently. attention to. Q105 Reverend Smyth: Exports from Northern Q102 Chairman: What are your options if the Ireland, as I understand, to the mainland will be Commission should reject the scheme? liable for the full levy of £1.60 a tonne. Are exports John Healey: In a sense, I think the more likely areas to the United Kingdom from other EU Member of discussion if the Commission do not feel that they States to be taxed in any way? can support in entirety the design of the new scheme Mr Romanski: Yes. Imports of virgin aggregate are that they might regard certain elements of what should bear tax when the aggregate is commercially we are proposing as less acceptable and they may not exploited in the United Kingdom. The aggregate in agree those. We have not been working on a imported processed products would not bear tax. contingency scheme if this were to go down the pan. Except in the case of the Republic of Ireland and the We would be left, clearly, with the current relief Northern Ireland border, there is actually very little scheme, that would remain extant and in operation, trade in processed products. It tends to be high- so that from 1 April, instead of the new design of quality, speciality materials, where the tax is not relief scheme that we believe is necessary for the really an issue when it comes to competition. These industry in Northern Ireland, we would be left with products are imported because that sort of product the current one. is not available in Great Britain and that is what people want. Tax is not in practice causing serious Q103 Chairman: You would be left also with all of distortions. There is no evidence that it has. the environmental problems which you had not considered before introducing this in Northern Q106 Reverend Smyth: So some of the concerns that Ireland, and you would be left with the fact that the have been expressed may not necessarily be worthy environmental improvements you are seeking have of much more consideration? not happened. Mr Romanski: I cannot put my hand on my heart John Healey: What we would be left with would be and say that there is nobody in Great Britain who is a relief scheme to try and recognise the particular being aVected, but certainly it is a very small-scale circumstances in Northern Ireland which in our problem. judgment, based on the evidence of the Symonds John Healey: Just to be clear, the concerns that have Report and indeed this Committee, would not be been expressed particularly from the industry, the meeting the environmental aims that we originally Quarry Products Association in Northern Ireland set out for the levy, would not be meeting the and BAA, about the situation in Northern Ireland environmental aims as the levy appears to be starting versus the UK mainland have been taken very to do in the rest of the UK, and we would therefore seriously, and what they want to see is what we put have to re-think how we try to make the levy operate in the application for, in other words, that for both in the particular circumstances in Northern Ireland processed products and for extracted aggregates, the in a way that would not have the economic impact special relief scheme would only apply to those that that, because the levy is in operation, we have been are extracted and used in Northern Ireland, so that able to assess and that it has become clear it has, and we do not run the risk of distorting the market within we would have a system that would not achieve the the UK mainland as well. environmental gains that we are looking for. Q107 Reverend Smyth: You did say that it was Q104 Reverend Smyth: I understand the concept of limited to Great Britain. Do I take it then that the environmental impact. What assessment have exports of virgin aggregates or processed products you made of the impact of the proposed scheme on from Northern Ireland to other EU Member States imports and exports of virgin aggregates or even would be levy-exempt? processed products? Has any assessment been made Mr Romanski: The virgin aggregates exported to of that? another Member State would be levy-exempt. The Mr Romanski: Yes. Implementing the proposed processed products exported would contain scheme should help. As far as processed products go, aggregate charged at 32p a tonne, because there is by keeping the relief at 80%—and I think that is the not any special relief for aggregate used in processed judgment both of the industry in Northern Ireland products. and ourselves—the 20% tax, 32p a tonne diVerential is not enough to cause serious problems and serious Q108 Mr Bailey: Can we just move to enforcement? incentives for imports from the Republic, or a You have introduced a number of measures serious disincentive for exports of processed designed to improve enforcement which would on products from Northern Ireland to the Republic of the face of it seem to be fairly robust. Can you clarify Ireland either. Equally, by reducing the tax and the for us which of these, if any, are new measures being tax diVerential on virgin aggregate used in its raw put in place or whether they are basically an state, it should help ease the current incentive that extension of the existing measures? 9437108005 Page Type [E] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

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25 February 2004 John Healey MP and Mr Kris Romanski

John Healey: In one sense all the measures we are John Healey: I think the imperative for much greater putting in place now are new, because they are cooperation and joint working is not changed by the measures that are designed to enforce what is a new nature of the relief scheme that is in place. All of our levy and a new system in Northern Ireland. The experience—short experience on the aggregates levy extra staYng that is being put in place is new. In the but much longer term experience, including in last year that has been increased from three to seven, Northern Ireland, on other regimes, whether it is and in the next financial year that is due to go up by drugs or fuel fraud or anything else in Customs—is another three. So our enforcement eVort and our that with agencies that historically have operated staV commitment to that will continue and will be separately, operated often with a rather diVerent increased as necessary, irrespective of the change in view of the world, conducting responsibilities and the relief scheme. The links that we have established remits that they do not regard as having any to produce the intelligence and cooperation with the connection with others, it takes some time to Republic of Ireland specifically on this and related overcome those sorts of cultural, organisational VAT issues is new. The publicity that we are putting barriers. I am pretty confident, Mr Bailey, that what through the trade press, particularly in Northern we have started here will mature, because that tends Ireland, aimed at the users of aggregates is new and to be the experience with this type of inter-agency is being stepped up. The memorandum of cooperation in other fields. understanding that Customs & Excise has with the Department of the Environment in Northern Q111 Mr Bailey: Assuming that the new Ireland for the information exchange both ways and enforcement scheme is up and running, say, by mid- also to enable much more joint enforcement action April, what sort of estimate of increased costs is new. The conferences that we have staged earlier would arise? this month, both on procurement for the public John Healey: I do not think the increased costs are authorities in Northern Ireland and also for the likely to be very significant. The increased resources agencies that have a potential role to play in helping that we are prepared to put into this as necessary I enforce the levy and other regulatory regimes have already given some indication of. They consist relating to quarrying, is new. The activities, the in the next financial year of another three full-time, operational activities of the enforcement teams, the dedicated, environmental taxation assurance 140 visits that have been made in recent months to oYcers just for Northern Ireland, bringing the construction sites near the border with the Republic strength to ten. What we will also see is the other law are new. The visits and the action taken in all 38 of enforcement oYcers that Customs operate, who the alleged illegal quarries identified by the QPA may be dealing with, say, oils fraud, increasingly Northern Ireland are new, and we have new picking up intelligence and information on the registrations, we have new tax that has been movements of aggregates that may help make sure identified as liable and due to the Exchequer that the levy is properly enforced. Also, our team of identified from that. VAT assurance oYcers, whilst the primary purpose of any visit to businesses will remain VAT assurance, are now better briefed and better attuned to some of Q109 Mr Bailey: It sounds impressive. What sort of the issues that may crop up over levy compliance, guarantees do you have that they will be any more and they, I think, will increasingly play a role as well successful than the old enforcement regime? in helping to reinforce the enforcement eVort and John Healey: There are two things I would hope compliance with the levy. might give the Committee more confidence. What I have indicated there is that we are stepping up the Q112 Mr Bailey: Obviously you have played down enforcement activity resources and commitment. potential increased costs, but have you any idea to We are doing that because we believe it is required. what extent Customs will have to pick up the tab, Secondly, if we are able to put in place the new relief and will it be from their existing budget? scheme that we propose, I think we can expect a John Healey: The short answer is yes, Customs will much greater incentive for quarries and other firms pick up the tab, as they should do, and it will be from in Northern Ireland to cooperate with the new relief within the existing settlement that Customs has scheme. What that should do is therefore reduce the overall. Next year is already a year that is set within incentive to operate illegally. It will therefore reduce the Spending Review system that we have the degree of unfair competition from operations established with the Government, but let me say I that are operating illegally or illicitly, and it should simply do not foresee a serious problem, and if the help, together with the reinforced enforcement V V Committee is concerned about that, let me make e ort, to see the levy operating e ectively but also clear that I am not, at this point. the levels of avoidance and illegal quarrying diminish. Q113 Mr Clarke: I wonder if we could turn to environmental issues. I am conscious that there Q110 Mr Bailey: You would probably agree that would be involvement from Angela Smith, as the eVective co-ordination between the enforcement Minister, but part of the new scheme, of course, does agencies is crucial if enforcement is to be eVective. include both a new code of practice and a new What progress do you think you have made to date compliance framework. Given the answer to the on that, and how would you anticipate this Chairman regarding the tight timescales in getting improving under the new scheme? agreement from the EU, we also noticed that the 9437108005 Page Type [O] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

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25 February 2004 John Healey MP and Mr Kris Romanski consultation period on the code of practice ran from weeks, 15 working days, in which you will have to December last year through to 5 March this year, first of all publish the new code of practice and the which leaves an extraordinarily tight window for the framework; from then you will be sending out Government to respond to the consultation and to questionnaires to those operators for them to make any changes if we are going to put the new complete and return; having a desk check; and then code of practice and compliance framework in place sending the interim certificates out. Would you for 1 April. Could you comment on how you are accept that it is still a tight timescale, even given the going to achieve that quite large amount of work small amount of work that you have to do, from 5 within what is in eVect a three-week period? March to 1 April to get something published, John Healey: The first thing to explain, I think, printed, questionnaires out, returns in, desk checks is that this is not a traditional government out, certificates back out? It is a very tight timescale. consultation where a set of proposals are published, John Healey: First of all, much of the work is going comments are invited, there is a period of reflection on at the moment, so it is not a square- one start and the Government responds, neither is the from 5 March. The second thing is that the critical publication of the code of practice and compliance date is not 5 March or 1 April; it is the point at which scheme by the DoE Northern Ireland a first stab at we are clear that we are going to get the State aid this. Its genesis is derived from the Helm Report approval, because until we have that we cannot previously, which is based on the work that was done proceed to put in place this process that we are within government to take up the proposals that preparing and planning in order to get those in the were set out by a draft code of practice by the industry who wish to participate signed up, eligible industry itself earlier last year. So there is a long and therefore claiming the more generous terms of developmental history of this work. What this the relief that we are looking for. largely iterative process is designed to do up until 5 March and beyond is essentially to set the Q115 Mr Tynan: A certification scheme has been put framework, the principles within which the DoE in in place at the present time, and that would require Northern Ireland would be able, with the industry that under the proposed new levy scheme, and with individual companies, then to settle certification systems would be put in place for the company and site-specific environmental government procurement. Have you estimated the agreements that will be required as the precondition likely revenue gains to the Treasury from levy for the level of relief that we are now looking for. compliance in public sector building projects or the Not all of that needs to be done by 1 April. There will revenue losses to date in the absence of certification be a period in terms of how we envisage that process schemes? beyond 5 March working. Once we have got the Mr Romanski: I am not sure we have any sort of State aid approval, what Customs and the Northern detailed estimates of that sort. The Symonds Report Ireland Environment Department will be able to do in terms of the overall extent both of illegal is to write to those quarry operators, inviting them quarrying and imports on which levy was not being to complete a very simple application form, that will charged managed to establish that there had been confirm the basic regulatory requirements are met increases in these areas, but was not able to put any and are in place. DoE Northern Ireland will then quantification on it. I could not even give you a rapidly be able to verify that basic information. They figure for the precise amount of levy being lost in will do that probably via a desk audit rather than Northern Ireland as a result of this illegal activity at visits, and they will be able then to issue what one the moment, let alone break it down into how much might describe as an interim certificate that will of that was occurring in the government allow that operator to claim the new relief. That procurement sector, I am afraid. allows, for the duration that that interim certificate John Healey: I can give you a figure that might give is valid, the detailed work to be done with the quarry you an indication of scale, Mr Tynan. This is a very operator, site by site, to come up with the negotiated important industry to Northern Ireland, and it is environmental agreement, which would be certified obviously a matter of strong concern to the by the Department of the Environment in Northern Committee, but the total cost, we reckon, in the last Ireland and would enable the operator to continue financial year of the exemption that we have in to claim that new relief, and certification of those place—in other words the revenue foregone by the agreements would last for a period of around two exemption arrangements for the 80% relief—is only years or so. Perhaps shortly before the expiry they around £10 million. Significant though that is—very would be reviewed to see whether the commitments significant to the individual operators and contained in the agreement had been met, rather in quarries—that gives you an indication of the sort of the way that the climate change agreements operate scale of the Northern Ireland component of the already, and if they have been, a fresh agreement will revenue streams that relate to the aggregates levy. be put in place and eligibility for the continuing claiming of the relief will continue without any interruption. Q116 Mr Tynan: So you have no idea whatsoever of the possibility of gains to the Treasury from compliance? It is just a situation where you believe Q114 Mr Clarke: I take the point you make about it there will be a gain for Treasury—or do you? not being the normal consultation, therefore there John Healey: We have not done that detailed will not be a period when you are responding to calculation. It could probably be done. It would be comment, but even so, there are probably three rough and ready. The amount would be in the sort of 9437108005 Page Type [E] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

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25 February 2004 John Healey MP and Mr Kris Romanski proportion that I have indicated that the Northern quarries and potentially sterilising the reserves that Ireland operation of the levy includes. To give you might later be extracted. We are very conscious of an indication again, I mentioned earlier on the that particular problem, but the interest in seeing enforcement activity, the site visits to construction greater levels of recycling is fundamental to the companies and some of the quarrying operations rationale of the levy. that the QPA Northern Ireland have indicated we have signed up as a result of those registrations for Q120 Mark Tami: If you do support that, what are the levy, but the total levy liability from those sites you actually doing to stop them being trucked to that we have now signed up in many cases is only landfill sites or whatever? What are you doing to several thousand pounds. promote this on-site process? John Healey: Obviously, the Committee has a Q117 Mr Pound: One of the by-products of the particular concern about Northern Ireland. There is quarrying process is the secondary aggregates. adiVerence in the situation as far as we have been Under the operation of the levy, the cost to the able to establish it so far between Northern Ireland consumer of secondary aggregates has made it and Great Britain. The Symonds Report confirmed economically unviable; they cannot shift them, they that one of the weaknesses of the operation of the have been priced out of the market, and they are in levy and one of the reasons why it is not achieving fact being stockpiled. Throughout Northern Ireland the objectives we set for it is that the scope for quarries are laden with stockpiled secondary material, including demolition waste, in Northern aggregates. Does the new scheme in any way address Ireland to be available for recycling is highly limited. this problem? That is not the case in Great Britain. In Great Britain John Healey: First of all, that is a common criticism what we are finding is that the introduction of the we get from the industry. levy itself is a dynamic in the system that means we are finding much greater investment in recycling Q118 Mr Pound: I am not being critical. plant. We have seen over the last year or so a big John Healey: Just to refer you to the Symonds surge in the sales of crushing, sorting and recycling Report, which is our best evidence and analysis of equipment, and that appears to be, as far as the early this, it suggests that there is some evidence of evidence indicates, working in the way that we operators not being able to shift secondary wanted the levy to work. aggregate that they might previously have been able to do. It was not able to quantify the scale of the Q121 Chairman: It has been suggested that the use problem, and we have encountered a similar of combined quarrying and recycling centres oVers diYculty in examining this very closely in mainland the most cost-eVective and environmentally friendly UK as well, which we have been doing for at least the way of disposing of construction and demolition last 12 months. One of the great advantages of the waste. Are you, together with the Department of the new approach—in other words, the environmental Environment in Northern Ireland, exploring the agreements that are there site by site, operator by merits of such centres? operator—is that they allow a flexibility which Mr Romanski: Whilst we are not directly thinking the current levy system does not do to deal with about how it might be done, although your the particular environmental circumstances, the suggestion, Mr Chairman, is certainly one way, one particular economic circumstances that a quarry of the elements of the new scheme will be, as part of might have, so that if this were an element that the environmental agreements for those quarries we felt we could help to tackle through an where it is appropriate, to include targets for environmental agreement in particular sites, then increased use of recycled material, and that sort of that might well form an element of it. We still have combined operation might be a means of achieving not reached that point because, in relation to Mr those targets. Some processed products are actually Clarke’s questioning, we have not completed either produced by the quarry companies. Some quarry the full consultation or the confirmation of how the companies already use recycled material to mix in compliance scheme will be designed. with their virgin aggregate when they sell it, and in those cases there would be targets in the Q119 Mark Tami: Looking at the question of environmental agreements for the increased use of demolition waste, does the Treasury support the recycled material, so that incentive which the levy idea of on-site recycling of this waste? provides is not lost with the lower rate. John Healey: Explicit in the design of the levy was a John Healey: Can I just add what might be a slightly desire to see a greater degree of recycling of cautionary caveat to Mr Romanski’s comments demolition/excavation/construction waste, and with there, which is that whilst there may be scope within a greater degree of recycling therefore a likely the environmental agreements, and there may be reduction in the demand for virgin aggregates scope within Northern Ireland, as he says, for extraction. That was the very core of the levy. The looking at this, I would not want the Committee to general response to that is clearly yes. It is a concern believe that we are looking at being too dirigiste in that there may be levels of secondary aggregate this. If you take one step back, part of the rationale which companies are finding diYcult now to market, and concept of the levy was to try and make the and it is a concern particularly where there are market function more eVectively, principally by arguments, although the evidence is yet to be firmly saying there are certain environmental costs at the demonstrated, that these are being stockpiled within moment of quarrying that are not captured in the 9437108005 Page Type [O] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

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25 February 2004 John Healey MP and Mr Kris Romanski price in the market. The levy itself, the levy on the Q124 Mr Barnes: So the number of 38 seemed to virgin aggregate in particular, therefore directly shrink down to nine by the analysis that you have increases the value of recycled aggregate—not in put forward to us, but what action can then be taken Northern Ireland because we have analysed and seen for the nine in terms of any unauthorised activity how it does not apply in Northern Ireland in the way that they are engaged in? it does in mainland UK. In mainland UK what is John Healey: Some may be unregistered in planning beginning to be clear is that the levy itself is creating terms, some may be unregistered for aggregates levy, a dynamic in the market that means companies are and, as long as we can identify the people now prepared to make investments in recycling plant responsible, we can ensure that they do not continue and capacity which they were not necessarily the operations unless they conform with both the prepared to do before, and that the levy itself is a regulatory and the ﬁscal framework. major element of that. Mr Chairman, I was fortunate enough to open a new waste crushing, sifting and recycling plant in my own constituency Q125 Mr Barnes: Does the levy itself produce a last month, a £2 million investment with a capacity problem in pushing them to continue illegal to recycle 2,500 tonnes a week, and the managing operations? director, Martin Lynskey, said to me that the John Healey: The levy itself, as any tax does, creates aggregates levy was a major factor in the forecast some incentive for some people to try and avoid it. plan they put together in taking the decision to open Once we have got hold of them, the liability to pay their new recycling plant in Wath-Upon-Dearne. the levy and the potential to pay a penalty on top, There is a speciﬁc example of how the levy has creates a sanction system that could be applied by altered the dynamics of the market in precisely the Customs as part of enforcement activity. way that we designed it to try and do.

Q122 Mr Barnes: Earlier, Minister, you said that Q126 Mr Beggs: We acknowledge the Government’s there were 38 illegal or unauthorised quarry sites, intention to replace the present scheme with a new although a number of these have since registered. scheme rather than attempt to run two schemes in Does the proposed new scheme contain any parallel. However, for those businesses which measures to address the damage to the environment cannot aVord either the cost of environmental that the continuing unauthorised extraction sites compliance or to pay the levy in full, you are are causing? eVectively forcing them out of business. Is this an John Healey: V The most e ective way, I suppose, of acceptable consequence of introducing a new making sure that unauthorised sites create minimal scheme? environmental damage is to make sure that they do John Healey: The assessment and the estimates that not continue to operate as unauthorised, illegal, we have done, working with the industry, suggest non-levy-paying sites and are brought within the that there is likely to be in most cases a minor cost scope of the environmental agreements with the benefit to operating under the new scheme compared operators. The agreements will give us the capacity to the current scheme, but in the end the decision to reduce the environmental impact. That would be about whether or not to enter into an environmental the major way that we would have to try and tackle agreement as part of the new relief scheme has to be the environmental damage caused by the illicit sites. down to the owner and operator of the site itself, and they will have to weigh up whether or not they wish Q123 Mr Barnes: I understand that Customs went to to participate in the relief scheme and therefore the sites back in November and January, and that attract what we hope will be the 80% level of relief, only three of the sites registered. That leaves 35 from set against their other option, which will be to pay the figure you gave earlier. Is action then taken in the levy in full. order to close down all those operations? John Healey: I have the details here. In respect of those 38 quarries, one was found to be registered Q127 Mr Beggs: Has any estimate been made of the already. Five were registered with a total number of businesses that will be unable or outstanding levy liability of £8,000, which is the unwilling to sign up to the new scheme? point I was making to Mr Tynan earlier on. With the John Healey: The short answer is no, because (a) the other 32, the further assurance and checking work scheme has not been finalised yet; (b) the decision has almost been completed. Five of the sites of the that each operator will take, the 140 or so registered remainder were derelict and not in use, nine were not for the levy at present in Northern Ireland, will liable to register for the levy for various reasons, and depend on a variety of factors, and it is diYcult to with nine of the sites it is proving very diYcult either anticipate; (c) whilst I am aware that some people to locate the site accurately or to locate the are running what I would regard as scare stories, principals that are responsible for the activity— given that we have not fully designed the scheme yet because we must be clear that this is in large part and nobody can be confident how it is going to work, illicit activity while it is going on; they do not work that somehow these are going to be driven out of 9-5 shifts, and making sure that we can catch them business, I think it is not possible to make that sort at it is not always straightforward. of assessment at present. 9437108005 Page Type [E] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

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25 February 2004 John Healey MP and Mr Kris Romanski

Q128 Mr Beggs: But you will monitor the situation? Sustainability Fund is £35 million and that would be John Healey: Of course we will monitor the then divided up according to the established Barnett situation, just as we were wanting to monitor and Formula. then evaluate as best we could the operation of the relief scheme that we have in place at the moment. Q133 Mr Swire: You will have heard the accusation that the aggregates levy was introduced in Northern Ireland without due regard to the “unique and Q129 Mr Beggs: Looking to the future, the proposed special circumstances” in Northern Ireland. Is the scheme, if it is accepted, would freeze the rate of Government now prepared to learn from this aggregates levy relief at 80% until 2012. What process in order to ensure that such an oversight in measures have been considered for Northern Ireland the future will not occur again when introducing after that date? legislation that impacts specifically on Northern John Healey: The honest answer is that we have not Ireland? worked that far ahead. We have not got the scheme John Healey: I would certainly hope so and I would in place yet and we have not got our State aid trust in the role of this Committee to help make sure clearance in place yet, but it would be open to us, as that the Government does that. What I think we we approach that 2012 date, to return to the have demonstrated is that we have, certainly over the Commission to look for an extension or indeed last 18 months or so, been very ready to monitor and potentially a reform of the relief scheme for to take on board the assessment and views from the Northern Ireland at that point. industry of the impact of the levy and then commission, if we needed to do, a proper study which the Symonds Group carried out for us which Q130 Mr Swire: Of the £29.3 million distributed was able to provide the hard evidence that we from the Sustainability Fund in its first year of required in order to judge whether or not this was a operation, how much was spent on the environment, policy and a levy which could work in Northern heritage and access projects in Northern Ireland? Ireland. Clearly it does not and I hope that the John Healey: I cannot give you that information, Mr Committee would at least recognise that if we did Swire. It may be that the Department in Northern not get the formula for the relief scheme right in the Ireland could give you some indication of that. The first place, we have been pretty quick oV the mark in particular diYculty in Northern Ireland is that with trying to devise a better relief scheme which I hope the division of the Sustainability Fund funding, we will be able to put in place, subject obviously to according to the Barnett Formula, with that comes a the State aids clearance, without further delay. devolution to Northern Ireland, Scotland and Wales about how they choose to treat that and, as far as I Q134 Chairman: Just to reinforce that, having been understand, in Northern Ireland there has not been critical of the fact that Northern Ireland got a decision yet to set up a ring-fenced or specific overlooked in the original plan, I think it is highly aggregates sustainability fund. That is not to say commendable that you and your team have made that some of what would have been resources which the eVorts you have made to get the scheme revised would have been transferred to Northern Ireland as and I think I speak on behalf of all the Committee part of that Barnett Formula division of the when I say that we wish you well in your eVorts in Sustainability Fund would not have been spent on combating the Commission, and “combating” is aggregates-related projects, but I simply am not in a probably the wrong word, but never mind. I think it position to give you that information as I do not is also appropriate to say, Minister, that the have it and I draw your attention to the fact that, aggregates levy in Northern Ireland is probably not unlike in Wales and Scotland, there has not yet been the major thing across your desk as the Economic a decision to ring-fence it in Northern Ireland. Secretary of the United Kingdom Treasury and I, for one, and I am sure the rest of the Committee have been very impressed indeed with your grasp of the Q131 Mr Swire: Perhaps if there was some more brief and your knowledge in this rather abstruse information as to how much money has been spent, subject which I hope we have helped to bring to your that would be made available to the Committee in attention. Thank you very much indeed for coming due course. and for helping us with our inquiry. John Healey: I am certainly happy, Mr Chairman, to John Healey: Can I just in return say to you, make those enquiries on the Committee’s behalf if Chairman, and to the members of the Committee the Committee would like me to do so rather than that our work in trying to get to the bottom of the approaching the Department of Environment in problem and map out a diVerent form of relief Northern Ireland yourselves. scheme has certainly been assisted by the interests and expertise the Committee has brought to it. Your response on behalf of the Committee when I last Q132 Mr Swire: My next question was going to be came before you on November 5 where you on the estimated expenditure for the current and essentially gave the support, critical, constructive future years, but that is rather answered by your and certainly scrutinising support, was, nevertheless, first answer. important and it was a spur to us in government and John Healey: Well, you mentioned a figure for the I hope it has been so also to industry which has Sustainability Fund in the first year. In the following certainly helped us in the work we have been doing. year our estimate for the money going out of the Chairman: Thank you very much indeed. 9437101023 Page Type [O] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

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APPENDIX 1

Memorandum submitted by the Planning Service (Minerals Unit), Department of the Environment, Northern Ireland

THE EFFECTS OF THE INTRODUCTION OF THE AGGREGATES TAX LEVY ON MINERAL OPERATIONS IN NORTHERN IRELAND 1. The aggregates tax was introduced into the minerals industry in Northern Ireland in April 2002. 2. The nature of the quarrying industry in NI is diVerent to that in GB. There are only a limited number of large multi-nationals eg Tarmac extracting minerals in NI compared to the rest of the UK. On the other hand there is a considerable number of small family owned quarries dispersed across NI who have been in the minerals business for many years. These quarries on the whole are small scale compared to those in GB with outputs between 200–300,000 tonnes per year but taken together highlight that NI relies more heavily on the quarrying industry than other regions in the UK. Ni quarries are primarily located in rural areas where the density of population is greater than would be found in the rest of GB. 3. Outlined in the table below is a summary of the number of unauthorised quarrying sites in NI which were brought to the attention of the Department either by members of the public or reported through the industry.

Financial Year No of Quarry Sites 01/04/98–31/03/99 22 01/04/99–31/03/00 11 01/04/00–31/03/01 13 01/03/01–31/03/02 20 01/03/02–31/03/03 38 Breach of condition and unauthorised plant/ machinery are not included in these statistics.

From the above figures it can be seen that after April 2002 when the Aggregates Tax was introduced there was a significant increase in the number of unauthorised quarries which had opened up in NI—some 18 sites detected over the previous financial year 2001–02. The only explanation Planning Service can give for this increase is the introduction of the aggregates tax. Many, but not all of these unauthorised sites were located in close proximity to the international border with the Republic of Ireland. 4. Most of these unauthorised sites are being operated by one or two men who make use of small JCB type excavators, mobile processing plant and HGVs to transport the extracted mineral to the consumer. At no time do these unauthorised operators gain access to explosives to extract the minerals as these are strictly controlled in NI by the Police Service of Northern Ireland (PSNI). There is an established liaison between PSNI and Planning Service (Minerals Unit) if there is any doubt about an operator. The operators of the unauthorised sites would not have taken any regard to Health and Safety at quarries which is controlled by the Quarry Inspectorate of the Health and Safety Executive (NI). Dangerous machinery, unbunded fuel tanks, substandard vehicle access with no sight visibility splays onto the public road, no regard for the environmental eVects of their operations on adjoining neighbours eg noise and dust, unsafe working quarry face heights and in many cases untaxed HGVs would not be uncommon among such operators. 5. In terms of increased workload for Minerals Unit of Planning Service, the Unit had an enforcement resource of two junior staV when the aggregates tax was introduced. This has since been reduced to one member of staV at June 2003. (From the start of July 2003 Special Studies Section has had an increase in enforcement staV to assist in the workload). This person has a full workload of between 150 and 175 cases to process including breaches of planning condition and unauthorised operation of quarry plant and machinery. Enforcement is a time-consuming process with cases often running for one and two years before there is an outcome. In all cases where unauthorised extraction is commenced the Department has to assess quickly whether there is a priority need in policy terms to take immediate enforcement action by serving Enforcement/Stop Notices. This implies that all sites must be inspected within a given time period of coming to the attention of the Department. As minerals planning in NI is a headquarters function and is centrally based in Belfast it means staV have long distances to travel to carry out investigative work to produce a site report. Enforcement section is therefore fully stretched to cope with an ever-increasing workload. 6. In my opinion the number of unauthorised extraction sites will continue to increase in the foreseeable future as powers of enforcement are weak and resources inadequate to deal with the situation. There is an increasing number of farmers trying to diversify their income by other means due to the general slump in income from agriculture. In so doing they are turning to extracting minerals from their farm holdings hoping to sell such rock to local builders. The builders are only too pleased to be supplied with building material at a lower cost than it could have obtained from the legitimate quarry operator who has had to comply with all the rules and regulations but has had to bear the increased aggregates tax cost. 9437101023 Page Type [E] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Ev 70 Northern Ireland Committee: Evidence

7. Conclusion: As a result of introducing the aggregates tax into NI Planning Service would state the following conclusions can be reached from feed back from operators and practice: (1) Increased workload for enforcement section of Planning Service(Minerals Unit). (2) Unauthorised sites are being operated without regard to regulations which are imposed and complied with by authorised operators. (3) Diversiﬁcation of agriculture has led to an increase in the number of unauthorised extraction sites. (4) Limited enforcement resources causes delay in pursuing unauthorised extraction. (5) Authorised operators feel they are being penalised due to slow, ineVective means of controlling the unauthorised operations—not a level playing ﬁeld. 26 August 2003

APPENDIX 2

Memorandum submitted by the Health & Safety Executive Northern Ireland Thank you for your letter dated 8 July 2003. In response to the questions that you have raised, I would advise as follows: 1. I assume that your reference to “authorisation” is a reference to planning consent or a reference to registration for the purposes for the aggregates levy. Under quarrying-related health and safety legislation, HSENI do not perform any authorisation role. Quarry owners are required to notify HSENI when quarry activities are commenced, abandoned or recommenced under Article 16 of the Quarries Order (Northern Ireland) 1983. This is a notification procedure only. During the course of normal field operations, HSENI has observed a number of sites for which it had not received any consultation papers from the Planning Service for Northern Ireland. It is assumed that these sites are operating without formal planning consent. Our field intelligence on the full extent of unauthorised sites is however very limited. As a result of some recent additional field observations conducted as a result of your inquiries, we have identified over 20 sites that we had not been previously aware of either by notification to HSENI or through consultation exercises with the Planning Service. The sites that we have identified through our field observations range from very small operations consisting of a single excavator removing low grade aggregate from rock outcrops to larger scale activities consisting of mobile crushing and screening plant and a range of associated vehicles. We are not in a position however to confirm if there has been any increase in the unauthorised extraction of aggregates as a direct result of introducing the aggregate levy. 2. We are unable to estimate the level of unauthorised extraction of aggregates that has taken place since and prior to the introduction of the aggregates levy. 3. For sites that are oYcially notified to HSENI, and permission sought through the normal channels of planning approval, HSENI does have the opportunity to advise the site operator on the relevant legal requirements, assess the level of compliance and take relevant action if appropriate. This intervention to assess and secure compliance is obviously easier for sites that we are made aware of through the normal notification/approval channels. In considering the health and safety issues that unauthorised extraction may raise, we have not been made aware by the PSNI that the high-risk activity of blasting is taking place at these sites. Our limited experience to date with a number of these sites has indicated that some common problems do exist and these include the absence of appropriate risk management systems, plant not maintained in a safe condition and site development not planned in a safe manner. Other safety issues encountered in recent times include unguarded dangerous machinery, vehicles operating without brakes, dangerously high faces and lack of adequate perimeter fencing to protect the public. Although standards are likely to be lower in many “unauthorised” operations, with our limited experience with these sites, HSENI does not currently have strong conclusive evidence to correlate adverse diVerential industry safety standards for unauthorised extraction activities and the non-payment of the aggregate levy. 4. The general strategic approach by HSENI to quarry safety in Northern Ireland is essentially based on prioritisation of risks within the industry and our aim is to tackle the most pertinent risks through a range of promotion and enforcement interventions. Over recent years these interventions have included routine and focused inspection campaigns (eg on machinery guarding) and promotional events to raise awareness of standards, legislation and best practice. 9437101024 Page Type [O] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Northern Ireland Committee: Evidence Ev 71

Since the introduction of the aggregates levy in Northern Ireland, HSENI as a health and safety regulatory authority has not been routinely proactive in seeking to identify and distinguish sites that may be involved in unauthorised extraction of aggregates. It has been our approach to inspect all quarries as we encounter them as part of our normal field operations and to apply the health and safety legislative standards as appropriate. 5. It is assumed that from a purely volume perspective that any increase in unauthorised extraction will result in reduced extraction volume from authorised sites and vice versa. Any balancing between authorised and unauthorised activities as a result of the levy factor essentially equates to no net gain in terms of overall extraction volumes. In such circumstances we would not envisage any significant impact relating to the resource needs of the health and safety regulatory system. In your request to speculate therefore on any resource implications for HSENI as a result of future increases in aggregate levies, we do not currently envisage any significant increased HSENI resource implications arising out of future levy changes in the industry. 6. HSENI are a statutory consultee in relation to planning applications for quarries. We routinely liaise with the Planning Service for Northern Ireland on quarry consultations and share intelligence as necessary. Our inter-agency working is therefore focused on our working arrangements between HSENI and the Planning Service for Northern Ireland. We cannot comment on the enforcement role performed by the Planning Service in relation to the enforcement of planning legislation. HSENI is not in a position to identify all sites involved in unauthorised extraction. It is assumed that even for planning approved sites, there is also the potential for unauthorised extraction for avoidance of levy payment. HSENI would not be in a position to identify if levy is being paid in any such case. 7. In enforcing health and safety at work legislation, it is essential that robust evidence can be obtained that persons are at work and that proof of work status can be obtained. With unauthorised extraction activities, it is envisaged that there may be potential legal diYculties relating to the question as to whether it is permissible for HSENI to mount prosecutions for dereliction of statutory duty by employers where the employment relates eVectively to illegal activities. We envisage diYculties in enforcing the health and safety statutory provisions in such circumstances. In general terms there are a broad range of penalties that may be imposed by the courts in relation to health and safety matters certainly for legitimate quarries. These obviously depend on the specific oVence and the court in which the matter is dealt with. A list of the main legislative provisions relating to legitimate quarries is attached in annex 1. The maximum penalties for breaches of duties under the Health and Safety at Work (Northern Ireland) Order 1978 are an unlimited fine or six months’ imprisonment, or both when dealt with in the higher courts. In practice however the actual penalties imposed for quarrying activities are much lower, and are typically in the region of £100 to £2500 for serious breaches. In the undertaking enforcement work, we are mindful of both the potential enforceability diYculties relating to unauthorised extraction activities and also for the need to preserve the safety of our staV. On a broader front, it is not known if there is direct or fringe criminal and/or paramilitary involvement with any of these activities that may warrant interest or intervention from other authorities. 8. It is the view of HSENI that your very legitimate concerns over levy payment issues are a very distinct and separate matter to the subject of health and safety regulation. We do not believe that the logical way to progress a levy payment strategy is necessarily through a health and safety enforcement strategy. It is our view that any investigative and enforcement functions necessary for the regulation of aggregate levy payment should be the responsibility of an authority that is dedicated and authorised for this purpose. I trust that this information is of assistance to the Committee. Please do not hesitate to contact me should you require any further information. Bryan Monson Head of Quarries Group

Annex 1

LEGISLATION APPLYING TO QUARRIES Quarries (Northern Ireland) Order 1983 (SI 1983/150 (NI 4) (This is an existing statutory provision of the 1978 Order. Penalties are as set out in that Order). Mines and Quarries (Tips and Tipping Plans) Regulations (Northern Ireland) 1995 (SR 1995 No 296) Quarries Miscellaneous Health and Safety Provisions Regulations (Northern Ireland) 1995 (SR 1995 No 378) 9437101024 Page Type [E] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Ev 72 Northern Ireland Committee: Evidence

Quarries (Metrication) Regulations (Northern Ireland) 1992 (SR 1992 No 216) Quarries (Explosives) Regulations (Northern Ireland) 1991 (SR 1991 No 233) Mines and Quarries (Repeals and Modiﬁcations) Regulations (Northern Ireland) 1980 (SR 1980 No 333) The Regulations above (made from 1980 onwards) were made under the 1978 Order—penalties are those for non-compliance with health and safety Regulations. Quarries (Returns and Records) Rules (Northern Ireland) 1963 (SR & O (NI) 1963 No. 41) Quarries (Safety, Health, Equipment and Explosives) Rules (Northern Ireland) 1962(SR & O (NI) 1962 No 180) The Regulations above were made, or have eVect as if made, under the 1983 Order—penalties are the same as those for non-compliance with health and safety Regulations. The following table is taken from the Great Britain ACoP on Quarries. It lists the non-quarry-speciﬁc legislation most relevant to quarries. There are Northern Ireland equivalents to all the items listed.

Health and Safety at Work, etc Act 1974 Management of Health and Safety at Work Regulations 1992 Provision and Use of Work Equipment Regulations 1998 Control of Substances Hazardous to Health Regulations 1999 Workplace (Health, Safety and Welfare) Regulations 1992 Manual Handling Operations Regulations 1992 Personal Protective Equipment at Work Regulations 1992 Noise at Work Regulations 1989 Conﬁned Spaces Regulations 1997 Lifting Operations and Lifting Equipment Regulations 1998 Reporting of Injuries, Diseases and Dangerous Occurrences Regulations 1995

APPENDIX 3

Memorandum submitted by the Federation of Small Businesses Northern Ireland The Federation of Small Businesses (FSB) is the largest group representing the interests of the self- employed and those who direct business in Northern Ireland. The FSB is run by business people for business people and is funded by member subscriptions. The Federation of Small Businesses welcomes the opportunity to contribute to the Northern Ireland AVairs Committee Inquiry into Aggregates one year on. The Aggregate Tax aVects a number of small businesses in Northern Ireland (NI) particularly as 16.3% of Northern Ireland’s small businesses operate in the construction industry. Northern Ireland is unique in that it shares a land border with another EC state (Republic of Ireland). This tax is a tax for the GB quarrying industry and does not withstand scrutiny as a rationale for discouraging aggregates extraction within the NI context. The environmental impact of quarrying in NI is much less than that of GB. The Republic of Ireland (RoI) has no similar tax in operation. The price of aggregate has always been similar in both jurisdictions, however with the introduction of the tax in NI, producers in the RoI now have competitive advantage. Unlike GB Quarries NI Quarries tend to be small family businesses producing less than 300,000 tpa. The eVect of the Aggregate Tax on the Quarrying is damaging for the industry as a whole; however the cross-border haulage from the Republic of Ireland has witnessed the decline of many of the border county quarries that are already located in high unemployment areas. The tax over the past year has witnessed specific implications for those small businesses operating in the border areas including: — Loss of jobs in quarries aVecting rural areas; — Loss of jobs in suppliers, related trades, contractors and associated businesses; — Inflated costs of basic social fabric, such as roads, schools and hospitals; — The closure of smaller quarrying firms; — An increase in cross border heavy goods vehicle activity, impacting on the environment; and — The closure of small welding and fabricating businesses. 9437101025 Page Type [O] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Northern Ireland Committee: Evidence Ev 73

The FSB supports the Quarry Products Association in their proposal of an 80% discount on all aggregate used within NI. We urge that this proposal be put in place to prevent the further closure of the smaller operators who are under continual pressure to sell out to the majors, resulting in people having to travel further for materials, paying more and receiving an inferior service with less choice. Policies must be put in place to save smaller ﬁrms that were once successful businesses, returning a great deal to the communities they served by way of much needed employment and with relatively small environmental Impact. May 2003

APPENDIX 4

Memorandum submitted by the Royal Institution of Chartered Surveyors Northern Ireland 1. We welcome this opportunity to comment on the impact of the levy and its long-term eVects on industry sectors in Northern Ireland. We highlight key diVerences between how these factors vary from the position in Great Britain. We would be pleased to oVer further evidence if requested. 2. The RICS Northern Ireland is the national association of the global RICS. RICS NI has 2,000 members who practise across 16 specialist faculties, including Construction, Minerals, Waste and Environmental protection. RICS’ members operate in all aspects of land, construction and property and in the public, private and voluntary sectors. 3. The diYculties faced by the construction and building supplies industry in Northern Ireland during the phase-in introduction of the aggregates levy, and the long-term eVects on the industry and economy as a whole, may be summarised as follows: — Northern Ireland (NI)—Unique Market Conditions: (i) NI quarrying industry within the UK market is unique in terms of location, scale and economy. (ii) NI has a land border with another EU state (iii) Most NI quarries are small family businesses producing less than 300,000 tonnes per annum (tpa) (iv) Average ex pit price for aggregates in NI is less than £2.80/tonne (excluding taxes) (v) The lowest available explosives price in NI is £1.35/kilo. — By comparison in Great Britain (GB): (i) GB has no land borders with other EC states (ii) GB quarries tend to be signiﬁcantly greater in size than those in NI (iii) GB ex pit prices for aggregates are usually greater than those in NI, though they do vary considerably by location (iv) The lowest available explosives price in GB is 35p/kilo. 4. The aggregates levy is a GB tax for GB quarries. It has been clear from its conception that no thought was given to its eVect on the NI quarrying industry and the NI economy. Arguably, the aggregates levy has been inappropriately researched in relation to its application to NI.

Unauthorised Development 5. The Department of Environment Northern Ireland Planning Service has noted a signiﬁcant increase in the number of unauthorised aggregates extraction operations in NI. The introduction of the aggregates levy and increased attempts by rogue operators to avoid the tax, has compounded what was already a major problem, both in terms of environmental damage and health and safety risks to illegal operators, their employees and the general public.

Environmental EVects of the Levy 6. The purpose of the levy is to reduce environmental damage as a result of quarrying. Introduction of the tax in Northern Ireland has not succeeded in encouraging a shift away from the use of virgin aggregates towards the use of recycled aggregates and other alternative materials. Alternative materials are just not available in the required quantities in NI. Primary production of aggregates has increased since the levy was introduced. The tax therefore has not been successful in reducing the industry associated environmental problems of noise, dust and air pollution. 9437101026 Page Type [E] 11-03-04 22:28:25 Pag Table: COENEW PPSysB Unit: PAG1

Ev 74 Northern Ireland Committee: Evidence

Northern Ireland Border with Republic of Ireland 7. Since the introduction of the aggregates levy, NI quarries operating along the border counties have experienced a decline in demand resulting in redundancies within the industry. There has been an increase in cross border heavy goods vehicle activity, putting pressure on an already inadequate rural roads network, compromising road traYc safety and damaging the environment. 23 May 2003

APPENDIX 5

Memorandum submitted by the National Joint Utilities Group NJUG’s view is that it is not appropriate for mined aggregate used in street works reinstatement to be subject to an aggregate tax. The imposition of an aggregate tax itself does not reduce the demand for primary aggregates for reinstatement of the street following utility street works. We seek exemption from the tax for aggregates used for this purpose until the use of recycled aggregate comes into common usage. Additionally, undertakers have already been unreasonably burdened with the eVects of the Landﬁll Tax and this latest proposal is a further imposition for them to have to bear. If introduced, the tax should apply only to those quarried aggregates that are used primarily as aggregate ie trimmings from dimension stone and “scalpings” should not be subject to tax because they arise as a by- product from another primary product. Therefore, if they are disposed of by being crushed for use in, for instance, street works, no tax should be applied. This philosophy means that it would only be necessary to identify primary aggregate for taxable purposes; all others would not be subject to tax. NJUG believes that all aggregate should be untaxed for street works use but, if introduced, it should only apply to primary aggregate; all other forms should remain exempt.

APPENDIX 6

Memorandum submitted by Friends of the Earth I am afraid that we are going to be unable to make a submission to the Northern Ireland AVairs Committee on the subject of the Aggregates Levy to the extent I anticipated. I appreciate that this is contrary to what I said previously but a current staV shortage means that we are unable to participate fully. Please pass my sincere apologies to the Chair of the Committee. I would, however, like to make one point which has received relatively little attention. We said in our original evidence to the Committee that we would like to see the Chancellor raise with the Minister of Finance in the Republic, the issue of how harmonisation of this kind of tax can be achieved. Ecological taxes (eg on fuel, pesticides, fertilisers and aggregates) are easily undermined by diVerentials across borders. We would urge the Committee to point out to the Chancellor that he has a duty to the people of Northern Ireland to ensure that ﬁscal measures designed to protect the environment work as well here as elsewhere in the United Kingdom. In the long run, the only way this can be achieved is by close cooperation with the Republic to encourage them to introduce similar measures to those in the UK. In our view this does not constitute interfering in another State’s internal aVairs. Tackling this kind of issue is one of the purposes of the institutions of the Belfast Agreement and it is incumbent on both the Chancellor and the Minister of Finance to use those institutions eVectively. 26 August 2003

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