Clause 196 - Standard rate of landfill tax

Finance Bill – in a Public Bill Committee am 2:45 pm ar 18 Mehefin 2013.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Question proposed, That the clause stand part of the Bill.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

This is another short, technical clause. It amends the Finance Act 1996 to increase the standard rate of landfill tax for disposable waste made or treated as made on or after 1 April 2014. In the June 2010 Budget the Government announced that the standard  rate of landfill tax would rise by £8 per tonne on 1 April each year up to and including 2014. The clause therefore provides for that rise to the standard rate of landfill tax from £72 to £80. The Government also announced a floor under the standard rate of landfill tax so that it would not fall below £80 per tonne from 2014-15 to 2019-20. Will the Minister say whether the Government will reduce further annual rises in the standard rate of landfill tax after 2014, or will it remain at £80? The Government announced at Budget 2013 that the lower rate of landfill tax for less polluting qualifying waste, currently £2.50 per tonne, will remain frozen in 2014-15. Will the Minister tell us what impact assessments have been carried out on the freeze? Is he also able to give us insight into the Government’s plans for the lower rate of landfill tax beyond 2014-15? That would be helpful to the Committee.

Photo of John Pugh John Pugh Democratiaid Rhyddfrydol, Southport

I have spent an unusual amount of time recently looking at landfill because I am doing a stint with the Industry and Parliament Trust and, for my sins, I opted to go for waste recycling as something I was particularly interested in. I have spent a good deal of time talking to people who either pay landfill tax or contribute to the industry in some way. My view is that it is an excellent tax. It follows, of course, from an EU directive and as a fiscal instrument it works pretty well, in the sense that we are now recycling, reclaiming and reprocessing a great deal.

We are also burning a great deal, although we do not talk about incinerators now. We talk of many of the facilities as creating energy from waste, because we do not want to use the word incinerator. There is a tension between incineration and recycling, which probably most people will be aware of. Incinerators need to be kept at a certain temperature, need to be fed all the time and, once built, need to be kept working year after year.

Hon. Members should be aware that the process of administering the landfill tax is heavily bureaucratic. There are probably more people involved in the paperwork associated with shifting waste around the country than in actually shifting waste around the country, with a lot of unnecessary on-costs.

I am concerned about where we are heading in the long term. There has clearly been a dramatic change in behaviour by local authorities, waste disposal authorities and so on, because costs have gone up appreciably. Fifty years ago it was about only £22 per tonne and now it is heading towards £80 per tonne. The Government have done things in addition to putting up the cost. They have dropped the landfill allowance trading scheme and withdrawn PFI credits from a number of waste disposal authorities that recycle waste or use it effectively rather than have it go to landfill.

There is a possibility that a few years down the line this could indirectly be a stealth tax. I was reading earlier, by coincidence, a submission from the Liverpool city region about waste disposal in its area. It reckoned that it was heading for very promising figures. It said it was recycling pretty well 90% of its waste, but then there would be 10% left that could not usually be disposed of in whatever way, through incineration, recycling or reuse. Some things at the end of the day are safest put into land. Asbestos is something that primarily has to go into land. That is the only satisfactory way to dispose of it.

I want to know what will happen when certain waste disposal authorities have responded to the nudge and the fiscal imperative and got to a point where they can go no further and where it is the rational, sensible thing to stick stuff into land. Will they continue to be taxed? In which case, will the tax perform simply as a straightforward levy? It would be a kind a stealth tax that no one really noticed was being paid.

Landfill has an ultimate value. I am told that wise people are buying old landfill sites on the grounds that it will soon become more cost-effective to reclaim metal from an old landfill site than to extract it from ore. I want to find out where the Treasury thinks we are heading.

Photo of Fiona O'Donnell Fiona O'Donnell Llafur, East Lothian 3:00, 18 Mehefin 2013

I am interested to hear the hon. Gentleman say that there is interest in land that was used formerly for landfill. Does he think that that is linked to the fact that last year, the Government brought in legislation that loosened some of the restrictions on the use of possibly contaminated land?

Photo of John Pugh John Pugh Democratiaid Rhyddfrydol, Southport

The hon. Lady is a greater conspiracy theorist than I could possibly be. If we take into account the increase in landfill tax, the abandonment of the landfill allowance trading scheme and the withdrawal of PFI credits, which will make the landfill tax obligation easier to fulfil for some waste disposal authorities, we could be tempted to go down the road of suggesting that the Treasury, although we do not doubt its green credentials, has in mind a steady revenue stream for the future here, unless we can portray the landfill tax as what it is supposed to be under the EU directive: a fiscal instrument, designed to reduce landfill and no more. Will the Government tell us where they think we are ultimately heading with that particular tax?

Photo of Sajid Javid Sajid Javid The Economic Secretary to the Treasury

Clause 196 increases the standard rate of landfill tax from £72 per tonne to £80 per tonne with effect from 1 April 2014. By way of background, the landfill tax has been successful in reducing the amount of waste sent to landfill; since it was introduced in 1996, the amount of waste sent to landfill has nearly halved. The benefits of that reduction are twofold. First, the economy benefits from our making better use of valuable resources, rather than simply tipping them into a hole in the ground. Secondly, greenhouse gas emissions from decomposing waste are reduced.

The landfill tax also plays a significant role in reducing the volume of waste sent to landfill to meet the targets set out in the landfill directive. That minimises the risk of incurring the substantial penalties that falling short of those targets would trigger. If waste is not sent to landfill, as we have just heard from my hon. Friend the Member for Southport, it goes to alternative, more sustainable waste management practices such as recycling.

The June 2010 Budget confirmed that the standard rate of landfill tax would increase by £8 per tonne each year until 2014. The Government also confirmed that that rate would not fall below £80 per tonne between 2014 and 2020. By confirming that £8 per tonne increase for 2014-15, we continue to provide certainty for the  waste management industry to invest in infrastructure for alternative means of waste disposal.

The environmental impact of lower-rated waste is significantly less than that of standard-rated waste. The current rate adequately reflects that impact. Therefore, the lower rate of landfill tax, which applies to less polluting waste such as rocks and subsoils, will remain frozen at £2.50 per tonne for 2014-15.

The increase in the standard rate of landfill tax will affect businesses and local authorities that send waste to landfill. However, by managing their waste more sustainably and reducing the amount of waste that they send to landfill, they will be able to reduce their landfill tax liabilities. In addition, the costs of the tax and the necessary investment in waste infrastructure were considered as part of the spending review process and included in the local government settlement.

To turn more specifically to the questions raised, the hon. Member for Newcastle upon Tyne North asked about potential future changes in the rates. I confirm that we have set out that the standard rate of £80 will remain at least at that level between 2014 and 2020, which provides confidence to businesses that in the future it will not suddenly become cheaper for waste to be sent to landfill. Beyond that commitment, we have yet to make any policy decisions on the rate for the years between 2014 and 2020, other than that minimum level. The rates of landfill tax, as with any other tax, however, will remain under constant review.

The hon. Lady also asked about the lower rate. We are comfortable that the environmental impact of the lower-rated waste is significantly less than that of the standard-rated waste, and that the current rate of £2.50 per tonne adequately reflects that impact. We will keep the rates under review, but we currently have no plans to change the lower rate.

My hon. Friend the Member for Southport made a couple of points. He asked if we had considered the impact of the changes made under the clause. The Government do not routinely undertake an impact assessment on rate changes of this type—or on rate freezes—so there is no assessment in this case. He used, I think, the words “stealth tax” and said, if I understood correctly, that even when a local authority sends the maximum amount possible to alternatives to landfill, a small proportion of the total waste still needs to go to landfill, so the authority is unable to avoid a minimal level of landfill tax. His assessment is right, but that is a necessary feature of a tax system that incentivises people to use less landfill and look for alternative, more sustainable sources.

The clause increases the standard rate of landfill tax, as announced at Budget 2010 and confirmed in Budget 2013, and I therefore move that the clause stand part of the Bill.

Question put and agreed to.

Clause 196 accordingly ordered to stand part of the Bill.