Clause 18
Finance Bill
2:15 pm

David Gauke (Shadow Minister, Treasury; South West Hertfordshire, Conservative)

I would like to raise a number of points on aggregates tax, which are part of clause 18. The first is on the issue of neutrality and what the funds raised by the aggregates tax will be used for, which continues from where we left off on the climate change levy and the landfill tax. The clause results in a small increase in the aggregates tax per tonne from £1.95 to £2, which we could say was broadly inflationary. Last year’s increase was more significant; I think that it was 30p per tonne.

Again, the issue when that was introduced was that there was an aggregates levy sustainability fund that was going to use the proceeds of the aggregates tax. My understanding is that in the fund’s first four years of operation, only 70 per cent. of the nominal £117 million allocation went into the aggregates levy sustainability fund. Can the Minister confirm whether that is right? Can she also provide details as to what the fund is there to achieve, and details of the funding formula?

We had this debate in the Public Bill Committee last year. The Minister for Local Government was Financial Secretary then. I asked him whether last year’s increase could be said to have been revenue neutral. Although it could be said that it was introduced alongside a 0.1 per cent. reduction in the rate of employers national insurance contribution, there did not appear to be an equivalent tax cut last year. He pointed out that business taxes were being cut last year, but he confirmed in a letter to me on 5 June 2007 that the increase in the aggregates levy last year, which we saw come into effect last month, was not part of that business tax package. What is the Government policy on recycling the aggregates levy?

Secondly, my hon. Friend the Member for Putney has met industry representatives and experts in this sector and it is a great pity for all concerned that she is not able to fully express all their concerns this afternoon. There are concerns about the precise workings of the aggregates tax. I put that to probe the Government. There are exemptions; for example, slate is not subject to the levy. A number of new slate quarries have opened up since the levy was introduced. They have a competitive advantage over granite quarries, which are closing down. Why is slate not subject to the levy? That is a genuine inquiry.

In addition, I understand that china clay aggregate is not subject to the levy either and nor is shale or aggregate that is exported. Are there any EU law implications, as there so often are, for the fact that exported aggregate is not subject to the levy and would that cause difficulties under the treaty of Rome? I understand that limestone for agricultural use is not subject to the levy but the same limestone if used in construction is. Equally, a limestone quarry that produces aggregates to make cement is not subject to the levy, but a limestone quarry that produces aggregate for concrete is. There may well be very good reasons for those distinctions and I look forward to hearing them.

Jeremy Browne (Shadow Chief Secretary To the Treasury, Treasury; Taunton, Liberal Democrat)

I will be extremely brief. The hon. Gentleman raised many interesting questions. I am looking forward to hearing the Minister’s response, not least because it will help me to decide whether to refit some of my house with slate rather than granite surfaces,  if I can afford either. My understanding is that the levy raises something in the region of £300 million a year, but only £35 million goes into the aggregates levy sustainability fund. I do not know whether those were the numbers that the hon. Gentleman used as I did not quite catch them. He used quite a few numbers in a short space of time. If that is the case, why does only 10 per cent. of the revenue raised go into the environmental fund and what is the Government’s thinking on the appropriate proportion of the revenue raised that should go into that fund?

Kitty Ussher (Economic Secretary, HM Treasury; Burnley, Labour)

The clause increases the rate of aggregates levy from £1.95 per tonne to £2 per tonne. The new rate will apply to any aggregate commercially exploited on or after 1 April 2009. We have always said that we would make sure that the levy kept pace with inflation over time. That is broadly what we are doing today. There is strong evidence that the levy is achieving its environmental objectives. Between 2001 and 2005 sales of virgin aggregate in the UK fell by 8 per cent., while there was an increase of nearly 6 million tonnes of recycled aggregate.

I shall now deal with the types of material as it follows on from that point. Exemptions are granted to certain materials such as slate waste and china clay waste to promote their use as alternatives to so-called virgin aggregate. That policy stems from our broad minerals planning policy, which seeks to encourage the use of these materials as alternatives to virgin aggregate. I do not know whether either are available from John Lewis, and whether that will help the hon. Member for Taunton to decide how to redo his house. In terms of the fund, he is entirely right. The levy raises around £300 million a year. The budget for the sustainability fund is £35 million a year. The difference is used to fund roughly a 0.1 per cent. employers national insurance contributions cut, which was made when the levy was introduced. Even if one includes what we discussed on the previous clause, it still does not fund all the mixed concessions. Therefore, there were no stealth taxes involved in this.

The hon. Member for South-West Hertfordshire wanted to know a bit more about the sustainability fund. It is administered by the Department for Environment, Food and Rural Affairs and it aims to minimise demand for primary aggregates, to promote environmentally friendly extraction and to reduce the effect of local aggregate extraction. Outside England it is up to the devolved Administrations to decide how to spend their allocation. However, in the spirit of co-operation, the Government have helpfully suggested that it should be used in six areas: overcoming market barriers; promoting increased use of alternative materials as aggregates; funding and research into more sustainable construction and demolition; promoting conservation and increased biodiversity; restoring the natural landscape and promoting environmentally friendly quarrying practices; and supporting local community projects.

The value of the sustainability fund was set at its introduction and continues to offer value for money. Our internal estimates suggest that 10 per cent. of the total amount raised is the maximum scope for such spending. I hope that that is sufficient to encourage the Committee to agree to the clause.