I beg to move amendment No. 5, in page 24, line 32, at end insert
'provided that the tax shall not be charged until such time as a matching cut in the main rate of employers' national insurance contributions has been made.'.
The amendment's purpose is to bring the rebate in line with the levying of the landfill tax.
The landfill tax was announced in the Budget in 1994 as a tax with an unusual purpose. Rather than raising revenue, it is intended to change behaviour and to encourage the production of less waste by business and consumers, less disposal of waste in landfill sites and, most important, more recycling and other recovery of the value from waste. The detailed proposals to be implemented in the Finance Act 1996 and the statutory instruments that will follow later in 1996 must be measured against that yardstick.
Most important, the subject of the amendment involves the fact that revenue from the tax is to be passed back to business by way of a rebate of employers' national insurance contributions. Within certain limits, rebates will also be given for contributions to certain "environmental trusts". The 1995 Budget confirmed the linkage to national insurance contributions, although it is not complete as the landfill tax is collected for six months from 1 October 1996 and the national insurance contribution rebate comes into effect from 6 April 1997. Our amendment seeks to bring those two dates in line. I should like to explain why that should be done.
Many detailed provisions, which will be set out in secondary legislation, are pertinent to the rebate, but we cannot discuss them this afternoon. The functioning of the environmental trust scheme, the definition of qualifying materials and the cost-compliance assessment will be considered in secondary legislation, but it is the rebate that we are concerned with today.
I need to put it on the record that Labour is broadly in favour of landfill charges and that we are not objecting today to the principle. We made it clear in our document "In Trust for Tomorrow" why we supported a landfill tax. It is based on the principle that the polluter should pay, it targets most dangerous waste, and it introduces credits against increased charges for landfill sites that install equipment to generate energy from methane. Charges should reflect differing regional environmental impact, and that must be done alongside a package of other measures.
We agree with the conclusion of the report from the House of Lords Select Committee on Sustainable Development, which states at page 75:
It is not realistic to expect people to change their lifestyles for moral reasons alone. We need appropriate fiscal and legal measures to overcome the barriers to the adoption of more sustainable lifestyles and patterns of consumption".
That is the purpose of the landfill tax. There is serious doubt, however, that that laudable aim can be achieved by the Government's proposals.
The Government state that the aim of introducing the new tax is that the additional costs arising will be passed on to waste producers. For local authorities, that suggests that council tax payers should bear the additional cost through an increase in their council tax bills, which will create, in theory, the incentive for them to reduce waste and to make better use of their waste produce. However, any incentive would be very weak.
The problem with the national insurance rebate is clear because council tax payers pay for waste disposal at an undifferentiated sum within their council tax bills. In addition, authorities are already spending at their capping limits, so any additional cost that is not reflected in those limits could result in serious reductions in services elsewhere. The relationship to the national insurance contribution rebate is crucial. If the desired move from waste disposal to waste reduction and recycling is to happen, there must be a major awareness and education campaign on the issues, so that the public can understand the rationale behind the tax.
The problem with the mechanism in the clause is that the conditions on British landfill sites vary. Disposal without energy recovery is at the very bottom of the waste hierarchy. Likewise, landfill sites without the benefit of modern technology to monitor conditions and recover methane are environmentally a poor option for disposing of waste. Inevitably, waste contains a certain amount of moisture and during the process of that waste breaking down leachates—liquid from waste—sinks to the bottom of the land and methane is produced. By the Government's own admission on page 20 of their draft waste strategy,
landfill sites are the largest single source of methane emissions in the UK, and methane is the second most important greenhouse gas after carbon dioxide.
Therefore, the relationship of the rebate and the environmental trust to those who manage the sites needs to be tightly drawn.
Many of the sites have problems with high levels of leakage, which threaten to contaminate the surrounding environment. Delays in money being made available to improve the sites clearly exacerbate the problem. However, surveys show that half the landfill sites operate the dilute and disperse method, which allows leakage into the soil and water beneath the site with no attempt at controlling it. If those sites are to have access to rebates, that will simply encourage bad behaviour. Some sites use modern engineering techniques to monitor and control gas emissions. Indeed, I know of a good one in Avon, which would not be rewarded for its good practice through the payment scheme mechanism in the clause.
I want now to deal specifically with the national insurance contribution. Treasury press notice 138/94 of 29 November 1994 quotes the Chancellor as saying in the 1994 Budget statement that it was his intention
to look at ways to offset the impact of landfill tax on business, including compensatory reductions in employers' national insurance contributions. This switch in the balance of taxation will discourage an activity which damages the environment while helping to cut the costs of investment.
That was a good statement.
In his 1995 Budget statement, the Chancellor confirmed the switch, saying:
The money raised by the landfill tax will allow for a matching cut in the main rate of employers' national insurance contributions by a further 0.2 per cent. to 10 per cent. from April 1997. That will cut the cost of employment by half a billion pounds and will make it cheaper for businesses to create new jobs."—[Official Report, 28 November 1995; Vol. 267, c. 1064.]
The intention of the amendment is to take the Chancellor's words and put them on the face of the Bill, and it is difficult to see how the Government could possibly object to that.
A clear undertaking has been given time and time again that the tax would be levied and the national insurance contributions would come back at the same time as the compensation. Indeed, the intended reduction was confirmed in the Secretary of State for Social Security's annual national insurance contribution review. Since the annual national insurance changes are introduced by statutory instrument, there is no direct reference to the proposed reductions in the Finance Bill. Consequently, there is no guarantee that the tax will always be offset by national insurance changes in the future.
In addition, although the tax will be introduced in October 1996, the rebate does not take effect until six months later on 6 April 1997. As the proposals do not affect businesses equally, the process will obviously result in winners and losers. If, as the Government intend, the tax succeeds in deterring dumping on landfill sites, revenues will decrease. That will affect future rates of national insurance contributions.
To give an example, the Association of Metropolitan Authorities has made the following calculation—local authorities collect approximately 22 million tonnes of waste a year, so the tax will mean an added cost in the region of £154 million a year. The Government's response to the consultation on the landfill tax last year stated:
The concerns of local authorities are also understood by the Government. Local authorities are responsible for the collection and disposal of household waste, and it is recognised that the cost of the tax in respect of such waste that is landfilled will fall on them. The proposed reduction in employers' NICs will affect local authorities and, over the coming months, the Government will address the issue … in the context of the local government finance settlement.
A reduction of 0.2 per cent. in employers' national insurance contributions for the whole of local government only adds up to £30 million. There is therefore a net cost of more than £120 million. This is not accounted for in the local government settlement, and authorities will have to find the money from elsewhere. A further delay in introducing the national insurance rebate will clearly make that situation more difficult.
The net costs arise because local authorities have labour-intensive services, and are therefore likely to benefit more than average from reductions in national insurance contributions. Not only do they dispose of waste generated from their own operations—as would be the case in industry generally—but, as waste disposal authorities, they are responsible for disposing of waste generated within their boundaries.
On Budget day 1995, the Secretary of State for the Environment sought to buttress the considerations of national insurance by saying:
The establishment of environmental trusts will complement and reinforce our policies for sustainable waste management, for example by promoting recycling, and strengthen the environmental credentials of the landfill tax. The trusts scheme has the potential to generate up to about £100 million of private sector expenditure for environmental improvement.
The trusts will be funded by contributions from landfill operators. Local authorities cannot apply to the trust for money because they do not run landfill sites. The money that the operators pay in comes out of their own pockets—it works something like a donation to a charity, on which companies receive tax relief—but they do not pay as much as they would if the rebate did not exist.
Someone more cynical than I am might ask why landfill site operators would want to pay into a scheme that would be a net cost to them, particularly when there is a rebate delay. The idea of the tax is to reduce the amount of waste that goes into landfill, but unless the site operator is also a waste producer, and most are not, why would they want to reduce the amount of waste, which produces their profits, going into landfill? The operators have no incentive to do so, and the manner in which the national insurance contributions are returned does not encourage them.
The Government say that site operators will be able to increase their charges to pass on the incentive to the waste producers. Will there be any safeguards on the amount of the charge increases? Could a landfill operator, for example, pass on the cost, not only of the tax but of its contribution to the environmental trust? I shall give another example from my county, while it still exists. Under these proposals, disposal of the waste generated by Avon county is estimated to cost £1.4 million in 1996–97 and £2.8 million in 1997–98, while the total rebate to the authority would be less than £500,000 in the first year. Considerable costs would be borne there, and it is antagonised by the delay.
There should be greater emphasis on providing economic mechanisms to encourage the recycling of construction and demolition waste. One suggestion, beyond a weight-based tax, is to band it to reflect the level of environmental protection in place at different sites. The idea is to discourage un-engineered sites and to encourage further investment in advanced landfill disposal facilities with containment systems. That would be a sensible way to buttress the national insurance rebate and the applications to the environmental trust for funds—but it does not do that.
Any substantial increase in cost is likely to encourage the cowboy element in the industry, which seeks the cheap option by fly tipping. Although the Government have said that they will look into the problem, the costs of dealing with it are still in doubt and the decisions still have to be made. Like the attempt to label VAT on domestic fuel an environmental measure, the proposed implementation risks of the tax are in danger of discrediting the idea of environmental taxation. It is therefore in the interests of all hon. Members to ensure that the proposals are clearly drafted and that they deliver their drafters' objective.
The Government say that the aim of the tax is to promote a more sustainable approach to waste management. If that is so, why is landfill the only option being considered? Are we sending a signal to the market that landfill is the preferred method of disposal, and are we in danger, therefore, of not making the connections with future development?
Most commentators say that, if the tax achieves anything, as it stands, it will create a distortion in the market in favour of recycling, re-use and environmentally friendly policies. The theory of environmental taxation is that it should be set at the level of the marginal external costs of the environmental damage, but those costs must include wider considerations than have been given in this submission.
The question is whether the tax achieves its purpose. It does not favour recycling over non-landfill, and incineration or dumping at sea could increase. The tax structure does not recognise the fact that, in some cases, landfill is the best method of disposal from an environmental viewpoint—indeed for some waste it is the only method. In those cases, it operates, at best, as a straight tax on disposal and not as an environmental tax.
The tax does not recognise that, in some cases, material can be of positive benefit in a landfill site while still being waste to the person who is disposing of it. Inert materials are a classic example. They can be used as backfill in mine workings or to cap landfill sites. As a result, the tax does not encourage as much as it might the matching of waste from one business to the needs of another. The tax is a blunt instrument for distinguishing waste according to the degree of environmental damage that it causes.
There will be more incentive for individuals and businesses to evade their environmental responsibilities, both in respect of the fly tipping of rubbish on other people's land and of disposing of material on their own land without complying with licensing requirements under the Environmental Protection Act 1990.
The tax is flawed in one important respect. During the consultations, the Government made it clear that the objective of the tax is to force waste producers either to produce less waste for landfill or to find a place higher in the waste hierarchy for their output. Unfortunately, the current proposals do not do that.
Most importantly, the proposals do not provide for commitments that were given to the House. National insurance contributions and the tax are levied at the same time. This is a tidying-up amendment that would put into legislation the commitments made by the Chancellor of the Exchequer, over two years, for national insurance contribution cuts to run in parallel with the levying of the tax. I hope that the House will accept the amendment as a positive contribution to an important debate.
The proposed landfill tax has my full support. I have always thought that, if the Government were to intervene in the market to change the environmental behaviour of industry and commerce, the best way would be by means of a fiscal instrument such as this rather than by endless extra regulation of businesses. I believe that it is possible to change behaviour quite quickly by using the tax system. I understand the Treasury's reluctance to adopt green taxes—after all, there will be no net addition to the Revenue.
Our one green tax is the extra tax on leaded petrol, which has been extremely effective in persuading motorists to change to unleaded fuel, with considerable benefit to the environment. The landfill tax breaks new ground, because it is principally a tax on business. It is right that the Treasury should have consulted widely before introducing it, to ensure that it impacts fairly on business.
The tax has my full support, because I have several landfill sites in my constituency. As there is a great deal of gravel in the Thames valley, it has many landfill sites. They are not popular with local people, because they are messy, smelly places. There is no doubt that more could be done to recycle many waste materials, including paper.
The hon. Member for Bristol, South (Ms Primarolo) mentioned the response of councils. Of course they will be concerned if the only option available to them is to pass the costs on through extra council tax, but that is not the only option available. The tax should concentrate the minds of councillors on finding other ways to dispose of the waste. For example, my council—South Bucks district council—has recently introduced the separate collection of waste paper, which will allow it to send paper off for recycling rather dumping it at landfill sites. That is a major step forward. The tax will inevitably encourage other councils to adopt a similar approach.
The important thing for business is to keep a close eye on the objective of the tax. As a matter of principle, it should be levied only where there is a satisfactory alternative that offers an environmental improvement. I guess that that is the case in most examples that one could think of, but I want to mention a company in my constituency, British Alcan of Gerrards Cross, which makes aluminium products. It has a chemical plant in Scotland, which produces not only 220,000 tonnes of an aluminium chemical every year but 220,000 tonnes of red mud.
I am not sure what red mud is, but there is no alternative to dumping it in a landfill site, which the company owns and operates. The company has tried to find alternative uses for the red mud, but nobody seems interested in using it for motorways or anything else for which it might be suitable. As the company operates in an international market with world prices, if we simply impose an extra tax of £7 or even £2 per tonne on what it does, we shall simply render it uncompetitive in that market.
I hope that, when we consider the details of this provision in Standing Committee, we can take the issue a little further forward. I appreciate that today we are debating only the narrow amendment, moved by the hon. Member for Bristol, South, that the introduction of a national insurance rebate should be brought forward to October. I do not know when those who collect the landfill tax will first pay it to Customs and Excise, but if it is anything like VAT, there will be a four-month delay and the first payment will be in January, although the tax may have been collected in October. A company's cash flow position may therefore be a factor.
I support the tax in principle and hope that my hon. Friend the Minister will look at the matters that I have mentioned in relation to British Alcan in Committee.
I am delighted to follow the hon. Member for Beaconsfield (Mr. Smith), particularly in the light of his distinguished record as a Minister in the Northern Ireland Office. Having held that office, he will be as aware as I am of the 26 extremely small councils that will be responsible for handling the landfill tax. He will know that they are starved of resources and that their rating machinery does not compare to the machinery that exists on this island. That is why I have doubts about the principle of the landfill tax.
The hon. Member for Bristol, South (Ms Primarolo) used an unfortunate term in her speech when she said that pressure must be applied on polluters. In Northern Ireland, the "polluters" are those 26 small councils, so it is not fair that the victims should be regarded as the polluters. The councils are not large employers of labour. They provide services mainly to their ratepayers rather than large industrialists with an enormous amount of waste for disposal.
To what extent does the hon. Lady think that those councils would benefit from a cut in national insurance contributions? I doubt whether they would benefit greatly; after all, most of the waste they collect is household waste. They will be compelled to collect the landfill tax mainly from householders, and will then have to resort to imposing the burden on ratepayers.
As the hon. Member for Beaconsfield will understand well, we have a peculiar layer of local taxation called the "regional rate", which relates to some mythical council area in north-east England and is pure guesswork. I cannot see how the councils could benefit from a reduction in national insurance contributions unless they transferred the full burden of collecting the tax and the tax itself to ratepayers in their individual counties. The House will have gathered that I am not making a case for the landfill tax, but I am inclined to oppose it as, particularly in our case, it clobbers the wrong sector.
I am speaking to amendment No. 5, not because the Labour party opposes the principle of a landfill tax or levy but because we feel that such a tax should be a fiscal instrument that operates in a way that can truly be said to benefit the environment. The costs and benefits of the employers' national insurance contributions have not yet been properly worked out. The amendment attempts to address those issues and highlight the aspects of the landfill tax or levy that still cause great concern to businesses and major employers that are involved in waste disposal and that will therefore be liable to the environmental tax.
When the Environment Select Committee conducted an inquiry into recycling, we were convinced of the case for the waste hierarchy that puts waste reduction at the top, followed by waste recycling or waste recovery through incineration, followed by incineration without any energy recovery, followed by landfill. That hierarchy is roughly correct, particularly in a small, over-populated set of islands such as Britain, where it seems ridiculous to use large areas of land, often in overcrowded urban areas, and to have large, dirty lorries trundling to and fro, causing extra environmental pollution while distributing heavy-duty landfill waste among tips. Such an operation presents a cost to the public, particularly in large, urban conurbations. We are very much in favour of taking whatever measures we can to ensure that those costs are met by businesses in a way that affords better environmental solutions to waste disposal.
My hon. Friend the Member for Bristol, South (Ms Primarolo) also said that large-scale landfill sites that are inadequately managed can also pose a danger. The existence of methane in large landfill sites is well known. If sites are well managed and the necessary resources are provided, the methane can be a source of useful energy recovery; but if the resources are not provided, the site becomes dangerous to the public and to residents living around it. For those reasons, it makes sense to have a fiscal incentive that ensures that the costs to the local community and to commercial waste firms are addressed. We have tabled the amendment because the tax, as presently worked out, does not take proper account of those implications.
There is an absence in the Finance Bill generally of complementary incentives from the other side of the waste industry to accompany the landfill levy. In the Environment Select Committee report on recycling, published on 6 July 1994, we concluded that we did not believe that there was a case for the imposition of a landfill levy at that time. Where a levy was to be imposed, however, we believed that it
should be imposed in order to encourage alternative forms of waste management.
In order to encourage alternative forms of waste management, more effort needs to be taken to complement a landfill levy; to encourage other—
Mr. Morris, I think that you will accept that my argument returns directly to the implications of the amendment.
I am arguing that, unless there are alternative incentives for big waste disposal authorities and unless the costs of the landfill levy are counterbalanced immediately by an offset in employers' national insurance contributions, the costs will fall especially on local authorities, which have the overall duty of waste disposal in their areas, in such a way as to constrain their initiatives to promote or put resources into complementary types of waste disposal.
The local authority in Sheffield in whose area I live has a magnificent reputation for incineration combined with heat recovery. It will be unable to continue developing such initiatives if that element of local authority spending is constrained. The authority estimates that the landfill tax will take £900,000 of its budget in the first year and £1.8 million in the second year. The authority is worried because, to this day, it has received no assurances from the Department of Social Security of the amount or scale of the compensation that will come back to it in the employers' national insurance offset.
Far from the landfill levy being part of an environmental policy that will help to redress the negative side of the waste hierarchy in Sheffield, the good schemes that the authority wants to promote may be constrained by the way in which the tax is levied. A great deal of material that goes into landfill could be used, with a small amount of research and development investment, for anaerobic composting, which could benefit Sheffield's large municipal parks. That is the type of complementary waste operation that may be difficult to cope with as a result of the landfill tax as it is presented at the moment.
The steel industry will be affected. We received a document from the British Iron and Steel Producers Association saying that its initial calculations show that the annual direct gross cost of the landfill levy will be about £18 million and that the national insurance offset will only marginally reduce that. Steel is probably the industry best suited to recycling. I am very proud of the company Stocksbridge Engineering Steel in my constituency, and I am always amazed that its works transforms 10,000 tonnes of messy scrap metal into 12,500 tonnes of engineering steel for use in the aerospace and other specialised industries. That is accomplished in one week, and all the company's products are recycled from scrap metal.
Stocksbridge Engineering Steel, as a major steel producer, simply cannot afford the landfill tax. According to its calculations, it will mean on-costs of 36p for every tonne of steel produced—which will amount to almost £200,000 a year. The firm wants certain elements of the levy to be reconsidered in view of the extra costs that will be imposed.
For example, it requires the definition of waste to be clarified further. The firm wants to know which of its waste will be declared inert waste and which waste will be charged at £7 per tonne. Until it is clear about which of its waste will be charged at £2 per tonne and which will be charged at £7 per tonne, it will find it very difficult to plan and to finance its forward projections on the extra cost to the business. That is of particular concern when, as the amendment points out, firms are still unsure about the benefits that will accrue from national insurance contributions.
There is a further cost and a further complication for the steel industry in areas such as South Yorkshire. Anyone who is familiar with that area will know that there is much derelict steel industry land and many empty factories in South Yorkshire. The technology has changed and, although the industry is not producing less special steel, it is producing it in very different ways in a much smaller area.
The steel industry has been left with large areas of land which can be reclaimed only through landfill operations and it must dispose of its waste, while facing the added costs imposed by the landfill tax. The industry must also pay for the waste that is used to reclaim and redevelop many derelict sites, such as those in Rotherham at Templeborough which are owned by the firm that controls Stocksbridge Engineering Steel in my constituency. The landfill tax would impose that second cost on the British steel industry, on top of the £200,000 that I have mentioned already.
In addition, it is also unclear whether the disposal of material that is used in reclamation will be subject to landfill tax. I am sure that we will return to many of the issues when we discuss other clauses in Committee, but I think that it is important to raise the matters now in the Chamber. The firm is the largest employer by far in my constituency. Any issue that will cause the firm such financial concern—36p on-costs on every tonne of engineering steel that it produces—is serious. The firm supplies about 60 per cent. of the manufacturing sector with steel, so it will be a problem for manufacturing production nationwide.
I am aware that there are other matters, such as the dredging issue, on which we will have further discussions. I have given the reasons that lead me to believe that the amendment should be considered seriously and supported. The Government have not thought through how the balance of the extra costs of the landfill levy will be complemented by the cuts in national insurance contributions.
I am pleased to speak to the amendment. I had the opportunity to talk about the landfill tax during the Budget debate, and I welcomed it. I still welcome the landfill tax, and I have now had the opportunity to consider it further. My support for it is still substantial, although I have some reservations about one or two issues.
The importance of the landfill tax in the Budget is that it moves taxation from labour to environmental issues, such as pollution. That must be right, and I look forward to future Budgets pursuing that approach. I am, however, concerned that the landfill tax will come into effect on October 1996, but the discount on national insurance contributions will not come into effect until April 1997. That is the issue that amendment No. 5 addresses.
I strongly believe that those two issues should be closely linked, and that there should be no gap between them. If the Government believe that we should switch taxation from labour to pollution, a clear manifestation of their support would be a timetable that coincided. At the moment, there is a clear six-month gap, and that is not acceptable.
In essence, the aim of the policy is to tax pollution. I wish to examine that aim in relation to domestic waste producers—all of us who put our waste in dustbins. The policy as it stands does not provide the necessary linkage. Although it is a green policy, it is one of which no one will be aware. The ordinary householder will not be aware of the landfill tax, and that is a real weakness.
Local authorities will face some difficulties, as some of my colleagues have already mentioned. It is clear that the landfill tax will cost local authorities more. The final figures have yet to be worked out, but the provisional figures seem to show that the additional cost for local authorities, which collect about 22 million tonnes of domestic household waste a year, will be about £154 million. There will be a reduction in national insurance contributions of 0.2 per cent. Perhaps the Minister will tell us the level of wages that that national insurance discount will affect. I suspect that it will be about £10,000, so full-time employees will get the discount but part-timers will not.
Nationally, the additional cost to local authorities will be £154 million, but the rebate on national insurance costs might be about £30 million. In other words, local authorities will face a net additional cost of something like £124 million. It is plain as a pikestaff that someone will have to pick up these costs; it seems to me that that "someone" will be the poor council tax payer.
I am particularly concerned about my local authority in Nottinghamshire. Judging by the figures that it gave me just this morning, it seems that the county council disposes of 500,000 tonnes a year of household waste. I should like to praise local authorities, which sometimes do not get the praise that they deserve. Many years ago, there was a move in Nottinghamshire towards incineration. The Eastcroft incinerator disposes of an average 125,000 tonnes of domestic waste a year, leaving a substantial amount—375,000 tonnes—to go into landfill.
I should like to ask the Minister whether the ash from the incinerator will be classified as inert material—an important point. The difference between a disposal cost of £7 a tonne and £2 a tonne—for inert material—can make a great deal of difference to council tax payers. Certain bodies such as the CBI have questioned how the categories into which waste is divided for the purposes of the £7 band and the £2 band are defined. I know that consultations are going on, but the guidelines eventually issued will have to be clearly understood by everyone. This, I am afraid, is yet another example of legislation being passed without the ground rules being clear, and that is not good practice.
As I said, 375,000 tonnes of domestic waste go into landfill sites in Nottinghamshire.
Does that mean that no recycling at all is going on in Nottinghamshire? Would not the councils there be well advised to consider changing their behaviour, instead of just passing on all the extra tax to council tax payers?
Of course. Had he been listening, the hon. Gentleman would have heard me talk about the early construction of an incinerator in Nottinghamshire; it heats domestic and industrial properties throughout the city of Nottingham. The hon. Gentleman will also know of the work done by local authorities to recycle paper, glass, and so on. Obviously we should support all such work, but there remains the problem that not all domestic waste can be recycled in that way. A large amount will still go into landfill sites, as it does in Nottinghamshire.
The cost to the local authority next year—a part year—will be £1.3 million, and in 1997–98 it will be £2.6 million. We may set the national insurance discount against that, but it amounts to a mere £130,000. There is clearly a large gap which has to be met by someone. I do not believe that local authorities will meet it; rather, it will be passed on to council tax payers.
I know that local authority associations have taken up the matter recently with Ministers, particularly Ministers from the Department of the Environment, and I expect that there will soon be a discussion in the House about the financial settlement for local authorities next year. I hope that the Minister will talk to his colleagues in other Departments about this issue, because there is a strong case for examining the capping levels that have been put on local authorities, particularly those that are also waste disposal authorities—usually, county councils.
I look forward to Ministers from the Department of the Environment coming to the House and explaining to us, perhaps next week—
I am grateful for your advice, Mr. Morris.
Perhaps Ministers will come to the House shortly—next week or perhaps the week after—to say how the gap between the extra costs to local authorities and the discounts on national insurance contributions, which is what the amendment is about, will be met. I very much hope that the Government will listen to the voice of local authorities on that issue and consider relaxing the cap.
The landfill tax is a potential tax on coal. Electricity generators burn coal. I do not believe that they burn enough. I would like them to burn more and to keep the pits in Nottinghamshire and throughout the country going. The consequence of burning coal is that waste—fly ash—is collected at the end. My hon. Friend the Member for Sheffield, Hillsborough (Mrs. Jackson) spoke about reclamation. Fly ash has been used for many years to reclaim sites. There are areas of dereliction all over the industrial midlands and the north. I would be keen for us to examine ways to discount some element of the taxation on fly ash. It is an issue not just for coal mining areas but, for example, for Bedfordshire, where clay has been extracted from the ground to produce bricks, and, gradually, the pits are being filled. If there is an environmental benefit from that, it deserves careful consideration during the passage of the Bill.
I ask the Minister to confirm that fly ash will be classed as inert waste and taxed at the rate of £2 per tonne rather than £7 per tonne. That is an important issue, as it is eventually a tax on consumers. Although there will be some discount for the generators—for example, PowerGen and National Power—through national insurance, that will not go any way towards meeting the cost for disposing of fly ash. I have figures from both generators. I shall not discuss them this afternoon, but I know that they have written to Ministers on that point.
It is clear that the disposal of fly ash will cost the generators tens of thousands of pounds. My real fear is that, in a competitive energy market, the coal industry, which has declined rapidly over recent years, will once again be put under a very real threat. It is a serious issue, at which the Minister should look. It is linked to the discounting of national insurance charges, and it is not sufficient to make up the extra cost.
There are many other issues that I would like to pursue on the landfill tax, but the appropriate place to do, that is upstairs in Standing Committee. I am concerned about fly tipping. We need to look at that. We need to look at best disposal practice in landfill sites. The landfill tax—I shall not over-egg the case—could lead to difficulties in that regard.
I ask the Minister to consider having a de minimis rule for small operators. As the Bill stands, all operators will have to comply with the legislation.
I am still a supporter of the landfill tax. I am an ardent supporter of green taxation. The points that I make are meant to be helpful to the Minister. I look forward to pursuing them during the next few weeks.
I confess that I am relatively new to the concept of landfill taxes. Almost two years ago, before I was elected to the House, I was a member of a team that visited Slovakia with the president of the Institute of Wastes Management and a person who had a doctorate in composting. We discussed landfill taxes, and the conclusion that the experts reached was that, in the majority of cases, burying rubbish, rather than other methods higher up in the waste disposal hierarchy, was the best solution for the United Kingdom.
I shall make a general observation about the detail behind clause 36. As with many other clauses, much of its effect is hidden in secondary legislation, which will appear later and might get less scrutiny than it deserves. There are three Treasury orders, one Customs and Excise order and 15 sets of Customs and Excise regulations on landfill tax to come.
A press release at the time of the Budget stated that there would be consultation on the secondary legislation in the spring of 1996, and that the instruments would be laid during the summer. It is not clear to me whether that process will include exposure of draft regulations—the provisions of the Finance Bill were not released in draft—so I would appreciate clarification from the Minister on that, and on whether there will be draft regulations for businesses to comment on.
Like other Opposition Members, I do not object in principle to the concept of a landfill tax—a number of us have supported green taxes for a considerable time—and I do not object to the method by which the tax has been raised. I pay tribute to the Government for listening to the voice of industry and moving away from an ad valorem basis of taxation towards cost per tonne. By doing that, we are falling into line with landfill tax regimes in Europe.
At the moment, as I understand it—the Minister will correct me if I am wrong—five European countries have landfill taxes, and all of them have weight-based regimes. Denmark is the most expensive, with a tax of £20.67 per tonne. In France, depending on whether waste is municipal or hazardous industrial, there is a charge of £2.50 or between £5 and £8. The proposed regime seems to be in accordance with that. In Germany, the charge can vary from £10 to £41 for hazardous industrial waste. Whether there should be a higher band for hazardous waste is a potential issue. In Belgium—
Order. What the hon. Gentleman is saying is most interesting, but he must relate his comments to the rebate on employers' national insurance contributions. That might be in order, but just recounting the facts is not.
Thank you, Mr. Morris.
When considering the burdens on business—the Government have made great play of the fact that there is a matching national insurance contributions rebate to ensure that there is no burden on business—we must ensure that there is a level playing field. Other European countries do not have, and never have had, a matching rebate. What is more, a number of European countries do not force businesses to pay landfill tax. The Government should consider establishing a level playing field across Europe for landfill taxation. I hope that the Minister and his colleagues will press for a common European standard on landfill tax.
The Environmental Services Association, formerly the National Association of Waste Disposal Companies, represents companies that provide waste management and related environmental services. It is the lead body and it shares some of my concerns. It says that it
fully supports the development of a sustainable waste management policy, but is concerned that isolated fiscal instruments may not be the best method of attaining such a policy in accord with the best available technology not entailing excessive cost … principles.
The tax appears to be a one-off, with a matching cut in contributions, as the amendment says. Environmental taxation is not seen in the round. Partly as a result of that—I hope that I am not misquoting him—Peter Neill, the chairman of the ESA, said:
Waste producers—both domestic and commercial—must be aware that this is a tax which will ultimately be paid by themselves.
That is a salient point of which we should be aware.
The views of businesses that emerged from the consultation exercise that began in March 1995 are interesting, and I am surprised that the Government have not supported some of them. According to the official summary of responses to the consultation paper that was published on 1 September, of the 249 responses expressing a view on the Government's landfill tax and their plan to cut employers' national insurance contributions, only 25 were in favour and 173 were against. The Government argue that that imbalance arises because, generally, the businesses that responded were more likely to be net losers than net gainers.
There are clearly winners and losers, but the real reason for that overwhelming opposition is that many employers in the industry recognise that there is no real link between national insurance contributions rebates and reductions, which are basically to do with industrial policy, and an environmental policy, of which landfill tax is one small, isolated, example. It is difficult not to come to the conclusion that the landfill tax proposal and its matching national insurance contributions reduction is a con trick, and that the Government have simply found a new wheeze for raising additional taxation, which has been adopted by five other European countries.
That is nonsense. The whole point is that, although the tax is new, it will not raise any extra revenue. The money is being handed back to industry and commerce. One of the greatest tax burdens on industry and commerce is national insurance contributions, because they constitute a levy on jobs. Why does not the hon. Gentleman welcome the reduction?
I welcome the reduction in employers' national insurance contributions, but I am saying that that reduction is a sensible measure that the Government should and would have wanted anyway. I see no compelling reason for a link between the two. If something is worth doing, it is worth doing for its own sake, and that applies both to environmental taxes and to reductions in national insurance charges.
In addition, there is no guarantee that the 0.2 per cent. reduction will hold in the medium term. If, as seems likely, employers modify their behaviour and, as a result, make less use of landfill, the revenue raised from the landfill tax will decline. The Red Book projections show a surplus yield to the Exchequer through to 1998–99. They say that, in 1996–97, landfill tax will produce a net £110,000 above national insurance contributions reductions. In 1997–98, landfill tax is forecast to bring in £450 million, and employers' national insurance contributions reductions are forecast to cost the Exchequer some £495,000. It is only in 1998–99 that there will be a cumulative surplus yield to the Exchequer. I therefore remain to be convinced of the importance of the link between national insurance contributions and the landfill tax.
Contaminated land is an issue of great importance to my constituency, Dudley, West, in the black country. I have had representations from the Building Employers Confederation and a number of other organisations which are concerned about the effect of the landfill tax on them. Much redevelopment of contaminated land—I have some major developers in my constituency—is undertaken through Government grant regimes.
Government grant is allocated only on the basis that the projects would not proceed unless such money was forthcoming. The landfill tax makes no exemption for contaminated land, so the Government will have to pay out more in grant in order to redevelop the land, or developers will decide that they do not want to proceed with much needed urban regeneration. Exempting waste taken from contaminated land from landfill tax is worth considering.
The tax will also affect my local metropolitan borough council, which currently disposes of 120,000 tonnes of waste per annum. It does not take a mathematician to calculate that, at a rate of £7 per tonne, the cost to the authority will be £840,000 a year. Estimates suggest that the reduction in national insurance contributions will benefit the authority to the tune of about £300,000 but, as a result of the landfill tax, it will be about £500,000 out of pocket, and the cost will almost inevitably be passed to the consumer.
The authority is currently engaged in discussions with a number of, companies in connection with an incineration contract that it wants to let. I suspect that there will be a strong trend among authorities that are major users of landfill sites towards incineration. No one would object to that if the incinerators conformed to European standards—environmental benefits would result—but it is feared that they will not.
At present, my local authority makes considerable use of recycling. In the event of a long-term contract with an incineration company, it will try to deliver the best possible deal to council tax payers, but it will lose money. The Government should act, perhaps by means of the "other services" part of the standard spending assessment.
On the one hand, small businesses will be subject to the landfill tax; on the other, they will benefit from national insurance contribution rebates. The tax will, however, be subject to VAT, which will be charged in accordance with section 19 of the Value Added Tax Act 1994: landfill tax will be deductible in the computation of profits or income for direct tax purposes. The Government should consider exempting small businesses that will have to wade through all the regulations and Treasury orders—and pay extra VAT on their landfill tax.
I think that landfill tax should be aligned with VAT as far as possible. I understand that the Law Society recommended that, and that operators who are not registrable for VAT should be exempt from the landfill tax.
One of the penalties of the tax is the imposition of a separate interest charge on tax shown on returns but not paid by the due date. I have often spoken in the House about the effect of late payment on small businesses, but the House should note that the Bill proposes a complete departure from previous tax arrangements. We are replacing the default surcharge regime with a penalty interest rate. The compounded interest rate of 10 per cent. over the standard rate could rapidly add up to a large sum: with an interest rate of 7 per cent., after three years, the penalty interest could amount to some 66 per cent. of the tax. If it is good enough for the Government to introduce legislation on late payment to raise money for themselves, surely it should be good enough for them to do the same for businesses.
I support the amendment, as it would delay the onset of the tax, but it would be more sensible to levy a zero rate for inert materials on land disposal sites, because they do not cause the environmental problems that might justify a landfill tax. A zero rate would allow our chemical industries to compete with those elsewhere in Europe.
The Government have introduced the tax as an opportunistic way of raising more money, and they have done so in their usual fashion. Admittedly there has been consultation, but they have ignored the arguments for zero rating for inert materials, thus cutting across long-standing contracts and investments made years before and damaging the competitive position of the firms that made those investments. It is extraordinary that a so-called business man's Government should make no allowance for investment decisions made some time ago, and should suddenly slap on a tax that will penalise British firms that are in competition with European firms that do not have to pay such a penalty.
I raise the issue because the tax will have a serious effect on Tioxide, a Grimsby firm which produces titanium dioxide.
Order. "Order" means "sit down". I hope that the hon. Gentleman will relate his remarks to employers' national insurance contributions. Perhaps he did not hear the hon. Member for Bristol, South (Ms Primarolo) move the amendment, and therefore missed the significance of that issue, which he has not yet mentioned.
I mentioned it in my introduction, Mr. Morris. Tioxide is a major contributor to Grimsby's economy, but it will not benefit massively from a reduction in employers' national insurance contributions because it is a capital-intensive, rather than an employment-intensive, industry. The reduction is one way of palliating the blow, but I think that we should do that in other ways.
I was about to cite the decisions that Tioxide made. The main waste product in the production of titanium dioxide is sulphuric acid. Disposal is a problem. There are two possible treatments of the waste: it can be concentrated and recycled, or neutralised to form gypsum. Tioxide decided to comply with the European directive on waste disposal, and opt for the neutralisation treatment. That commercial decision was taken on the ground that gypsum, an inert material, could be disposed of in two ways—first, as an ingredient in plasterboard manufacturing further along the Humber bank and, secondly, in an ex-British Steel ironstone quarry at Roxby, close to the Grimsby site. It planned to fill in the quarry there with the inert material, and the site was to have been made available for various leisure uses once it had been filled in—a sensible procedure.
As a result of that commercial decision, which was taken some time ago, when there were no proposals for a landfill tax in exchange for a compensating reduction in employers' national insurance contributions, Tioxide went in for a two-stage neutralisation system at the Grimsby site. Its substantial investment was tailored to produce gypsum, partly for plasterboard manufacture and partly for disposal in the quarry. The Roxby quarry landfill site was set up with a licence to take only gypsum or similar waste. Tioxide negotiated a direct rail link to the site to minimise disamenity and an agreement to convert the site into a nature park once it had been filled in.
Tioxide took a commercial decision in a competitive titanium dioxide market. Its competitive position will not necessarily be improved substantially by a reduction in employers' national insurance contributions, but it will be changed by the impact of the tax on landfill, the method by which it decided to dispose of the material.
The neutralisation system produced an investment at Grimsby of £27 million. That major decision and investment is now called into question by the sudden imposition of a landfill tax, against which Tioxide has protested. The employers' national insurance contribution reduction is minimal, and inadequate compensation, because competitors in Europe operate on the basis of zero-rating for landfill disposal of such material.
Tioxide was complying with the industry-specific European Community directive that aims to harmonise competition by applying similar environmental constraints to every producer in the sector. The idea of that directive was to reduce liquid effluents and increase solid waste effluents. It therefore encourages firms to use landfill. When European competitors do that, they have the benefit of no landfill tax or of zero-rating for the inert gypsum material that they produce, but Tioxide is suddenly faced with a decision to tax the product in this country.
Tioxide has done its best to meet European requirements, but the Government have come in, with little consideration for the realities, the scale of the investment or the competitive position of the firm, and slapped on a tax, proposing compensation by way of a reduction in employers' national insurance contributions. That compensation is not sufficient, because this industry is not labour-intensive.
Not much can be done with the material except place it in a landfill site. Tioxide has made a long-standing arrangement that will result in a nature park. It is in intense competition with Europe. It has complied with the EC directives and now, suddenly, the Government have blundered in and decided to tax in this fashion. It is typical of the Government's lack of concern for the competitive position of British industry that they can suddenly slap on such requirements—thinking that they are giving some compensation when they are not—and not take the competitive position into account.
The Government should approach this matter by asking: what are the damaging consequences of this material? Is there methane gas? No, there is not. Is it inert? Yes, it is. The problems that would justify the taxation do not arise in relation to this material. It should, therefore, be zero-rated. The national insurance contribution concession is not enough. I ask the Minister to tell me what concessions can be made to compensate a firm such as Tioxide—which has headed into long-standing contracts and commitments and which has invested £27 million in the treatment of waste—for this sudden blow and sudden change in its competitive position vis-a-vis European competitors.
The amendment has given opportunities for a fairly general debate on the landfill tax. May I respond to some of the points raised and correct some of the misapprehensions that exist, especially among Opposition Members?
The landfill tax will essentially do two things—encourage good environmental practice and raise money that will be used to cut the main rate of employers' national insurance contributions. It will therefore help employment and the environment at the same time. The hon. Member for Dudley, West (Mr. Pearson) is right: we are not alone in introducing such a tax. It already exists in Denmark, the Netherlands, France and parts of Belgium and I understand that the Italians are proposing to introduce such a tax. In general, the rates of those taxes are above what we are proposing.
I understand that that is not true. There are a number of specific reliefs and exemptions in some countries, but they do not, as I understand it, cover entirely the point that the hon. Gentleman raised, but I will touch on the case that he instanced.
This is not an environmental European tax. We have no desire to harmonise such tax rates throughout the European Community. We are introducing it in this country because it suits British conditions and it is good for our environment. Also, we can relieve taxation on employment in the way that I have mentioned.
It is not the first time that the British Government have used taxes to encourage better environmental practice, but this is the first tax that will be introduced specifically for environmental purposes. We are using an economic instrument to achieve an environmental goal.
The objects of the tax are to ensure that landfill waste is properly priced and that the charges that are borne by waste producers reflect the environmental harm that is caused. Landfill operators will bear the tax and will have to account for it to Customs, but they will pass on additional costs to those who produce the waste. It is important that the disposal costs that those producers face reflect the full environmental impact of landfill.
That environmental impact can take a number of different forms—the production of methane, which, as the Committee knows, is a greenhouse gas that contributes to global warming; or pollution of groundwater. It may not have a direct environmental effect—it could be in the category of nuisance to local residents. Committee members who have landfill sites in their constituencies will know that landfill operations frequently cause problems of dust, dirt, noise, litter, seagulls and traffic movements. It is important that all those 'external costs are captured and attributed to the waste producer.
The right hon. Gentleman said that the site operators would pay the tax—which we know—and that they would pass that on to the waste producers, presumably through increased charges. We will look at the mechanisms for that in Standing Committee. Local authorities have a responsibility to dispose of other people's waste and industrial waste, and they collect waste within their boundaries. What mechanism does he envisage to ensure that, in those circumstances, the waste producers bear the increased charge? Local authorities have the responsibility to collect but they may be capped or restricted on spending—and they have not yet been told by the Government how they are expected to cope with the loss of revenue resulting from the extra charges that they will have to pay.
The landfill operator will bear the costs and then pass them on to waste producers. I shall deal with local authorities later in my remarks. However, the local authority—a district council, for example—will be in the best position to influence the amount of waste that is landfilled and the amount diverted to recycling or other waste streams. It will be in the best position to take the necessary corrective action.
Waste disposal diverted into recycling or incineration is more expensive than landfill—even more expensive than landfill plus the landfill tax. Come what may, local authorities will face an extra cost for disposal, which must be paid for by somebody—by the local authority, the national taxpayer or the council tax payer. If we impose a green tax, someone has to pay it. That charge will have to be met in the coming year by some local authorities. Can my right hon. Friend give an estimate of the total revenue that will come from local authorities this year and next year, which will have to be collected from local council tax payers?
My hon. Friend is not entirely correct in saying that alternative waste disposal such as recycling is necessarily more expensive than landfill. For example, with aluminium cans the industry will melt them down to make new aluminium products. That waste stream is, in some cases, cheaper than landfilling that metal. Indeed, there are already a number of good and self-sustaining recycling schemes, even without the incentive of a landfill tax for material dumped into holes in the ground. The tax will give a further impetus to what is already happening with recycling.
I repeat the point that capturing those external costs, whether they be pollution or a form of nuisance to residents and others, is an important consideration. It will encourage the waste producers, whoever they may be, to look for ways to produce less waste and to reuse and recycle more waste if they cannot avoid producing it. We know that there is substantial scope for businesses and others to adopt better waste management practices. The tax will give them a precise incentive to continue to do so.
In other words, what we are proposing will reinforce the existing policy of sustainable waste management, which was set out in considerable detail in the White Paper published by my right hon. Friend the Secretary of State for the Environment last month. The concept in the White Paper was of a waste hierarchy, headed by waste minimisation. The most desirable aim must be not to produce so much waste. Lower down the hierarchy is re-using waste.
Further down again comes the recovery of waste, which can include recycling, composting and energy recovery from incineration. The hon. Member for Sheffield, Hillsborough (Mrs. Jackson), who is no longer in her place, was under the misapprehension that the landfill tax would somehow act as a disincentive or inhibition on composting. In fact, the reverse is the case, as the hierarchy shows. If waste can be composted, it will avoid landfill tax. At the bottom of the waste hierarchy is disposal, which includes landfill.
The landfill tax will be an important means of moving waste up the hierarchy and away from landfill. The hon. Member for Bristol, South (Ms Primarolo) said, bafflingly, that the tax would send a signal that landfill was the most desirable means of disposal. That calls into question her understanding of the whole principle of the tax because the reverse is the case. By taxing landfill, we are providing an incentive to move to other, more environmentally benign means of dealing with waste.
A study for the Department of the Environment undertaken by Coopers and Lybrand showed that, with a levy on landfill even as high as £20 per tonne, recycling would still remain a relatively unattractive financial option and that the use of the tax alone would not be enough to develop alternatives. Therefore, essentially the Government are saying that landfill is all right or that options that are worse than landfill but cheaper are also all right.
The hon. Lady is now arguing for a much higher rate of tax, which can only double the anxiety expressed by some of my hon. Friends. If she is suggesting that the modest tax we are proposing will not boost recycling in the way that we wish, that is an argument for a higher charge. We do not accept that. Although the tax will not overnight create vast quantities of recycled waste, that might be a good thing. By flooding the market with recycled products, we might kill the very process that we are trying to promote. We believe that the tax rates of £2 and £7 will at least nudge the market towards a greater use of recycled materials and therefore move waste generally up the hierarchy that I described earlier.
That is a serious point, which my hon. Friend was right to highlight. All that we have heard this afternoon is reaffirmation that the Labour party is a high taxer by nature. When it sees a tax, its instinct is to raise it.
When my right hon. and learned Friend the Chancellor proposed the landfill tax in his 1994 Budget, he made it clear that he wished to consult widely on the details. That will include secondary legislation—to answer the specific point raised by the hon. Member for Dudley, West. In fact, the details in the Bill are the fruits of the consultation exercise. We thought long and hard about the rates and we also consulted outside interests. The tax will be levied per tonne. The standard rate, which will apply to most waste, will be £7 per tonne.
Following the persuasive representations that were made during the consultation exercise, we decided that there will be a lower rate of £2 a tonne for inactive or inert waste. Examples of this are soil, sand, gravel, brick, concrete, glass and so on. These do not decay to any significant extent and have much less potential to pollute the atmosphere or groundwater with gas.
It remains important to provide an incentive to recycle materials such as aggregates in the construction industry, and these should be taxed in most cases at the lower £2 rate. Taxing such materials will encourage a reduction in the amount of aggregates that are extracted from the ground and will encourage people to seek ways of recycling them wherever feasible.
The differential between the £7 and the £2 rates reflects the different environmental impacts of different types of waste, as well as the arguments that were put to us during the consultation exercise. Customs and Excise is now consulting on the exact details and types of inert waste to be involved.
I shall anticipate the hon. Member for Sherwood (Mr. Tipping). The question of fly ash is being investigated, and I cannot give a definitive answer at the Dispatch Box as to whether fly ash is genuinely inert or whether it includes some form of pollutant that would put it into the £7 limit. I will make further inquiries about the matter.
I am grateful for the Minister's assurance that the issue is at least being examined. Could he turn his mind to the issue of ash from incinerated domestic waste? Will that be classed as inert? Is there not a case for the classification of soil, for which there should be no charge at all? I make this point not because I am a high taxer, but because I want the tax to be practical and efficient.
The residue from the incineration of domestic waste will bear the landfill tax, but as it has been reduced in volume considerably from the initial waste stream, the overall quantity of household waste will be taxed less if it has been through an incinerator. That, in turn, gives exactly the right signal to those involved in the incineration of domestic waste, particularly if that includes energy recovery—as it does near the constituency of the hon. Member for Sherwood (Mr. Tipping).
My hon. Friend the Member for Beaconsfield (Mr. Smith) asked me about some specific cases that do not relate to the amendment. As a result, these cases will probably be better examined upstairs in the Committee, of which, I am happy to say, my hon. Friend will be a member.
I ought to make the general point that, even where alternatives to landfilling do not presently exist or where the alternatives are not economic at present, it is important to ensure that the environmental costs of landfilling are properly reflected in the charges paid. That will, in turn, encourage innovation and research into alternatives to landfilling that may not presently exist, and so promote in the future the environmental objectives of the tax to which I have referred.
Much the same argument applies to the point raised by the hon. Member for Great Grimsby (Mr. Mitchell), although I am not fully familiar with the industrial process that he described. I think that the hon. Gentleman said that the first waste product would be sulphuric acid, which would surely be a high-grade, dangerous product to dispose of and would incur in all circumstances a higher charge. The firm which he instanced had put in a process to render that waste inert in the form of gypsum and, in so doing, move it from a higher charge to a lower one and save itself an equivalent sum of money. I will have to investigate the point made by the hon. Gentleman, particularly as I may stray out of order if I continue on that subject.
I am grateful for the Minister's promise of an investigation. To facilitate such an investigation, I should make clear the point that I was making. There are two methods of waste treatment, and Tioxide chose the second method—to neutralise it to produce gypsum—because of the availability of a British Steel quarry. The infill of gypsum would convert that quarry into a nature park.
That was a commercial decision affecting the company's competitive situation, but the company was not warned by the Government that there was to be a tax on inert material disposed of in this fashion. The company faces competition from other European countries, primarily Germany, where there is no such landfill tax, and France, where inert materials such as gypsum are zero-rated. The Bill will seriously and adversely affect the competitive situation of this firm. Why do the Government not zero-rate inert materials such as gypsum that are environmentally benign?
I have commented on that matter, but I shall look again at the specific point that the hon. Gentleman has raised.
I had better get on more directly to the Opposition amendment, which affects the timings. The tax will come into effect in October of this year, and in a full year will yield about £450 million. That is an approximate calculation, but it is the best we have at present. Because revenue is collected quarterly in arrears, the yield in this financial year will be about £110 million.
The amendment leaves the implementation date in place, but seeks to bring forward the announced cut in national insurance contributions to the same date. This is another enormous uncosted commitment by the Labour party, and blows another hole in Labour's claims to be the party of fiscal rectitude. Labour has landed an enormous bill on to the desk of the hon. Member for Dunfermline, East (Mr. Brown), who is very anxious not to play the old game of giving money away with one hand while putting up taxes with the other to cover the difference.
While Labour has made a big and uncosted commitment, we nevertheless rejoice when it repents of its old high-tax policies. I remind the Committee that in 1979, employers paid 13.5 per cent. in national insurance contributions, including the infamous national insurance surcharge, which was a direct tax on jobs. We have brought the rate down to 10.2 per cent., and it is less than that for lower-paid employees. That is one of the important reasons why we have the lowest non-wage labour costs of any major European economy, and correspondingly low unemployment.
The revenue from the landfill tax will enable us to cut the rate further to 10 per cent. But if Labour really wants to emulate our policies on employment generation, it must adopt all of them—including our rejection of the damaging European social chapter with its possible consequences, and the minimum wage, which would deal a body blow to low earners. I welcome Labour's support for a cut in national insurance contributions, and we will do that as soon as practicable.
The mid-year changes would impose a very significant compliance burden on the businesses which pay it. We are not talking about the 1,400 or so businesses that will be paying the landfill tax, but of the millions of taxpayers who pay national insurance contributions. Those taxpayers would all be affected by any mid-year switch in the rate.
There is another—I think, better—reason for rejecting the amendment, which is that it requires a matching cut that would require us to match the revenue from the landfill tax, penny for penny, with cuts to national insurance contributions. That is considerably less generous than what we are proposing. The tax will raise about £450 million in a full year, but the national insurance contribution cut will cost £500 million in its first full year. The year after that, it will be more generous still and cost some £120 million more than the revenue from the landfill tax.
That is an important point, particularly in relation to the burden on local authorities. If my right hon. Friend is correct in saying that the national insurance rebate reduction will more than offset the additional costs to be borne by local authorities collecting or paying the landfill tax, does that therefore mean that there is no justification for local authorities—Labour local authorities in particular—suggesting that the tax is a reason for increasing the council tax this year?
There are bound to be winners and losers. Not all businesses or types of business will unequivocally be winners, because they may incur landfill tax charges that are greater than any benefit that they receive in national insurance contributions. That is true for local authorities as a whole.
I should like to say another word about local authorities—particularly to attempt to answer some of the points that have been made by the right hon. Member for Lagan Valley (Sir J. Molyneaux). I am aware that the Environmental Protection Act 1990—which brought into effect a chain of waste management regulations in England, Wales and, subsequently, in Scotland—does not yet apply to Northern Ireland. As I understand it, starting this year, the Northern Ireland Office will introduce equivalent regulations and environmental requirements.
I can make a general point about Northern Ireland that is similar in England and Wales: local authorities are in a good position to influence the amount of landfill tax that they pay because they are the movers and shakers in the recycling, composting and incineration industries as they affect domestic waste. Many local authorities have already made investments in those industries, often with Government support. Indeed, the Government have given or have made available some £50 million-worth of grants to local authorities for investment in recycling.
I accept two of the points that the Minister has made. First, resources have been made available to local authorities through credit approvals and the rest; but more needs to be done. Secondly, local authorities are actively making an attempt in this sphere. The bottom line is that landfill is substantially cheaper than recycling. How can we encourage more recycling when the cost difference between the two schemes is so wide?
We can bridge that gap only by an enormous increase in the landfill tax, which we will not contemplate for many reasons—but the tax helps. The tax sends the right price signal and gives the right incentive to move more of the waste up the waste hierarchy, away from landfilling, towards other means of waste management, including recycling. Local authorities in all parts of the United Kingdom are in a good position to take advantage of that. On grounds of practicality, the cost of administration and because it is of benefit to the great majority of businesses, I urge the Committee to reject the amendment.
The Paymaster General has made some interesting criticisms of our amendment. He attacked it because he said that it was a spending commitment and it reflected our desire to increase the cost of landfill. That is not the case.
I wonder, and the Committee may wonder, whether the Paymaster General knows when the election will be because, even if what he said were true, for it to be a spending commitment we would have to be in power by April, when the mechanism comes into effect. At the moment, I do not think that we will be. The Paymaster General then stood on his head by saying that our amendment, if it goes through, will be less generous and that there will be less money available to assist in landfill. It might have been better had the Paymaster General stuck to the amendment rather than trying to make the rather dubious political points that he made.
To avoid any misunderstanding, let me clearly spell out the fact that the hon. Lady's amendment would bring forward the date of the national insurance cut to 1 October this year. In the current financial year, that would cost an extra £210 million. That is why I say that the Labour amendment is spendthrift and uncosted.
Our proposals are more generous in the round because—unlike an insistence that we match the cut, penny for penny, to what is raised in future by landfill tax—after the present year and in future financial years, we will give away more in national insurance contribution cuts than we will raise by landfill tax. That is all taken into account in the published Budget arithmetic.
I am fascinated to hear the Paymaster General describe the words of the Chancellor of the Exchequer as spendthrift because the amendment reflects the Chancellor's commitment on matching finance from the employers' national insurance contribution that he made in his two Budget statements literally word-for-word. The Paymaster General is still trying to have it both ways: one minute he says that we are spending money and the next minute that we are not spending enough.
Let us return to the serious debate about the amendment. The Paymaster General has still not explained to the Committee why the original proposals and the statements made to the Chancellor said that matching cuts in the main rate of employers' national insurance contribution would be made. He has not explained why there is the delay, and he has not adequately explained how local authorities will be compensated for increased charges if they fall on the local authorities as a result of the imposition of this charge. In particular, he has not explained how that will affect local authorities that are in serious financial difficulties, regardless of whether they are Labour or Conservative-controlled, although I realise that there are not many Tory-controlled authorities left.
In relation to the national insurance contribution mechanism being used for matching finance, the Paymaster General did not give an undertaking that the mechanism would definitely be in operation in future years. In moving the amendment, I made it clear from the Dispatch Box that an annual decision is taken on national insurance contributions. There is no clear guarantee in the proposals that that mechanism will be permanent or will last for as long as the landfill tax.
Many of my hon. Friends have made it clear that we are concerned not only about the tax's impact on local authorities but about its impact on business and the possible effect of distorting waste management away from the laudable objectives that the Government initially put before us. It is incredible that the sugar beet industry, for instance, will have to pay to put topsoil that has been removed from sugar beet back on to the ground. [Interruption.] If hon. Members wish to intervene, I should be happy to let them. The Paymaster General gave a wide-ranging response to the debate and it seems reasonable that, as I stuck to the amendment in moving it, I should be able to reflect on some of the points that he made before we debate clause stand part.
The tax takes an inert material such as topsoil and charges an industry for putting it in a hole in the ground. The Paymaster General tells us that that is a sensible environment strategy. We do not accept that.
Our amendment seeks only to take a lead from the Chancellor of the Exchequer—something, admittedly, that we do not do very often. We sought to take him as a man of his word in the two statements that he made, which were reinforced by one from the Secretary of State for the Environment, and put what he said into the Bill. That point has not been answered by the Paymaster General.
I am tempted to go beyond the amendment, but I shall withhold my remarks until the clause stand part debate. We will withdraw the amendment but because of our dissatisfaction, we intend to vote against the clause. I beg to ask leave to withdraw the amendment.
With this, it will be convenient to discuss amendment No. 2, in page 24, line 35, at end add—
'(4) A disposal is not a taxable disposal if the material disposed of consists entirely of dredgings.
(5) For the purposes of subsection (4) "dredgings" means material forming part of or projecting from the bed of—
The amendments raise important issues that should be considered by the Government. The landfill tax is designed to encourage the reduction of wastes. All hon. Members approve of that. However, there are some anomalies that need to be aired and that I hope my hon. Friend the Minister will consider.
The return of uncontaminated soil from agricultural produce, especially from the sugar beet industry, to landfill sites in the area whence it came—merely returning soil to soil—should not be taxable. That case is especially valid because one of the factors that causes the industry's inability to dispose of soil is the restrictions that have been agreed with officials to prevent the spread of rhizomania.
As many hon. Members know, when sugar beet is harvested, some soil adheres to it. In the harvest of, for example, 8 million or 9 million tonnes of sugar beet, approximately 500,000 to 1 million tonnes of soil will also be delivered to the processor, depending on the weather conditions of the season—whether the ground is wet and heavy. In general, the proportion of soil delivered with beet has declined in the British sugar beet industry as it has developed improved on-farm cleaning methods, which must be welcomed. They have resulted in some of the lowest proportions of topsoil delivered with beet in Europe. In France, for example, the proportion of topsoil delivered with beet can be as much as 30 per cent.
When sugar beet is processed, the topsoil is collected separately and conditioned before being sold on for a variety of uses, including horticultural and landscaping work, other recreational amenities, improvements to agricultural land, civil engineering projects and the capping of landfills. The industry has worked hard to develop markets for the topsoil, and the long-term aim is for all sugar industry topsoil to go to such markets.
In the past, the topsoil delivered with sugar beet was returned to the growing regions whence it came, but this is no longer possible because of the need to control a soil-borne root disease of sugar beet called rhizomania, which entered Britain from the continent. As part of a control policy agreed with the Ministry of Agriculture, Fisheries and Food, topsoil can no longer be returned to beet-growing farms. That has meant that, until alternative markets are developed for the topsoil—which, at present, cannot be marketed—it has to be returned to landfill sites. In 1995, one company involved in the industry sent approximately 500,000 tonnes to nine landfill sites owned and operated by that company.
The intention of the tax is to encourage industries to be more efficient and produce less waste. As the beet industry has done a lot to reduce the quantity of soil leaving farms, the effect of the tax will be merely to increase costs, which have been estimated at between £1 million and £2 million extra annually for the industry, depending on the quantity of soil to be disposed of in a particular year.
To summarise, the return of uncontaminated soil that is representative of a region is merely the return of soil to soil and surely cannot be held to be waste disposal. Indeed, if all the soil could be removed from beet on the farms of origin, there would be no question of attempting to label the soil as a waste. The application of a plant health and hygiene measure to control the spread of an agricultural disease should not be used to charge an extra tax.
The application of the tax where the soil is actively used in the environmental management of a landfill site—for example, in forming the sandwich layers between waste in a landfill or in the final capping of a landfill—will increase the costs of operating landfill sites to no good purpose because the soil will still be needed. Up to a fifth of the contents of a landfill can be soil. Surely it is only equitable that, where soil is placed in a landfill site that is owned and operated by an individual company, and where there is no public facility and no cost to the public, it should be exempted from what is proposed.
I have a constituency interest in respect of amendment No. 2(5)(a), involving the extraction of brine from caverns, which has taken place in Cheshire since Roman times. In the salt purification process, residues are returned via a closed-loop circuit by pipelines to where the brine originates in underground cavities. As no environmental impact arises out of that method of disposal, a landfill tax on salt residues, under the "polluter pays" principle, cannot be justified.
The salt industry, especially British Salt in my constituency, has invested considerable sums in developing the best practical environmental option to dispose of salt purification residues. Unlike soil, there is no market elsewhere for the residues.
The Second Deputy Chairman:
Order. I am a little concerned that the matter with which the hon. Lady is dealing relates more to an amendment that has not been selected than to the one that she claims she is speaking to. I am not happy about that.
I stand admonished, Dame Janet. May I make one final point, however, which relates to a matter raised in the previous debate? The reduction in national insurance contributions would provide British Salt with an annual saving of approximately £926, whereas the landfill tax at the lower rate would cost the industry £36,000 a year. That would be a tremendous on-cost for the industry that feeds that commodity to the chemical industry.
I hope that my hon. Friend the Minister will look favourably at the case of soil produced as a by-product of the agricultural process and the other matters that I raised, because they are valid arguments and need to be considered carefully. I hope that he will give an encouraging reply.
I wish to speak to amendment No. 2 in so far as it affects a number of inland waterways in my constituency. I am grateful to those who tabled the amendment for raising this important issue. The Government must think it through carefully. I hope that the Minister will allay fears by confirming that the Government did not intend to create a tax on inland waterways. I understand from correspondence thus far that that is not the case.
The Manchester ship canal is not just a major route into the ports of Runcorn, Ellesmere Port and further up into Manchester, but a drainage system that collects its water by natural mechanisms from a number of rivers in the Mersey basin. Close to my home in the constituency of the Parliamentary Secretary to the Treasury, the right hon. Member for Eddisbury (Mr. Goodlad), is the River Weaver, which flows into the ship canal. That river deposits material into the canal, and the canal needs dredging as a result. Such natural phenomena should not be subject to a tax, as envisaged by the Bill.
The National Association of Boat Owners often writes to me on issues relating to narrowboats, because of the presence of the canal museum in my constituency. It has drawn to my attention a study undertaken by the Construction Industry Research and Information Association in consultation with waterways organisations and English Nature, which reported that
Dredgings are natural materials which do not arise from any polluting activity, or industrial or commercial process. They are not waste in the conventional sense, and the operator disposing of them does not create them. The tax would not result in a reduction in the amount of material created.
It is a simple phenomenon of the river systems that feed those canals.
They are therefore not the materials, nor are the operators the polluters, at which the tax is aimed.
Clearly, dredging is an essential part of such canal systems. Those not familiar with the area's geography may be interested to know that the lagoons into which much of the dredged material is deposited were not created simply for dumping materials but are a function of the creation of the ship canal, which cut off much low-lying land from the Mersey basin. They have created a wonderful habitat for a number of species. That process, which has continued since the canal was first built, has enriched the environment and it is important to handle it with great care and sensitivity. The Bill would penalise the Manchester Ship Canal Company and, subsequently, users of the ship canal not only for a natural phenomenon but for depositing materials in lagoons that are best served by being recovered and transformed in the same way as other marshland.
A number of other companies have written to me. GATX Terminals Ltd. points out the economic impact on the ports, from Eastham through to Runcorn. When I first moved to the north-west in 1977, a day rarely went by when a large ship did not pass up the canal on its way to Manchester. That no longer happens. The ports are extremely depressed, and financial penalties will put them at further risk.
I have also received a copy of a letter from the chairman and chief executive of Shell UK, which raises some important points. The Stanlow oil refinery abuts the shores of the ship canal in the Ellesmere Port area. Shell points out:
Because of the specific geographical circumstances of the Manchester Ship Canal, about 700,000 tonnes of dredgings are not disposed of at sea".
Instead, they are put into the lagoons that I described earlier.
In many other localities, port authorities could be required to dispose of dredgings at sea but that is not the case in the circumstances that I described. Appropriately, Shell's letter was sent to the Minister for Industry and Energy, and I hope that he brought it to the attention of Treasury Ministers. Shell argues that the proposed tax would impact on the costs to both the Manchester Ship Canal Company and a number of users.
Against that background, the Government should take a fresh look at the case. The materials are not waste materials in a conventional sense, but simply a function of nature. The rivers that feed the waterways create the materials that have to be dredged to keep the commercial, environmental and pleasure facilities open. Those materials cannot properly be regarded as waste materials in the context of the tax.
I welcome the Chancellor's Budget, including the concept of a landfill tax. That tax is intended to be environmentally friendly by taxing landfill tipping of commercial and household waste. However, as it relates to port dredgings, the tax is clearly and categorically environmentally hostile—it is that aspect of the tax which lies at the heart of amendment No. 2.
The impact of the new tax will be devastating for ports throughout the United Kingdom—none more so than the Manchester ship canal. Were this part of the Finance Bill to pass on to the statute book unamended, it would amount to a declaration of war on the Manchester ship canal and the company that operates it. I am sure that that cannot have been the intention of my right hon. and learned Friend the Chancellor—or, indeed, the Government. I therefore venture to hope that my amendment is pushing at an open door.
It is true that the Manchester ship canal no longer carries the volume of traffic of previous years. As recently as the 1970s it was common to see 10,000-tonne container vessels slipping silently up the waterway between fields of cabbages—an amazing sight. Even today, the canal represents an important factor in the economic life of Greater Manchester, Salford and many other communities along its banks. The Manchester ship canal is important to those companies that import vast quantities of grain, and it is especially important to the major oil companies, all of which have oil refineries or terminals on it.
The canal is indispensable to the operations of the numerous companies—the more than 1,350 individual companies—in Trafford Park which the hon. Member for Stretford (Mr. Lloyd) and I have the honour of representing. Trafford Park is one of the greatest of the Government's many success stories. Thanks to the Government's policies on enterprise zones and development corporations, in the past 10 years, employment in Trafford Park has increased by more than 50 per cent. The number of people who come each day to Trafford Park to earn their living has increased from 25,000 to more than 37,500. Many thousands of those jobs would stand to be blighted if decisions were taken in the House which rendered uneconomical the operations of the port of Manchester, the canal and the Manchester Ship Canal Company that operates it.
I support the amendment and I am grateful to the hon. Gentleman for giving way.
Is it not estimated that the tax on the Manchester Ship Canal Company could be as much as £5 million a year, which would, in itself, put the company out of business? As the hon. Gentleman rightly says, that would have a devastating impact on the regional economy and on the many multinational companies and the smaller companies that thrive owing to the Manchester Ship Canal Company and its support. Will the hon. Gentleman give my assurance to the Minister that the Opposition support the amendment and hope that the Government will recognise its importance to the future of the companies situated on the ship canal and the Ship Canal Company itself?
I am much obliged to the hon. Gentleman for assuring me of his support and for his offer of support from the Opposition. I endorse what he has said about the importance to all the communities in the Greater Manchester area of this great undertaking. It is not only the commercial undertakings that would be damaged were the Manchester Ship Canal Company to go under. Our constituents, over a vast area, would get their feet wet because the ship canal provides drainage for 750 square miles. Not only would the tax have a devastating commercial impact, but the adverse environmental impact would be every bit as great if the company operating the canal were forced into bankruptcy and the canal was allowed to silt up.
In order to keep the canal and the port of Manchester open, the Manchester Ship Canal Company has to dredge no fewer than 1 million tonnes of silt and sludge from the canal each year. It is, for sound economic reasons, discouraged by the Ministry of Agriculture, Fisheries and Food from dumping the waste at sea. It is therefore left with no choice but to dispose of its dredgings on landfill sites. The Manchester Ship Canal Company has estimated that, if the Finance Bill's landfill tax provisions were to pass on to the statute book unamended, the company could face a financial liability of between £1.8 million at the bottom of the scale to £4.7 million at the top, depending on how the water and pollution content of the dredging is assessed by the Customs and Excise.
I am most grateful to my hon. Friend the Paymaster General for his assurance that he does not intend, at least for the time being, to make the water content of dredgings taxable. I am sure that hon. Members will agree that the Treasury has made a remarkable and important concession. It is a great relief to know that the Treasury has not yet come up with a way of taxing H2o, but doubtless that omission is, even now, being worked on in a broom cupboard in an office in Great George street. For the moment, we have been assured that the water content of dredgings will not be taxable, and I take the Minister's assurance at face value.
If the clause were to pass unamended, the Manchester Ship Canal Company would face bankruptcy and my constituents, and those of other hon. Members, would stand to get their feet wet as a consequence of the canal silting up.
I bring to the attention of my right hon. Friend the Minister the fact that the Manchester Ship Canal Company does not create those dredgings, or such pollution as the dredgings contain. Those come down as silt in the tributaries to the River Irwell and to the ship canal. Nor does the company profit from the disposal of such dredgings, which cost it many millions of pounds a year to remove.
Two years ago, the Manchester Ship Canal Company and the ship canal celebrated the centenary of the canal's opening by Queen Victoria in 1894. The canal is a monument to the spirit of enterprise of the Victorian era and the entrepreneurship of the burghers of Manchester. It continues to serve a vital function, environmentally and commercially.
It would be nothing less than a tragedy if a free-enterprise Government—which the present Administration pride themselves on being—as a result of the Bill, unwittingly forced the Manchester Ship Canal Company into bankruptcy and caused the canal to silt up. I cannot believe that that is the Government's wish or intention. However, I should be enormously grateful to my right hon. Friend the Minister for his assurance about that, because otherwise I shall be impelled to press the amendment to a Division.
The effect of the landfill tax on the sugar beet industry has been mentioned several times. I hope that the Minister will listen to the anxieties that have been expressed on both sides of the Chamber.
I have a direct constituency interest. Although British Sugar's factory at Newark is not in my constituency, many of the suppliers, farmers and producers are based in the Sherwood constituency and in north Nottinghamshire.
I have visited British Sugar's factory at Newark. There are eight similar factories, and I believe that many hon. Members share my worries. I have been impressed by the way in which the factory has become increasingly efficient. The market is highly competitive, and I have no doubt that the management and work force of the factory are keen to maximise profits and make the plant as efficient as possible. Their record speaks for itself.
As sugar beet is lifted, soil is lifted too. Over the years, the amount of soil lifted has been reduced substantially. I understand that between 8 million and 9 million tonnes of sugar beet are lifted annually, which results in about 500,000 tonnes of soil being left as waste. That is an excellent relationship, compared with that in competitor nations. In France, 30 per cent. of the tonnage is soil waste.
In the old days, soil was taken back to the farms and spread on the land, and obviously that was a sensible way to proceed. The difficulty has arisen because of a disease called rhizomania and the fact that it is no longer considered acceptable to spread that soil on the ground. Other ways of disposing of the 500,000 tonnes must be found.
British Sugar and others have worked on that problem. The residue is used for landscaping, horticulture and other purposes, and more research has been undertaken. In the long term, it may be possible to find other uses, but a substantial amount of soil remains to be disposed of.
In fairness to British Sugar, we should acknowledge that it has set up eight landfill sites of its own. The cost of a landfill tax on the disposal into its sites will be about £2 per tonne. That may cost the sugar beet industry, which competes in a highly competitive market against international concerns, as much as £2 million.
Sugar beet operators are being disadvantaged. I hope that the Minister will undertake to consider the issue carefully, for three reasons. First, sugar beet operators desire to put soil back to soil; it is the way of nature, and they should be helped to do so, not taxed. Secondly, they are forbidden to return soil to soil by Government guidelines and legislation to combat rhizomania. Thirdly, we should acknowledge that the disposal has been done by the company itself in its own landfill sites.
Given that background, for those three reasons there is a compelling case to reconsider the issue and to consider the notion of disposing of soil in that use under a different category—not the inert category, at £2 a tonne, but a new, zero-rated category.
I hope that the Minister will listen to the opinions of hon. Members on both sides of the Chamber, study the amendment carefully and give us the benefit of some further thought on that matter.
I have listened with great interest to the debate, especially to the persuasive speeches of my hon. Friends the Members for Davyhulme (Mr. Churchill) and for Congleton (Mrs. Winterton) and the hon. Member for Ellesmere Port and Neston (Mr. Miller). However, what is suggested in the two amendments may lead us into the danger of creating an interesting anomaly in the way in which the landfill tax might operate, were those amendments to be accepted.
The real problem is the definition of waste in landfill generally. The tax, which would encourage recycling and waste minimisation, is designed to tackle local authority waste and commercial industrial waste, which might be eliminated if minimising such waste were encouraged more. Unfortunately, certain processes, such as the dredging of canals and the washing of sugar beet, inevitably create unavoidable residues that are not, in the usual definition of waste, regarded as waste products. Those residues are simply what has come up from the earth and, when they return to the earth, cannot be regarded as man-made waste. There is an obvious difference between that position and the usual position in a commercial or public landfill site.
The most common items in any landfill site, by mass, are telephone directories. If we seek ways to minimise the bulk in landfill sites, the first thing that we might do is compel all telephone companies to collect their telephone directories and recycle them. That would take about one third of household waste out of any landfill site.
The Minister told the House the environmental reasons for raising the new tax. I strongly support what the Government are doing. I have qualms about the use of inert material such as soil from sugar beet and dredgings from canals, but let us compare those types of material with the material that is left after ores have been processed. Ores come out of the earth and, after the metal has been extracted from them, a certain amount of rock is left. It comes in the form of pure, inert—albeit chunky—pieces of soil, but it is from the earth and is usually placed into landfill straight afterwards.
There is no way of minimising the amount of inert rock material that results from processing an ore into a metal. I shall give the Committee a specific example. A company in my constituency, Harcros, provides most of Europe's chrome. The chromium ore is mined in South Africa and Russia, it is brought to this country by ship and transported by road to the factory, where it is melted in a giant furnace to produce the chrome which appears on our cars, refrigerators and other domestic appliances which we use every day.
The residue from that process is an inert grey powder which must then go to landfill. The amount of powder resulting from the process cannot be minimised: it is produced in direct proportion to the amount of ore used, which is dependent on how much metal must be extracted. There is no way that Harcross can minimise the waste inert material that it produces. It disposes of the material in clay-pits and it sells the clay to a brick manufacturer next door. The firm owns the landfill site, which is not available for public use.
The firm can control the amount of waste material produced only by cutting production. Therefore, I am afraid that the landfill tax will impose a severe penalty on that company. If it installs new processing machinery to ensure that there are no poisonous chemicals in the residue, it will not be allowed to offset the cost of the machinery against the amount paid in landfill tax. The company has its own landfill site and it is not depriving others of landfill facilities, but the costs that it incurs will eventually be passed on to the customer.
The hon. Gentleman presents a compelling argument in the context of a specific case. However, does he agree that there is a difference between general waste that is derived from mineral exploitation and the circumstances described in amendment No. 2, in that the waste material that is derived from mineral exploitation is manmade, whereas the waste that is found in inland waterways is deposited naturally by the river courses which feed those waterways?
The inland waterways are manmade also. Material is excavated from those waterways by way of a human process in the same way that extracting metal from an ore is a human process. We are in danger of creating an anomaly in that regard.
We may also create an anomaly in the case of development corporations. My hon. Friend the Member for Davyhulme (Mr. Churchill) mentioned the Trafford Park development corporation; the Teesside development corporation is located in my constituency. In both cases, large areas of land—which are called brown-field sites—are being reclaimed. Those areas were previously subject to industrial development and in many cases their reclamation involves removing concrete, tarmac and other materials. That waste material is removed and used as landfill on another part of the site, or it is taken from the site and landfilled elsewhere.
In such cases, the landfill tax could be viewed as a tax on urban regeneration, as that material must be removed from the surface before any further development can take place. The directors and the board of the Teesside development corporation are concerned about the matter and have raised it with the Department of the Environment. I hope that the Department has passed on those concerns to the Treasury, and I look forward to hearing my hon. Friend the Minister respond to them in due course.
I invite my hon. Friend to consider carefully the two amendments in the context of sugar beet soil and river dredging. However, there may be other cases—such as urban regeneration and the extraction of mineral ores—where the ordinary operation of the human development process involves the transfer of earth to another site. Rubbish waste is not created, and I question whether it is just to impose a landfill tax in such cases.
I listened carefully to the speech of my hon. Friend the Member for Stockton, South (Mr. Devlin). Many of his points must be considered further in Standing Committee, because they fall outside the scope of the two amendments under consideration. However, I do not dismiss his remarks and I can reassure him that, if the spoil and waste from mining are not categorised as controlled waste, they will not be taxable under the proposals. My hon. Friend went on to describe an industrial process which would be taxable.
On amendment No. 1, the case for exemption for processing certain agricultural waste soil was advanced very ably by my hon. Friend the Member for Congleton (Mrs. Winterton). I know that my hon. Friend the Member for Newark (Mr. Alexander)—who could not be present—is also concerned about the issue. He has sugar beet growers and processors in his constituency and he fears that the new tax will damage that industry. The hon. Member for Sherwood (Mr. Tipping) made a similar point.
I have listened carefully to the views expressed, but I stress that the landfill tax is designed to encourage all waste producers to reduce the amount of waste produced. In this instance, the soil that adheres to the sugar beet during processing is a waste product and must be disposed of in some way.
British Sugar has reduced the amount of soil that adheres to sugar beet roots so that it has to wash and transport less waste material, and the landfill tax might be an incentive to reduce waste even further. The industry is also exploiting the market for good-quality soil that is washed from the sugar beet. There is a ready market for such soil in some parts of the country. It is used for landscaping landfill sites, golf courses, and so on. At present, the industry disposes of some soil in that way, although the concentration of nine processing sites in the eastern part of the country has caused some market saturation in those counties.
I refer my hon. Friend to another valid argument. British Sugar is no longer allowed to dispose of waste soil at the site from which it was taken originally. That was the usual practice until it was restricted by the Ministry of Agriculture, Fisheries and Food in an attempt to stop the spread of rhizomania. Will my hon. Friend and his Department examine the problem and perhaps advance some helpful proposals?
My hon. Friend has told the Committee about rhizomania and the restrictions placed on British Sugar about returning the soil to the areas where sugar beet is grown. Those restrictions do not prevent the soil from being used for landscaping, and it can be returned to agricultural use for pasture. The restrictions are important for the suppression and prevention of rhizomania. The case for an exemption has not been made, but I wish to be helpful to my hon. Friends and other hon. Members who have raised the issue. I will ensure that the Ministry of Agriculture, Fisheries and Food discusses the matter further with British Sugar to see whether the agreement to prevent rhizomania can be relaxed or adapted to permit British Sugar to dispose of surplus soil in ways that are impossible at present.
Furthermore, I will ensure that Customs and Excise, for which I am responsible, continues its fruitful discussions with British Sugar. Those two organisations could define the problem exactly, and examine the possibility of allowing the company to set some of the soil aside in storage, temporarily and without paying the tax, pending the return of the soil or its sale to markets. The continuing discussions will assist the company concerned and other root and vegetable processors in trying to ameliorate the impact of the tax. One of the aims of the tax is to give an incentive to do what the company is already doing—to seek other markets and other ways to dispose of the soil.
I am grateful for the interest that the Minister has shown in the subject and for the discussions that are to take place between British Sugar and Customs and Excise. In those discussions, will the excise be mindful that British Sugar disposes of the waste itself? The waste goes to its own sites and it bears the costs. In effect, the whole operation is financially neutral and that may be an area for fruitful discussion.
I am aware of that point, and I will emphasise it to the officials.
Amendment No. 2 deals with dredgings, and the case for exempting them. I am aware of that case because, during the extensive consultation that took place, it was made repeatedly by those who own and operate ports and waterways. Dredgings are currently within the scope of the tax, because they are controlled wastes under Department of the Environment regulations. Therefore, disposal of that material to landfill is taxable. However, that illustrates the point that such material that is not landfilled—in other words, disposed of at sea, on the bank of a canal or on land in other ways—is not taxable. So, much of such material does not fall within the tax. However, some of it does have to go to landfill and will fall to be taxed.
I wish to emphasise the point, which was made by my hon. Friend the Member for Davyhulme (Mr. Churchill), that such material is only dry waste. He made light of that point, but some of those who are complaining about the impact of tax have mildly exaggerated its effect by including all the water that may be mixed up with the materials that will be landfilled. A conversion factor will be applied, and we are seeking to tax only dry weight. However, I accept the point that some dredgings must be landfilled and will fall to be taxed.
My hon. Friend the Member for Davyhulme made several powerful points, as did the hon. Member for Ellesmere Port and Neston and other hon. Members who are familiar with that important canal and waterway. The distinction that can fairly be drawn in this case is that the waste that operators are disposing of exists only through natural forces. I accept that point. The soil and the silt that they are dredging are being returned to dry land. As has been pointed out, dredging has the beneficial result of keeping waterways clear for navigation and preventing floods.
Dredgings form a relatively definable category of waste that it was not the intention of my right hon. and learned Friend the Chancellor to tax when he announced his proposals to the House more than a year ago. I cannot accept amendment No. 2, because it would amend the wrong part of the Bill, and we need to define further exactly how an exemption would operate. I hope that the Committee will accept that I wish to find a way of exempting dredgings. With that assurance, I hope that the amendment will be withdrawn.
I wish to express my appreciation to my hon. Friend the Minister, to the Chancellor and to the Government for accepting the clear-cut case that those of us who have spoken to the amendment feel exists for exempting canal and port dredgings from the ambit of the tax. I am most grateful to my hon. Friend for his comments, and I am delighted to accept his assurance that a suitably drafted amendment will be introduced later during the passage of the Bill. On that basis, I am more than happy not to press amendment No. 2.
My hon. Friend the Member for Manchester, Withington (Mr. Bradley) and I have listened to the Minister's response about the Manchester ship canal. Given the powerful arguments that have been advanced, will the Minister assure us that, before a new amendment is introduced, he will urgently consult those companies and their representatives from that river basin? This is an important issue.
This subject has been characterised throughout by a willingness to consult, and we will continue that. We hope to exempt dredgings in a precise way that does not give rise to any ambiguity, and we shall consult on the wording.
May I first apologise to the Minister? I had to leave the Chamber when he was replying to the remarks that were made on amendment No. 5. I wish to say what I would have said had I remained in the Chamber at that time.
The hon. Member for Davyhulme (Mr. Churchill), who is just leaving the Chamber, and my hon. Friend the Member for Manchester, Withington (Mr. Bradley) will be aware that the metropolitan authorities in the old Greater Manchester area joined together to become their own waste disposal authority. My local authority, the metropolitan borough of Wigan, which has a population of almost 250,000, decided some years ago to pull out of the Greater Manchester waste disposal authority. As a former mining area, Wigan can dispose of its waste considerably more cheaply alone than if it remains part of the authority. This arrangement has applied for the past five or six years.
I want to stress that what we are putting in the landfill sites in my constituency and in three or four others in old mining areas is domestic waste. We are not putting in industrial waste. I have visited the landfill site on many occasions, and I am convinced that it is extremely well managed. The methane is extracted safely, and there are special precautions to prevent leaching into the water courses. The tip is sprayed and covered each evening. The Minister talked about the nuisance created by seagulls. My local authority, which owns the tip, has engaged a falconer who comes along with his falcon and scares away the seagulls.
Even disregarding the employers' national insurance contributions, this tax will mean that council tax payers in the metropolitan borough of Wigan will have an additional burden placed on them. My authority is already rate-capped. It owns the landfill site, it manages it properly and it then reclaims the land for community purposes. The tax will amount to a wheelie bin tax on the council tax payers of Wigan.
I have no problem with making polluters pay for their waste, stored in landfill sites or elsewhere, but I hope that my hon. Friends will press again in Committee the point that the tax penalises my local authority for putting domestic waste in a landfill site that we own and manage. Even taking into account the money that will come back to the local authority in the shape of national insurance contributions, we shall be about £750,000 worse off as a consequence. That cost will fall directly on my constituents and on the rest of the metropolitan borough. It is therefore not a good idea, and I hope that something will be done about it at a later stage of the Committee's proceedings.
I am sorry to say that what is poison for one constituency is pure honey for another. My constituents will be delighted with this measure. There was a rash of applications for landfill sites a few years ago. When I looked into the detail, I found to my horror that, for various historical and geological reasons, Britain is covered with quarries and disused gravel pits—most of them in my constituency. I then discovered that we were turning our country into a place where other countries were attracted to dump their rubbish. I learned that, for geological reasons and because of the availability of sites here, the costs were horrifyingly low. Other countries also offer more incentives to incinerate.
I pride myself in a small constituency way on having given a little push to this tax. I am glad to see Treasury Ministers, of all people, improving their environmental credentials by introducing the tax.
I have written to the Minister about the fact that my constituents in Pitstone and Ivinghoe are threatened by a massive landfill site that will badly damage local amenities in an area of outstanding natural beauty. I should be pleased to hear more details, as soon as my hon. Friend has them, about the Government's exact intentions in respect of the tax.
The last thing I want is that the tax should impede business in any way. I was interested to hear hon. Members raise objections in that regard. I was glad to hear the Minister imply that there might be some solution to those objections. I have in my hand a letter from Shell UK to the Minister for Industry and Energy about the Manchester ship canal. Those who, like me, have had a small hand in pushing this idea forward do not want to inhibit our industries in any way.
In any event, I congratulate the Minister on introducing the measure.
This is an important measure. It is interesting to note how widely the principle behind it is accepted as a desirable method of dealing with the problems. I agree with the hon. Member for Buckingham (Mr. Walden) that pressure on many sites in rural and suburban areas has become intense. To the extent that the tax will concentrate people's minds on finding other ways of disposing of waste, it must be highly desirable.
It is also true that the measure will pose difficulties for some industries. Some of the paper mills in my constituency produce inert waste that is not easily disposed of. Nevertheless, we all accept that the nettle must be grasped if we are to tackle these environmental problems.
Hon. Members have already mentioned the difficulties from the local authority point of view. There are also concerns as to how quickly they will be able to adjust. My hon. Friend the Member for Cheltenham (Mr. Jones) tells me that Gloucestershire county council reckons the measure will cost it £740,000 in the first year. Multiplied across the country, it becomes clear that local authorities, which are already squeezed, will face difficulties—although I am sure they will use their ingenuity to implement the measure.
I want to refer, secondly, to the point of principle in amendment No. 5. The Government, and all political parties that believe in environmental taxation, must make it clear to the public that measures such as these are not just another wheeze for getting money out of people, but represent a genuine desire to shift habits. The money that is raised should be repaid immediately in tax cuts elsewhere. I am therefore slightly worried about the Government implementing the tax this year while making a great song about benefits that will not accrue until next year.
I might also point out that there will have been a general election in the interval, so the Government might not be in a position to deliver on their promise—leaving them exposed to the charge that they are more interested in introducing a tax than in providing the offsetting benefits.
That partly explains why my party voted against the Government's proposals to extend VAT to fuel, which was claimed afterwards to be an environmental move, but the revenue generated was used only to boost the Exchequer. An important matter of principle is at stake, and the Opposition amendment neatly encapsulated it. I suspect that that is why we shall vote together to ensure that our point is well made.
The Government have not answered a number of points to do with clause 36, which deals with the charge to tax and the date for the national insurance contributions rebate. We debated the latter fully earlier this afternoon. Local authorities and landfill site operators will be greatly disadvantaged by the six-month delay that the Government have introduced—despite the undertakings given by the Chancellor in 1994 and 1995.
I want to make a few clear points about our objections, which are not to the existence of the tax but to the way in which the Government propose to implement it. It is crucial to encourage the development of alternative waste management options if we are to achieve the full potential of the tax.
We have heard about the Manchester ship canal and British Sugar, and my hon. Friend the Member for Great Grimsby (Mr. Mitchell) spoke about Tioxide UK, which will be penalised. Although that company takes highly toxic waste and puts it through an environmental process, recycling a great deal of it, there remains inert waste which it will have to pay to landfill. Presumably, one of its options is to put all its toxic waste into landfill and simply pay a slightly higher charge. It is vital that we have support systems in place to develop alternatives.
Despite the assurances that were given by the Paymaster General today—frankly, he is on a wing and a prayer—it is clear that he does not understand the cost of recycling or the investment that is necessary to introduce such processes. Changing people's behaviour is vital. He did not deal with the likely encouragement of disposal by less environmentally desirable options than landfill. He certainly did not say how we will ensure that fly tipping is not the by-product of the tax, which would defeat the very purpose of introducing it. He did not explain the interim measures that will ensure that waste producers are not able to avoid payment. He did not deal with current illegal sites, which will remain outside the landfill tax. Finally, he did not say how local authorities that are already under severe financial containment by the Government will be able to deal with new strategies to encourage recycling when they do not have the financial resources. The landfill tax will increase their costs for the disposal of waste.
For all those reasons, we shall vote against the clause and continue to press the Government to convert the landfill tax into a true environmental tax instead of a bit of window dressing.
The clause is an important element in the introduction of a landfill tax, about which we have consulted widely. I am grateful for the expressions of support for the principle of the tax from hon. Members on both sides of the House. It will encourage good environmental practice. By taxing landfill, we will encourage the development of alternative ways of dealing with waste. Indeed, it will lead to less waste being produced in the first place.
That justification for the tax is valid even if the landfill site is well engineered, as obviously is the case in the example described by the hon. Member for Wigan (Mr. Stott). My hon. Friend the Member for Buckingham (Mr. Walden) put the other side of the argument and showed that, even if a landfill site is well run and managed, there are still substantial nuisance problems to surrounding residents—smell, noise, litter, dust and traffic movements, for example. It is right, therefore, to try to capture those external costs and attribute them to the producers and handlers of waste.
The revenue raised from the tax will be some £450 million in a full year, and rather more than that—some £500 million in a full year—will be used to cut further the main rate of national insurance contributions to 10 per cent. The UK is leading the way in lightening the burden of employment taxation. That is one reason why our employment record is better than that of any other major economy in Europe.
Bafflingly, the Opposition now say that they will vote against the clause. Having supported the landfill tax, and having failed to indicate anything in the clause with which they disagree, they will, for reasons best known to themselves, vote against a key clause in bringing into effect the landfill tax. My right hon. and hon. Friends know better. I urge them and as many other hon. Members as possible to vote for the clause.
|Division No. 32]||[7.05 pm|
|Ainsworth, Peter (East Surrey)||Bottomley, Peter (Eltham)|
|Aitken, Rt Hon Jonathan||Bottomley, Rt Hon Virginia|
|Alison, Rt Hon Michael (Selby)||Bowden, Sir Andrew|
|Allason, Rupert (Torbay)||Bowis, John|
|Amess, David||Boyson, Rt Hon Sir Rhodes|
|Arbuthnot, James||Brandreth, Gyles|
|Arnold, Jacques (Gravesham)||Brazier, Julian|
|Ashby, David||Bright, Sir Graham|
|Atkins, Rt Hon Robert||Brooke, Rt Hon Peter|
|Atkinson, Peter (Hexham)||Brown, M (Brigg & Cl'thorpes)|
|Baker, Rt Hon Kenneth (Mole V)||Browning, Mrs Angela|
|Baker, Nicholas (North Dorset)||Bruce, Ian (Dorset)|
|Baldry, Tony||Burns, Simon|
|Banks, Robert (Harrogate)||Burt, Alistair|
|Bates, Michael||Butcher, John|
|Batiste, Spencer||Butler, Peter|
|Bellingham, Henry||Butterfill, John|
|Bendall, Vivian||Carlisle, John (Luton North)|
|Beresford, Sir Paul||Carlisle, Sir Kenneth (Lincoln)|
|Biffen, Rt Hon John||Carrington, Matthew|
|Body, Sir Richard||Cash, William|
|Bonsor, Sir Nicholas||Chapman, Sir Sydney|
|Booth, Hartley||Churchill, Mr|
|Boswell, Tim||Clappison, James|
|Clark, Dr Michael (Rochford)||Heathcoat-Amory, Rt Hon David|
|Clarke, Rt Hon Kenneth (Ru'clif)||Hendry, Charles|
|Clifton-Brown, Geoffrey||Hicks, Robert|
|Coe, Sebastian||Higgins, Rt Hon Sir Terence|
|Colvin, Michael||Hogg, Rt Hon Douglas (G'tham)|
|Congdon, David||Horam, John|
|Conway, Derek||Hordern, Rt Hon Sir Peter|
|Coombs, Anthony (Wyre For'st)||Howard, Rt Hon Michael|
|Coombs, Simon (Swindon)||Howell, Rt Hon David (G'dford)|
|Couchman, James||Hughes, Robert G (Harrow W)|
|Cran, James||Hunt, Rt Hon David (Wirral W)|
|Currie, Mrs Edwina (S D'by'ire)||Hunter, Andrew|
|Curry, David (Skipton & Ripon)||Jack, Michael|
|Davies, Quentin (Stamford)||Jackson, Robert (Wantage)|
|Davis, David (Boothferry)||Jenkin, Bernard|
|Day, Stephen||Jessel, Toby|
|Deva, Nirj Joseph||Johnson Smith, Sir Geoffrey|
|Devlin, Tim||Jones, Gwilym (Cardiff N)|
|Dorrell, Rt Hon Stephen||Jones, Robert B (W Hertfdshr)|
|Douglas-Hamilton, Lord James||Jopling, Rt Hon Michael|
|Dover, Den||Kellett-Bowman, Dame Elaine|
|Duncan, Alan||Key, Robert|
|Duncan-Smith, Iain||King, Rt Hon Tom|
|Dunn, Bob||Kirkhope, Timothy|
|Durant, Sir Anthony||Knight, Mrs Angela (Erewash)|
|Dykes, Hugh||Knight, Rt Hon Greg (Derby N)|
|Eggar, Rt Hon Tim||Knight, Dame Jill (Bir'm E'st'n)|
|Elletson, Harold||Knox, Sir David|
|Emery, Rt Hon Sir Peter||Kynoch, George (Kincardine)|
|Evans, David (Welwyn Hatfield)||Lait, Mrs Jacqui|
|Evans, Jonathan (Brecon)||Lamont, Rt Hon Norman|
|Evans, Nigel (Ribble Valley)||Lawrence, Sir Ivan|
|Evans, Roger (Monmouth)||Legg, Barry|
|Evennett, David||Leigh, Edward|
|Faber, David||Lennox-Boyd, Sir Mark|
|Fabricant, Michael||Lester, Sir James (Broxtowe)|
|Field, Barry (Isle of Wight)||Lidington, David|
|Fishburn, Dudley||Lilley, Rt Hon Peter|
|Forman, Nigel||Lloyd, Rt Hon Sir Peter (Fareham)|
|Forsyth, Rt Hon Michael (Stirling)||Lord, Michael|
|Forth, Eric||Luff, Peter|
|Fowler, Rt Hon Sir Norman||Lyell, Rt Hon Sir Nicholas|
|Fox, Dr Liam (Woodspring)||MacKay, Andrew|
|Fox, Sir Marcus (Shipley)||Maclean, Rt Hon David|
|Freeman, Rt Hon Roger||McLoughlin, Patrick|
|French, Douglas||McNair-Wilson, Sir Patrick|
|Gale, Roger||Madel, Sir David|
|Gallie, Phil||Maitland, Lady Olga|
|Gardiner, Sir George||Major, Rt Hon John|
|Garel-Jones, Rt Hon Tristan||Malone, Gerald|
|Garnier, Edward||Mans, Keith|
|Gill, Christopher||Marlow, Tony|
|Gillan, Cheryl||Marshall, John (Hendon S)|
|Goodlad, Rt Hon Alastair||Marshall, Sir Michael (Arundel)|
|Goodson-Wickes, Dr Charles||Martin, David (Portsmouth S)|
|Gorman, Mrs Teresa||Mates, Michael|
|Gorst, Sir John||Mawhinney, Rt Hon Dr Brian|
|Grant, Sir A (SW Cambs)||Mayhew, Rt Hon Sir Patrick|
|Greenway, Harry (Ealing N)||Mellor, Rt Hon David|
|Greenway, John (Ryedale)||Merchant, Piers|
|Griffiths, Peter (Portsmouth, N)||Mitchell, Andrew (Gedling)|
|Grylls, Sir Michael||Mitchell, Sir David (NW Hants)|
|Gummer, Rt Hon John Selwyn||Moate, Sir Roger|
|Hague, Rt Hon William||Monro, Rt Hon Sir Hector|
|Hamilton, Rt Han Sir Archibald||Montgomery, Sir Fergus|
|Hamilton, Neil (Tatton)||Needham, Rt Hon Richard|
|Hampson, Dr Keith||Neubert, Sir Michael|
|Hanley, Rt Hon Jeremy||Newton, Rt Hon Tony|
|Hannam, Sir John||Nicholls, Patrick|
|Hargreaves, Andrew||Nicholson, David (Taunton)|
|Harris, David||Norris, Steve|
|Hawkins, Nick||Onslow, Rt Hon Sir Cranley|
|Hawksley, Warren||Oppenheim, Phillip|
|Hayes, Jerry||Ottaway, Richard|
|Heald, Oliver||Page, Richard|
|Heath, Rt Hon Sir Edward||Paice, James|
|Patten, Rt Hon John||Sweeney, Walter|
|Pattie, Rt Hon Sir Geoffrey||Sykes, John|
|Pawsey, James||Tapsell, Sir Peter|
|Peacock, Mrs Elizabeth||Taylor, Ian (Esher)|
|Porter, Barry (Wirral S)||Taylor, John M (Solihull)|
|Porter, David (Waveney)||Taylor, Sir Teddy (Southend, E)|
|Powell, William (Corby)||Temple-Morris, Peter|
|Redwood, Rt Hon John||Thomason, Roy|
|Renton, Rt Hon Tim||Thompson, Sir Donald (C'er V)|
|Richards, Rod||Thompson, Patrick (Norwich N)|
|Riddick, Graham||Thornton, Sir Malcolm|
|Rifkind, Rt Hon Malcolm||Thurnham, Peter|
|Robathan, Andrew||Townsend, Cyril D (Bexl'yh'th)|
|Roberts, Rt Hon Sir Wyn||Tracey, Richard|
|Robertson, Raymond (Ab'd'n S)||Tredinnick, David|
|Robinson, Mark (Somerton)||Trend, Michael|
|Roe, Mrs Marion (Broxbourne)||Trotter, Neville|
|Rowe, Andrew (Mid Kent)||Twinn, Dr Ian|
|Rumbold, Rt Hon Dame Angela||Vaughan, Sir Gerard|
|Sackville, Tom||Viggers, Peter|
|Sainsbury, Rt Hon Sir Timothy||Waldegrave, Rt Hon William|
|Scott, Rt Hon Sir Nicholas||Walden, George|
|Shephard, Rt Hon Gillian||Walker, Bill (N Tayside)|
|Shepherd, Richard (Aldridge)||Waller, Gary|
|Shersby, Sir Michael||Ward, John|
|Sims, Roger||Wardle, Charles (Bexhill)|
|Skeet, Sir Trevor||Waterson, Nigel|
|Smith, Tim (Beaconsfield)||Watts, John|
|Soames, Nicholas||Wells, Bowen|
|Spencer, Sir Derek||Whitney, Ray|
|Spicer, Sir James (W Dorset)||Whittingdale, John|
|Spicer, Sir Michael (S Worcs)||Widdecombe, Ann|
|Spink, Dr Robert||Wiggin, Sir Jerry|
|Spring, Richard||Wilkinson, John|
|Sproat, Iain||Willetts, David|
|Squire, Robin (Hornchurch)||Wilshire, David|
|Stanley, Rt Hon Sir John||Winterton, Mrs Ann (Congleton)|
|Steen, Anthony||Winterton, Nicholas (Macc'f'ld)|
|Stephen, Michael||Yeo, Tim|
|Stern, Michael||Young, Rt Hon Sir George|
|Stewart, Allan||Tellers for the Ayes:|
|Streeter, Gary||Mr. Roger Knapman and|
|Sumberg, David||Mr. Timothy Wood.|
|Abbott, Ms Diane||Byers, Stephen|
|Adams, Mrs Irene||Caborn, Richard|
|Ainger, Nick||Callaghan, Jim|
|Ainsworth, Robert (Cov'try NE)||Campbell, Mrs Anne (C'bridge)|
|Allen, Graham||Campbell, Menzies (Fife NE)|
|Alton, David||Campbell, Ronnie (Blyth V)|
|Anderson, Donald (Swansea E)||Campbell-Savours, D N|
|Anderson, Ms Janet (Ros'dale)||Canavan, Dennis|
|Armstrong, Hilary||Cann, Jamie|
|Ashdown, Rt Hon Paddy||Chisholm, Malcolm|
|Ashton, Joe||Clapham, Michael|
|Austin-Walker, John||Clark, Dr David (South Shields)|
|Banks, Tony (Newham NW)||Clarke, Eric (Midlothian)|
|Barnes, Harry||Clarke, Tom (Monklands W)|
|Battle, John||Clelland, David|
|Beckett, Rt Hon Margaret||Clwyd, Mrs Ann|
|Bell, Stuart||Coffey, Ann|
|Benn, Rt Hon Tony||Cohen, Harry|
|Bennett, Andrew F||Connarty, Michael|
|Benton, Joe||Cook, Frank (Stockton N)|
|Bermingham, Gerald||Cook, Robin (Livingston)|
|Berry, Roger||Corbett, Robin|
|Betts, Clive||Corston, Jean|
|Blair, Rt Hon Tony||Cousins, Jim|
|Boateng, Paul||Cunningham, Jim (Covy SE)|
|Bradley, Keith||Cunningham, Rt Hon Dr John|
|Brown, Gordon (Dunfermline E)||Cunningham, Roseanna|
|Brown, N (N'c'tle upon Tyne E)||Dafis, Cynog|
|Bruce, Malcolm (Gordon)||Dalyell, Tam|
|Burden, Richard||Darling, Alistair|
|Davidson, Ian||Litherland, Robert|
|Davies, Bryan (Oldham C'tral)||Livingstone, Ken|
|Davies, Chris (L'Boro & S'worth)||Llwyd, Elfyn|
|Davies, Rt Hon Denzil (Llanelli)||Loyden, Eddie|
|Davies, Ron (Caerphilly)||Lynne, Ms Liz|
|Denham, John||McAllion, John|
|Dewar, Donald||McAvoy, Thomas|
|Dixon, Don||McCartney, Ian|
|Dobson, Frank||McCrea, The Reverend William|
|Dowd, Jim||McFall, John|
|Eagle, Ms Angela||McKelvey, William|
|Eastham, Ken||McLeish, Henry|
|Etherington, Bill||Maclennan, Robert|
|Evans, John (St Helens N)||McMaster, Gordon|
|Ewing, Mrs Margaret||McNamara, Kevin|
|Fatchett, Derek||MacShane, Denis|
|Faulds, Andrew||McWilliam, John|
|Field, Frank (Birkenhead)||Madden, Max|
|Flynn, Paul||Mahon, Alice|
|Foster, Rt Hon Derek||Mandelson, Peter|
|Foster, Don (Bath)||Marek, Dr John|
|Foulkes, George||Marshall, David (Shettleston)|
|Fyfe, Maria||Martin, Michael J (Springbum)|
|Galbraith, Sam||Maxton, John|
|Galloway, George||Meacher, Michael|
|Gapes, Mike||Meale, Alan|
|Garrett, John||Michael, Alun|
|George, Bruce||Michie, Bill (Sheffield Heeley)|
|Gerrard, Neil||Michie, Mrs Ray (Argyll & Bute)|
|Gilbert, Rt Hon Dr John||Milburn, Alan|
|Godman, Dr Norman A||Miller, Andrew|
|Godsiff, Roger||Mitchell, Austin (Gt Grimsby)|
|Golding, Mrs Lin||Molyneaux, Rt Hon Sir James|
|Gordon, Mildred||Moonie, Dr Lewis|
|Graham, Thomas||Morgan, Rhodri|
|Grant, Bernie (Tottenham)||Morley, Elliot|
|Griffiths, Nigel (Edinburgh S)||Morris, Rt Hon Alfred (Wy'nshawe)|
|Griffiths, Win (Bridgend)||Morris, Estelle (B'ham Yardley)|
|Grocott, Bruce||Morris, Rt Hon John (Aberavon)|
|Gunnell, John||Mowlam, Marjorie|
|Hain, Peter||Mudie, George|
|Hall, Mike||Mullin, Chris|
|Hanson, David||Murphy, Paul|
|Harvey, Nick||Oakes, Rt Hon Gordon|
|Henderson, Doug||O'Brien, Mike (N W'kshire)|
|Heppell, John||O'Brien, William (Normanton)|
|Hinchliffe, David||O'Hara, Edward|
|Hodge, Margaret||Olner, Bill|
|Hoey, Kate||O'Neill, Martin|
|Home Robertson, John||Orme, Rt Hon Stanley|
|Hood, Jimmy||Parry, Robert|
|Hoon, Geoffrey||Pearson, Ian|
|Howarth, Alan (Strat'rd-on-A)||Pendry, Tom|
|Howarth, George (Knowsley North)||Pickthall, Colin|
|Howells, Dr Kim (Pontypridd)||Pike, Peter L|
|Hoyle, Doug||Pope, Greg|
|Hughes, Robert (Aberdeen N)||Powell, Ray (Ogmore)|
|Hughes, Simon (Southwark)||Prentice, Bridget (Lew'm E)|
|Hutton, John||Prentice, Gordon (Pendle)|
|Illsley, Eric||Prescott Rt Hon John|
|Ingram, Adam||Primarolo, Dawn|
|Jackson, Glenda (H'stead)||Purchase, Ken|
|Jackson, Helen (Shef'ld, H)||Quin, Ms Joyce|
|Jamieson, David||Randall, Stuart|
|Jones, Barry (Alyn and D'side)||Raynsford, Nick|
|Jones, Lynne (B'ham S O)||Reid, Dr John|
|Jones, Martyn (Clwyd, SW)||Rendel, David|
|Jones, Nigel (Cheltenham)||Robertson, George (Hamilton)|
|Kaufman, Rt Hon Gerald||Robinson, Geoffrey (Co'try NW)|
|Keen, Alan||Roche, Mrs Barbara|
|Kennedy, Jane (L'pool Br'dg'n)||Rogers, Allan|
|Khabra, Piara S||Rocker, Jeff|
|Kilfoyle, Peter||Ross, Ernie (Dundee W)|
|Kirkwood, Archy||Rowlands, Ted|
|Lestor, Joan (Eccles)||Ruddock, Joan|
|Liddell, Mrs Helen||Salmond, Alex|
|Sedgemore, Brian||Touhig, Don|
|Sheerman, Barry||Trimble, David|
|Sheldon, Rt Hon Robert||Turner, Dennis|
|Shore, Rt Hon Peter||Tyler, Paul|
|Short, Clare||Vaz, Keith|
|Simpson, Alan||Walker, Rt Hon Sir Harold|
|Skinner, Dennis||Wallace, James|
|Smith, Andrew (Oxford E)||Walley, Joan|
|Smith, Chris (lsl'ton S & F'sbury)||Wardell, Gareth (Gower)|
|Smith, Llew (Blaenau Gwent)||Wareing, Robert N|
|Smyth, The Reverend Martin||Watson, Mike|
|Snape, Peter||Welsh, Andrew|
|Soley, Clive||Wicks, Malcolm|
|Spearing, Nigel||Wigley, Dafydd|
|Speller, John||Williams, Rt Hon Alan (SW'n W)|
|Squire, Rachel (Dunfermline W)||Williams, Alan W (Carmarthen)|
|Steel, Rt Hon Sir David||Wilson, Brian|
|Steinberg, Gerry||Winnick, David|
|Stevenson, George||Wise, Audrey|
|Stott, Roger||Worthington, Tony|
|Strang, Dr. Gavin||Wright, Dr Tony|
|Straw, Jack||Young, David (Bolton SE)|
|Taylor, Mrs Ann (Dewsbury)||Tellers for the Noes:|
|Timms, Stephen||Mr. Jon Owen Jones and|
|Tipping, Paddy||Mr. Eric Martlew.|