Clause 184 — Rate of Landfill Tax

Part of Finance Bill – in the House of Commons at 5:45 pm on 14th May 2003.

Alert me about debates like this

Photo of George Osborne George Osborne Opposition Whip (Commons) 5:45 pm, 14th May 2003

As my hon. Friend Mr. Flight pointed out, clause 184 points the way to substantial increases in the landfill tax. The clause proposes that it should increase by £1 this year, £1 next year and, from 2005–06, by £3 a year so that, according to the Government, it will be levied at £35 a tonne. That is a substantial increase on the original tax introduced by the Conservative Government in 1996, which was just £3 a tonne. Before the clause passes into law, we should reflect on the original assumptions behind the decisions made by the then Chancellor, my right hon. and learned Friend Mr. Clarke, when introducing the tax.

The first assumption was that the landfill tax would be offset by a compensatory reduction in employers' national insurance. Indeed, in his 1994 Budget, my right hon. and learned Friend said:

"I am determined not to impose additional costs on businesses overall . . . I want to raise tax on polluters to make further cuts in the tax on jobs."—[Hansard, 29 November 1994; Vol. 250, c. 1098.]

There is a striking contrast with this year's Budget. Instead of a compensatory reduction in employers' national insurance, there are substantial increases. Mr. Thomas did not give the landfill tax the credit that it is due. It is not just one of the oldest environmental taxes, it was the first tax with an explicit environmental purpose. The assumption—pretty radical at the time—was that a landfill operator could offset any contributions that it made to an environmental charity or voluntary group against its liability for landfill tax up to a specified limit. Indeed, it could claim tax credits for 90 per cent. of its contributions to charities and voluntary groups up to a total of 20 per cent. of its overall landfill tax bill in any one year. The nature of those environmental bodies was spelt out—they were non-profit-making bodies, they were not controlled by central or local government and they were often local schemes. They were administered by Entrust, a central Government regulator.

Since landfill tax was introduced and the landfill tax credit scheme came into operation, more than £400 million has been contributed to environmental bodies, including, in 2000–01, the most recent figures that I have seen, £109 million to those charities. Substantial sums have been given to very small local groups, which has been a huge boon to such groups and charities. It has enabled them to be set up and has done an enormous amount of good locally in, I would guess, every constituency.

There is a philosophical point here. This is about strengthening civil society. It is about Burke's "little platoons", and about supporting voluntary groups, local charities and so on. As a member of the Public Accounts Committee, I am the first to accept that there have been problems with the scheme. The Committee looked into the matter, and I have its report. There were problems with the lack of oversight, accountability, transparency and so on. It is all spelt out in the Committee's report. However, the problems lay with the Government, the regulator and the way in which the scheme operated, not with the principle of the scheme. That is why I am sad that, instead of trying to fix the problems and stick with the principle, the Government have largely decided to abandon the principle altogether. That is a tragedy, not least because the Government recognised in their pre-Budget report what a good thing the scheme has been. The report stated:

"The Government recognises that the Landfill Tax Credit Scheme (LTCS) has supported many worthwhile community and environment projects that have improved the quality of the environment at the local level . . . The scheme has also been successful in generating local community involvement in such projects."

If we are not here to support such schemes, what are we here for? As I said, it is sad that the Government are largely abandoning the scheme.

That has caused enormous concern in groups in my constituency and in constituencies across the country. The Economic Secretary is proposing, in effect, to remove two thirds of the funding of the scheme—funding raised directly by clause 184—and to put that money into general public expenditure, although he says that it will be hypothecated to environmental management and so on within centrally managed expenditure. Nevertheless, £60 million or more, which is currently given to the charitable and voluntary groups, will go straight into the Treasury coffers.

When I wrote to the Minister about the matter, as no doubt did other right hon. and hon. Members, he replied on 22 January and, I think, gave the game away. He wrote:

"This change reflects the Government's conclusion that public spending will be a more effective way of providing strategic direction to sustainable waste management."

That tells us all we need to know about the Government. They think that Whitehall knows best. They think that their public spending is a more effective way of delivering change on the ground.

The charities and environmental groups that have written to me do not accept that, nor do the groups that will lose out most—those involved in activities such as research, development, education and information, all of which are vital, as the hon. Member for Ceredigion said, to a change in attitude in our country towards these issues.

I shall briefly further detain the House, although I know that the nationalists are keen to get on to their whisky clauses. Waste Watch has written to me and probably to many hon. Members. It runs the Cheshire Schools Waste Action club, which, it points out

"is a successful education project, which increases awareness of waste issues and supports schools in taking action to reduce their waste outputs. Projects have achieved between a 30–80 per cent. reduction of waste within schools."

Schoolchildren will take that learning with them for the rest of their life. Waste Watch comments:

"We will lose the opportunity to enable staff and children in Cheshire schools to reduce their waste."

The Cheshire Landscape Trust has brought to my attention a number of serious concerns, and I should be interested to hear the Minister's response. The trust points out that

"by moving some £100 million from the private to the public sector, to fund waste management projects, the public sector could lose the substantial amount of matched funding, which is currently running between £400 and £700 million."

Again, that should be the sort of thing that we want to encourage. Surely, we want to encourage local groups to work with local businesses and to bring in money through match funding. According to the Cheshire Landscape Trust, that will be lost. It asks,

"how will local communities, universities and other research establishments who are currently undertaking Research and Development projects access funding for sustainable waste management projects in the future?"

It goes on to express another very serious concern, noting:

"One estimate puts the number of job losses due to this transfer of funds away from Environmental Bodies to be 5000. This includes jobs created on and through projects as well as employees working for Distributive Environmental Bodies. For this trust, the proposed changes would put us in a very difficult position with possible job losses."

Finally, I wish to refer to an organisation that no right-thinking Member of Parliament could ignore—the Cheshire Federation of Women's Institutes. The Prime Minister learned to his cost what happens when one puts the women's institutes' backs up. The federation makes the point:

"The transfer of funds away from Environmental Bodies, many of which bring local knowledge to the allocation of the funds, means that local involvement and community participation will be lost."

It asked me to bring those concerns to the attention of the Government and the House.

These are very serious matters. We are talking about good-minded people who give their time voluntarily in our constituencies to work for local environmental groups and improve our local environment for everyone. Those groups will lose out to the tune of tens of millions of pounds.