At our previous sitting, the Economic Secretary to the Treasury responded too succinctly. He rightly paid tribute to the Select Committee on Northern Ireland Affairs but omitted to mention that it had concluded that the clause would reduce the impact of the levy on the value-added sector only temporarily and would have no effect on the concerns of the Northern Ireland Executive, the wider industry and the community, and that the announcement of the provisions of the clause did not affect the tenor of the conclusions and recommendations in its earlier report.
The Economic Secretary said at our previous sitting that clause 126
''allows the sector time to adjust to the changed market conditions by, for example, increasing the use of recycled or other non-taxed alternative material in its processed products.''—[Official Report, Standing Committee F, 20 June 2002; c. 502–503.]
Yet we understand from the British Geological Survey and work done by the Department for Transport, Local Government and the Regions that recycling even the maximum level of hard waste could substitute for between only 1 and 2 per cent. of the virgin aggregates needed. The provision will hardly produce the outstanding result suggested by the Economic Secretary that producers in Northern Ireland and the users of aggregates will be able to increase their use of recycled material to a much greater extent than was thought possible hitherto by any of the experts.
The Economic Secretary said that the Revenue forecast was expected to rise significantly next year and the following year because of the delay in implementation and the allowances to be made during the process of introduction. Why do the Revenue's forecasts continue to increase when the Government say that the purpose of the levy is to reduce demand? If demand were to fall, one would
expect the tax yield to fall rather than rise after the first year, but that is not what is shown in the Red Book.
What resources have been allocated to the problem of potential smuggling in Northern Ireland? The hon. Gentleman said that resources had been allocated and that there was a significant limit to the incentive to smuggle because of the weight, bulk and low value of aggregates. He did not explain the 40 per cent. drop in the output of traditional quarries in Fermanagh and South Tyrone. He did not answer the challenge that was posed about Northern Ireland quarrying sales being hit by smuggled aggregates. He did not mention the fact that producers of precast concrete in Northern Ireland are threatening to relocate to other parts of the European Union to take advantage of the competitiveness that will be created by the measure. A large coastal quarry in southern Ireland is being planned to target the United Kingdom market with its aggregates and tax-exempt concrete products. That is a sorry state of affairs and I hope that the Economic Secretary will provide a better response to our concerns than hitherto.
The hon. Gentleman is right to remind the Committee of the role of the Northern Ireland Affairs Committee in helping the Government to produce these provisions. It has played an important role. As that Committee recognises, it is important to emphasise, even if that is not fully accepted at this point, that the proposals are for transitional provision in Northern Ireland. They do not give an exemption to Northern Ireland but will mean that companies in the industry in Northern Ireland will have five years in which to adjust to the introduction of the aggregates levy. We proposed that provision to help Northern Ireland and to preserve the integrity of a single fiscal regime across the United Kingdom. The five-year period, as I have pointed out, recognises the unique circumstances in Northern Ireland, which has a long land border with the Republic of Ireland.
I am aware of the research that the hon. Gentleman cites on the potential for substitution with recycled materials, but I urge him to look less at academic research, which is inevitably predictive, based on best assumptions and estimates, and more at emerging practice on the UK mainland. That may be a sign of the way in which developments may go in Northern Ireland. For example, Alfred McAlpine is reportedly now investing £16 million in new transport infrastructure to move slate waste from its quarries in north Wales for use as road sub-base. The levy has made the slate waste commercially viable as a product for McAlpine, and it has plans to ship up to 10 million tonnes of slate waste per year from its north Wales quarries. According to reports, during the next 30 years, it intends to use up to 340 million tonnes of slate waste currently built up in its quarries. Until this point that has not been commercially viable but, as a result of the aggregates levy, it now is viable, and therefore a valuable source of an alternative to virgin aggregate.
On the resources that Customs has made available to deal with the potential for smuggling, I have nothing to add to my previous remarks. Hon. Members will appreciate that I shall not, in
Committee and in public, give chapter and verse on the deployment proposed by Customs to keep tabs on the impact of the levy and to ensure that we get the proper level of payment and avoid smuggling. Suffice it to say that Customs has built that into its operational plans for Northern Ireland and I am confident that the plans in place at this stage are sufficient.
On sales, it is true to say that sales from certain quarries in Northern Ireland have dropped during the past several months. However, it is too early to say whether that is the result of inevitable and predictable forestalling and stockpiling in advance of the introduction of the levy on 1 April or whether there is any long-term effect. I suggest that we need to wait and see for hard evidence of that, but I believe that the drop will prove to be the result of understandable forestalling practices in advance of the introduction of the levy.
Finally, on our anticipation of alterations to the revenue yields, the adjusted forecasts take account of the reduction in the extraction of aggregate as a result of the levy. That is precisely one of the purposes of the levy, built in from year one. The alteration to our anticipation of revenue take in the first year built in fresh assumptions about the forestalling practices that I mentioned a moment ago. However, we now anticipate our revenue yield on the levy once the phased introduction in Northern Ireland—which has also been built into the revised assumptions—is complete, to be very similar to what we had originally published and anticipated. The revised revenue forecast for the year 2005–06 is £395 million. For 2006–07, it remains at £420 million.
I am grateful for the Economic Secretary's further explanation of the matter, although I do not agree with him. He disclosed some revealing statistics about slate waste, and we shall have a chance to return to the issue when we debate another amendment but, for the time being, having had a debate about it, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 126 ordered to stand part of the Bill.