Clause 14

Finance Bill – in a Public Bill Committee at 3:30 pm on 10th May 2007.

Alert me about debates like this

Rates of aggregates levy

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

Photo of Philip Dunne Philip Dunne Conservative, Ludlow

I wish to address the clause because I am concerned that the Government are applying double standards in their attempt to justify a very significant increase in the aggregates levy of more than 20 per cent. after the levy has been stable for a number of years. The justification in the Red Book is that it will encourage the sustainable use of resources as some kind of green measure. Yet the Government then provide themselves with an exemption—they are saying that that is suitable for the private sector, but not the public sector. Highways have always been exempt from the aggregates levy and highways authorities are probably the largest users of aggregates in the country. Now the Government are seeking to exempt the railways—another Government user of aggregates. How do the Government square that? Should they not be subject to the same sustainability argument?

The main reason that I think that the clause applies a double standard is that increasing the cost of construction for UK-sourced materials will simply encourage the importing of materials. That was brought home to me when I read the comments of Mr. John Webster, who I believe is from a trade association. He said:

“There will be singing and dancing in the streets of Dublin and Brussels tonight as the Chancellor tilts even further the operational cost balance towards our overseas competitors”.

Many building products that can use pre-cast concrete for which aggregates are the main feedstock can alternatively use building materials made of timber imported from over seas. The environmental impact of encouraging imports of heavy and substantial building materials is far more significant than the alleged negative environmental impact of extracting aggregate resources. This country has plenty of the latter—they are not in scarce supply and can be sustainably extracted. It is a mockery to claim that the measure before us is anything other than a revenue-raising measure by the Government. Admittedly, it would not raise enormously significant revenues—according to the Red Book, the impact would be £40 million in the first year. None the less, it is significant for the construction industry because it will put up its costs. Those costs are not just for major infrastructure   projects—it will put up the cost of the Olympics, over which the Government have been embarrassed already. It will also put up the cost of affordable housing, about which all Committee members will be concerned. The measure has not been thought through. It is a penny-pinching and inappropriate tax-raising measure cloaked in greenery.

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

I fully understand the hon. Gentleman’s comments. Is he aware that the aggregates levy was introduced on 1 April 2002? If the clause goes through, it will put up the levy by the amount to which he referred from 1 April 2008. That will be the first rise in six years.

Photo of Philip Dunne Philip Dunne Conservative, Ludlow

I am aware of that. That is not in dispute, and we are not complaining about that. I am complaining that it will go up by 22 per cent. in one go for no apparent reason other than to raise revenue for the Chancellor. Of course, that is part of his job, but he is singling out that industry. That will have much wider ramifications, which have not been thought through, or clearly explained to the nation. I look forward to hearing how the Financial Secretary can justify them.

Photo of John Healey John Healey The Financial Secretary to the Treasury

I do not know, Mr. Gale. Whatever the hon. Gentleman’s leader says, if you vote blue in Ludlow, you do not get green. This is not a revenue-raising levy. When we introduced the aggregates levy in 2002, we cut the national insurance rate for employers across the board. So, if anything, the Treasury is down on receipts from the levy rather than up. In addition, it is an environmental tax; it is an environmental tax for environmental purposes. Its purpose is, first, to incorporate some of the external costs that come from quarrying and, secondly, to try to encourage the greater use of recycled stone and gravel.

The assessment, including the independent assessment of the impact of the levy since its introduction in 2002, shows that between then and 2005 the amount of newly quarried rock, stone and gravel in this country was reduced by 18 million tonnes, and the amount of recycled aggregate used in this country over that time increased by 5.5 million tonnes, so it is having the sort of impact that it was designed to achieve.

Photo of David Gauke David Gauke Conservative, South West Hertfordshire

I note the Financial Secretary’s point that when the aggregate levy was introduced there was a tax cut in another area to offset it, so it is, at best, neutral. However, according to the Red Book the increase in the aggregate levy will yield an additional £40 million in 2008-09 and £45 million in 2009-10. What taxes were cut to ensure that those increases will be fiscally neutral?

Photo of John Healey John Healey The Financial Secretary to the Treasury

I know that the hon. Gentleman did not miss it; there were some significant corporate tax cuts in the Budget this year, and we discussed them in Committee this week, under the main corporation tax rate cut in clause 2.

Adam Afriyie rose—

Mr. Gauke rose—

Photo of John Healey John Healey The Financial Secretary to the Treasury

I am going to make this point and then I will sit down. The aggregates levy has not changed, despite the principle on which we introduced it and our expectation that it would rise in line with inflation to maintain not just its real value but its real effect. As it  was bedding down, we chose to freeze it each year until this year. This is the first rise that we have proposed; in many ways, this is a catch-up year. We are making this increase in the rate in order to maintain the environmental impact that the levy, in its earliest years, appears to be have been having.

Question put and agreed to.

Clause 14 ordered to stand part of the Bill.