Clause 94 - Rates of landfill tax

Finance Bill – in a Public Bill Committee at 2:15 pm on 10 June 2014.

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

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

It is a pleasure to serve under your chairmanship, Mr Streeter.

Clause 94 provides for rates of landfill tax to be uprated in line with inflation. The standard rate of landfill tax from 1 April 2014 is £80 per tonne, while the lower rate, applying to less-polluting qualifying waste, is £2.50 per tonne. When the tax was first introduced, the standard rate was £7 and the lower rate was £2. However, following concerns about the limited environmental impact that the new tax was having, the standard rate of the tax has been increased consistently since 1999.

In 1999, the last Labour Government committed to increasing the rate of the tax by at least £1 per tonne each year. The duty escalator was increased to £3 per tonne in 2005 and £8 per tonne in 2007. In the 2009 pre-Budget report, the Government stated that that would continue until at least 2013—a policy that the coalition Government have continued to commit to, including in this year’s Finance Bill. Indeed, the Budget confirmed that landfill tax rates will continue to rise by RPI, rounded to the nearest 5p, beyond 2015.

According to a House of Commons Library note from 2009, the proportion of waste sent to landfill from the introduction of the tax up to 2009 fell by around a third, and that was accompanied by a similar increase in recycling. I am interested to hear whether the Minister could provide the Committee with more recent figures on waste sent to landfill, as well as levels of recycling, to update those outlined in the Library note from 2009.

Budget 2014 announced changes to the landfill communities fund—the tax credit scheme that enables operators of landfill sites to contribute money to organisations advocating projects that create significant environmental benefits and jobs and that improve the lives of communities living near landfill sites. The Budget outlined the changes as follows:

“The value of the landfill communities fund for 2014-15 will be reduced to £71 million...This reduction takes account of progress that environmental bodies have made to address the government’s challenge to reduce unspent funds.”

Can the Minister elaborate any further on that reduction? I have a personal interest in hearing her views, as I have seen first hand the benefit that this fund has had in my constituency. Last year, for example, I opened a newly refurbished tennis facility in Gosforth garden village—a village that was originally built for railway workers in the 1920s. The new facilities were 90% funded by the landfill communities fund and make a tremendous contribution to local sporting facilities. Turning back to the Budget, as a result of the reduction in the fund, the Chancellor also announced that the saving would be used to tackle waste crime.

Finally, following industry engagement to address compliance, Budget 2014 announced that the Government would introduce a “loss on ignition” testing regime on fines—the residual waste from waste processing—from waste transfer stations by April 2015. The Budget document announced:

“Only fines below a 10 per cent threshold would be considered eligible for the lower rate,” and that full proposals would be consulted on later this year.

I would be grateful if the Minister could elaborate on those points. Can he set out even a ballpark figure for the landfill tax rates that the Government are considering? The Government have already committed to inflationary increases in landfill tax rates up to 2019, so are they considering options over and above those that have been set out? Are they considering above-inflation increases in landfill tax rates, for instance, or are they instead looking at different rates of tax for different types of waste disposal? These points seem to be unclear at present and any degree of certainty that the Minister can provide now would, I am sure, be helpful to the industry and the Committee today.

Photo of David Gauke David Gauke The Exchequer Secretary

It is a great pleasure to serve under your chairmanship once again, Mr Streeter, and to respond briefly to our debate on clause 94, which, as we have heard, increases the standard rate of landfill tax from £80 per tonne to £82.60 per tonne, and the lower rate from £2.50 per tonne to £2.60 per tonne. Both rates take effect from 1 April 2015.

The landfill tax has been immensely successful in reducing the amount of waste sent to landfill. The hon. Lady set out the numbers she had from, I think, a 2009 Library note. I can tell her that since the introduction of the tax, the amount of waste sent to landfill has more than halved and recycling rates have increased threefold. I am happy to write to her with more detailed numbers if that would be of assistance, but I hope that those numbers give an indication that the trend that was clearly in place in 2009 has continued.

If waste is not sent to landfill, it goes to alternative, more sustainable waste management practices, such as recycling. As I have said, there have been significant increases in recycling, with a threefold increase. The Government have recognised the importance of providing tax certainty, so that industry has the confidence to invest in alternative waste management processes. The June Budget in 2010 confirmed that the standard rate of landfill tax would increase by £8 per tonne each year until 2014. The Government also confirmed that the rate would not fall below £80 per tonne between 2014 and 2020.

The pre-announced standard rate increases enjoyed the support of business groups, including the CBI and the Environmental Services Association, which regarded the escalator as providing certainty for long-term investment decisions. The clause provides further certainty for future standard and lower rates by confirming that they will not be eroded by inflation in future years. That means that businesses can have the confidence to invest in new waste treatment facilities, safe in the knowledge that it will not suddenly become cheaper in the near future for waste to be sent to landfill again. The rates will both rise  with RPI in 2015-16, rounded to the nearest 5p. That means that the lower rate will be £2.60 and the standard rate will be £82.60.

The increase in landfill tax will affect businesses and local authorities that send waste to landfill. By managing waste more sustainably and reducing the amount of waste they send to landfill, businesses and local authorities will be able to reduce their landfill tax liability. I know that some in the industry were looking for the Budget to give similar certainty to that delivered through the standard rate escalator, but I believe it is crucial to establish a level playing field in the industry before any further decisions are taken on rates over the longer term. The success of this tax has offered a small minority of unscrupulous individuals an incentive to try to make a quick buck by avoiding the tax or mis-describing material. The Government will work with the industry to address compliance issues. A consultation document will be published later this year. For the reasons I have outlined, there is nothing more I can say in response to the hon. Lady’s question on future rates.

On the landfill communities fund, the Government have always been clear that overall progress to meet the challenge will inform the fund’s future value. Although a large number of environmental bodies have addressed the challenge, others have not, with a small number now holding more unspent funds than at the start of the challenge. The size of the reduction balances the excellent efforts that many environmental bodies have made to address the challenge against the progress of the challenge as a whole. Crucially, the saving is going back to help local communities by addressing concerns raised by the industry about waste crime. Combating waste crime fits with the spirit of the LCF, which is designed to address some of the environmental disadvantages of living in the vicinity of a landfill site. DEFRA advises that 80% of illegal sites in England are within 5 km of a legitimate landfill site.

Clause 94 increases the rate of landfill tax by inflation, as announced at Budget 2014. As I have set out, the clause not only helps the Government towards their goal of creating a zero-waste economy, but provides certainty so that businesses and local authorities can plan their future waste disposal. I therefore hope that the clause will stand part of the Bill.

Question put and agreed to.

Clause 94 accordingly ordered to stand part of the Bill.