Landfill tax rates

Finance (No. 3) Bill – in a Public Bill Committee at 2:45 pm on 6th December 2018.

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Photo of Clive Lewis Clive Lewis Shadow Minister (Treasury) 2:45 pm, 6th December 2018

I beg to move amendment 130, in clause 64, page 45, line 22, at end insert—

“(5) The Chancellor of the Exchequer must review the revenue effects of the changes made by this section to section 42 of the Finance Act 1996 and lay a report of that review before the House of Commons within six months of the passing of this Act.”

This amendment would require the Chancellor of the Exchequer to review the revenue impact of Clause 64.

Photo of George Howarth George Howarth Labour, Knowsley

With this it will be convenient to discuss the following:

Amendment 131, in clause 64, page 45, line 22, at end insert—

“(5) The Chancellor of the Exchequer must review the expected effect of the changes made by this section to section 42 of the Finance Act 1996 on the UK’s ability to meet the Waste Framework Directive target of recycling 50% of waste by 2020, and lay a report of that review before the House of Commons within six months of the passing of this Act.”

This amendment would require the Chancellor of the Exchequer to review the impact of Clause 64 on the UK’s ability to meet the target of recycling 50% of waste by 2020.

Amendment 132, in clause 64, page 45, line 22, at end insert—

“(5) The Chancellor of the Exchequer must review the expected effect of the changes made by this section to section 42 of the Finance Act 1996 on the quantity of waste from the United Kingdom that is exported abroad.”

This amendment would require the Chancellor of the Exchequer to review the impact of Clause 64 of the amount of UK waste that is exported abroad.

Amendment 133, in clause 64, page 45, line 22, at end insert—

“(5) The Chancellor of the Exchequer must review the expected effect of the changes made by this section to section 42 of the Finance Act 1996 on the quantity of waste that is sent to landfill in the year after the increased rates come into effect and compare it with the quantity of waste that has been sent to landfill before that coming into effect.

(6) The Chancellor of the Exchequer must lay the review under subsection (5) before the House of Commons within two months of the passing of this Act.”

This amendment would require the Chancellor of the Exchequer to review the impact of this measure on the amount of waste being sent to landfill and to compare it with the amount that had been sent previously.

Amendment 134, in clause 64, page 45, line 22, at end insert—

“(5) The Chancellor of the Exchequer must review the expected impact on the environment of increasing the difference between the standard and reduced rates of landfill tax and lay a report of that review before the House of Commons within two months of the passing of this Act.”

This amendment would require the Chancellor of the Exchequer to review the anticipated environmental impact of increasing the difference between the standard and lower rates of landfill tax.

Amendment 135, in clause 64, page 45, line 22, at end insert—

“(5) The Chancellor of the Exchequer must review the expected effect of the changes made by this section to section 42 of the Finance Act 1996 on the cost of collecting landfill tax and lay a report of that review before the House of Commons within two months of the passing of this Act.”

This amendment would require the Chancellor of the Exchequer to effects on the costs of collecting landfill tax of the changes made by Clause 64.

Amendment 136, in clause 64, page 45, line 22, at end insert—

“(5) The Chancellor of the Exchequer must review the expected effect of the changes made by this section to section 42 of the Finance Act 1996 on waste disposal practice by waste disposal operators and lay a report of that review before the House of Commons within two months of the passing of this Act.”

This amendment would require the Chancellor of the Exchequer to review the behavioural impacts on waste disposal operators of the changes made by Clause 64.

Clause stand part.

Photo of Clive Lewis Clive Lewis Shadow Minister (Treasury)

I am not quite sure how I have displeased the shadow Chancellor so that I have to do yet another speech, this time on rubbish—or landfill—but it has fallen to me. I will speak to our amendments to clause 64, and I hope the Minister can answer some of the questions on it. As will become clear, we have some serious doubts about the clause as it stands, which I will explain in greater detail. It might be that the Minister resists our amendments, but in any event I hope he will have some answers to the serious questions we have.

As the Minister will no doubt outline, the clause sets the rates of landfill tax for 2019-20, increasing the standard and the lower rates in line with RPI rounded to the nearest 5p. The Exchequer impact is estimated to be nil. That change was announced in the autumn 2017 Budget and follows the pattern of increasing duty rates in line with inflation, which applied for both 2017 and 2018. In the 2018 Budget, the Government announced that duty rates will be increased in the same way for 2020.

The measure, although it widens the differential between the lower and the standard rates of the tax, is estimated by the Government to have no overall impact on Exchequer revenue, but we are concerned about a number of points to which I will draw the Minister’s attention. As has become something of a theme in our debates today, a number of assessments seem to be lacking: the market and revenue impacts of the clause, its effect on recycling rates and meeting Government targets, its impact on UK waste exports and the amount sent to landfill, the costs of tax collection, its environmental impact, and its impact on the behaviour of waste disposal operators.

Labour Members find it remarkable that the Government should seek to adjust such an important levy on all forms of waste—it is one of the few fiscal tools in the Government’s policy bag to encourage recycling and reuse rates, and to dampen waste streams—without apparently carrying out any assessments in the first instance. Will the Minister explain why the measure is being introduced without such basic information being available to him, let alone the Committee? If such data are available, why have they not been published alongside the Bill with the accompanying Budget documents?

That is especially so given that those types of assessment would surely guide any reasonable adjustment to the tax rates in order first to ensure the most beneficial outcomes for the environment and the Exchequer; secondly to accelerate the roll-out of a functioning, closed-loop, circular resource economy in the UK; and thirdly to do the most we can to stop the illegal dumping of wastes that have such an adverse impact on local communities and environments. Will the Minister confirm that those are indeed objectives of public policy and expand on how he believes that landfill tax and the changes contained in the clause will contribute to achieving them? What is the evidential basis for the Government’s belief that they will do so?

In that vein, the amendment simply requires the Chancellor to review the anticipated impact of the measure on revenue and to publish it for scrutiny. Will the Minister explain precisely why the Government assume no impact at all on revenue given that tax increases on goods and services invariably lead to increases in successful avoidance by some taxpayers? What kind of modelling and analysis has been conducted internally? Has expert opinion been taken? Was there any consultation or was a broad assumption made without detailed consideration behind it?

Similarly, amendment 131 requires the Chancellor to review and publish the analysis of and any findings on the impact of the clause on our ability to meet the EU-mandated target of recycling 50% of our waste by 2020. As the Minister is aware, our low recycling target is unambitious by comparison with that of our northern European neighbours such as Sweden, which has developed highly effective closed-loop resource, recycling and reuse systems for a number of household waste items.

Those more successful countries have achieved that change in significant part through tax changes, such as the decision to cut VAT on repairing bicycles, clothes, household linen, leather goods and shoes from 25% to 12%. Will the Minister tell us whether the Government have given any consideration to such steps given their potential interrelationship with total quantities of landfill waste?

Sweden also allows people to claim back from income tax 30% annually—up to 50,000 Swedish kroner, or some £5,000 per person—of the labour cost of repairs to white goods appliances such as fridges, ovens, dishwashers and washing machines, as well as purchases of data and IT services, and of some social activities such as babysitting, household cleaning and gardening. Will the Minister explain why the Government have not taken similarly innovative steps to tackle throwaway consumption and boost the market for repair and reuse, enhance the economy through the jobs and small businesses that go with it, and enhance social living?

Amendment 132 would require the Chancellor to review the impact of the clause on the amount of UK waste exported overseas. Earlier this year, the Minister’s colleagues at the Department for Environment, Food and Rural Affairs announced an overhaul of UK waste recycling policies because countries such as China were sensibly refusing to take in UK waste exports—the raw materials regularly used in a closed-loop economy. British household and commercial plastics waste was being illegally dumped in countries such as Malaysia. Will the Minister explain the UK’s feeble waste recovery and reuse policies—the rates set out are inadequate—and acknowledge that the effectiveness of the tax is made worse by the lack of relevant data?

Amendment 133 would require the Chancellor to review the impact of the clause on the amount of waste being sent to landfill, to compare that with historical disposals to the same type of site, and to publish the results and findings of that review. I hope the Minister recognises that even marginal changes to tax rates can affect the behaviour of both scrupulous and unscrupulous waste operators.

According to DEFRA’s collated statistics on waste published on 9 October this year, recycling rates from household waste, biodegradable municipal waste and packaging waste have not been updated since 2016. Moreover, data on the recovery rate for construction and demolition waste; commercial and industrial activity waste; total waste generation and final treatment of all waste; and waste infrastructure have not been updated since 2014. Will the Minister commit both to writing to his ministerial colleagues at DEFRA asking them to urgently update those statistics, and to sending that data to all members of the Committee? In the light of such appalling monitoring, can he explain how the Government could oversee any type of effective management regime, or ensure that different waste streams are not ending up at landfill sites or being dumped elsewhere, illegally, to the detriment of local communities and urban, suburban and natural environments?

Similarly, amendment 134 would require the Chancellor to undertake a review—publishing the analysis and findings—of the environmental impact of increasing the difference between the standard and the lower rates of tax. As the Minister will be aware, the disposal of waste can give rise to a range of adverse environmental impacts. Those include, but are not limited to, the unsightly and illegal dumping of household and business goods, such electrical appliances, machinery and vehicles, clothing, mattresses and soft and hard furnishings; leachates polluted into the ground, water courses and atmosphere; and rotting organic and bio-degradable materials, which add methane and other greenhouse gas contributions to global warming and climate change. They also look and smell bad.

Badly managed legal and illegal waste disposal can attract vermin such as rats, and make life extremely unpleasant for people in the vicinity. Will the Minister explain why the likely adverse environmental impacts of those changes to the tax rates, not least their potential to encourage more illegal dumping, have not yet been assessed? Will he agree to make such an assessment and will the results published as our amendment calls for?

Amendment 135 is in a similar vein, and would require the Chancellor to properly assess, with full publication, the effects on the costs of collecting the landfill tax as a result of the changes to the applied rates. It is perhaps surprising that the Treasury has not seen fit to carry out such a simple cost-benefit analysis of adjusting the applied rates. Surely it goes without saying that without such a cost-benefit analysis, the Government cannot possibly anticipate the impact on the public purse. Will the Minister tell us why such an elementary assessment of the costs of implementation has not been carried out, and will he commit to carrying out that assessment and publishing the results?

Amendment 136 would require an assessment of the impact of the tax changes in the clause on the behavioural impacts on waste disposal operators of all types. The clause represents a series of missed opportunities by the Government to adjust and strengthen landfill tax in ways that would help to address a number of environmental and disposal problems and would drive forward the roll-out of a closed-loop resource economy across the UK by increasing recycling and reuse of goods and materials that any responsible society should not be throwing away.

Photo of Kirsty Blackman Kirsty Blackman SNP Deputy Leader, Shadow SNP Spokesperson (Economy) 3:00 pm, 6th December 2018

The hon. Gentleman is making an excellent speech in which he is talking about a lot of sensible measures to reduce waste. I just want to say that the matter covered in this aspect of the Bill is devolved, so if he presses the amendment to a vote, the Scottish National party will not take part in it.

Photo of Clive Lewis Clive Lewis Shadow Minister (Treasury)

I thank the hon. Lady—her point is taken on board.

Such a beneficial undertaking would help both businesses and households to reduce drastically their waste streams and so cut their work-related and living costs. It would also go a very long way to helping the UK to meet its energy and greenhouse gas emission targets on the way to becoming a zero-waste, zero-carbon economy. As well as securing existing jobs and helping to create many new ones in the reuse, repair and recycling sectors, adopting the amendments that we are calling for would undoubtedly help to protect urban, suburban and natural environments where illegal waste dumping continues.

Will the Minister tell us how he means to address the very serious concerns of the Environmental Industries Commission and its members about the growing gap between the lower rate and the higher rate of this tax? The existing gap is already causing significant problems in the industry, with some operators presenting for the lower rate inert waste that actually contains asbestos fibres and therefore should be subject to the higher rate. How does the Minister intend to address that imbalance? In the EIC’s view, which is shared by Labour and a number of prominent environmental and countryside non-governmental organisations, the gap should be closed and not made wider, so that the tax acts as a deterrent to illegal waste disposal of all types and so benefits the public purse and society at large in significant environmental ways.

That being the case, in the absence of significant assurances from the Minister, we will struggle to support the clause as it stands. However, I would like to give the Minister the opportunity to provide us both with those assurances and some answers to the questions that we have posed. I look forward to his response.

Photo of Robert Jenrick Robert Jenrick The Exchequer Secretary

Like the hon. Gentleman, I get all the glamorous jobs, so I will endeavour to answer all his questions about landfill.

Clause 64 increases the standard and lower rates of landfill tax in line with inflation from April 2019, as announced in Budget 2017. Landfill tax has been immensely successful. Since its introduction, the amount of waste disposed of at landfill sites has fallen by more than 70%—of course, we would like to go further—and the benefits of that reduction are twofold. The first is to the economy: we have made better use of scarce resources rather than simply tipping them into holes in the ground across the country. Secondly, greenhouse gas emissions from decomposing waste are reduced. When waste is diverted from landfill, we promote more sustainable waste treatment, such as recycling. We are committed to moving towards a more circular economy, and we are working together with business, industry, civil society and the public to achieve that valuable aim. Landfill tax is an important fiscal lever that we can use to achieve it.

The hon. Gentleman asked why the Government are not doing more to meet their recycling target. The Government are very committed to meeting the target of recycling 50% of household waste by 2020. Through the Waste and Resources Action Programme, we are providing guidance and support to local government to help it to improve recycling services and to communicate with householders so that they recycle more. The next milestone in our campaign is the upcoming resources and waste strategy, on which we at the Treasury have been working closely with the Environment Secretary and the Department for Environment, Food and Rural Affairs. That will outline a number of further measures to increase recycling across the UK.

The hon. Gentleman and others will have noticed other important measures in this regard, including the announcement of a forthcoming consultation with respect to a deposit return scheme and other measures in the Budget—for example, a plastic packaging tax, which is to be consulted on, with the aim of increasing the amount of recycled content in all the plastic packaging that we use in our daily lives.

Landfill tax continues to provide an incentive to reduce waste from landfill and ensure it is recycled and reduced: as landfill is the most expensive form of waste disposal, that makes perfect sense. We have also noted in the Budget that we would be willing to consider a future incineration tax once further infrastructure has been put in place to reduce, for example, the amount of plastics that are incinerated, further improving the environment and reducing the amount of throwaway single-use plastics.

The waste infrastructure delivery programme is providing some £3 billion in grant funding over its lifetime to a number of long-term local authority waste management projects, which has helped to increase recycling rates from 36% in 2008 to 45% in 2017. I hope the hon. Member for Norwich South will await the future resources and waste strategy, which will provide a number of important measures. Those will include further information on the reform of the producer responsibility system, which will play a crucial role in improving recycling capacity and infrastructure in all parts of the country.

The clause also changes the tax on disposal at landfill sites. Each tonne of standard-rated material is currently taxed at £88.95, and lower-rated material draws a tax of £2.80. Those rates per tonne will change to £91.35 and £2.90 respectively from 1 April 2019, which maintains the strong current signal to move waste away from landfill.

Amendment 130 would require a review of the revenue effects of the proposed changes. HMRC published tax information impact notes when the rates were announced at the autumn 2017 Budget.

Photo of Anneliese Dodds Anneliese Dodds Shadow Minister (Treasury)

As far as I understand it, that note did not look into the impact of differential tax rates on waste crime. The picture is very worrying: the number of illegal waste sites that the Environment Agency is dealing with had risen to 1,485 at the end of 2017-18, compared with 1,425 the previous year. The number of those illegal waste sites that were active had also risen—to 673—and there were eight fires at those sites last year, so why is the Minister not considering those factors? Surely a broader review is necessary.

Photo of Robert Jenrick Robert Jenrick The Exchequer Secretary

The hon. Lady raises an important question about waste crime, which affects many constituents across the country, including my own. We have taken a number of significant steps. The Secretary of State for Environment, Food and Rural Affairs has conducted with the Home Secretary a review of waste crime, which looked at many of these questions—I believe that review was published recently. We also included a measure in the Budget whereby local authorities, or those responsible for clearing up illegal waste sites, could receive support from the Treasury to enable them to do so if the site met certain criteria, essentially providing support equivalent to the cost of the landfill tax itself. A number of hon. Members from across the House approached us to ask for that support, and we have delivered it as a £10 million pilot.

Photo of Anneliese Dodds Anneliese Dodds Shadow Minister (Treasury)

I am very grateful to the Minister for giving way. However, in the previous Budget, landfill tax was applied to illegal waste sites, so surely that measure is more than a pilot. As I understand it, it came into practice in April this year, because I have been trying to find out whether or not it has been applied to any sites. Surely that money should already be coming into the Exchequer?

Photo of Robert Jenrick Robert Jenrick The Exchequer Secretary

Perhaps I did not explain myself correctly to the hon. Lady. The measure that she speaks to was in the Budget last year, and has since been implemented via a statutory instrument that went through the House. That measure ensures that the landfill tax is payable on illegal waste sites. The measure that we have included in the Budget enables innocent parties—local authorities that take on, and wish to clean up, a site that has been left by criminals—to apply through the Environment Agency as part of the pilot for a sum of Treasury funding equivalent to the landfill tax, instead of having to pay that tax in addition to all the other costs involved in cleaning up the site. We hope that that will help local authorities with sites that are among the worst and most dangerous to public health to meet the costs of doing so. That measure was requested by a number of Members from across the House.

Photo of Anneliese Dodds Anneliese Dodds Shadow Minister (Treasury) 3:15 pm, 6th December 2018

I am very grateful to the Minister for giving way yet again. Surely Committee members are scratching their heads and thinking, “Would it not be more efficient and effective just to fund the Environment Agency properly so it can actually do some prosecutions, rather than going through this very complex system?”

Photo of Robert Jenrick Robert Jenrick The Exchequer Secretary

We do fund the Environment Agency correctly, and it is stepping up its enforcement of these sites. We urged it to do so—that was part of the purpose of the waste crime review. We have also increased the powers available to local authorities. For example, since May 2016, they have been able to issue fixed penalty notices for smaller scale fly-tipping. Fly-tipping is a criminal offence punishable by a fine of up to £50,000 or 12 months’ imprisonment. We wish to see more successful prosecutions, because this is a significant area of criminality that is linked to serious organised crime and other important types of criminality, such as the drug trade and human trafficking, against which we wish to take serious action. That is why fly-tipping was included in the Government’s review of serious organised crime in the waste sector, to which I have already referred.

Amendment 131 seeks to review the effect of these changes on the Government’s ability to meet the waste framework directive target of recycling 50% of waste by 2020, and amendment 132 seeks to review their impact on the amount of waste exported for treatment abroad. As the clause maintains the rates of landfill tax in real terms, we do not expect significant changes to the strong behavioural incentives the tax already provides. Landfill tax continues to play an important role in our meeting our targets for recycling and encouraging alternative forms of waste treatment, and the clause will ensure that landfill remains the most expensive form of waste treatment. Furthermore, I assure the Committee that the Government are committed to meeting the 50% household waste recycling target through the Waste and Resources Action Programme and the upcoming resources and waste strategy, on which we at the Treasury worked extremely closely with the Department for Environment, Food and Rural Affairs. I hope the Committee sees that amendments 131 and 132 are therefore unnecessary.

Amendment 133 would require a review of the expected effect of these changes on the quantity of waste that is sent to landfill. The uprating of landfill tax rates in line with the retail prices index ensures that those rates remain stable in real terms, and means that the tax can continue to help the Government meet their objective. Figures published regularly—annually, I think—by Her Majesty’s Revenue and Customs show a consistent decrease in the amount of waste sent to landfill as a result of increases the capacity of alternative waste treatment, such as recycling, which is encouraged by our policy on landfill tax rates. As the clause will keep the rates the same in real terms, that decrease is expected to continue. I trust that provides the Committee with sufficient information, and I ask that amendment 133 not be pressed to a vote.

Amendment 134 would require a review of the expected impact on the environment of increasing the difference between the standard and lower rates of landfill tax. The clause seeks to increase landfill tax rates in line with inflation. That is the equivalent of maintaining the rates in real terms, which means there will be no real-terms change to the difference between the standard and lower rates. Although we appreciate there may be concerns about illegal dumping or breaking of the rules, we do not anticipate the clause making any material difference to those. The issues the hon. Member for Norwich South legitimately raised about individuals or companies dumping waste on which the higher rate should be paid, and seeking to pay the lower rate, are exactly the kinds of matters that were considered in the waste crime strategy. I hope that reassures the Committee, and I ask that amendment 134 not be pressed to a vote.

Photo of Clive Lewis Clive Lewis Shadow Minister (Treasury)

I thank the Minister for his answers. I also thank my hon. Friend the Member for Oxford East for her timely and useful interventions, which shed light on this issue.

Waste management is often the poor relation when it comes to policy making. It is not sexy, but it is critical. We have spoken about the environment and climate change today. Scientists say that it is entirely possible that we could save ourselves from climate change and its effects, only to destroy ourselves by breaching other planetary boundaries. Recycling and waste management are critical, if we are really to reap the benefits of improved recycling and technological processes that ensure we use resources as efficiently as possible. As we move through the 21st century, and population increases, that will become critical.

I will withdraw amendment 130, and will not press amendments 132, 133 and 135, but will press the remaining amendments to a vote. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: 131, in clause 64, page 45, line 22, at end insert—

“(5) The Chancellor of the Exchequer must review the expected effect of the changes made by this section to section 42 of the Finance Act 1996 on the UK’s ability to meet the Waste Framework Directive target of recycling 50% of waste by 2020, and lay a report of that review before the House of Commons within six months of the passing of this Act.”.—

This amendment would require the Chancellor of the Exchequer to review the impact of Clause 64 on the UK’s ability to meet the target of recycling 50% of waste by 2020.

Question put, That the amendment be made.

The Committee divided:

Ayes 5, Noes 8.

Division number 35 Finance (No. 3) Bill — Landfill tax rates

Aye: 5 MPs

No: 8 MPs

Ayes: A-Z by last name

Nos: A-Z by last name

Question accordingly negatived.

Amendment proposed: 134, in clause 64, page 45, line 22, at end insert—

“(5) The Chancellor of the Exchequer must review the expected impact on the environment of increasing the difference between the standard and reduced rates of landfill tax and lay a report of that review before the House of Commons within two months of the passing of this Act.”.—(Clive Lewis.)

This amendment would require the Chancellor of the Exchequer to review the anticipated environmental impact of increasing the difference between the standard and lower rates of landfill tax.

Question put, That the amendment be made.

The Committee divided:

Ayes 5, Noes 8.

Division number 36 Finance (No. 3) Bill — Landfill tax rates

Aye: 5 MPs

No: 8 MPs

Ayes: A-Z by last name

Nos: A-Z by last name

Question accordingly negatived.

Amendment proposed: 136, in clause 64, page 45, line 22, at end insert—

“(5) The Chancellor of the Exchequer must review the expected effect of the changes made by this section to section 42 of the Finance Act 1996 on waste disposal practice by waste disposal operators and lay a report of that review before the House of Commons within two months of the passing of this Act.”.—(Clive Lewis.)

This amendment would require the Chancellor of the Exchequer to review the behavioural impacts on waste disposal operators of the changes made by Clause 64.

Question put, That the amendment be made.

The Committee divided:

Ayes 5, Noes 8.

Division number 37 Finance (No. 3) Bill — Landfill tax rates

Aye: 5 MPs

No: 8 MPs

Ayes: A-Z by last name

Nos: A-Z by last name

Question accordingly negatived.

Clause 64 ordered to stand part of the Bill.

Clause 65