Clause 28 - Rates of landfill tax

Finance Bill – in a Public Bill Committee at 2:00 pm on 16 January 2024.

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

Photo of Gareth Davies Gareth Davies The Exchequer Secretary

It is great to see you back in the Chair, Mr Paisley, and a pleasure to serve under your chairmanship. The clause increases the lower and standard rates of landfill tax, from 1 April 2024, in line with the retail prices index as forecast by the Office for Budget Responsibility at the time of the spring Budget 2023. Landfill tax is charged on material disposed of at landfill sites or unauthorised waste sites in England and Northern Ireland. The objective of the tax is to divert waste away from landfill, and support investment in more circular waste management options, such as recycling, composting and recovery.

Since 2000, landfill tax has contributed to a 90% decrease in local authority waste to landfill in England. Increasing the lower and standard rates of landfill tax by RPI in recent years has helped maintain a strong price incentive to divert waste away from landfill. The clause will increase the lower rate of landfill tax from £3.25 per tonne to £3.30 per tonne. It will increase the standard rate of landfill tax from £102.10 per tonne to £103.70 per tonne.

In conclusion, the clause increases landfill tax in line with RPI from 1 April 2024, to maintain a strong price incentive for diverting waste from landfill. I hope that it can stand part of the Bill.

Photo of James Murray James Murray Shadow Financial Secretary (Treasury)

It is a pleasure to be back with you in the Chair, Mr Paisley. As we heard from the Minister, clause 28 is about rates of landfill tax. As he outlined, the clause seeks to increase landfill tax in line with inflation, to £103.70 per tonne for the standard rate; the lower rate will be £3.30 per tonne. The landfill tax was introduced in 1996 to encourage recycling, composting and recovery, and reduce landfill. It increased the cost of waste disposal at landfill to encourage waste producers and the waste management industry to switch to a more sustainable way of disposing of waste material. The tax was originally UK-wide, but has been devolved to Scotland from April 2015, and to Wales from April 2018.

We will not oppose the clause, but will the Minister provide an update, given that I raised the issue of landfill tax fraud during the passage of the last Finance Bill, in May 2023? As he may recall, we then discussed the most recent estimate by His Majesty’s Revenue and Customs of the landfill tax gap—the gap between the landfill tax due and the revenue collected—which was £125 million in 2021. We recognise that at 17.1%, that gap was much larger than the overall tax gap for that year. He may recall that I asked how much of the £125 million tax gap identified in 2021 had been recovered by HMRC. He said that he would get back to me on that point, as he did not have the information in front of him. I wondered if he had it to hand now, so that he could put it on the record in Committee this year. I would also be grateful if the Minister shared with us whether HMRC has annual estimates of the landfill tax gap for years more recent than 2021.

Photo of Gareth Davies Gareth Davies The Exchequer Secretary

I am grateful to the hon. Gentleman for that. I recall that exchange, and he is right to raise the issue of tax gap. Clearly, we all agree that we need it to be lower, and I assure him that at HMRC, every effort is being made to tackle the tax gap. I can update him; in 2021-22, the tax gap was 18.4%. As I say, HMRC is committed to continuing to tackle the gap, principally through two measures: first, through increased data sharing across Government agencies, and secondly, through the better use of intelligence-led interventions. Those two measures, particularly in 2022-23, recovered £280 million of compliance yield. If there are additional pieces of information and data that I do not have to hand, I am happy to follow up on those in writing.

Question put and agreed to.

Clause 28 accordingly ordered to stand part of the Bill.