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HM CUSTOMS & EXCISE
CONSULTATION
ON THE
AGGREGATES LEVY
- THE GMB RESPONSE -
GMB ResearchDepartment
August 2000
Introduction
The GMB tradeunion has some 700 000 members working in private industry and the publicservices with a substantial membership in the construction industry. We are thelargest trade union operating within the aggregates sector. The GMB welcomesthis opportunity to comment on the draft legislation for an aggregates levy.
To date,however, the consultative process appears to have been badly mis-managed. TheEnvironmental Audit Committee (EAC) stated, in a recent report, that they were surprised at the lack of any on-goingformal dialogue with the industry and the apparent unwillingness of theGovernment to try to build a consensus approach involving departments, theindustry and environmental organisations.
The Governmentis on record as being committed toprogressing the environmental tax agenda in an open and consultative way,listening to all the views of all interested parties and trying to buildconsensus where possible on the best way forwardYet, in the GMB's experience there has been no attempt by Governmentdepartments, and in particular, the Department of the Environment Transport andthe Regions (DETR) to involve trade unions in the consultation processes. TheGMB now hopes that the present consultation exercise marks the beginning of aninclusive dialogue.
Aim of submission
This submission is not anexamination of the draft legislation. Instead, we aim to address what weconsider to be the substantive issues. Whether an aggregates levy as proposedwill: minimise the environmental impact of quarrying; will achieve specific environmentalimprovements; will encourage good or bad practice; or encourage increased useof recycled materials. Finally, we ask whether the levy is consistent withGovernment environmental taxation policy.
ExecutiveSummary
The GMB is an environmentallyaware trade union. We will support measures, including economic instruments,which are properly designed to promote sustainability and generateenvironmental improvement. We have no objections against environmental taxesper se. However, we regret the position taken by HM Customs and Excise that, intheir view, the draft legislation is broadly finalised and that major changesare not anticipated.
In the GMBs analysis the draftlegislation is based on mistaken assumptions and is deficient in major areas.Without amendment the levy will not deliver environmental improvements; it willbe nothing more than a straightforward production tax.
the Governmentsenvironmental objectives are confused;
the levy doesnot distinguish between good and bad performers;
no specificenvironmental improvements will resultfrom the levy;
there is limitedscope for recycling; and
the levyconflicts with the Government's Environmental Taxation Policy.
TheGMB calls for further amendments in order to provide for an exemption from thelevy for those quarriers that perform to a high standard of environmentalperformance. We suggest that in order to qualify for such an exemption acompany would be required as a minimum:
to introduce externally auditable environmentmanagement systems, and
provide all employees with environmental training toNVQ level.
The aggregates levyis being promoted as an environmental measure. It is therefore appropriate, atthis point, to state GMB environmental policy in order to avoid any possibleconfusion. It will be clear that our opposition to the proposed legislation isbased primarily on environmental arguments rather than on economic orindustrial grounds.
The GMB is anenvironmentally aware trade union and we recognise that our environment isprecious. As a trade union, we know only too well that there is no invisiblewall between health and safety and the environment. That is why the GMB prefersan integrated approach where health, safety and environmental improvements areincorporated into all aspects of workorganisation.
The GMBs focusextends beyond the workplace. Over many years we have developed policies toreflect our environmental interests. For example, GMB energy policy calls forincreased levels of investment into renewable energy sources and clean coaltechnologies. As a trade union, we have responded on a wide range of issues,from GM foods to global warming. Moreover, GMB General Secretary, John Edmonds,together with EnvironmentMinister, Michael Meacher, co-chairs the TradesUnions and Sustainable Development Advisory Committee (TUSDAC) which wasestablished by the current Government to tackle the impact of climate changeand promote sustainable development. Therefore, when the GMB comments onenvironmental matters it does so from a position based on long experience.
Specific criticisms of the proposed Aggregates Levy
Government policy confusion
There is widespreadconfusion within the industry regarding the intended policy objectives. TheQuarry Products Association understood that the Governments initial concernappeared to relate to mitigating the physical effects of quarrying. The mainjustification initially given for the levy, by the Government, was that theextraction and transport of aggregates imposed real costs on local communitiesin terms of noise and vibration, dust, loss of bio-diversity and amenity andvisual intrusion. The Environmental Audit Committees enquiry reached similarconclusions. Researchcarried for the DETR quantified the financial value of various environmentalimpacts (cost externalities) at 380 million. However, the Governmentsposition moved beyond the cost externalities. Their present position is that itis not just local communities which suffer, there was also evidence of widerpublic concern over the environmental impact of quarrying.
Unfortunately, itis not at all clear what an aggregates levy is intended to deliver. Is the aimsimply to reduce demand for aggregates? If so, how does this square with anearlier Government statement that it wasessential that there continued to be an adequate supply of aggregates.[5] Is the objective to ensure that theenvironmental costs, the so-called externalities, are factored into the pricewhich are then passed on to the end user? Oris the aim is to promote recycling of materials? There has either been ashift or drift in Government policy for the EAC 'found it interesting that the [Treasury] Minister (Stephen Timms)placed so much emphasis on increasing environmental recycling as a primaryobjective of the tax - as opposed to ameliorating the environmental impactswhich quarrying gives rise to.' What is desperately required is a Government statement which clarifies thelevys objectives. Only then can a sensible debate ensue.
the levy does not distinguish between goodand bad performers
The GMBs maincriticism of the proposed levy is that it is a blunt instrument which will notdistinguish between good and bad quarriers. In our experience, there areenvironmentally aware quarriers who perform to high levels of environmentalperformance. By the same token there are others who barely take notice of theimpact of their operations. The GMB recommends a system of exemptions to ensurethat environmentally friendly operators, that meet specific criteria, are notbe penalised by the imposition of a levy. The levy could then act as anincentive to others to raise their game.
The EnvironmentalAudit Committee considered whether a national tax on aggregate extraction wasan appropriate instrument given that environmental impacts of quarrying mayvary hugely from site to site. The EAC reported that the consensus amongwitnesses appearing before the committee was that quarrying has immediate localas opposed to national impacts. It was also accepted that some operators maymanage their sites to take more account of bio-diversity and environmentalimpacts than others even though the nature of the quarries may be verysimilar.
The GMB believes that the Government has adopted ablanket view on aggregates extraction. It has consistently failed todistinguish between good and bad environmental performers. In written evidenceto the EAC, English Nature stated that while mineral extraction has a wideranging impact on nature it also provides opportunities to reverse decline inwildlife habitats through aftercare schemes.English Nature argued that ensuring an environmentally sustainable approach tomineral extractions was an essential part of achieving better environmentalquality. To be sustainable, the working of aggregates should minimise andmitigate for any impacts on nature conservation interests and maximiseopportunities provided by restoration. Policies affecting aggregate extractionshould therefore promote these objectives. The GMB concurs with that analysisand policy-makers must take note.
The GMB believes that the levy should be structuredto allow for exemptions for those quarriers operating environmental managementsystems and providing environmental training to all employees in order topromote good environmental performance. It is our view that these twocomponents are inextricably linked. It is impossible to deliver goodenvironmental performance without high quality training which depends onmotivated and committed employees.
The core theme underlying this submissionis that, to be an effective environmental tool, the Aggregates Levy mustprovide exemptions for those quarriers that maintain a high standard ofenvironmental performance. The Environmental Audit Committee came out in favourof a tax but concluded that companies participatingin an approved scheme should be exempted totally from a tax. There should stillbe a tax, however, both to ensure adherence to the scheme and encouragerecycling and refurbishment
In their attempt toreach a voluntary agreement the Quarry Products Association (QPA) offered, aspart of its New Deal From The AggregatesIndustry proposals, industry-wide adoption of ISO 14001. The QPA alsocommitted themselves to providing environmental training for all drivers,including sub-contractors, environmental awareness training for all employeesand achieving 50% of employees to obtain a NVQ by 2004.
It was unfortunatethat the Government and the QPA were unable to reach a satisfactory voluntaryagreement. In our view, and that of the EAC, there was much to recommend in theQPA proposals. The Government, for whatever reason, has taken the tax route.That is the reality we must address. The GMBs position is that in order toqualify for an exemption a company would be required to commit, as a minimum:
to introduce externally auditable environmentmanagement systems, and
provide all employees with environmental training toNVQ level.
EnvironmentalManagement Systems
The GMB believes that the QPA proposals can providethe basis for inclusive industry-wide and Government discussions. However, wealso recognise that, as an environmental management system, ISO 14001 has itscritics. In an ideal world, the Eco-management and audit scheme (EMAS), whichis both more stringent and has a greater public profile than ISO 14001, wouldbe the preferred system to adopt. For instance, EMAS sites are required topublish environmental performance data in an environmental statement.
The GMB recognises that among the industrys keyplayers competitive pressures are already at work driving companies toimplement ISO 14001. In the short term, however, the GMB would be prepared toaccept ISO 14001, but with the requirement that company schemes areindependently audited. This would satisfy one of our two minimum conditions needed before anexemption would be applied.
In the long term, the minimum environmentalmanagement system requirement could be raised to the EMAS standard. However,the GMB acknowledges the resource and time frame implications required toachieve EMAS. In our view, at this stage of the process it would place anunfair burden on the industry. It must also be remembered that the levy isplanned to take effect from April 2002 and that until very recently theaggregates industry had a legitimate expectation that a voluntary agreementwould be reached.
EnvironmentalTraining
Our second minimum condition is that all employeesshould receive environmental training to an accredited level such as NVQ. Asstated, above, high environmental performance cannot be delivered without goodquality training, the effectiveness of which is dependent on a motivated andcommitted workforce. In our view, the Quarry Products Associations commitmentto providing environmental training up to NVQ standard provides a useful basiswith which to take the debate forward.
The GMB favours a partnership approach toenvironmental training. We have an excellent record in using our specialistknowledge to assist employers improving the working conditions and we havedeveloped joint training courses in order implement company health, safety andenvironmental policies. We have the most highly resourced Health andEnvironment Department of any UK trade union and we would welcome theopportunity to discuss similar initiatives with the aggregates industry.
no specificenvironmental improvements will resultfor the levy
The levy will be applied to all aggregate extractionat the rate of 1.60 per tonne. It is very unlikely that this additional costwill be absorbed by any producer. In all likelihood the cost will be passedonto the consumer, of which Public Sector projects account for 40% ofaggregates supply. Almost all aggregates are sourced within the UK with lessthan 1% imported. According to the QPA a levy set at this rate will have noeffect on demand. The tax would have to be set significantly higher.
The QPAs stated position was that a tax would be anineffective means of minimising the environmental impacts of quarrying.Instead, the QPA, favoured a policy which aimed to reduce local impacts andimproving environmental practice. The GMB has sympathy with those arguments. Webelieve that it is difficult to see how the levy, without exemption provisions,can encourage better environmental performance, reduce demand or promoteincreased recycling.
there is limitedscope for recycling
The EAC were somewhat surprised that the Minister(Stephen Timms) had stated that the primary objective of the levy was toincrease environmental recycling. Yet, the EAC found that there was no reliabledata to establish performance in this area. Moreover, there was even confusionbetween different types of waste, e.g. between construction and demolitionwaste and other secondary waste. The committee referred to an earlier HMCustoms & Excise consultation which concluded that there was no consensuson the distinction between primary and secondary aggregates.[8]
The GMB believesthat recycling of materials should be encouraged but this particular argumentdoes not appear to stand up. Firstly, the regulatory guidance, MPG6, whichcontains recycling targets dates back to 1994. Secondly, the Minister was only able to rely on 1990 recyclingdata. If recycling was such a primary objective then it would be reasonable toexpect more recent supporting evidence .
There are otheraspects regarding recycling which need to be addressed. Some of these can bedealt with by the regulatory framework. Issues regarding the availability ofproducts, the continuity of supply and the performance and quality of recycledmaterials require more thought. However, the major problem which has yet to betackled is the environmental impact posed by the transportation of recycledmaterials. Moving large quantities of recycled waste is itself an environmentalissue.
the levyconflicts with Government Environmental Taxation Policy.
Perhaps the mostdamaging criticism of the levy is that not consistent with Government policy onenvironmental taxation. The policy framework. was established in the 1997Budget by the Chancellor, Gordon Brown, when he announced that the environmentwould be central to the tax system and that taxes would encourage the good and discourage the bad. A Statement of Intentset out the criteria on the use of environmental taxes:
the Governments key economic objective ofhigh and sustainable levels of growth and employment would be pursued in waysthat were environmentally sustainablewhere it is effective to do so, tax reform will be used to achieveenvironmental objectivesHow and whatgovernments choose to tax sends clear signals about the economic activitiesthey believe they should be encouraged and those that should bediscouragedenvironmental pollution should be discouraged. Over time thegovernment will aim to reform the tax system to increase incentives to reduceenvironmental damage.
Following the 1997Budget, it was also announced that research was being carried out on theenvironmental costs of attached to quarrying. The results of that researchwould inform consideration of whether there is a case for tax measures and toensure that costs are reflected in prices. However, the Government insistedthat environmental taxes must be subject to the general tests of good taxation:
It must be well designed, to meetobjectives without undesirable side-effects; it must keep dead-weightcompliance costs to a minimum; distributional impact must be acceptable; andcare must be had to implications for international competitiveness. Whereenvironmental taxes meet these tests, the Government will use them.
The price mechanismwould deliver both short and long term effects. In the short term a levy wouldprovide an incentive to reduce pollution. In the longer term it would create apermanent incentive for innovation and investment in less polluting processesas well as encouraging the consumption of cleaner products. By Budget 2000, theStatement of Intent had been fleshed out with specific criteria. Environmentaltaxes should meet the tests of good taxation, and:
Polluters should face the true costs which theiractions impose on society;
The social consequences of environmental taxation mustbe acceptable;
Economic instruments must deliver real environmentalgains cost-effectively
Environmental policies must be based on sound evidencebut uncertainty cannot necessarily justify inaction; and
Environmental policies must not threaten thecompetitiveness of UK business.
Whereenvironmental taxes meet these test, the Government will consider introducingthem [10]
In the GMBs view, the proposed Aggregates Levyconflicts with the principles contained in the Statement of Intent and thecriteria set out in Budget 2000. The levy fails the first two hurdles of thegeneral tests of good taxation: it is neither well designed nor likely to meetany environmental objectives.
Addressing the specific Budget 2000 criteria it isclear that under the proposed legislation, the Polluter Pays principle willhave no effect: it will be the consumer who will end up paying the costs.Unless the levy is significantly increased it will have no discernible effecton demand. As we have argued above, there is no evidence that any realenvironmental improvements can be delivered. The levy is deficient in that itfails to offer any effective incentive, such as an exemption, to promote goodenvironmental performance.
Conclusion
In their memorandum to the EAC, the Friends of theEarth argued that the Treasury had concentrated too much on raising revenuesfrom environmental taxes and environmental protection seems to be aboutpenalties. There are not nearly enough incentives, either for companies orindividuals, to modernise by going green.
That is an illuminating comment. It certainly sums upthe process so far. On the Governments part there has been a lack of clarityon the objectives being pursued. The industry seems to have spent much timechasing shadows not really knowing what they were expected to deliver.Unfortunately, up to this point in time, the trade unions as key stakeholdershave been excluded from the debate. This submission marks a change. The GMBintends to use its resources and all its influence to get the legislationamended to meet the concerns of our members and of the industry.
GMB Research Department
August2000