Select Committee on Environmental Audit Second Report


Memorandum from Brunner Mond UK Ltd


  Brunner Mond is the UK's sole producer of soda ash, which is an essential ingredient in products such as pharmaceuticals, confectionery and glass. The company is based in Cheshire, and our competition comes mainly from Europe and the USA. In the UK we employ some 480 people directly with about a further 2000 jobs amongst our supplier base being dependent on our operations.

  As a chemicals producer, the company has considerable experience of the wave of recent environmental taxation, including the Landfill Tax, the Aggregates Tax and the Climate Change Levy.

  Brunner Mond has a long-standing corporate commitment to the environment, and supports the general principle of a mix of fiscal, regulatory and voluntary "carrots and sticks" to protect it.


  Our experience to date of environmental taxation leaves us unsure as to whether some, at least, of these recent initiatives will actually succeed in their stated aim.

  Our business is in commodity chemicals. The technology and materials we use are well-known and well-established and our competitors across Europe operate in exactly the same way as us. In a commodity business control of costs is critical as it is essential to be the low-cost supplier. The producer who cannot control his costs will go to the wall. This is also true of many of our customers. Over 50 per cent of soda ash is sold for the manufacturer of glass, another commodity product facing exactly the same competitive pressures from across Europe as ourselves. Both the soda ash and glass industries have had onerous new burdens imposed on them by environmental taxation and there is a very real risk that these new taxes may well destroy companies and thus leave a worse environmental blight than they seek to prevent. We have already seen glass customers in the UK having to close their operations with the glass production effectively exported to other European countries. This damages the UK economy; often leaves derelict industrial land to be remediated; but does nothing to improve global environmental conditions when exactly the same environmental effects, or worse, are generated by the overseas producers where the displaced production is carried out.


  Our experience has been that insufficient specialist expertise is applied when the Treasury is developing environmental taxation, for example the Aggregates Tax.

  When this measure was first mooted, it took us some time to get Government to understand that it might well apply to Brunner Mond because we use limestone as an essential raw material in our chemical process. We then found out that those involved in the development of the tax appeared unaware that there were other applications for aggregates than road-building. We succeeded in gaining exemption from the Tax after much hard work. We estimate that this saved us in the region of £5m a year on turnover of £140m.

  Similarly, our experience of the Landfill Tax was that Treasury officials were so overtly keen on revenue generation that valid environmental arguments against the imposition of new tax burdens on operations that already met the highest environmental standards failed to received proper consideration, largely due to a misunderstanding of the technical processes involved in our industry. The reluctance and inability of the Treasury and the Department of Environment to consider such matters jointly rather than separately added to the difficulty of getting a proper understanding of this issue.


  Our experience is that this type of legislation is extremely and perhaps unnecessarily complex, and a lot of the detail is covered by statutory instruments, the introduction and implementation of which is neither transparent not particularly democratic. The Climate Change Levy CHP exemptions were dealt with in this way, and took an immense amount of time and effort to disentangle and understand.

  We take our power from a new state-of-the-art CHP plant owned and run by Powergen CHP Limited. Thus we are exempt from the Climate Change Levy, but the Levy is still charged on any excess energy sold to the National Grid. What incentive is that to CHP producers?


  Our experience is that European legislation is often used as a method of widening the scope of existing taxation, for example, the impact the forthcoming Landfill Directive will have on those who pay the Landfill Tax. It is hard to avoid the impression that Whitehall sees European legislation as a tempting collection point for various initiatives which would otherwise have to await a major Environment Bill. It may also be fair to say that the lack of specialist expertise leads to overly rigorous interpretation of the underlying principles of the legislation for the UK. There is too much gold-plating. There should be a clear distinction between the policy behind environmental protection at the level of European regulation and the policy objectives of UK "green" tax initiatives.


  All these initiatives cost us time and resources: to find out what is proposed, and the likely impact on our business; to find out how it's going to work; to try to ensure that the stated purpose will in fact be achieved; and to comply with the end result. All this is before any beneficial impact on the environment may result, or before any tax is collected.


  We would like to see a situation where those likely to be on the receiving end of environmental taxation are involved at a much earlier stage in the development process, so that any resulting legislation will work, will be appropriate and applicable, and will produce the impact intended without imposing costs and regulatory burdens on industry which do not contribute to the policy objectives of the tax.

November 2001

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