Select Committee on Northern Ireland Affairs Minutes of Evidence

Letter from the Quarry Products Association, Northern Ireland to the Chairman of the Committee

  The Quarry Products Association (NI) represents 70 per cent of the aggregate, blacktop, concrete, sand and gravel companies in Northern Ireland. We have been campaigning vigorously against the introduction of the Aggregates Tax in Northern Ireland, because of the unique circumstance of the proximity of the border with the Irish Republic.

  Despite being an issue which has united every strand of opinion in the Province HM Treasury still shows no indication that Northern Ireland will be given separate consideration, despite our different circumstances from the UK mainland, and the fact that Northern Ireland was never even considered during the study prior to the levy being announced.

  The introduction of the tax will severely damage the competitiveness of Northern Ireland companies as manufacturers in the Republic will be able to import their concrete blocks, precast concrete and asphalt into the North tax free.

  We estimate that this will endanger up to 4,000 jobs, a figure supported by the Department of Finance and Personnel, and longer term will result in northern companies relocating in the Republic. The tax will also have a severe impact on the environment, particularly in border areas, by increased lorry movements from the Republic.

  We would therefore respectfully ask that this serious issue be raised and discussed at the next meeting of the select committee, and that you consider making representations to the Treasury on our behalf. Any changes to the finance bill of which the Aggregates Tax is part will take place prior to the pre-Budget Statement in November.

  I have enclosed a briefing document and Editorial for your information.

21 September 2001


  The Northern Ireland Branch of the Quarry Products Association was formed in 1998. The membership, which is expanding, now accounts for 70 per cent of aggregates output. Our membership includes major, medium and smaller sized companies. The Association represents companies engaged in the supply of primary aggregates, the processing of recycled and secondary materials, the production of downstream value added products such as asphalt, lime, mortar, ready mix concrete and pre-cast, and road surfacing contracting.

Aggregates Tax—What is it?

  The Chancellor announced on 21 March 2000 that a green tax to tackle the environmental cost of quarrying and encourage the use of recycled materials is to be introduced on 1 April 2002. The tax of £1.60 per tonne, to be charged on a weight basis, rather than as a percentage of value is to be applied to all virgin sand, gravel and crushed rock extracted in the UK. This will include all aggregates incorporated in downstream products like asphalt, bricks, blocks, concrete, etc.

  Imported virgin aggregates will be taxed. How this will be applied, however, not even Customs and Excise are sure. They work with finite resources which are directed toward the greatest risk. The excise duty on a smuggled oil tanker is around £12,000, the duty of a load of stone is around £35. It does not take a genius to know where the resources will be directed.

  At present, imported added value products such as bitmac, asphalt blocks and pre-cast concrete will not be taxed simply because it is considered to be too difficult to determine, outside the jurisdiction, the amount of aggregates contained within such processed products.

Why is Northern Ireland at a Disadvantage?

  By way of illustration, consider this example. A client owns a hotel in Enniskillen and he wishes to resurface his car park. Contractor A from Irvinestown tenders for 1,000 tonnes of blacktop, as does Contractor B who is located just over the border.

  With the Aggregates Tax in place in Northern Ireland, Contractor A has to pass on the £1.60/tonne to his customer on the blacktop. The client, however, goes to Contractor B and buys the blacktop south of the border, as he can buy it without the tax being applied.

  The same client has also had to purchase ancillary concrete kerbs, gulley pots and concrete blocks. Once again, because of the Aggregates Tax, he buys these products over the border as these are downstream products and imported from the South tax free.

  The client was able to get the job done £1,600 cheaper on blacktop alone (1,000 tonne x £1.60) by giving the work to Contractor B. Contractor A lost the contract and may need to lay off several workers due to lost contracts, all due to the imposition of Aggregates Tax.

  Northern Ireland is the only part of the UK with a physical land border with another EU Member State, ie the Republic of Ireland, of which five out of six counties border. With no similar tax rate being introduced in the Republic, producers in Republic of Ireland will be able to select their products in the North at a significant advantage to local manufacturers. This imposition, combined with lower fuel cost and Corporation Tax in the Republic, will exacerbate the disadvantage Northern Ireland producers.

  The imposition of this tax will also have a disproportionate increase in construction costs in Northern Ireland due to the significantly lower ex-quarry price of aggregate compared to Great Britain. Equally, it is estimated that this tax will take some £21 million out of capital budgets in the public sector in Northern Ireland and there has been no assurance given that this net loss in capital spending will be compensated for at a time when the Assembly is trying to address the infrastructure deficit in the Province.

What Effect will it have on Jobs?

  The percentage of the workforce employed in the quarrying industry is much greater in Northern Ireland than in Britain.

  The industry has provided thousands of jobs throughout Northern Ireland and is often the only prospect for employment in rural areas, apart from agriculture.

  The total estimated as being directly employed in the NI industry is 5,600 and, as Counties Antrim, East Derry and North Down represent 35 per cent of production, there are approximately 3,600 jobs at risk. This, we feel, will rise to near 4,000 when one takes into account the effect on local economies, particularly those within 25 miles of the Republic of Ireland border, and further job losses occasioned by the inevitable reduction in public sector spending.

  The conclusion of this issue is that large scale unemployment will take place, and one has to ask the questions, in which industries are these people going to be employed, and who is going to train them? There may be movement to the Republic of Ireland, which will incur a further loss of revenue to the Exchequer.

Is This A Green Tax?

  No one would argue against any industry carrying out their operations in an environmentally responsible way. At present all QPA members in Northern Ireland have to adhere to strict Environmental Legislation.

  The Aggregates Tax purpose is to encourage the use of the recycling of materials in construction projects. Unfortunately, in Northern Ireland we do not have the vast urban regeneration that they have on the mainland. We have enormous resources of good quality aggregate, unlike England who have very little apart from river gravels and china clays. We do not have the huge stockpiles of waste material from steelworks or power stations which they have on the mainland.

  Northern Ireland last year recycled approximately 700,000 tonnes of material used mainly at the Odyssey Project, the new City Airport and the Laganside site at the old Sirocco Works. The material can still be seen sitting there ready to be used in a new residential and retail outlet project.

  The imposition of the tax, as we have indicated before, will mean increased lorry movements across the border. It is a fact that for every tonne of stone manufactured and delivered approximately 13 kg of CO2 is released into the atmosphere, of which 50 per cent is transport related.

  The imposition of the tax, therefore, will leave Northern Ireland at an environmental deficit.

How much Political Support have we had?

  The Quarry Products Association in Northern Ireland has lobbied MLAs, Westminster MPs and the Treasury intensely over the past 12 months.

  On 8 June 2001 there were the following written answers in the Northern Ireland Assembly:

  Sir Reg Empey, the Minister for Enterprise, Trade and Investment, wrote that he shared the concern of the industry that the proposed aggregates tax of £1.60 per tonne " could have an adverse impact in Northern Ireland. The First and Deputy First Ministers met the Chancellor of the Exchequer on 24 January 2001 to emphasise the Executive's concern. Subsequently, my Department and the Department of Finance, in consultation with the NI Quarry Products Association, put a detailed case to the Chancellor advocating the exclusion of Northern Ireland from this levy. The Chancellor has asked for a more detailed analysis of the potential effect upon Northern Ireland and this work is presently underway".

  Following representations by QPANI members to a number of MLAs, Gregory Campbell, the Regional Development Minister, gave information on the estimated impact of the Aggregates Tax in Northern Ireland. "The introduction of the tax will raise roads structural maintenance costs by some 4 per cent and the cost of capital schemes by between 4 per cent and 17 per cent depending on the nature and scale of the works. The impact of the Water Service capital programme is estimated at about 1 per cent additional costs and about 0.5 per cent on the public transport capital budget. As recently as last month (May 2000), my Department made further representations to the Department of Finance and Personnel on my behalf, and registered bids for additional resources to cover the increased costs in the context of next year's budget. The bid reflects current estimated costs, which total just under £8 million, rather than the £7 million we had assessed earlier. Failure of the bids will impact adversely on my capital programmes, particularly in the Roads Service, where the structural maintenance programme will also be severely affected".

  Later in the month (15 June 2001), in response to questions arranged by QPANI, the Education Minister, Martin McGuinness, also gave information on the effect of the Aggregates Tax on school refurbishment and building projects in Northern Ireland. He said that the cost of aggregate would be about 0.6 per cent of the contract value and was estimated to amount to an additional cost of £600,000 per year. "My officials have raised this pressure o the capital budget with the Department of Finance and Personnel officials and I will be discussing this with the Minister for Finance and Personnel at our next meeting".

  On Monday 6 August 2001, the Quarry Products Association (NI) Aggregates Tax Committee had a joint Ministerial meeting with the Department of Finance and Personnel and the Department of Employment, Trade and Investment to discuss the way forward in our campaign.

  The Minister informed us that he was hoping to meet Paul Boateng, First Secretary to the Treasury, very shortly, hopefully in Northern Ireland. A meting with him is essential in order to convey the stark reality of job losses, company closures and the environmental deficit that the introduction of the tax will mean for Northern Ireland.

  On Tuesday 7 and Wednesday 8 August 2001, in a joint venture by QPA(NI) and the British Aggregates Association, a Customs and Excise team responsible for levy policy and implementation visited Northern Ireland. The team were taken to a number of our members in the Fermanagh border area and saw at first hand what this tax will do to businesses in that area.

  Our first visit was to Tarmac's Quarry at Ederney where they manufacture concrete blocks, concrete and asphalt, and employ 28 people. Pat Lyons, Northern Ireland Business Manager for Tarmac in Northern Ireland, gave a presentation to the team to illustrate the effect tax-exempt products from the Republic of Ireland will have on their business.

  The additional cost of £1.60 per tonne for aggregate, which goes into his blocks, concrete and asphalt, will make them uncompetitive. The financial impact of this will be to turn an acceptable annual profit into a loss.

  Tarmac have planned a substantial investment for the quarry, which has been put on hold until the final outcome of the Aggregates Tax question is known. Pat made it quite clear that the introduction of the Tax will put the future of the quarry at risk and jeopardise the employment of 28 people in an area already hit by job losses.

  The situation was repeated when we visited Tracey Concrete in Enniskillen and Paddy Clarke and Sons in Lisnaskea. Both these companies are long established County Fermanagh firms. Patsy Tracey outlined the consequences for his company of the Aggregates Tax. These were investment in new concrete mixers cancelled, losses of 30 jobs in the ready mix concrete business, loss of business in both the South and the North due to the import of tax-exempt products from the South and, ultimately, the re-location of his business into the Republic.

  The same scenario was painted at Paddy Clarke & Sons by Paddy Clarke himself who implored the Customs and Excise people to do all in their power to convince HM Treasury back in London of the serious situation here.

  Ralph Clarke, Senior Director in Ready Use Concrete, joined us for dinner in Dungannon on the Tuesday evening. Ralph informed the Customs team that his company were already negotiating for possible re-location sites in the Republic for their existing operations in Strabane and Derry.

  In Armagh, we took the Customs and Excise team to visit W J H Crozier, David Coote Concrete, Armagh City Quarries and Douglas Acheson Ltd. Roddy Acheson took the team on a drive, crossing the border a number of times to illustrate the numerous routes that importers from the Republic will be able to use to supply his present customers with cheaper aggregate after the tax burden has been placed on him. The Customs and Excise team acknowledged the consistently alarming message that was coming forward and voiced genuine concern that Northern Ireland producers face a clear threat from imports from the South of Ireland.

  They admitted that at no time in the early stages of levy policy formation and the original analysis carried out by London Economics was the Northern Ireland situation even considered. I, as Regional Development Manager for the QPA in Northern Ireland, relayed the Association's view that at the very least the implementation of the tax in Northern Ireland should be suspended for at least 12 months pending further investigation into our unique set of circumstances. During that time, other options in which the protection of the Northern Ireland industry can be considered.

  It is clear that, as far as policing the tax, the Department's resources will be stretched to the full. Customs and Excise work on finite resources and budgets and resources are normally targeted towards the greatest risk. Considering that the lost excise duty on a tanker of oil is in the region of £12,000 and a lorry load of stone is £45, it does not take a genius to work out where the resources are going to be directed.

  Having spent two days with the Customs and Excise team, I am cautiously optimistic that they will go back to England and report to HM Treasury that the Northern Ireland situation is unique and is very serious, and that further investigation is required. We are, at present, forwarding to Customs and Excise additional relevant facts and statistics.

  May I take this opportunity, on behalf of those employed in the industry, particularly those in the 50 per cent of Northern Ireland which is within 25 miles of the border, to appeal to you, the greater Northern Ireland public, who may have family members, or even know just one person who works in the quarry, concrete or sand and gravel industry, to lobby your local MLA or MP and, if possible, write to Gordon Brown, Chancellor of the Exchequer, 11 Downing Street, London.

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2001
Prepared 11 December 2001