Select Committee on Northern Ireland Affairs Minutes of Evidence


Examination of Witnesses (Questions 180 - 199)

WEDNESDAY 14 NOVEMBER 2001

MR NIGEL SMYTH, MR RALPH CLARKE AND MR STEVE FIDGETT

  180. What will be the effect on Northern Ireland's and the United Kingdom's competitiveness if the levy is introduced?
  (Mr Clarke) In the products with which I am familiar, concrete and blocks, we will not be able to compete. We will lose our competitiveness in the Republic of Ireland. In fact, not only that, if we did nothing—I have already indicated that we would move—the Republic of Ireland producers will take our market in the north.

  181. You are not saying that as being universal between the Republic and Northern Ireland? Is it in specific areas?
  (Mr Clarke) It is very specifically in the border areas. For the tax value of £32 in 1,000 blocks, we'll travel at least 30 miles, so the whole economic border moves from South to North. The North then becomes vulnerable to southern producers and the South is totally protected from northern producers.

  182. So that is what, 30 miles into Northern Ireland that the problem would exist—that would take half of Northern Ireland.
  (Mr Clarke) If we able to penetrate perhaps 10 miles—no, we already have existing transport costs. Let us say we go 10 to 15 miles into the Republic; that will move the opposite direction and we will be vulnerable 10 to 15 miles into the north for our market place from the Republic side producers.

  183. You are arguing, really, that the Government have come up with little in terms of explaining the problems and figures or researching connection with it.
  (Mr Clarke) It is an absolute disaster. Everyone has agreed that no research was done on Northern Ireland. That is diabolical, considering 10 per cent of the UK's aggregates are produced there. They did research twice and neither time did they consider us. The corollary of what I was saying about moving our plant into the Republic is that we shall still buy the aggregates from the north, as the Green Party said—

Chairman

  184. Friends of the Earth.
  (Mr Clarke) That was a Freudian slip. We will still source our materials from the same pits and quarries that we use currently, so we'll just avoid the tax. It's either that or we will have to close. But there will be a domino effect. There was talk of a large part of Northern Ireland being immune to this. No one will be immune. There will be a domino effect from the border inwards. All the producers who were selling in the Republic won't sell there; they will lose part of their northern market and will look internally. They will then push on to other northern producers till we get to the English channel or the Irish channel. Everyone will be affected and the most likely substitution of products that I can see is in the pre-cast market towards metal decking, instead of in situ concrete. I do not see how that will help the economy in terms of—we do not make metal decking in the north of Ireland and also I am sure that it is less environmentally friendly than taking aggregates from the ground. We're going to steel and timber.

  185. Things that we won't go into this afternoon.
  (Mr Clarke) No.

Mr Barnes

  186. Things are not all doom and gloom across the border all the time. Presumably when one action is taken, counter-reactions sometimes take place. I did not believe the Friends of the Earth argument that there would be alternative employment created by this had any substance, or that it is an element that needs to be taken into account to cut down on what one thinks are disastrous effects that will result.
  (Mr Clarke) I am sure that they would be happy to have a steel factory for metal decking in Northern Ireland to produce metal decking for office blocks and so on.
  (Mr Fidgett) In relation to the aggregates tax, it is something of a fallacy. A good environmental economic instrument should, as Friends of the Earth said, stimulate innovation other ways that shift activities from those that are environmentally damaging to those that are environmentally positive. In the case of the aggregates tax, there will be no change in behaviour in terms of the externalities that the DTR research mentioned. So quarries will still have to comply with planning and other regulations as regards landscape biodiversity, noise, dust and other issues, and in terms of transportation. The tax will not alter that level of behaviour. The only thing that I think was discussed this morning, and by Government generally, was recycling. But as was said earlier, that is already tackled through the landfill tax so does not need a second tax to encourage or stimulate that type of behaviour. The CBI's position generally, and especially in relation to Northern Ireland—

Chairman

  187. I am sorry to interrupt you, but we are wanting to focus specifically on the Northern Ireland factor. I know that there is a general objection to the taxation and I think that we can take that as read, but we do not want to go down that road.
  (Mr Fidgett) I appreciate that, but specifically in relation to Northern Ireland, there are considerable environmental disadvantages to the tax which you touched on earlier in terms of transportation of minerals and such movements, and I will not repeat them. This is one issue identified in the London Economics Research which was noticed and which caused people concern. The other issue is the amount of income in a marginal industry in Northern Ireland with low profit that can be directed towards environmental activities. It (the tax) is taking an additional element from their ability to put investment into environmental work.

Mr Beggs

  188. You said in your opening remarks that the proposed aggregates tax is another ill-judged environmental tax. That indicates a degree of cynicism about the use of financial instruments to influence behaviour. But you went further and outlined principles on which environment taxes should be based. Do you accept the principles of environmental taxation?
  (Mr Fidgett) Yes. That is the CBI's position and it published a paper to that effect setting out the principles that they should apply, which mirror to a large degree the Government's own principles and on which the aggregates tax fails.

  189. How far does the Government's development of the aggregates tax meet your tests of being sound, transparent and rigorous.
  (Mr Fidgett) It doesn't, is the short answer. It doesn't change behaviour to the environmental advantage. That is our key criticism of the tax. It applies in Northern Ireland as much as to the rest of the UK.
  (Mr Smyth) The other key criticism is the impact on UK competitiveness. Clearly this has not been taken into account in Northern Ireland.

  190. There would be a far greater effect on the environment if the Government employed three more environmental protection officers and sent them round the north of Ireland each day of every year than this tax could ever have.

Mr Tynan

  191. The CBI states that its mission is to help create and sustain the conditions in which businesses in the UK can compete and prosper. You say that no research has been done, apart from research done by yourselves. How far has the Government taken the uniqueness of Northern Ireland's position into account when developing this levy?
  (Mr Smyth) The simple answer is that they didn't. It was raised with them and the CBI facilitated a meeting with the QPA in September 1999. We raised the issue ourselves earlier this year, bearing in mind the Construction Employers Federation and the QPA are members of the CBI, and that this is very much a sectoral issue. We raised it again with the First Minister in February this year and we are aware of the work done by the sectoral organisations to bring attention to this. It was over the summer that we actually saw the first Customs and Excise officers over here attempting to understand the situation. Perhaps Mr Clarke will comment.
  (Mr Clarke) We had a visit from Customs and Excise in August. We trotted them around the border areas for about three days and showed them the lengthy queues at all the filling stations in the ROI and the closed filling stations in the North, and we said, "This is what is going to happen." They certainly took it all on board but obviously made it clear that they had no influence on policy, that they were there only to act as instruments of the Government in the collection of the tax. At the time I asked them one or two pertinent questions and was not overly happy about their answers.

  192. Were they Ministers, or officials?
  (Mr Clarke) No, these were Customs and Excise officials.

  193. Did you make representations to Ministers?
  (Mr Clarke) We have made representations to every Member of Parliament whose name and address we have. We had a debate in the Northern Ireland Assembly. We have lobbied Ministers. Mr. Robinson has left but I met him two years ago on the same subject. There has been extensive lobbying.

  194. In 1997 the Government made a statement. Now, four years down the line, have you found it difficult to gain access to Ministers and officials to put your case?
  (Mr Clarke) From a Northern Ireland perspective, the QPA in Northern Ireland was only in an embryonic stage in 1997; it was established in 1998. We sort of took a back seat and thought that the UK National are fighting this, they have the resources and the money, and they felt that they would win. They presented their alternatives in December 1998 and July 1999 but both were unsuccessful. At that Stage we in Northern Ireland got alarmed and said, "We are going to have to take a serious interest in this ourselves" and at the time we contacted our local MPs, MLAs, councillors and everyone who would listen. We were on television and in the papers and raised a fair old stir.

  Our first contract with the Treasury was in September 1999.
  (Mr Fidgett) We had a specific meeting with Treasury officials in 1999. It followed our other meetings in 1998 with Customs and Excise people looking in a UK-wide context at the issues in terms of implementation of the tax at a detailed level. One of those issues was the geographical problem, both in Northern Ireland with the particular issue of the land border, but also because of the concern about the potential, at the time, for coastal super quarries in Scotland and in Wales, and to some extent in southern Ireland and on relationship that they would have with imports to and from the UK as a whole. All these issues were discussed at the time with the Treasury and Customs and Excise.

  195. So did the CBI make a separate presentation from the UK as regards the distinctiveness of Northern Ireland.
  (Mr Fidgett) It was included as one item in our overall submission to them.

  196. Would you say that you pushed this as far as you possibly could?
  (Mr Fidgett) It is difficult to say how far one can push something. Certainly the main quarry trade associations were involved in extensive activities to talk to as many people as would listen, to get these points across. We had a supporting role in the sense that our interests are both with aggregate producers and with the construction sector and industry generally, as a consumer and use of minerals and aggregate products. So we were taking some of the broad issues, as well as some geographic issues. We made representations and had meetings with officials and so far as we knew they understood the points being made. It doesn't appear to have influenced their thoughts, or in terms of the practical implementation of the regulations.

  197. You said that you welcomed the comments of Paul Boateng, the Financial Secretary to HM Treasury. In what way?
  (Mr Smyth) Well, I was at the meeting and we have since followed up with a letter. He recognised that there was a specific issue to be addressed, although he did not say that he would address the issue of the land boundary with the Republic.

  198. Was that the basis of the pressure being put on the QPA in Northern Ireland?
  (Mr Smyth) Partly, and I understand that the following day he also met the Minister, Mark Durkan, so he get a clear message at the time of the impact. Indeed, a very senior team of Treasury officials were over at the end of September and the QPA and the CBI were there to raise the issue. I was not at that meeting but I understand that they were in reasonably defensive mode.

  199. Do you believe that the case being put was strong enough or do you think that the Treasury simply ignored it?
  (Mr Smyth) I have not been closely enough involved over a period to be able to say. What I do say is that hearing from colleagues coming out of the September meeting that if we were going for a derogation we would have to get EU support, which would all be a bit difficult. But we have a precedent for that; we have 100 per cent capital allowances in Northern Ireland for smaller firms. So we believe—and have highlighted this in our submission—that if there was a commitment to that it could be done. So it may be due to a lack of commitment by the Treasury to recognise it as a special case.
  (Mr Fidgett) That is certainly the case from that meeting of Treasury officials who at that stage mentioned their uncertainty about whether any derogation would comply with competition law, but we left it for them to consider that and respond accordingly.


 
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