Select Committee on Northern Ireland Affairs Minutes of Evidence

Letter from the Financial Secretary, HM Treasury to the Chairman of the Committee

  The Clerk of the Committee wrote to the Treasury's Parliamentary Clerk on 18 October about the Committee's intention to conduct a short inquiry into the introduction of the aggregates levy.

I thought it might be useful first to provide some background and context to your investigations into the levy.

  The environmental rationale and the efficient rate of an aggregates levy were established by independent economic research, commissioned by the former DETR. Initial findings were published in April 1998. The Government invited an academic review of this work, which informed the second round of research. The study concluded that there were significant environmental costs associated with quarrying, including noise, dust, loss of visual amenity and damage to wildlife habitat, and estimated the value of these costs on a conservative basis at £1.80 per tonne. The Government has set the levy at a more cautious rate of £1.60 per tonne.

  The aim of the aggregates levy is to reduce these environmental costs and encourage the use and development of recycled and alternative materials in place of virgin aggregate. The levy will also encourage greater resource efficiency within the construction industry. The 0.1 percentage point cut in national insurance contributions for employers which is part of the aggregates levy package will also promote employment in Northern Ireland as elsewhere in the UK. Spending of resources provided for the Sustainability Fund as a result of the levy's introduction is a devolved responsibility, but again it will offer benefits to Northern Ireland.

  As you will be aware, the aggregates levy was announced in Budget 2000, although the principle was initially aired in 1998 via the Government's consultation on how an aggregates levy could operate. Provision for the levy was included in the Finance Act. A whole day was devoted to discussion of the levy in Committee of the Whole House. The levy is due to take effect from April 2002.

  Turning to the position of Northern Ireland, a great deal of data on the Northern Ireland aggregates and aggregates-processing industry has been gathered and analysed, including evidence from the Northern Ireland Executive, the Quarry Products Association (Northern Ireland), the British Aggregates Association and the British Pre-cast Concrete Federation, who I am meeting this week. Officials and I have been in contact with industry groups to request further information in addition to the analysis provided by these groups. I have also received representations from several interest parties, which are being closely studied.

  In addition to exchanging data and information, there have been several meetings with representatives from the industry and the Northern Ireland Executive. HM Treasury and HM Customs officials recently visited the Northern Ireland Executive, and met representatives of the Northern Ireland aggregates industry. HM Custom's officials also visited border area quarries and discussed aggregates issues with representatives of the industry during the summer. I visited Northern Ireland this week and met with representatives.

  As a result, Treasury Ministers are currently actively considering the issues surrounding the detailed implementation of the levy as part of the ongoing Pre-Budget Report and Budget 2002 process, including the issues relating to Northern Ireland. We expect to announce progress on many of these issues in the Pre-Budget Report this autumn.

  I am very happy to help the Committee with its inquiry. In particular, although the timescale is very tight, I will undertake that the Committee will be supplied with a short memorandum about the consideration of these issues. However, given that I am currently considering decisions relating to the aggregates levy, I would find it very difficult to comment on these issues publicly in advance of any possible announcements in the Pre-Budget Report. For that reason, you may feel that my value to the Committee at this stage is limited. I would however be delighted to attend with officials to supplement any technical or policy questions that arise from the memo, or simply to hear your views.

  I hope that I have reassured the Committee that the Government has been carefully examining the issues raised in Northern Ireland by the aggregates levy and is actively considering them ahead of the Pre-Budget Report and Budget 2002.

  In addition, if you would find it helpful, I would be very happy to meet or talk to you about this issue, and in particular to discuss how best I can help with the Committee's Inquiry subject to may earlier caveats.

26 October 2001

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