Select Committee on Northern Ireland Affairs First Report


INTRODUCTION OF THE AGGREGATES LEVY IN NORTHERN IRELAND

3. THE BORDER THE GOVERNMENT FORGOT

The implications of the border for the environmental goals

26. We are forced to wonder how the Government could have got into a position where a proposal genuinely and specifically targeted at environmental damage could have been developed in so counter-productive a manner. The implications of the land border between Northern Ireland and the Republic seem to have passed them by. We are surprised at the omission of the Government to carry out any kind of investigation of the impact which the border would have on the balance of environmental and economic costs.

27. The Republic of Ireland does not have an aggregates tax. While the Friends of the Earth Northern Ireland and the Green Party in Belfast argued that the Republic should introduce an equivalent levy,[42] we are not aware of any plans for such a tax. Under the Government's proposals imported virgin aggregates will be subject to the levy, but imported 'value-added products' such as concrete will not, when the manufacturing process takes place outside the United Kingdom.

28. We were told that for the UK in general the effect of the levy on the difference in price between domestic and imported goods will not be of great significance because of the associated haulage costs. Over any significant distance they are expected to outweigh the impact of the levy, ensuring that local sourcing remains the more desirable option.

29. However, Northern Ireland cannot be considered in the same light as the rest of the UK, because of the land border. Mr Murphy of the Quarry Products Association explained:

    "The logic of the tax legislation as it is currently formed is that by and large the products our industry produces are not of sufficient value to warrant import or export. By and large that is true, but true for Great Britain is not true for Northern Ireland. In a mechanism by which the tax is expected to work ... the client who is responsible for that product's use will have no alternative other than to pay it because you cannot competitively source an alternative. In Northern Ireland the client has an alternative. The client can simply source product from elsewhere."[43]

30. The economic implications of this alternative are discussed in detail in Chapter 4 of our Report. From a purely environmental point of view, the aggregates producers are convinced that a significant increase in imports to Northern Ireland of aggregates and construction material from the Republic will have negative environmental effects:

    (a)  increased haulage will lead to increased air pollution from vehicle exhausts.

The Friends of the Earth Northern Ireland suggested that the argument about transport effects was of limited significance, since the average distances travelled in other parts of the UK were already likely to be much higher.[44] The QPANI confirmed that the average distance travelled on the mainland is 32 miles,[45] whereas the average haulage distance in Northern Ireland is 12 miles. The QPANI also told us that, on average, 4kg of carbon dioxide are emitted per tonne of aggregate extracted and delivered.[46] Our primary concern is, of course, not the distance travelled of itself, but the increase in distance which is directly consequent upon introduction of the levy. We are inclined to believe that if the levy would make it economic for producers in the Republic to transport tax-free aggregates over distances of 20 miles or more into Northern Ireland, a proportionate increase in CO2 emissions could be expected.[47] Any added contribution to global warming is a significant consideration to set alongside the more immediate environmental effects we have previously discussed, of dust, noise and visual intrusion.

    (b)  the levy might prompt Northern Ireland producers to increase levels of virgin aggregate extraction in order to compensate for loss of business in value-added products.

Mr Murphy told us one of the options his firm faced was to:

    "... stay where we are in our current location, but close our asphalt plant and ... increase the rate at which we extract and sell virgin aggregate. In order to maintain our current level of business activity, we would have approximately to treble the amount of aggregate we quarry per year."[48]

It would seem that in Northern Ireland the levy, whether it is intended to reduce aggregate extraction or to reduce pollution, is destined to fail its environmental goals.

The exclusion of Northern Ireland from the research

31. The QPANI told us that London Economics had failed to take account of: the density and significance of quarrying in Northern Ireland; the current lower level of travel movements; and the difference in environmental management of quarrying in Northern Ireland as compared to the mainland.[49] We asked them if London Economics had looked specifically at the situation in Northern Ireland, and they told us "No."[50]

32. Friends of the Earth Northern Ireland confirmed the flaw. "The lack of research into the effects of the levy on Northern Ireland is a serious oversight by the Government", they wrote.[51] In oral evidence they confirmed this, saying "It is clear that with our unusual position of having a land border, some research should have been done in Northern Ireland to take account of this".[52] Turning to the London Economics report we found that Northern Ireland was wholly excluded from the research on environmental impacts "for logistical reasons".[53]

33. We asked the Government what these logistical reasons were. They told us that:

    "The aim was to choose representative sites in terms of rock type, output and population density in order to provide a sound statistical basis for generalisation of the results. While the expert group advised that the researchers should seek to ensure a reasonably broad geographical spread of sites, they were content that areas not specifically studied, such as Northern Ireland, were suitably represented in terms of the above criteria".[54]

34. This answer tends to support our view of a very blinkered approach to the issues under consideration. Since we were not entirely satisfied, we pursued the question of the 'logistical reasons', and of the efforts made to fill the gaps left by London Economics, with the Financial Secretary to the Treasury. Initially, the Financial Secretary told us that "the work was subject to independent review by a panel of academic experts and not found wanting in any respect".[55] Given the comments by Mourato and Pearce which we have quoted previously in paragraph 17, we were surprised. After further discussion, however, the Minister conceded:

    "The research was managed by the DETR on a very narrow point of environmental cost. If they had been asked the questions that we are now asking in the Treasury and which you are asking as a Committee they would have produced a different piece of work and it may well be that a separate piece of work ought to have been commissioned, nevertheless it was not ..."[56]

35. The issue of the border, and of the problems associated with cross-border price differentials, is not new. Our predecessors in the last Parliament drew attention to it in their Third Report of 1998-99;[57] the former Trade and Industry Select Committee raised the same point in their Fifth Report of Session 2000-01.[58] While we accept the Minister's point that the industry's representatives might have reacted more quickly,[59] the case nonetheless remains that the QPANI and the CBI met officials in London about the problem on 29 September 1999,[60] and that it took another two years for HM Customs and Excise officials to make the return trip to Northern Ireland, in August 2001.[61] We also point to the fact that the Steering Group which was supposed to be providing "advice to the Department [of the Environment, Transport and the Regions] on the management and direction of the research"[62] included representatives not only of the DETR but also of the Treasury, HM Customs and Excise and the Department of Trade and Industry.[63] In the circumstances we find it almost impossible to believe that the potential difficulties posed by the border were not raised at some point in the Government's discussions.

36. We are forced to conclude that the lack of consideration given to the unique position of Northern Ireland was both unfortunate and unhelpful. The environmental and economic costs to Northern Ireland could be serious.


42  Ev pp37,71 Back

43  Q49 Back

44  Ev p36 Back

45  Ev p25 Back

46  Ev p25 Back

47  Q19, Ev p25 Back

48  Q6 Back

49  QQ47- 48 Back

50  Q52 Back

51  Ev p37 Back

52  Q94 Back

53  The Environmental Costs and Benefits of the Supply of Aggregates, Phase 2, London Economics/DETR July 1999p10 Back

54  Ev p76 Back

55  Q230 Back

56  Q236 Back

57  Impact in Northern Ireland of Cross-border Road Fuel Price Differentials, HC334 1998-99, London TSO Back

58  Impact on Trade and Industry of Motor Fuel Taxation, HC 268, 2000-01, London TSO Back

59  See for example Q230 Back

60  Ev p25 Back

61  Q43 Back

62  Ev p75 Back

63  The Environmental Costs and Benefits of the Supply of Aggregates, Phase 2, London Economics/DETR July 1999, Preface Back


 
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Prepared 11 December 2001