The effects on employment
61. The crisis in the value added products sector
is particularly significant for the effects it may have on employment:
we were told that the manufacturing processes employ between five
and ten times as many people as quarrying itself.
If firms were to relocate, it was suggested, it would in many
cases be uneconomic for existing workers to commute to the new
plant, and, as suggested by Mr Clarke in the evidence cited above,
jobs would therefore also be lost to the Republic.
62. We sought clarity about the extent of the job
losses which might arise from the tax. The final figures provided
to us by the QPANI calculated that approximately 3,600 jobs were
at risk by virtue of being located within an economic haulage
distance from the Republic (discussed previously in paragraphs
50-53); 3,600 jobs represents 65 per cent of the industry.
Mr Doran of the Construction Employers' Federation Northern Ireland
estimated that 1,000 to 2,000 of those jobs could be at risk in
the short- to medium term.
While the Financial Secretary believed that a figure of 1,000
jobs was "about right", the Northern Ireland Executive
stressed that "this would still represent a severe blow to
the NI economy". 
It was also suggested that there could be knock-on effects to
supporting industries such as engineering firms and fuel suppliers.
63. The Government did not fully comprehend the
importance of the industry to individual communities in Northern
Ireland, which are frequently rural and provide few employment
opportunities. Councillor Fergus McQuillan of Fermanagh District
Council testified to the reality of the unemployment problem,
while the Construction Employers' Federation Northern Ireland
pointed to the fact that two thirds of the jobs in quarrying and
ancillary industries in Northern Ireland are in areas designated
as TSN (Targeting Social Need).
Councillor McQuillan wrote that in Erne East and Erne West:
" ...quarrying is the
most important sector of our economy and ... the consequent manufacture
of blocks, kerbstones and tarmac maintain a large workforce ...
Much of the product from these quarrying operations
is exported to the Republic of Ireland bringing in much needed
revenue to the Northern Ireland economy. It is reasonable to assume
that half of those employed by the firms based in Erne West reside
in Erne East, an unemployment blackspot ...
The industrial base in Erne East has contracted to
such an extent that now only one factory exists in a 150 mile
We cannot afford to lose these jobs".
64. Friends of the Earth Northern Ireland argued
that the introduction of the aggregates levy provided a perfect
opportunity to foster new forms of employment "in areas such
as organic farming, producer retailing, timber production, tourism
and recycling of aggregates" which would provide a more sustainable
future for communities.
However, they accepted that for many communities the present alternative
to aggregates production is "the threat of unemployment and
poverty": they did not make clear how the transition from
the current state to their desired state would be achieved.
The majority of our witnesses were not optimistic, at least for
the short term and the effect of job losses on rural communities.
One possibility for further employment which we raised was in
the haulage industry, but again it was suggested that the cheaper
fuel and excise rates available in the Republic meant that firms
there were more likely to feel the benefit.
Illegal trading and enforcement
65. Following the experience of the petrol retailing
industry, fears were also expressed to us that competition in
Northern Ireland would come not only from legitimate businesses
in the Republic but from those dishonestly evading the levy. Robinson
Quarry Masters expressed concerns about a "massive black
while Loughside Quarries believed that:
of the tax would be about impossible to police in Northern Ireland,
many devious schemes already being considered by unscrupulous
operators to avoid much of the tax".
66. Others expanded on the difficulty of enforcement.
Mr Acheson of the British Aggregates Association reminded us that
"in a five to ten-mile length of the border itself there
might be a dozen border crossings".
The Quarry Products Association Northern Ireland and the British
Aggregates Association were sufficiently concerned about the possibility
of illegal aggregates being transported across the border that
they organised a visit to Northern Ireland by members of the HM
Customs and Excise policy team in August 2001.
67. The details of that visit are set out in the
QPANI's original submission to us.
In oral evidence the Chairman of the QPANI, Mr Jack Duffy, told
us that "Customs and Excise have admitted to us verbally
that it is going to be very, very difficult to police and they
only have limited resources".
Mr Clarke of the CBI Northern Ireland similarly believed that
Customs were struggling, "perhaps picking up only four per
cent or five per cent" of current illegal imports. The industry
believed it to be inevitable that, in these circumstances, Customs'
attention would be focussed on the recovery of petrol revenues
which could amount to up to £12,000 per tanker impounded.
While the lost revenue on a lorry full of aggregate would be only
about £35 a load,
Mr Murphy of the QPANI pointed out that the cumulative effect
on the industry of illegal imports slipping through was potentially
"...you have the difficult
situation where each individual load is not worth chasing but
hundreds of loads put together are enough to put a local quarry
out of business."
68. We asked the Minister how the tax would be policed.
He told us:
"Customs will be responsible for enforcement
in Northern Ireland the same way as they are for other indirect
taxes, that is their responsibility ... What one would say is
that opportunities to smuggle aggregates will be limited because
of the nature of the product, bulky, low value and high transport
costs ... the running of sand is never going to be a major money
As Mr Murphy suggested, it does not need to be. Again,
this points to the Government's lack of understanding of the reality
of the situation in Northern Ireland. We contrast the Minister's
words with those of Mr Clarke:
"I asked Customs and
Excise ... how they would collect the tax from imports from the
Republic ... "we will tax the end user" was the reply.
I asked, "How will you know who the end user is?" "He
will have to register", he said. That to me creates great
difficulties. If one is a ready-mixed producer buying 10,000 tonnes
a month, one will be caught, so you register, but if you are buying
20 loads to make a lane into your field you will not register.
That just won't happen. I then asked what happens if a Republic
of Ireland producer comes into a Northern Ireland quarry and says
"I am taking this material to the Republic of Ireland, therefore
I don't pay tax"? He said, "That's fine". "What
if he drives it down the road and takes it somewhere else in Northern
Ireland?" "Oh, that is evasion ... We will rely on the
producer to determine the destination. As long as he makes an
honest effort to determine the destination we will accept that."
But it is wide open for exploitation."
We are not re-assured.
64 QQ7-8 Back
65 Q2 Back
66 Q1 Back
67 Q5 Back
68 Q11 Back
69 Q11 Back
255, 262 Back
71 Q236 Back
72 QQ208-209 Back
25; 56 Back
Act 2001 (c. 9) s19 Back
76 Q44 Back
77 Q9 Back
78 Q163 Back
79 Q2 Back
80 Q43 Back
85 Q184 Back
88 Q8 Back
89 Q25 Back
90 Q12 Back
Act 2001 (c.9) s16(4) Back
92 Q217 Back
93 Q242 Back
94 Q247 Back
Tax: direct compliance costs and associated burdens, paper by
the British Aggregates Association, June 2001 Back
96 Q12 Back
97 Q4;Q6 Back
98 Q174 Back
99 Q17 Back
100 QQ13-14 Back
102 Q62 Back
Ev p82 Back
104 Q7 Back
pp73, 28 Back
109 Q16 Back
112 Q54 Back
114 Q54 Back
115 Q34 Back
116 Q34 Back
117 Q56 Back
119 Q207 Back