Finance Bill

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Mr. Chope: Dealing with amendment No. 255 first, the Economic Secretary explained how naturally occurring water in aggregate is part of the system, and how aggregate is weighed and sold by the tonne with as much water as there happens to be in it. He went on to explain the fiendishly complicated calculation that Customs and Excise had brought in to work out how much water has been put into aggregate in order to reduce the incidence of dust. He said that there was an environmental benefit in the reduction of dust, which we would endorse absolutely. What he did not address were cases when aggregate is washed and sold wet, having been washed to make it more saleable. It may be sea-dredged aggregate that has been washed. Why should there be a special allowance for aggregate in that washed state when there is no allowance for aggregate from beneath the water table? I am not convinced by the Economic Secretary's explanation on that.

On amendment No. 256, the hon. Gentleman says that the aggregates industry has been consulted. Perhaps I could tell the Committee of something that I was informed about this morning by the British Aggregates Association. It says that there was a court case in front of the European Commission when the application for state aid approval in relation to Northern Ireland was considered by the Commission. The Commission's judgment reached the conclusion that it would be reasonable to allow state aid approval for Northern Ireland, but it also—more interestingly—reached the conclusion that the whole United Kingdom regime was state aid because of the differential impact that it has on different parts of the industry. As one can see from the examples that we have talked about, that is particularly true of the slate industry.

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The Government have introduced a fiscal regime that will give an incentive for virgin slate to be quarried and to be used in place of aggregate waste. It will be transported hundreds of miles across the country to enable that to happen. How can that be sensible? It is surely a distortion of the market. How can the Government assert that it is a good thing to have a slate quarry operating, but not a limestone quarry, or that it is a bad thing to quarry virgin limestone but acceptable to quarry virgin slate? That does not make sense.

The European Commission produced its findings on the matter in April. The Government were given 14 days in which they were allowed to indicate whether they felt that the draft judgment should be made publicly available. They did not say anything, and it is only in the previous 48 hours or so that Customs and Excise has agreed with the British Aggregates Association that the draft judgment should be published. The draft judgment shows that the European Commission's view is that the whole regime and structure involves state aid. It has given approval to that, but the Government have hitherto argued that the only element of state aid was in so far as it affected Northern Ireland. Needless to say, that will be the subject of further litigation in the courts, but I think that it drives a coach and horses through the Economic Secretary's suggestion that he is actively consulting the aggregates industry. The industry urged Customs and Excise to give permission to publish the judgment at the end of April but it is only now, towards the end of this Committee, that that permission has been granted. It is significant and exemplifies the responsibility of the British Aggregates Association that it did nothing that it was not authorised to do and sought approval from Customs and Excise first.

Opposition Members feel that we should not countenance legislation that will encourage the mining and crushing of virgin slate while at the same time encouraging the dumping and accumulation of waste aggregate. That encapsulates our arguments in support of amendment No. 256.

John Healey: Before the Committee perhaps divides on the amendment, I would not want it to be under any misapprehension on a matter as important as the proceedings and judgments of the European Commission, which Conservative Members follow closely. The High Court, in the judicial review proceedings brought by the British Aggregates Association to which the hon. Member for Christchurch referred, found that the exemption was not a state aid. The Commission ruled that the levy does not contain any state aid, contrary to the information supplied to the Committee by the hon. Gentleman, apart from the phasing in of the levy in Northern Ireland, which is accepted by the Commission as a permitted state aid under environmental guidelines of which the European Commission is the custodian. I hope that that clarification has set my hon. Friends' minds at rest.

Question put, That the amendment be made:—

The Committee divided: Ayes 10, Noes 18.

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Division No. 7]

AYES
Bercow, Mr. John Burnett, Mr. John Chope, Mr. Christopher Field, Mr. Mark Flight, Mr. Howard
Grayling, Chris Hoban, Mr. Mark Jack, Mr. Michael Luff, Mr. Peter Pugh, Dr. John

NOES
Brennan, Kevin Casale, Roger Cruddas, Jon Cunningham, Mr. Jim David, Mr. Wayne Harris, Mr. Tom Healey, John Hendrick, Mr. Mark Kelly, Ruth
Luke, Mr. Iain McKechin, Ann Marris, Rob Pond, Mr. Chris Primarolo, Dawn Ryan, Joan Smith, Angela Southworth, Helen Wright, David

Question accordingly negatived.

Clause 127 ordered to stand part of the Bill.

Clause 128 ordered to stand part of the Bill.

Clause 129

Aggregates levy: miscellaneous amendments

Question proposed, That the clause stand part of the Bill.

The Chairman: With this it will be convenient to take the following: New clause 26—No exemption for commercial exploitation within the United Kingdom—

    '.—In section 19(5) of the Finance Act 2001 (c. 9) at end insert ''and if the purposes for which the aggregate is commercially exploited are within the United Kingdom.''.'.

New clause 27—Aggregates levy: adjustment of contracts—

    '.—(1) The Finance Act 2001 (c. 9) is amended as follows.

    (2) In section 43(1)(a), after ''quantity of aggregate'' insert ''or quantity of product containing aggregate.''

    (3) In section 43(1)(b), at end insert ''or quantity of product containing aggregate,''.

    (4) In section 43(2)(a) insert ''or

    (iii) indices for the price of aggregates''.'.

New clause 28—Reduced rate of aggregates levy—

    '.—In subsection 4 of section 16 of the Finance Act 2001, for ''£1.60'' substitute ''50p''.'.

Mr. Chope: These new clauses, particularly new clause 28, enable us to have a debate on the nonsense of the aggregates levy. New clause 28 is drafted to reduce the rate from £1.60 per tonne to 50p per tonne, but that is a form of words to enable the debate to take place. New clause 26 would exempt from the tax, aggregate used in the production of concrete products for export—a straightforward competitiveness issue. New clause 27 would extend the protection in section 43 of the Finance Act 2001 so that price increases due to the levy could be passed on in long-term contracts to supply aggregate products. The increase shown by price indices due to the levy would not then cause rents linked to those indices to rise.

The competitiveness problems arising from the legislation are now coming into stark relief. Nowhere is that more true than in Northern Ireland, as we have said, but it is also true in Scotland. As I understand it, a company there manufactures products, for sale outside the United Kingdom, involving the use of a

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lot of aggregate as an aggregate coating on those products. As a result of the incidence of this tax on its products, it is seriously considering whether to relocate its business outside the United Kingdom. The tax is making its product uncompetitive in the marketplace. If that is what the Government wanted to achieve, they are well on the way to doing so, unless they accept new clause 26, which would allow some relief.

While we are talking about Scotland, we know from the Quarry Products Association that the total aggregates tax regime will cost Scotland about £12 million. In contrast, Greater London will benefit by some £43 million each year. Is that something that the Government intended? Did they intend to subsidise Mayor Livingstone's people by £43 million and take away £12 million from the Scots as a result of the operation of the aggregates tax? I suspect that they did not, but that has been the consequence of this ludicrous taxation regime. Now, on top of that, they will find that, because of the effects on companies in Scotland manufacturing products involving aggregate for export overseas, those companies will be separately penalised and the Scottish economy damaged. What a deplorable state of affairs.

An argument put forward for the aggregates levy was that there would be a sustainability fund to help communities—as it was originally expressed—adversely affected by the impact of quarrying. One's immediately thought is that it is hard luck on people who live near the slate quarries that are now reopening as a result of what the Government's legislation is doing in the marketplace; they will not be given any help from the fund. The fund was originally intended to help communities close to quarries, but we are now told that that will not happen because much of the money will be frittered away on bureaucracy and so on. It will not be used to help local people, who normally feel imposed on when quarrying or sand and gravel extraction takes place in their communities. I know that from my constituency, where there are sand and gravel workings. One of the consequences of having a constituency on the very edge of both Hampshire and Dorset is that, because the Hampshire minerals plan has decided that it would be best to extract minerals right on the edge of the county boundary, and the Dorset minerals plan does exactly the same thing, my constituents suffer. They were led to believe that they would get some relief under the regime from the special fund that would be provided from the tax proceeds. We now find that that will not happen. That is one justification for significantly reducing the rate of the tax.

11.15 am

Another justification for reducing the rate of the tax—indeed, eliminating it—is to do away with the enormous bureaucracy that has built up around it. The tax was ill advised in the first place. The Department for Transport, Local Government and the Regions expressed serious doubts about it. In a previous debate, the Economic Secretary dismissed the studies that the Department carried out at taxpayers' expense as backward rather than forward looking. If the

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studies were worthless, why were they commissioned in the first place? The short answer is that they came up with the wrong answer and, instead of accepting the advice that they should have accepted, the Government decided to ignore them and to try to justify the tax on the basis of fresh argument.

I hope that the Committee will accept the new clauses and thereby improve the present position by reducing the adverse impact of the tax. However, as we have said before, the best answer would be to abolish the whole rigmarole.

 
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