Memorandum from Brunner Mond UK Ltd
1. BRUNNER MOND
Brunner Mond is the UK's sole producer of soda
ash, which is an essential ingredient in products such as pharmaceuticals,
confectionery and glass. The company is based in Cheshire, and
our competition comes mainly from Europe and the USA. In the UK
we employ some 480 people directly with about a further 2000 jobs
amongst our supplier base being dependent on our operations.
As a chemicals producer, the company has considerable
experience of the wave of recent environmental taxation, including
the Landfill Tax, the Aggregates Tax and the Climate Change Levy.
Brunner Mond has a long-standing corporate commitment
to the environment, and supports the general principle of a mix
of fiscal, regulatory and voluntary "carrots and sticks"
to protect it.
2. FIT FOR
Our experience to date of environmental taxation
leaves us unsure as to whether some, at least, of these recent
initiatives will actually succeed in their stated aim.
Our business is in commodity chemicals. The
technology and materials we use are well-known and well-established
and our competitors across Europe operate in exactly the same
way as us. In a commodity business control of costs is critical
as it is essential to be the low-cost supplier. The producer who
cannot control his costs will go to the wall. This is also true
of many of our customers. Over 50 per cent of soda ash is sold
for the manufacturer of glass, another commodity product facing
exactly the same competitive pressures from across Europe as ourselves.
Both the soda ash and glass industries have had onerous new burdens
imposed on them by environmental taxation and there is a very
real risk that these new taxes may well destroy companies and
thus leave a worse environmental blight than they seek to prevent.
We have already seen glass customers in the UK having to close
their operations with the glass production effectively exported
to other European countries. This damages the UK economy; often
leaves derelict industrial land to be remediated; but does nothing
to improve global environmental conditions when exactly the same
environmental effects, or worse, are generated by the overseas
producers where the displaced production is carried out.
3. LACK OF
Our experience has been that insufficient specialist
expertise is applied when the Treasury is developing environmental
taxation, for example the Aggregates Tax.
When this measure was first mooted, it took
us some time to get Government to understand that it might well
apply to Brunner Mond because we use limestone as an essential
raw material in our chemical process. We then found out that those
involved in the development of the tax appeared unaware that there
were other applications for aggregates than road-building. We
succeeded in gaining exemption from the Tax after much hard work.
We estimate that this saved us in the region of £5m a year
on turnover of £140m.
Similarly, our experience of the Landfill Tax
was that Treasury officials were so overtly keen on revenue generation
that valid environmental arguments against the imposition of new
tax burdens on operations that already met the highest environmental
standards failed to received proper consideration, largely due
to a misunderstanding of the technical processes involved in our
industry. The reluctance and inability of the Treasury and the
Department of Environment to consider such matters jointly rather
than separately added to the difficulty of getting a proper understanding
of this issue.
4. TOO MUCH
Our experience is that this type of legislation
is extremely and perhaps unnecessarily complex, and a lot of the
detail is covered by statutory instruments, the introduction and
implementation of which is neither transparent not particularly
democratic. The Climate Change Levy CHP exemptions were dealt
with in this way, and took an immense amount of time and effort
to disentangle and understand.
We take our power from a new state-of-the-art
CHP plant owned and run by Powergen CHP Limited. Thus we are exempt
from the Climate Change Levy, but the Levy is still charged on
any excess energy sold to the National Grid. What incentive is
that to CHP producers?
Our experience is that European legislation
is often used as a method of widening the scope of existing taxation,
for example, the impact the forthcoming Landfill Directive will
have on those who pay the Landfill Tax. It is hard to avoid the
impression that Whitehall sees European legislation as a tempting
collection point for various initiatives which would otherwise
have to await a major Environment Bill. It may also be fair to
say that the lack of specialist expertise leads to overly rigorous
interpretation of the underlying principles of the legislation
for the UK. There is too much gold-plating. There should be a
clear distinction between the policy behind environmental protection
at the level of European regulation and the policy objectives
of UK "green" tax initiatives.
All these initiatives cost us time and resources:
to find out what is proposed, and the likely impact on our business;
to find out how it's going to work; to try to ensure that the
stated purpose will in fact be achieved; and to comply with the
end result. All this is before any beneficial impact on the environment
may result, or before any tax is collected.
We would like to see a situation where those
likely to be on the receiving end of environmental taxation are
involved at a much earlier stage in the development process, so
that any resulting legislation will work, will be appropriate
and applicable, and will produce the impact intended without imposing
costs and regulatory burdens on industry which do not contribute
to the policy objectives of the tax.