Memoranum submitted by the Construction
Employers Federation, Northern Ireland
The Construction Employers Federation is the
representative body for the construction industry in the Province.
We represent some 500 individual construction firms who collectively
account for over 80 per cent of all construction work in the Province.
The construction industry employs some 45,000 operatives and makes
a contribution of 8 per cent to Northern Ireland's GDP with a
turnover of some £1.9 billion per annum.
The CEF has been directly involved with the
Quarry Products Association in lobbying against the introduction
of this tax. We fully support the QPAs detailed argument about
the detrimental affects that this tax will have on both the quarrying
industry the construction industry in the Province.
The proposed levy will apply to virgin sand,
gravel and crushed rock which is subject to commercial exploitation
in the UK. It will be charged £1.60 per tonne. The levy will
not apply to recycled aggregates or to certain secondary aggregates.
Imported virgin aggregates such as raw stone, sand and gravel
etc. will be subject to the levy when first sold or used in the
UK but the downstream aggregate products will be exempt.
Northern Ireland is however in a unique position
in that it is the only part of the UK with a land border with
another EU member state ie the Republic of Ireland where such
a tax does not exist. The QPA has covered in detail the practical
effects that this will have on the market in Northern Ireland.
The proposed tax will have significant effect
on public infrastructure projects.
The total volume of aggregate sales in Northern
Ireland is 22 million tonnes per annum, of which some 60 per cent
is sold to the public sector clients.
The total tax raised on 22 million tonnes would
be £35 million per annum (22m x £1.60)
The public sector would account for 60 per cent
of this tax ie £22 million. In other words £22 million
per annum would be lost from the public sector infrastructure
programme each year because of the Aggregate tax. That is equivalent
to more than twice the value of the total major roads programme
for 2001-02 and would bring into question whether significant
projects such as the Westlink underpasses or the A1 Newry to the
border or the Al Loughbrickland schemes that are currently in
the major works preparation pool will ever be completed.
Earlier this year the DRD Minister Gregory Campbell
MLA gave a written answer to the Northern Ireland Assembly on
the estimated impact of the Aggregates tax on his Department as
follows "The introduction of the tax will raise roads structural
maintenance costs by some 4 per cent and the cost of capital schemes
by between 4 per cent and 17 per cent depending on the nature
and scale of the works. The impact on the Water Service capital
programme is estimated at about 1 per cent additional costs and
about 0.5 per cent on the public transport capital budget."
The Programme for Government has recognised
that our infrastructure has suffered from many years of under
funding and is attempting to address this issue but this proposed
tax will put those plans in jeopardy. Some Departments have made
bids in the draft Programme for Government but it is noticeable
that others who also spend significant amounts on capital projects
such as Health, Education and Social Housing do not appear to
have made any provision.
The impact on the private sector impact of aggregates
tax is unquantifiable in terms of additional costs imposed on
clients investing in private sector construction projects. Major
investment decisions could be put at risk however at a time when
the industry is beginning to experience a slowdown in economic
Government has announced a £35 million
per annum Sustainability Fund which is to be allocated using the
population based Barnett formula. This gives £29 million
to England and £6 million to be shared between Scotland,
Wales and Northern Ireland. Under this Mechanism Northern Ireland
will receive approximately £1 million this equates to a 2.4
per cent share.
This is iniquitous however because Northern
Ireland Contributes some 10 per cent to the total UK output of
aggregates and hence we will provide 10 per cent of total tax
revenue. We submit therefore that Northern Ireland's share should
be 10 per cent of the Sustainability Fund ie £3.5 million
It is estimated that the average new building
by detached house requires 400 tonnes of aggregate. This will
increase the cost by £640 or approximately 1 per cent.
However as a result of government policy of
passing on direct capital costs and charges to the private housing
market, the cumulative effect has been to increase new house prices
over the last two years by some 30 per cent. The Aggregate tax
will be an additional burden on this sector which is showing significant
slow down in demand.
It is also our view that this policy of passing
on such charges is a direct taxation on a small sector of the
community which we believe is contrary to the government's Equality
policy in accordance with Section 75 of the Northern Ireland Act
The tax constitutes a major threat to employment
in rural areas within up to 25 miles of the Border where 110 of
the 176 active quarries in Northern Ireland are located (Geological
Survey Northern Ireland). In other words 62 per cent of active
quarries will be affected.
The quarrying and ancillary distribution and
transport industries employ some 5,600 employees in the Province.
Two-thirds of these jobs are at risk ie 3,500 located in Border
areas which are identified as TSN areas (Targeting Social Need).
Much of the quarrying and related industry is
located in unemployment blackspots of and areas of social disadvantage
which are already struggling to cope with problems beset in these
rural agricultural communities.
The DETI/IDB would therefore come under strong
pressure to take remedial and expensive measures to counter the
potential job losses in the new TSN areas.
We would also submit that the proposed introduction
of the tax has failed to address the equality impact provisions
of Section 75 of the Northern Ireland Act 1998 insofar as the
implementation of the tax will generate a significant imbalance
and unfairness between quarry operators within Northern Ireland.
There has been very broad consensus against
the introduction of the aggregates tax. The Assembly passed a
motion unanimously on 12 December 2000 which called upon Ministers
to make representations to the UK Treasury on behalf of the industry
to prevent the introduction of this tax in Northern Ireland. This
received cross party support from all MLAs including those who
are known to support environmental issues.