Examination of Witnesses (Questions 180
WEDNESDAY 14 NOVEMBER 2001
180. What will be the effect on Northern Ireland's
and the United Kingdom's competitiveness if the levy is introduced?
(Mr Clarke) In the products with which I am familiar,
concrete and blocks, we will not be able to compete. We will lose
our competitiveness in the Republic of Ireland. In fact, not only
that, if we did nothingI have already indicated that we
would movethe Republic of Ireland producers will take our
market in the north.
181. You are not saying that as being universal
between the Republic and Northern Ireland? Is it in specific areas?
(Mr Clarke) It is very specifically in the border
areas. For the tax value of £32 in 1,000 blocks, we'll travel
at least 30 miles, so the whole economic border moves from South
to North. The North then becomes vulnerable to southern producers
and the South is totally protected from northern producers.
182. So that is what, 30 miles into Northern
Ireland that the problem would existthat would take half
of Northern Ireland.
(Mr Clarke) If we able to penetrate perhaps 10 milesno,
we already have existing transport costs. Let us say we go 10
to 15 miles into the Republic; that will move the opposite direction
and we will be vulnerable 10 to 15 miles into the north for our
market place from the Republic side producers.
183. You are arguing, really, that the Government
have come up with little in terms of explaining the problems and
figures or researching connection with it.
(Mr Clarke) It is an absolute disaster. Everyone has
agreed that no research was done on Northern Ireland. That is
diabolical, considering 10 per cent of the UK's aggregates are
produced there. They did research twice and neither time did they
consider us. The corollary of what I was saying about moving our
plant into the Republic is that we shall still buy the aggregates
from the north, as the Green Party said
184. Friends of the Earth.
(Mr Clarke) That was a Freudian slip. We will still
source our materials from the same pits and quarries that we use
currently, so we'll just avoid the tax. It's either that or we
will have to close. But there will be a domino effect. There was
talk of a large part of Northern Ireland being immune to this.
No one will be immune. There will be a domino effect from the
border inwards. All the producers who were selling in the Republic
won't sell there; they will lose part of their northern market
and will look internally. They will then push on to other northern
producers till we get to the English channel or the Irish channel.
Everyone will be affected and the most likely substitution of
products that I can see is in the pre-cast market towards metal
decking, instead of in situ concrete. I do not see how that will
help the economy in terms ofwe do not make metal decking
in the north of Ireland and also I am sure that it is less environmentally
friendly than taking aggregates from the ground. We're going to
steel and timber.
185. Things that we won't go into this afternoon.
(Mr Clarke) No.
186. Things are not all doom and gloom across
the border all the time. Presumably when one action is taken,
counter-reactions sometimes take place. I did not believe the
Friends of the Earth argument that there would be alternative
employment created by this had any substance, or that it is an
element that needs to be taken into account to cut down on what
one thinks are disastrous effects that will result.
(Mr Clarke) I am sure that they would be happy to
have a steel factory for metal decking in Northern Ireland to
produce metal decking for office blocks and so on.
(Mr Fidgett) In relation to the aggregates tax, it
is something of a fallacy. A good environmental economic instrument
should, as Friends of the Earth said, stimulate innovation other
ways that shift activities from those that are environmentally
damaging to those that are environmentally positive. In the case
of the aggregates tax, there will be no change in behaviour in
terms of the externalities that the DTR research mentioned. So
quarries will still have to comply with planning and other regulations
as regards landscape biodiversity, noise, dust and other issues,
and in terms of transportation. The tax will not alter that level
of behaviour. The only thing that I think was discussed this morning,
and by Government generally, was recycling. But as was said earlier,
that is already tackled through the landfill tax so does not need
a second tax to encourage or stimulate that type of behaviour.
The CBI's position generally, and especially in relation to Northern
187. I am sorry to interrupt you, but we are
wanting to focus specifically on the Northern Ireland factor.
I know that there is a general objection to the taxation and I
think that we can take that as read, but we do not want to go
down that road.
(Mr Fidgett) I appreciate that, but specifically in
relation to Northern Ireland, there are considerable environmental
disadvantages to the tax which you touched on earlier in terms
of transportation of minerals and such movements, and I will not
repeat them. This is one issue identified in the London Economics
Research which was noticed and which caused people concern. The
other issue is the amount of income in a marginal industry in
Northern Ireland with low profit that can be directed towards
environmental activities. It (the tax) is taking an additional
element from their ability to put investment into environmental
188. You said in your opening remarks that the
proposed aggregates tax is another ill-judged environmental tax.
That indicates a degree of cynicism about the use of financial
instruments to influence behaviour. But you went further and outlined
principles on which environment taxes should be based. Do you
accept the principles of environmental taxation?
(Mr Fidgett) Yes. That is the CBI's position and it
published a paper to that effect setting out the principles that
they should apply, which mirror to a large degree the Government's
own principles and on which the aggregates tax fails.
189. How far does the Government's development
of the aggregates tax meet your tests of being sound, transparent
(Mr Fidgett) It doesn't, is the short answer. It doesn't
change behaviour to the environmental advantage. That is our key
criticism of the tax. It applies in Northern Ireland as much as
to the rest of the UK.
(Mr Smyth) The other key criticism is the impact on
UK competitiveness. Clearly this has not been taken into account
in Northern Ireland.
190. There would be a far greater effect on
the environment if the Government employed three more environmental
protection officers and sent them round the north of Ireland each
day of every year than this tax could ever have.
191. The CBI states that its mission is to help
create and sustain the conditions in which businesses in the UK
can compete and prosper. You say that no research has been done,
apart from research done by yourselves. How far has the Government
taken the uniqueness of Northern Ireland's position into account
when developing this levy?
(Mr Smyth) The simple answer is that they didn't.
It was raised with them and the CBI facilitated a meeting with
the QPA in September 1999. We raised the issue ourselves earlier
this year, bearing in mind the Construction Employers Federation
and the QPA are members of the CBI, and that this is very much
a sectoral issue. We raised it again with the First Minister in
February this year and we are aware of the work done by the sectoral
organisations to bring attention to this. It was over the summer
that we actually saw the first Customs and Excise officers over
here attempting to understand the situation. Perhaps Mr Clarke
(Mr Clarke) We had a visit from Customs and Excise
in August. We trotted them around the border areas for about three
days and showed them the lengthy queues at all the filling stations
in the ROI and the closed filling stations in the North, and we
said, "This is what is going to happen." They certainly
took it all on board but obviously made it clear that they had
no influence on policy, that they were there only to act as instruments
of the Government in the collection of the tax. At the time I
asked them one or two pertinent questions and was not overly happy
about their answers.
192. Were they Ministers, or officials?
(Mr Clarke) No, these were Customs and Excise officials.
193. Did you make representations to Ministers?
(Mr Clarke) We have made representations to every
Member of Parliament whose name and address we have. We had a
debate in the Northern Ireland Assembly. We have lobbied Ministers.
Mr. Robinson has left but I met him two years ago on the same
subject. There has been extensive lobbying.
194. In 1997 the Government made a statement.
Now, four years down the line, have you found it difficult to
gain access to Ministers and officials to put your case?
(Mr Clarke) From a Northern Ireland perspective, the
QPA in Northern Ireland was only in an embryonic stage in 1997;
it was established in 1998. We sort of took a back seat and thought
that the UK National are fighting this, they have the resources
and the money, and they felt that they would win. They presented
their alternatives in December 1998 and July 1999 but both were
unsuccessful. At that Stage we in Northern Ireland got alarmed
and said, "We are going to have to take a serious interest
in this ourselves" and at the time we contacted our local
MPs, MLAs, councillors and everyone who would listen. We were
on television and in the papers and raised a fair old stir.
Our first contract with the Treasury was in
(Mr Fidgett) We had a specific meeting with Treasury
officials in 1999. It followed our other meetings in 1998 with
Customs and Excise people looking in a UK-wide context at the
issues in terms of implementation of the tax at a detailed level.
One of those issues was the geographical problem, both in Northern
Ireland with the particular issue of the land border, but also
because of the concern about the potential, at the time, for coastal
super quarries in Scotland and in Wales, and to some extent in
southern Ireland and on relationship that they would have with
imports to and from the UK as a whole. All these issues were discussed
at the time with the Treasury and Customs and Excise.
195. So did the CBI make a separate presentation
from the UK as regards the distinctiveness of Northern Ireland.
(Mr Fidgett) It was included as one item in our overall
submission to them.
196. Would you say that you pushed this as far
as you possibly could?
(Mr Fidgett) It is difficult to say how far one can
push something. Certainly the main quarry trade associations were
involved in extensive activities to talk to as many people as
would listen, to get these points across. We had a supporting
role in the sense that our interests are both with aggregate producers
and with the construction sector and industry generally, as a
consumer and use of minerals and aggregate products. So we were
taking some of the broad issues, as well as some geographic issues.
We made representations and had meetings with officials and so
far as we knew they understood the points being made. It doesn't
appear to have influenced their thoughts, or in terms of the practical
implementation of the regulations.
197. You said that you welcomed the comments
of Paul Boateng, the Financial Secretary to HM Treasury. In what
(Mr Smyth) Well, I was at the meeting and we have
since followed up with a letter. He recognised that there was
a specific issue to be addressed, although he did not say that
he would address the issue of the land boundary with the Republic.
198. Was that the basis of the pressure being
put on the QPA in Northern Ireland?
(Mr Smyth) Partly, and I understand that the following
day he also met the Minister, Mark Durkan, so he get a clear message
at the time of the impact. Indeed, a very senior team of Treasury
officials were over at the end of September and the QPA and the
CBI were there to raise the issue. I was not at that meeting but
I understand that they were in reasonably defensive mode.
199. Do you believe that the case being put
was strong enough or do you think that the Treasury simply ignored
(Mr Smyth) I have not been closely enough involved
over a period to be able to say. What I do say is that hearing
from colleagues coming out of the September meeting that if we
were going for a derogation we would have to get EU support, which
would all be a bit difficult. But we have a precedent for that;
we have 100 per cent capital allowances in Northern Ireland for
smaller firms. So we believeand have highlighted this in
our submissionthat if there was a commitment to that it
could be done. So it may be due to a lack of commitment by the
Treasury to recognise it as a special case.
(Mr Fidgett) That is certainly the case from that
meeting of Treasury officials who at that stage mentioned their
uncertainty about whether any derogation would comply with competition
law, but we left it for them to consider that and respond accordingly.