MPA seeks reduction of the aggregates levy and new local community fund

17 February 2011

MPA has called on Government to reduce the level of and re-assess the environmental rationale of the Aggregates Levy, following the Government announcement that a key element of the Levy - the Aggregates Levy Sustainability Fund - will be scrapped from April 2011.

The MPA representations are based on the following key factors:

• The Aggregates Levy, which was introduced in April 2002, is nominally an environmental tax, but has been subject to no environmental assessment, has no related environmental benchmarks and provides no incentive for aggregates producers to improve environmental performance. It is environmentally ineffective.
• The levy is scheduled to rise again in April 2011 to £2.10 per tonne and has increased by over 30% since introduction. These increases have been imposed in spite of continuing improvements in the sustainability of the aggregates industry, both in terms of operating standards, the restoration and aftercare of industry sites and the supply of essential materials to improve the quality and performance of our infrastructure and built environment. These sustainability improvements have not been generated by the levy, but by a combination of industry action and regulation.
• The levy, which raises over £300 million pa, imposes additional costs on the construction industry and clients, including public sector clients such as local authorities who are already struggling, for example, to fund critical repairs to the deteriorating local road network.
• When the levy was introduced an integral part of the Levy "package" was an Aggregates Levy Sustainability Fund (ALSF). In England the ALSF funds a range of environmental and local community projects associated with quarrying communities and industry impacts, and is financed by the hypothecation of a proportion of aggregates levy revenue (equivalent to 6% of Levy revenue since 2002/3)
• Independent research carried out in 2010 confirmed that the ALSF represents very good value for money, but Defra (who administers the ALSF) has announced that it will no longer fund the ALSF, despite the aggregates levy rate increasing in April.
• Defra says that the "ALSF does not represent a core activity for the Department", although the ALSF contributes directly to enhancing the environment and biodiversity, to supporting Government objectives on climate change, and to empowering local communities, all of which are Defra priorities for 2011 - 2015.
• There is an outstanding need for the retention of an ALSF–type mechanism which focuses primarily on local community activities and the localism agenda, biodiversity, climate change and marine environment projects and potentially funding aspects of a strategic mineral planning system

Nigel Jackson, Chief Executive of MPA, said: "There are clearly major questions about the environmental performance and relevance of the levy and the additional costs it is imposing on construction clients and the supply chain at a time when Government needs to focus on policies encouraging economic growth and not imposing additional costs.

"The ALSF was designed as an integral element of the levy in recognition that the levy itself is a blunt instrument and more targeted spending and interventions were necessary to generate environmental and community benefits. The fact that Government has now decided to scrap the ALSF further diminishes the levy's environmental credentials and turns it into a straightforward revenue raising measure and not an environmental tax.

"There is now a golden opportunity to support communities in quarrying areas by creating a new fund which recycles part of the levy directly into new 'local community trusts' while also retaining funding to support key projects relating to biodiversity, climate change, the marine environment and the strategic mineral planning system

"Government is now reviewing its approach to environmental taxation and The MPA has been pleased to contribute to this process - it is now the right time to reconsider future policy in relation to the Aggregates Levy and the Aggregates Levy Sustainability Fund in the broader context of our industry's sustainability performance and we hope The Treasury will react positively to this proposal."

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