Written Evidence submitted by Mineral Product Association
- The Mineral Products Association (MPA) is the trade association for the aggregates, asphalt, cement, concrete, dimension stone, lime, mortar and silica sand industries. With the affiliation of British Precast, the British Association of Reinforcement (BAR), Eurobitume, MPA Northern Ireland, MPA Scotland and the British Calcium Carbonate Federation, it has a growing membership of 530 companies and is the sectoral voice for mineral products. MPA membership is made up of the vast majority of independent SME quarrying companies throughout the UK, as well as the 9 major international and global companies. It covers 100% of UK cement and lime production, 90% of GB aggregates production, 95% of asphalt and over 70% of ready-mixed concrete and precast concrete production. In 2018, the industry supplied £16 billion worth of materials and services and was the largest supplier to the construction industry, which had annual output valued at £172 billion. Industry production represents the largest materials flow in the UK economy and is also one of the largest manufacturing sectors.
- MPA’s members are subject to a number of environmental taxes well in excess of £500 million per annum, including the industry-specific Aggregates Levy. We are also one of the industries facing the loss of the red diesel rebate and presented evidence to Treasury demonstrating that this tax change would not have an environmental benefit.
- In both these cases, the impact of the tax is to raise revenue, with no discernible environmental benefit.
- Carbon Price Support is changing behaviour but potentially in a perverse manner through carbon leakage. It is not clear that this is considered in its operation.
- Our industry ha a strong track record on environmental performance, for example in creating 8,300 ha priority habitat in the last decade, or through the reduction in the carbon emissions from the production of concrete and cement of 53% since 1990.
- The Aggregates Levy was introduced in 2002. It was subject to a review in 2019, and to which the government published its response in March 2020. This tax, levied at £2 per tonne of virgin aggregate, is an environmental measure which has weak grounds for justification, no behavioural impact on producers or consumers of the material, but which does provide substantial revenue to the Treasury of around £400 million per year.
- The environmental evidence for the introduction of the levy was very weak. Government has since recognised that the environmental impact of aggregates extraction is low. We have outlined a number of flaws in arriving at the original rate. These include ignoring the environmental and social benefits of extraction, in particular the very high quality, biodiverse habitat created by quarry restoration, poor survey evidence and poor use of that evidence.
- Ironically, the recycling of a proportion of the Aggregates Levy back into delivering environmental projects, via the Sustainability Fund, was one aspect of the Levy that received widespread support, but this was cut without consultation in 2011. Reinstatement of such a fund would be consistent with the concept of the ‘Natural Environment Impact Fund’ proposed in the government’s 25 Year Environment Plan.
- In MPA’s submission to the Aggregate Levy Review, we presented evidence of the lack of impact of the levy since its introduction. As we wrote:
“AGL does not discriminate between operators/operations with different environmental impacts and provides no incentive for higher environmental standards.”
- This is backed up by the NAO report which state “the impact of the Aggregates Levy on the use of recycled aggregate cannot be determined from the data HMRC has collected.” We would contend that this is because there is no impact.
- Additional evidence for the lack of impact is the high but stable level of recycling in our industry. Great Britain is the market leader in Europe, with 28 per cent of the market for aggregates supplied from recycled and secondary sources. But this has long been the case. The increase in recycling rates started around 1990, with no acceleration in recycling since the introduction of the tax. This varies over time in proportion to the amount of demolition work undertaken, but is not otherwise growing despite the tax incentives. This is because of the near-100% recycling rate already achieved for suitable materials, leaving no room for significant further growth.
- The NAO report cites a lack of evidence around the proportion of recycled and secondary material. Our research is modelled on the last real survey data, from 2005 and 2008, and updated. This is reasonable, given the near-100 per cent recycling of demolition material, but we would welcome funding for robust data collection. It is not clear that this would, however, generate any further evidence for impact of the levy, since you cannot recycle more than 100 per cent of such waste.
- We welcome NAO’s recognition that the evidence of impact of the levy is “limited.”
Removal of the Red Diesel rebate
- Diesel is one of the main cost inputs for operations in our sector, and as such the proposal to remove the red diesel rebate is a significant concern. The key issue for our sector is assessing the extent to which further efficiency could be driven by increasing the cost of diesel. MPA members, in our survey informing our response to the consultation, were clear that they already source the most efficient equipment available at the point of renewal. Therefore the only environmental impact of removing the rebate would be to incrementally speed up the availability of new, non-diesel fueled equipment. Given the small size of the UK slice of the global market for this sort of specialist equipment and the lack of a reliable counterfactual, it is hard to see any real evidence for this proposed tax change driving such an environmental benefit.
Carbon Price support
- The impact of Carbon Price Support is passed on by power generators to consumers, including industrial users who face some of the highest electricity costs in Europe. The management of the CPS to achieve an environmental outcome must be set against the wider impact of this policy on competitiveness, especially considering the impact of carbon leakage. In particular, it would be counter-productive if this leakage is to countries, possibly producing the same goods with higher emissions.
 MPA submission to the Review of the Aggregates Levy, pp4-5; available on request
 NAO “Environmental Tax Measures”, p9
 MPA (2020) “The Contribution of Recycled and Secondary Materials to Total Aggregates Supply in Great Britain in 2018”
 NAO “Environmental Tax Measures”, p31