HC Deb 29 February 1996 vol 272 cc1099-106

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Knapman.]

10 pm

Mr. Chris Davies (Littleborough and Saddleworth)

Yesterday, in my other capacity as a member of Oldham metropolitan borough council I had to vote for a budget embracing major cuts in public services, including cuts in education and social services that will have a severe effect on the local people whom I represent.

Of those cuts, £360,000 worth are directly due to the introduction of the new landfill tax. That figure is expected almost to double next year. The implications of the new tax were debated when parts of the Finance Bill was considered on the Floor of the House, but only now are the real concerns of local authorities starting to be felt and to be properly expressed.

During the early discussions of the Bill the lobbying of industry was paramount, and most apparent. Local authority treasurers had been led up the garden path and encouraged to believe that the effects would not be as severe as they have proved. So they have not spent the intervening time lobbying their local Members of Parliament. But now the realities are becoming clear, and I am grateful for the opportunity to debate them.

For once the Government had a really good idea—a green tax to benefit the environment, cut household waste and encourage recycling. Rarely, as I am sure the Minister will agree, can an idea have received such a warm welcome from all parties and from such a parade of environmental groups. The proposal was seen as beneficial and sweet, but it has rapidly turned sour.

The tax will cost councils in West Yorkshire, for example, some £3.3 million in the coming year alone. Across the Pennines it will cost councils in Greater Manchester £4 million, and in the country as a whole it will add £77 million to the burden of local authorities.

Instead of that money going to local councils to encourage recycling, it will go straight to the Government for their own purposes. Far from giving a boost to recycling, it will force councils to cut public services to pay for it, and in practice will leave them with even less money for recycling schemes. In summary, the tax is a tragedy—another wasted opportunity for environmental improvement.

I shall take the Minister back to those pleasant days in November 1994 when the Chancellor first announced his plans for a landfill tax. Each year local authorities dispose of about 20 million tonnes of household waste, 85 per cent. of which is tipped into one of Britain's 5,000 landfill sites.

It is widely recognised that that is not a good thing. Everyone who cares about the environment and about maintaining and sustaining the Earth's resources knows that it is not, and knows that we should reduce the amount of waste generated and recycle more of it. At present, I understand that only 5 per cent. of household waste is recycled. I am ashamed to say that in Oldham the figure is just 2.1 per cent., which is appalling.

Society's general throw-away approach results in the increasing use of the earth's finite resources, in the generation of additional road traffic and in heavy lorries taking waste materials to landfill sites which, in turn, causes disturbance and annoyance to local communities. It also results in the major generation of methane, which is one of the main greenhouse gases contributing to the warming of the planet, the results of which are becoming all too apparent as the conclusions of scientific study after scientific study prove.

The Chancellor's proposal for a landfill tax was therefore given a very warm welcome and a sympathetic hearing. It was thought that it would discourage the disposal of waste and encourage recycling and that it would be the Government's first genuine green tax—a really good move. It was assumed that money would be taken from local authorities on the one hand but given back on the other, in such a way as to create a disincentive to throw away our rubbish and put it in holes in the ground, leading to an increase in recycling facilities. It was to be a transfer of resources that would be revenue neutral but environmentally beneficial.

When the details of the tax were announced last November, we learned that landfill deposits of household waste were to be charged at £7 a tonne. That took local authorities by surprise because it was higher than they had originally anticipated. They were reassured, however, by the Government's response to the consultation paper produced last September. The Government said that the concerns of local government were understood and that the financial impact of the tax on local authorities would be addressed in the context of the local government finance settlement. It was only when the details of the settlement were announced that local authorities realised that they had been led up a dark alley and had, in effect, been stabbed in the back by an assailant who was all too familiar. The truth has now become clear: the Government never had any intention of compensating local authorities for the additional burden of the landfill tax. Not a penny of compensation has been earmarked in the standard spending assessments for the coming financial year. The money from the landfill tax is not being recirculated back to local authorities to encourage recycling but is being put directly into central Government coffers for purposes determined by central Government.

I cite two local examples. In the boroughs of Oldham and Rochdale, householders will be paying some £6 each in council tax specifically attributable to the costs of the new landfill tax. I wonder how the Government can attack other parties' tax policies when they behave in such a way, introducing a direct tax on householders in such a discreet manner.

It is true that the money will be used to reduce employer's national insurance contributions from April 1997—a worthy objective that the Liberal Democrats support. But why should that cost be met out of local authority budgets? If the Government were genuinely interested in protecting the environment and making effective use of green taxes, surely they would consider an alternative, such as increasing through the taxation system the price of electricity charged to business and industrial users by an amount equivalent to the reduction of employer's national insurance contributions. That would be revenue neutral and represent a transfer of costs to business, not an increase in their overall costs. It would encourage energy saving and employment—a classic green tax. But no, environmental considerations are not the Government's priority. How could they be when the effect of the landfill tax, which was hailed as a measure to encourage recycling, will be to discourage it?

Leaving aside the fact that many local authorities are locked into long-term contracts with landfill operators, the financial equation produces a solution that suggests that landfill is still the most economical option for local authorities. The vast majority of metropolitan and county councils are already budgeting at their capping limits, which means that they cannot even pass on the cost of the new tax to householders. They cannot even apply the principle that the polluter—in this case, the householder who generates household waste—pays. Councils' flexibility in such circumstances is minimal. They cannot increase council taxes. The only way in which they can find the money to pay the new taxes, which will go to central Government, is to cut existing services. I had to vote for a budget of severe cuts in the council chamber in Oldham last night. Cuts in spending, schools and social services across the country are the result of the landfill tax.

Given that councils are struggling to provide the services for which they have statutory responsibilities, how are we to find the money to expand recycling schemes, which are not a statutory requirement? How are they going to find money for what will be conceived of as optional extras such as that? The economics of the way in which the tax was introduced do not add up.

How different it could have been if the Government had insisted that the money raised from the landfill tax should instead be devoted to recycling promotion. That would still have been tough on local government services and on the education and social services budgets that I have highlighted, but it would have given a massive boost to recycling. To take the examples of Oldham and Rochdale again, it would have been sufficient to pay for the introduction throughout the borough, over three years, of kerbside collection of pre-sorted waste ready for recycling. That would have put us well on target to increase the amount of recycling from its present abysmally low level to the 25 per cent. target that was, after all, set by the Government and which is low by European standards. In Germany, householders are expected—and provided with the necessary facilities—to sort their waste into seven different categories so that it is ready to recycle, and the amount of waste thrown into tips or thrown away is kept to a minimum.

For local authorities, the dark clouds of the landfill tax have no such silver lining. I regret that the tax is proving bad in every respect. Not only does it damage local services and not only is it a tragic waste of the opportunity that the Government had to demonstrate their commitment to the environment, but it has been turned into an application of hypothecation that makes local authorities subsidise central Government priorities and expenditure. For heaven's sake, how devious can one get? The Conservative party is still supposed to believe in measures to oppose the centralisation of power. Yet, they are placing a tax burden on local authorities to subsidise a central Government commitment.

The Minister will no doubt tell the House that local authorities are large employers and will benefit from the reductions in employer's national insurance contributions. Frankly, however, the effects will be marginal, quite apart from the fact that the reductions will not come into effect for 12 months—some six months after the landfill tax is introduced.

Even when the reduction in employer's national insurance contributions is taken into account, local authorities will lose out by a factor of four to one, or even worse. Tonight, the Minister must tell us how he intends to help local authorities out of those financial difficulties; how he will properly compensate them in future years, as the tax burden bites ever deeper; how he will restore the Government's tarnished reputation, from proclaiming what was seen as an environmentally beneficial green tax but will, by application, betray those great promises; and what measures he and the Government will announce to encourage waste recycling in future years.

10.15 pm
The Parliamentary Under-Secretary of State for the Environment (Mr. James Clappison)

I welcome this opportunity to respond to a debate on an important subject and to explain the importance of the landfill tax in terms of our strategy for waste management, as well as dealing with some of the comments of the hon. Member for Littleborough and Saddleworth (Mr. Davies) about the impact of the tax on local government.

The landfill tax is to be introduced in October and will be the first tax to be introduced with essentially environmental objectives—something that the hon. Gentleman was able to bring himself to admit at least at one point in his speech. On reflection, he may want to reconsider his avowed belief that environmental considerations are not a priority as regards the tax. Clearly, that is not correct; it is an environmentally driven tax.

The tax marks an important step in extending the use of economic instruments to protect and enhance environmental objectives. The central purpose of the new tax is to ensure that landfill costs reflect the full costs of the environmental impact of activity. By doing that, business and consumers are encouraged, in a cost-effective and non-regulatory manner, to produce less waste, to recover value from more of the waste that is produced, and to dispose of less waste in landfill sites.

The introduction of the tax will not result in an additional burden on industry and commerce. As part of the Government's policy to shift the burden of taxation from employment to activities that have a detrimental effect on the environment, the Chancellor of the Exchequer has announced that he intends to reduce the main rate of employer's national insurance contributions by 0.2 per cent. from April 1997. The rates of tax, which my right hon. and learned Friend announced in his November Budget statement, take into account the environmental impact of landfilling different types of waste. The standard rate of tax will be £7 per tonne and the lower rate, which will apply to inactive waste, will be £2 per tonne. Those rates take into account research sponsored by my Department into the environmental impacts of landfill disposal operations, which are not at present reflected in the price charged for land filled.

The Government have recently consulted interested parties about the list of wastes that should be subject to the lower rate of tax. We are considering the responses to consultation and will announce our conclusions in due course.

Local authorities are responsible for the collection and disposal of household waste. The cost of the tax in respect of such waste will fall on them. Authorities already have an important part to play in helping to achieve the goals for sustainable waste management set out in our White Paper, "Making Waste Work". The tax will increase the incentive for them to encourage practices that reduce the amount of waste disposed of to landfill, for example by providing more recycling facilities and introducing kerbside collection schemes. The tax will also provide a further incentive for local authorities to bring home to local taxpayers the need to participate in that process.

The local government finance settlement was debated and approved in the House on 31 January. We have allowed a 3.3 per cent. increase in total standard spending—the overall level of provision for local authority spending next year. We accept that it will be a tough settlement for some councils, but within the limited resources we have given priority to education, as we said we would do. We believe that the settlement is fair and that authorities have sufficient resources to carry out their functions.

It is too easy for an authority to draw up a wish list or to add up all the new demands that it faces and ask taxpayers to pick up the tab. The Government have sought to put an end to that approach once and for all. Every council must ask what it can save as well as what else it needs to spend. The more efficient an authority is, the better services it will be able to provide.

During consultation on the settlement, we received many representations about the increased costs of the landfill tax. The net impact of the landfill tax will, of course, depend on individual local authorities' waste disposal policies and on the effect of the offsetting reductions in employer's national insurance contributions that my right hon. and learned Friend the Chancellor is making.

Some authorities have asked that the landfill tax be disregarded for capping purposes. Our capping criteria and capping limits are, of course, still provisional as final decisions are not announced until after local authorities have set their budgets. However, I should point out that we have not adjusted local authorities' base budgets to reflect the fact that they are no longer responsible for waste regulation. That has given authorities an additional £26 million of spending power in 1996–97.

Of course we do not expect local authorities to change their practices overnight. The hon. Gentleman was pitching it a little too high when he said that the announcement of the landfill tax should not have taken councils by surprise, suggesting that it had taken them by surprise this year. My right hon. and learned Friend the Chancellor announced that he intended to introduce a tax on landfill waste disposal in his 1994 Budget.

Mr. Chris Davies

I speak more in sorrow than in anger. Perhaps I am in a minority among Opposition Members in holding these views, but I believe that the current Secretary of State for the Environment is a committed environmentalist whose views are perhaps the most green among Conservative holders of that position. I re-emphasise that the landfill tax, the principle of which is not disputed, is warmly welcome. I welcome the tax, but not what the Government are doing with the money. The tragedy is that they are using the money not to encourage waste recycling, but for other purposes. Can the Minister give the House any indication that in practice the benefits of the tax will be used to the full by some of the money being given back to local authorities to encourage recycling projects?

Mr. Clappison

It would be churlish of me not to thank the hon. Gentleman on behalf of my right hon. Friend the Secretary of State for the Environment for the glowing and well deserved tribute to his environmental credentials. I am afraid that I shall now have to strike an unhappier note by diverging from the analysis that the hon. Gentleman has just made. He suggested that the tax has taken councils by surprise and that not enough thought has been given to recycling.

The announcement of landfill tax was made in 1994. As waste collected by local authorities represents a significant proportion of controlled waste, and as some 90 per cent. of local authority waste goes to landfill, which is above the average for controlled waste as whole, at 70 per cent., it could reasonably be inferred that it would be important for local authorities to respond to the landfill tax. It should have been in their purview to have considered other waste management options such as recycling, re-use and waste minimisation, which is at the top of the waste hierarchy. It was within the purview of my right hon. Friend the Secretary of State for the Environment, who clearly believes in those options and hopes that local authorities would follow such practices. Local authorities must now respond by implementing recycling—they have to respond to the landfill tax in the same way as industry and other generators of waste.

Mr. Chris Davies

How does a waste disposal authority—in Greater Manchester, for example— encourage local authorities to devote more expenditure to recycling when they are locked into five-year or seven-year contracts with landfill sites, and when the money that they could use to encourage recycling schemes is being taken away by central Government for their own purposes through the landfill tax scheme?

Mr. Clappison

The hon. Gentleman knows that central Government carefully considered this issue in taking decisions on the local government settlement. Local authorities must make long-range plans. They have had two years' notice, going back to 1994, of the landfill tax—they should have used that time to change their waste disposal policies. We are aware that the link between the costs of landfill tax and the levels of household waste are not as strong as in the case of business. At present, local taxpayers pay for waste disposal as an undifferentiated sum within their council tax bills.

Many other countries have different arrangements, where household waste collection and disposal is charged for directly, often by weight or by volume. Such arrangements may have practical difficulties, but we are continually reviewing the evidence to see whether such measures have a material impact on the amount of waste generated and on the extent of beneficial use.

Every year we have to set the demands of local authorities in the context of what the country can afford. Local government spending accounts for a quarter of all public spending and no Government can afford to ignore it. Public spending decisions are made in the context of the medium-term financial strategy to promote sustained economic growth and thus ensure higher living standards. The best way in which we can protect local government services is to ensure that the national economy is strong and that inflation is under control. To this end, we must continue to make better use of existing public spending and to keep control of public sector wage bills. Both local and central government have essential parts to play in bringing about these benefits.

I am aware that local authorities are concerned that fly tipping may increase as a result of the landfill tax. In November, my right hon. Friend the Secretary of State announced further measures to combat fly tipping when the tax is introduced. Although the current waste management licensing system and the duty of care for waste provide a strong regulatory framework to support the tax, it is intended to take further steps to avoid an increase in fly tipping. In particular, the Environment Agency will be asked to give a high priority to the prevention of fly tipping, and the financial gains made by perpetrators will be drawn to the attention of the courts.

I hope very much that local authorities will look on the introduction of the landfill tax as a further incentive to promote the use of more sustainable waste management practices in their areas. There will be considerable incentive for both tiers of local government to work together to reduce the amount of waste going to landfill and to encourage greater use of more sustainable waste management options as part of the waste planning process. As I have said, the tax will ensure that waste disposal to landfill is properly priced. In so doing, it will increase the awareness of local authorities of the advantages to be obtained by reducing the amount of waste generated in their areas by diverting waste from landfill and putting it to productive use through reuse or recycling.

I hope that what I have said will reassure the hon. Gentleman that the Government are fully aware of the impact of the task on local government and have taken account of all new burdens on local authority budgets in taking decisions about the overall level of provision for local authority spending in 1996–97. I draw my speech to a conclusion by going back to the starting point of the hon. Gentleman's speech: this is first and foremost an environmental tax. We have to make this a successful and effective tax, and the framework is in place for it to be successful.

Mr. Chris Davies

rose—

Mr. Clappison

The hon. Gentleman has intervened twice and I would like to draw my remarks to a conclusion. It is important for local authorities, for industry, for commerce and for householders to play their part in making this important environmental initiative the success that it deserves to be. The Government have laid the framework and it is now for others to rise to the challenge, as I am sure they will do, without becoming obsessed with the sorts of issues raised by the hon. Gentleman.

Question put and agreed to.

Adjourned accordingly at twenty-nine minutes past Ten o'clock.