Autumn Statement contains little for resource industry
Today’s (3 December) Autumn Statement has revealed little about the UK government’s future policy on waste, but has confirmed that government is looking to reform the Landfill Communities Fund, and that fines produced from waste processed at mechanical treatment plants will be subject to loss on ignition (LOI) testing to determine their biological content from 1 April 2015.
The Autumn Statement, which sets out the next stage of the government’s long-term economic plan, was announced this afternoon in Parliament by Chancellor of the Exchequer George Osborne.
Perhaps unsurprisingly – given central government’s decision to ‘step back’ on several areas of waste policy – Osborne did not touch on waste, recycling, or sustainability at all during his speech.
However, the full Autumn Statement 2014 document confirms that government ‘is consulting on options for reform to get funding to community projects more efficiently’ through the Landfill Communities Fund. A public consultation on the reform options generated by the working group will reportedly ‘follow in due course’.
This will only apply to England, Wales and Northern Ireland, however, as from April 2015, Scotland will control its own Landfill Tax. As such, from 1 April 2015, UK landfill operators will only be entitled to claim credit for qualifying contributions to the UK LCF if they are spent on projects in England, Wales or Northern Ireland. Operators in Scotland will be able to claim tax credit against their Scottish Landfill Tax liability for contributions they make to the Scottish scheme. However, there will be a two-year transitional period during which environmental bodies with unspent funds can continue to spend on projects throughout the UK, including in Scotland.
However, this could be revised in future, as Wales may ‘switch off’ from the UK-wide Landfill Tax and bring in its own devolved tax from April 2018, under an ‘unprecedented’ package of financial powers (as announced in March 2014).
LOI testing regime to be implemented
The full Autumn Statement also reveals that government will introduce an LOI testing regime on fines produced from the processing of waste at mechanical treatment plants from 1 April 2015, as first announced in the Budget 2014.
It is thought that this will assist landfill site operators determine the correct tax liability of fines; whether they should be taxed at £2.50 a tonne (the lower rate for ‘less polluting’ waste), or £80 a tonne (the current higher rate – though this is set to rise in line with the Retail Price Index from April 2015).
Although guidance on the testing has not yet been issued, the statement confirms that only fines with less than 10 per cent biodegradable and/or combustible content will be considered eligible for the lower rate, although there will be a 12-month transitional period where the threshold will be 15 per cent. Any fines surpassing the 10 per cent threshold will be subject to the higher level of Landfill Tax.
Reacting to the FOI confirmation, Jayne A Harrold, PricewaterhouseCoppers's Indirect Tax Senior Manager said: "The new testing regime should provide more certainty for landfill site operators. The confirmation that the changes are definitely being introduced should allow landfill site operators and recycling operations to start preparing for the change.
"The proposed 10 per cent limit for the loss on ignition test has been softened, with a 15 per cent limit applying for a 12-month transitional period until 2016. This should reduce the impact on recycling operations, which would be faced with a substantial increase in their operating costs if they could not meet the limits, and give them 12 months to adapt or change their processes to comply with the 10 per cent limit.
"A single recycling facility that sends 1,000 tonnes a month to landfill will face additional costs of nearly £1 million per year if they cannot comply with the new rules."
‘Chancellor has served up plenty of environmental gloom’
Environmental campaigners Friends of the Earth (FoE) had called on the Chancellor to deliver a range of 'green' actions, including a prioritisation of fossil fuel phase-out and a switch to low-carbon energy, a 'Stern Review for Resources', as well as giving the Treasury an 'additional, top-line aim of driving rapid carbon reduction, resource efficiency and focus on improving wellbeing' – none of which were in the Autumn Statement.
FoE’s Senior Economics Campaigner David Powell said: “The Chancellor has served up plenty of environmental gloom – with precious little silver lining.
“The Chancellor has cut tax for dirty gas and oil, despite overwhelming scientific evidence of the need to end our fossil fuel dependency. We have the ingenuity and resources to overcome the challenges we face and create an economy that benefits us all – but once again the people pulling the levers of power have let us down.”
Focusing on disappointment with a lack of focus on sustainability from the waste and resources sector’s viewpoint, the Resource Association took to Twitter to say: "Announcements on LOI and CHP exemption welcome but the vision on green economy still not there."
#AS2014 : little to cheer as expected. Announcements on LOI and CHP exemption welcome but the vision on green economy still not there.
— Resource Association (@Res_Association) December 3, 2014
Meanwhile, the Environmental Services Association's (ESA) Head of Regulation, Sam Corp, said that the trade association was "pleased that a line in the sand has finally been drawn, and that all operators now have a definitive date to work to comply with the LOI testing requirement".
He added: "The LOI requirement will mean that for the first time there will be an objective testing regime in place which will enable HMRC to crack down on misclassification of waste fines and provide a level playing field for all operators.
"Whilst ESA would have preferred the 10 per cent limit to commence straight way, the twelve month transition from 15 per cent down to 10 per cent will at least give some companies with ‘borderline’ compliant fines, the opportunity to modify their processes to meet the new standard."
Corp concluded that the system will need "robust enforcement" from to ensure it is not "abused".
Read the full Autumn Statement 2014 document.