Sustainability

No clarification on future of landfill tax

Osborne

Chancellor George Osborne with the Budget Box

The resources and waste industry has seen little changed in the Budget 2013, as the Chancellor of the Exchequer, George Osborne’s document confirms that landfill tax will be set at £80 per tonne ‘on or after 1 April 2014’ (though no mention of what will happen after this time), but that the value of the Landfill Communities Fund for 2013-14 will ‘remain unchanged at £78.1 million’, suggesting that the Treasury will be retaining a larger proportion of the landfill tax than previously.

The Budget, a report setting out the amount of tax the government will collect, how much it will borrow and how much it will spend, is Osborne’s fourth since the Conservative-Liberal Democrat coalition came into power.

Background

Writing in his first message on the micro-blogging website Twitter, ahead of the Budget announcement, Osborne said his Budget would "tackle the economy's problems head on" and help "those who want to work hard and get on”.

But despite Osborne’s June 2010 forecast that by 2013 the UK would be out of recession, the deficit would be “substantially reduced” and the economy would be “growing strong” (having grown by seven per cent), the state of the UK economy is still under pressure, after output shrank in 2012 and the UK lost its triple A credit rating for the first time since 1978.

In order to fuel economic growth, yesterday (19 March), Osborne told the Cabinet that he will be cutting departmental budgets by one per cent each year, and will use the £3 billion saved by 2015-16 on supporting infrastructure projects. He developed that fund today by saying that there will be a further £12 billion for new projects by 2020 (totalling £15 billion). The Chancellor said he could afford to make these cuts due to £11 billion of departmental underspending, adding “by investing in the economic arteries of this country, we will get growth flowing to every part of it”.

The Chancellor also confirmed that public-sector pay increases would be limited to one per cent.

Several areas however, will remain untouched from the cuts including health, education, police, overseas aid and local government budgets. 

“Much more to do” to get economy growing

Speaking at the House of Commons today (20 March), in a heated speech, Osborne made no reference to the waste and resource industry but hailed energy as “a vital sector for our economy” while announcing that there would be tax incentives for low-emission cars, tax allowances for investment in shale gas and no climate change levy for some of Britain’s heavy industries, such as the Midlands pottery industry.

Saying that the Budget was for people who aspire to "work hard and get on" (which he dubbed the "aspiration nation"), Osborne acknowledged that though there has been progress made – with interest rates at a "record low" and lower unemployment than when they came to power – there’s still “much more to do”.

He said: “Today, I’m going to level with people about the difficult economic circumstances we still face and the hard decisions required to deal with them. It is taking longer than anyone hoped but we must hold to the right track and by setting free the aspirations of this nation, we will get there.”

Labour Leader Ed Miliband responded to the Chancellor’s Budget statement by attacking what he labelled “a downgraded Budget from a downgraded Chancellor”, accusing Osborne of being the "wrong man, in the wrong place, at the worst possible time for the country". He alleged that after three years in power, the Coalition has made no progress on the economy.

Waste and environment

In regards to waste and environmental taxes, there is little change, and despite calls from councils for the escalating landfill tax not to go beyond 2014/15, there is no mention whether the landfill tax rate will continue to increase by £8 a year after this date. However, the tax rate for 2014/15 is confirmed as being £80 per tonne (with £2.50 the lower limit)

Despite landfill tax increasing by £8 on the year before (as announced in the Budget 2012), the value of the Landfill Communities Fund will ‘remain unchanged at £78.1 million’ (with the cap on contribution by landfill operators amended to 6.8 per cent) while ‘future decisions on the value of the fund will take into account the level of unspent funds held by environmental bodies’, suggesting that the Treasury will be retaining a larger proportion of the landfill tax than in previous years.

Other areas mentioned in the Budget relating to the waste industry include:

  • Enhanced capital allowances: Some energy-saving and water-effcient technologies will be designated for ‘enhanced capital allowances’ (to be updated during summer 2013, subject to state aids approval);
  • Capital allowances for energy-saving plant and machinery in Northern Ireland: Legislation will be introduced in that Finance Bill 2013 to align Northern Ireland with the rest of the UK in terms of expenditure on plant and machinery that qualifes for both first-year allowances for energy-saving technologies and the renewable heat incentive;
  • Increase the proportion of revenue from environmental taxes: The proportion of revenue from environmental taxes will increase from 0.5 per cent to 0.8 per cent over ‘this Parliament, in accordance with the Coalition commitment’.

Energy 

Energy was a major factor in the Budget with the Chancellor specifically giving support to the shale gas industry. 

Osborne said: “A vital sector for our economy and a cost of doing business for everyone is energy. Creating a low-carbon economy should be done in a way that creates jobs rather than costing them.” 

Referring to yesterday’s planning consent for a new nuclear power station at Hinkley Point in Somerset as a “major step forward for new nuclear”, Osborne also announced intention to “tap into new sources of low-cost energy such as shale gas”, and announced a “generous new tax regime”, including a shale gas field allowance to “promote early investment”. 

“Shale gas is a part of the future, and we will make it happen”, he added. 

According to the Budget, government will consult on tax measures to ‘encourage the exploration and production of shale gas’, including a new shale gas field allowance and the extension of the Ring Fence Expenditure Supplement for shale gas from six to 10 years (with legislation to be brought in the Finance Bill 2014). 

Further, in July, government will produce ‘robust planning guidance’ for shale gas and unveil specific proposals to “allow local communities to benefit”. 

Osborne also announced that government will be: 

  • scrapping a planned 3p rise in fuel duty;
  • taking “two major carbon capture storage projects” to the next stage of development;
  • supporting the manufacture of  “ultra-low emission vehicles in Britain with new tax incentives”;
  • introducing legislation in the Finance Bill 2015 to extend the 100 per cent first year allowance (FYA) for expenditure incurred on cars with low carbon dioxide emissions and electrically propelled cars for an additional three years to 31 March 2018, while reducing the threshold for which vehicles are eligible for the FYA from 95 grammes per kilometre (g/km) to 75g/km;
  • providing support for energy-intensive industries beyond 2015; and
  • decommissioning relief agreement for oil and gas. 

Carbon Price Floor

The Climate Change Levy (CCL) will see rates increase in line with inflation from 1 April 2014. The Carbon Price Floor (CPF) will be introduced in Great Britain from 1 April 2013 with the Finance Bill 2013 setting the carbon price support (CPS) rates of CCL for the years 2013-14, 2014-15 and 2015-16 and to exempt Northern Ireland. 

There will be some ‘minor changes’ to the CPF, including: 

  • all solid fuels that are taxed under CCL will be taxable commodities for CPS, with one rate covering all solid fuels;
  • the previously announced reliefs from the CPS rates of CCL for coal slurry and stand-by generators will be clarified; and
  • where conditions are met, credit from the CPS rates of CCL will be allowed when fuel that has borne CPS tax, but has not been used to generate electricity, is removed from a power station. 

Two statutory instruments will be laid before Parliament in March 2013. The first will set the CPS rates of fuel duty on oils used in electricity generation for the years 2013-14, 2014-15, and 2015-16, and exempt Northern Ireland from these rates. The second will deal with the administrative provisions needed to give effect to the CPS rates of CCL. 

Reaction

Commenting on the Budget 2013, Steve Lee, Chief Executive of the Chartered Institution of Wastes Management (CIWM), said there was little news, good or otherwise, for the waste and resource management sector.

“It is disappointing that repeated calls for a longer term plan for Landfill Tax to provide certainty beyond 2015 and increase investor confidence in the waste sector have not been heard. In addition, the Chancellor’s ringing words on boosting infrastructure frankly ring hollow against the backdrop of the recent and unexpected decision to withdraw PFI credits from another three waste infrastructure projects.

“Finally, the additional cut to Defra’s budget, as well as those potentially faced by DECC and BIS, will all impact on our sector. At a time when ambition, leadership and progressive policy making are needed to tackle critical issues such as resource and energy security, CIWM believes these cuts throw into serious doubt the Government’s ability to deliver its green economy promises.” 

There has also been growing concern over George Osborne’s trust in the use of gas in the future of the UK’s energy mix, particularly at his claims of the expense of ‘green industries’ and decarbonising the sector.

Andrew Raingold, Executive Director of the Aldersgate Group (an alliance of leaders from business, politics and society that drive action for a sustainable economy), said: "The Chancellor has prioritised increasing exports to the fast growing regions of the world but there is little support in the Budget for green industries that have a strong foothold in these markets and a trade surplus of £5 billion. 

“Rather than tax breaks for shale gas, the UK needs a clear regulatory framework that will drive investment and export opportunities for low-carbon technologies." 

Friends of the Earth's Head of Campaigns Andrew Pendleton said: "This is yet another fossil-fuelled Budget that will leave the UK struggling in the wake of forward-thinking nations that are already investing in the clean industrial revolution.  

"Our economy desperately needs new ideas, but George Osborne is a 19th century Chancellor, using 20th century tools to fix 21st century problems. 

"A few crumbs of comfort for the green economy are dwarfed by his enthusiasm for new oil and gas. That will cut little ice with the major energy investors demanding he commit to a clean, resilient and future-proof economy." 

Commenting on tax-breaks for shale gas, Pendleton added: "Shale gas is not the solution to rising energy bills – it's dirty, unnecessary and its extraction will have an earth-shattering impact on local communities across the UK."  

Read the Budget 2013