Budget 2016: Landfill tax and packaging target changes

Budget 2016 brings Landfill Tax and packaging target changesCuts to the Landfill Communities Fund (LCF) have been confirmed as part of the Budget 2016, issued by Chancellor of the Exchequer George Osborne today (16 March), though a proposed measure to prohibit third-party contribution has been dropped.

The Chancellor announced his annual budgetary measures as the government continues to target a budget surplus.

Among the measures was also an increase in landfill tax in coming years and a reduction in plastic and glass packaging recycling targets.

Proposed cuts to the LCF were unexpectedly included in Osborne’s Spending Review in November, which also announced cuts in the day-to-day spending of 15 per cent for the Department for Environment, Food & Rural Affairs (Defra) and 22 per cent for the Department of Energy & Climate Change (DECC).

Landfill Communities Fund

LCF is a tax credit scheme that enables operators of landfill sites to contribute funding to local good causes that meet the environmental objectives of the Landfill Tax Regulations.

The cuts announced in the November review have today been confirmed, with the value of the fund lowered to £39.3 million for 2016/17 and cap on contributions by landfill operators of 4.2 per cent.

However, the budget has not followed up a measure included in the review, which would have seen the removal of provisions for third parties to contribute 10 per cent of landfill operators’ donations to projects.

The Treasury says that after listening to concerns from stakeholders it will not remove the ability for third parties to contribute, which would have seen waste management companies facing extra costs of up to £500,000 every year to make up the shortfall.

Instead, HM Revenue & Customs (HMRC) and the fund’s regulator will publish guidance indicating that government expects to see landfill operators make a greater contribution to the fund.

Ahead of today’s announcement, Jacob Hayler, Executive Director of the Environmental Services Association (ESA), had urged the Chancellor to preserve the LCF, saying the proposed cuts would be ‘catastrophic for the scheme’.

He said: “The LCF has supported over 50,000 community and environmental projects across the UK with funds totalling £1.2 billion. This vital funding source for local projects would be potentially jeopardised, while jobs at the administering environmental bodies would also be at stake.

“Bringing in these changes now would provide landfill operators with little time to budget, particularly when their planning timescales tend to be around five years in advance and when some individual operators are facing unforeseen annual costs of almost £1 million.”

Landfill tax rates

Also announced in the budget was an increase in both the standard and lower rates of the landfill tax for waste disposed at landfill from April 2017 and again from April 2018.

The standard rate for the tax, devised in 1996 to encourage the use of non-landfill waste management options, will rise from £84.40 per tonne to £86.10 per tonne in 2017, and then to £88.95 per tonne in 2018.

The lower rate, which applies to wastes that are less polluting, will also increase from £2.65 per tonne in 2016 to £2.70 per tonne in 2017 and £2.80 per tonne in 2018.

From April 2018, the landfill tax is expected to be devolved to Wales, as set out by the Tax Collection and Management (Wales) Bill 2015. Should this occur, the 2018 and 2019 rate changes will apply in England and Northern Ireland only. The LCF will also cease in Wales from 31 March 2018.

The budget document states that additional funding will be made available from the proceeds of the landfill tax for increasing compliance activity across the waste supply chain, ‘enabling the government to better tackle waste crime’.

Plastic and glass packaging recycling targets

The Chancellor’s budget also confirmed that statutory plastic packaging recycling targets for 2016 and 2017 will be reduced after a consultation on the targets was held last year.

Legislation on the altered targets will be developed later in the year, with the government saying that reducing the goals will ‘reduce the burden on business’. New recycling targets for glass and plastic packaging for 2018, 2019 and 2020 will also be set.

For plastic, the existing target will be reduced to 49 per cent for 2016 and then increased by two per cent each year to 2020, ending at 57 per cent. For glass, the existing target of 77 per cent will be maintained until 2017 and then increased by one per cent each year to 2020, to 80 per cent.

Little to ‘to gladden hearts in the UK waste and resource sector’

Figures from the waste and resource industry have largely reacted with disappointment to the budget, with deputy chief executive of the Chartered Institution of Wastes Management (CIWM) Chris Murphy saying: “Although there is little of any substance in the Budget 2016 to gladden hearts in the UK waste and resource sector, the additional funding over the next five years for HMRC to tackle tax evasion and non-compliance across the waste supply chain is welcome, and confirmation of the landfill tax rate regime through to March 2019 provides some medium term certainty. The expected changes to plastic and glass packaging targets appear pragmatic and likely to ensure that the UK performance is more closely aligned with the new EU circular economy.

“In terms of providing a coherent framework to support green economic growth, however, the Chancellor has once again turned our sector away empty handed.”

Speaking of the budget’s impact on renewable energy companies, meanwhile, Philip Simpson, Commercial Director of anaerobic digestion company ReFood, added: “Today’s budget is another signal that the environment and renewable energy is far from the top of this government’s agenda. It was thoroughly disappointing to see that renewable energy generators are hit once more as the Chancellor announces rises to the Climate Change Levy, which became applicable to such businesses for the first time in 2015.

“To compound this, there have been further tax breaks offered to the oil and gas industry, demonstrating ongoing subsidy support to the fossil fuel sector. Adding salt to the wound, the renewable energy industry continues to be decimated by the ongoing policy uncertainty and swathing subsidy cuts around RHI, FiTs, et cetera.

“While £730 million of funding for new renewable energy projects can be welcomed, it is really only a drop in the ocean; this isn’t enough to allow the sector to really achieve its potential.”

The full Budget 2016 document can be read on the government’s website.