Landfill tax forecast raises future levy concerns

Despite government predictions that landfill tax take will rise by £500m over the next four years, speculation is mounting that the sector may be hit by new levies in the future.

The Treasury has forecast that the amount of landfill tax it will collect will hit £1.6bn in 2015-16, from a current projection of £1.1bn in 2011-12, detailed in new figures released this week.

However some observers believe the Government is being optimistic in its predictions, given that landfill gate fees will soon become cost-prohibitive when compared with other alternative waste treatment options.

While pointing out that it would be “dangerous” to speculate too much without first understanding the basis of the Treasury’s projections, Jonathan Davis who chairs the Environmental Industries Commission (EIC) waste working group said he had done some math on the figures which showed an expected fall in landfilled tonnage to 2013-14.

“It is not clear why this is expected to rise again from 2014 – this may be based on an assumption of economic recovery from that date,” he told edie.

However he added that this did not appear to take into account that by that date, landfill gate fees would be priced at around £100 per tonne, and that many treatment facilities currently under construction would be in operation, potentially reducing waste throughput to landfill.

Matthew Farrow, policy director at the Environmental Services Association (ESA) told edie that the revenue projections seemed “a little bit high” but added: “We don’t know how the Treasury has modelled it”.

Looking ahead he said the “looming issue” for the industry was the prospect of this revenue stream declining, perhaps as early as 2015.

“It raises an interesting question – as the Treasury starts losing some of the tax take, will it look to make it up by switching the landfill escalator back on?

“We don’t feel this would be the right approach – it would make more sense in environmental terms to look at other opportunities in the waste and resource sector with regard to green taxes.”

The ESA has already pre-empted the situation and on the back of discussions with the Treasury is currently researching possible fiscal drivers in the future, the proposals of which are due to be released in September.

While Farrow would not be drawn on specifics, he did say a key area of focus was on incentivising pushing waste up the hierarchy with greater emphasis on recycling, reuse and waste prevention.

Arguing that the landfill levy was originally introduced as a revenue-neutral tax, Davies said that should the Government try to claw back any shortfall in the future, the EIC “would support in principle a levy on virgin materials use”.

This, he added, would be more logical than introducing a tax on energy-from-waste processes such as incineration, as has been mooted in Ireland, as it would not be beneficial in terms of environmental or behavioural change.

Maxine Perella

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