Last summer, the Government issued a consultation document on tax incentives for the development of brownfield land. It discussed proposals for reform in five areas. One of these was the removal of landfill tax exemption for waste from contaminated land. This has since been confirmed by the Chancellor during his Budget statement last month – and the exemption will be phased out by April 2012.

The Government recognises the need for development and aims to support an increase in housing supply by at least 240,000 additional homes per year by 2016. It also recognises the need for brownfield development and the associated increased cost of preparing the land and building upon it. Two tax incentives currently exist to encourage this type of development – land remediation relief and landfill tax exemption.

Landfill tax was introduced in 1996 to discourage use of landfill in preference to more sustainable reuse and recycling. However, at the time, there were few proven technologies available that were demonstrated to be effective at cleaning contaminated land. Dig and dump was the standard industry practice for developers.

In recognition of no other practical soil treatment alternative, landfill tax exemption was introduced to allow dig and dump to continue to be economically viable and encourage the development of brownfield sites.

So why did the Government consult on a change to the landfill tax exemption scheme? It recognised that the technology and market for the treatment of contaminated soil has grown considerably over the past ten years. It can see that viable alternatives for the treatment and disposal of contaminated land are available, effective and competitively priced. Currently there are more than 80 specialist companies in the UK able to offer specialist remediation services, so dig and dump is now just one of a range of remedial options.

Push for more treatment

Seventy per cent of the companies that responded to the consultation were in favour of phasing out landfill tax exemption and enhancing landfill remediation relief, moving the emphasis of contaminated land remediation towards treatment rather than disposal. The majority of industry responding to the consultation document agreed that on-site decontamination had become the preferred solution delivering good environmental results.

The removal of landfill tax exemption can only be a good thing for remediation specialists as the price to dispose of contaminated land at a landfill site will increase by £24 per tonne at the current rate, rising to £32 per tonne for hazardous and non-hazardous waste in 2008. This can only stimulate the remediation market to grow, investing in technologies and researching new techniques. Removal of landfill tax exemption should level the playing field for alternative treatment methods to landfill.

If the land remediation specialists win, do the developers lose? The consultation document suggests they will not, because the Government is keen to support brownfield development. Hence the inference is that by removing landfill tax exemption, other benefits in the land remediation relief system will be introduced.

Are there any downsides to this? Some companies responding to the consultation document identified correctly that there are small developments where on-site treatment of the soil would not be economical and that this may prohibit the development of the site. However, there are an increasing number of off-site soil treatment facilities across the country operating in much the same way as a landfill, but offering dig and treat rather than dig and dump. With the removal of landfill tax exemption, these soil treatment sites are likely to proliferate as demand increases.

A more valid observation, made by another respondent to the consultation, is that there are materials that cannot be treated, and need to be sent to landfill. Given that landfill tax is administered by the treasury, the expertise to make decisions on whether an individual site should get a special landfill tax exemption would require levels of additional complexity and cost in administering the scheme.

Clarity is called for

A list of contaminants that would qualify for a special exemption – for example, asbestos – could be potentially drawn up. But there is a need for complete clarity as to what would qualify and what would not. In our experience, the quantities of contaminated soils that are contaminated with materials that must be sent to landfill are relatively small. In the spirit of simplifying the scheme, perhaps the industry should accept the increased costs associated with the disposal of such relatively small volumes.

One local authority raised a concern that illegal dumping of contaminated waste may occur. With this change, there will be a stimulation of the legitimate market and an equal stimulation of an unregulated/illegal market. There is evidence that under the current regime there are illegal practices under way. The concern that this could increase with the removal of landfill tax exemption, and hence higher disposal costs, is valid. Perhaps a stimulus to examine the effectiveness of the regulator and the penalties associated with illegal practices is needed.

Empowering the Environment Agency with the correct strategies to identify and prosecute the companies and individuals who dispose of contaminated soil illegally should be a priority. The resource to investigate illegal practices, in addition to simply regulating legal ones, is paramount for the long-term success of any plans that strive to make the treatment of contaminated land more sustainable and to reduce our dependency on landfill.

To be effective at regulation and enforcement, any scheme needs to be clear cut and this lends weight to the suggestion that landfill tax exemption should either exist or not, rather than having special qualifying cases. In a scheme where some contaminated soils can be certified as landfill tax-exempt, unscrupulous firms will focus on achieving the exemption rather than looking for cost-effective treatment.

A black market for the illegal certification of landfill tax-exempt material may then develop. The impression in the industry currently is that the regulator is stretched and not identifying and prosecuting illegal activities effectively in the current regime. To introduce something more complex could make them less effective than they already are.

As to how to the removal of the landfill tax exemption will be implemented, the consultation document promised no change in the current regime before 2008 and the Chancellor, in his Budget last month, announced that the exemption would be phased out by 2012.

Few people who responded to the consultation addressed the question of how it might be introduced, beyond suggesting sufficient notice of the removal of the exemption.

New beginnings

Perhaps the best method for introducing the scheme is to allocate an appropriate starting date and continue the exemption for existing developments where the developer has been able to prove they have sought cost-effective methods to avoid landfill disposal.

Implemented in the right way and carefully regulated, the removal of landfill tax exemption with the concurrent bolstering of land remediation relief has to be good for the industry as both developers and remediation specialists benefit. The Government also achieves its objectives of reducing landfill dependency for contaminated land while continuing to support the development of brownfield sites.

Providing the regulators have the resources to identify and punish illegal practitioners, setting examples swiftly and effectively, brownfield development will flourish in a sustainable way.

Dr Graham Holtom is director at Biogenie Site Remediationpromotions office at Belfast City Council

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