Government drops plans to hike up incinerator ash tax

Late last month, Chancellor Alastair Darling indicated in his Budget 2010 that the list of wastes which qualify for the lower rate of tax – currently charged at £2.50 a tonne in tax – would remain “broadly the same” (see letsrecycle.com story) despite a consultation last year on reducing the number of materials which would qualify (see letsrecycle.com story).

This is significant because, for every five tonnes of waste combusted, around one tonne of ash is produced, meaning that substantial volumes of waste would have been subject to a higher levy.

The Treasury said: “The list of wastes that qualify for the lower rate will remain broadly the same as at present. This means, for example, that pulverised fuel ash landfilled in a mono-fill, incinerator bottom ash, used foundry sand, furnace slags and aluminium/ferric hydroxide wastes will all remain lower rated.”

Confirming this in parliamentary written answer last week (March 31), Labour MP for Portsmouth North, Sarah McCarthy-Fry said: “The Government have concluded that bottom ash and fly ash from wood or waste combustion will remain eligible for the lower rate of tax, as will those from coal combustion when they are landfilled in a site containing no other waste.”

Criticism

While no official reason has been given for the government's U-turn, the decision follows heavy criticism of the original proposals by both councils and businesses – including the Confederation of British Industry (CBI) – who had feared that it would place a huge financial burden on them and risked altering the economic case for energy from waste incineration – and thereby renewable energy generation.

The Local Authority Recycling Advisory Committee (LARAC) had also warned that the UK might risk missing its landfill diversion targets if the tax was raised for the material (see letsrecycle.com story).

As a result, LARAC yesterday expressed “relief” at the latest decision.

LARAC chair Joy Blizzard told letsrecycle.com: “Local authorities will be relieved as many of them are involved in long term financial planning to avoid sending biodegradable municipal waste to landfill.

“If bottom ash was taxed more it would have seriously altered the financial outcome and consequently business case.”

However, others were less pleased. Julian Kirby, Friends of the Earth's Resource Use campaigner said that the lower-tax was in affect a “subsidy” for incineration.

He commented: “Incinerator bottom ash is not an inert waste and so should not benefit from a lower rate of taxation. That the Government plans to continue taxing it at the lower rate is in effect a book-cooking subsidy designed to prop up costly and wasteful incinerators at the expense of more sustainable schemes.

“The UK currently burns or throws away £650m of valuable resources a year. Government must rethink its tax regime to ensure more waste is prevented, reused and recycled instead of just being burnt and dumped in a hole in the ground.”

Protocol

Despite this criticism, the government explained yesterday (April 6) that it was making efforts to get more incinerator bottom ash recycled through the Environment Agency and WRAP's Waste Protocols Project which defines the point at which materials can be classed as a project and therefore are free from waste management legislation and are more marketable.

Commenting in a parliamentary written answer, recycling minister Dan Norris said: “A technical advisory group has been established, which is currently pooling evidence to demonstrate whether end-of-waste criteria can be met. The Environment Agency is working closely with industry to obtain additional data to help this process.”

Legislation

The government explained in its consultation response document that it planned to introduce legislation as soon as possible in the next Parliament to provide for the publication and review of new qualifying criteria for the lower rate in a bid to provide a more transparent environmental rationale for applying it. Criteria will include the waste being non-hazardous, having a low potential for greenhouse gas emissions and a low polluting potential in the landfill environment.

These will be taken into account when listing materials which qualified for the lower rate from October 1, it explained. It added that some minor changes to the Order which lists the materials that qualify for the lower rate of tax would be made on the same date.

In the consultation last year, the government had also looked at the possibility of redefining what constitutes a taxable disposal.

However, in its official response it explained that there were “no plans to proceed with changes to the way that waste disposal is defined in the legislation for tax purposes, as originally set out in the consultation.”

Instead, it explained that it would continue to assess the impact of the legislative changes made in September 2009 in light of the HM Treasury vs Waste Recycling Group court case (see letsrecycle.com story).