17 April 2013

Landfill Tax - a ten-fold increase since it was introduced

Landfill tax (LFT) rose by a further £8 from April this year, taking the tally from £64 per tonne to £72 per tonne — a ten-fold increase in 17 years. The lower rate for “inert” waste, (building fabric and excavated earth) remains unchanged, at £2.50 per tonne.

The Landfill Tax was introduced on 1 October 1996 by John Gummer (now Lord Deben), the former Secretary of State at the Department of Environment (DoE). The LFT was at a modest £7 per tonne for general waste and £2 per tonne for inert waste. Its primary purpose was to encourage councils and companies to reduce waste arisings through reuse and recycling, which in turn would help the UK meet its commitments under the Landfill Directive.
 
The LFT is widely regarded as the first environmental tax introduced in the UK. Most of the tax revenue raised is used to reduce the level of employer national insurance contributions, which at the time Lord Deben said would “raise tax on polluters to make further cuts in the tax on jobs”.
 
A smaller percentage (5.6%) of the tax revenue is also used to fund a tax credit scheme whereby landfill operators can contribute money to enrol environmental bodies to carry out environmental projects in local communities close to landfill sites.
 
LFT has remained a strong source of revenue for the Treasury which the Environmental Services Association estimates to be worth over £1 billion a year. Landfill site operators are responsible for paying the LFT, which is then passed to local authorities along with businesses that dispose of their waste to landfill, including the corresponding increase in VAT charged by landfill operators. But the tax is beginning to have a detrimental effect on waste producers. Local authorities say the rise in LFT will cost council tax payers three quarters of a billion pounds this year.
 
Veolia Environmental Services also forecast that the rise in LFT will cost SMEs £463 million if recycling rates do not improve. The Local Government Association has called on the Government to freeze landfill tax escalator, which will see taxes rise again in 2014 to £80 per tonne, on top of the rising waste disposal costs.