Filling the gap
With an independence referendum approaching and even unionist parties advocating transferring income tax to Scotland, there is a good chance that even more financial responsibility could he heading north in the future.
So the transfer of two areas of fiscal control – landfill tax and stamp duty – as part of the most recent Scotland Act could be seen as something of a test run for future governments.
Even though Scotland already has powers under the original devolution settlement to raise or lower the basic rate of income tax by 3p in the pound, it has never been used, and when announcing the introduction of the new Landfill Tax (Scotland) Bill last year, Finance Secretary John Swinney reiterated that: “The transfer of tax powers in this area only adds to the case for the responsibility for all taxation in Scotland to rest with the Scottish Parliament.”
Sending rubbish to landfill has been an ever present headache for environmental bosses, from local councils right up to senior government whether that is the environmental damage caused by gases produced by slowly degrading waste buried beneath or the realisation that there are only so many holes in the ground that can be dug before running out of space.
Policies have shifted towards encouraging individuals, local authorities and business to reuse first, then recycle – and landfill only as a last resort.
The Landfill Tax was the first ‘green tax’ introduced in the UK, aimed at offsetting the environmental impacts – such as emissions of gases like methane, soil and water pollution, or the noise and bad odours that can be associated with landfill sites. Since it was first introduced UK-wide in 1996, it has grown from essentially being a nominal sum, to a hefty charge – with the income being reinvested in environmental projects and longterm infrastructure.
And the charges, coupled alongside other measures to increase recycling, seem to be working. According to the Scottish Environment Protection Agency (SEPA), which takes a regular audit of waste figures across the country, between 2005 and 2009 the total quantity of waste fell by 22 per cent and the total quantity of controlled waste sent to landfill fell from 7.3 million tonnes to 4.7 million. In the Government’s own consultation on landfill tax, the total tonnage sent to landfill dropped from 86,913 tones in 1998/99 to 43,917 in 2009/10.
In April 2015, responsibility for landfill tax will be passed to Scotland and although experts told Holyrood they did not predict huge changes and the Government has said, in many aspects, the Scottish specific legislation will mirror the original, it does provide lawmakers here with the opportunities to make improvements.
Firstly, a new body, Revenue Scotland, has been set up to administer both taxes on landfill and stamp duty, headed up by former chief executive of the Scottish Court Service, Eleanor Emberson.
However, unlike the current tax, which is administered directly by HMRC, under the present proposals, this will be carried out by SEPA, which is already responsible for monitoring landfill sites for issues like potential environmental damage.
SEPA, therefore, will be responsible for the other major part of the tax, which is not seen under the current rules.
As well as taxing legitimate landfill operators who have already been licensed to operate by SEPA – the new rules will enable the agency to go after people dumping large quantities of waste illegally.
These are already dealt with through the courts, with the most recent example being Doonin Plant, which was fined £200,000 last December for keeping hundreds of tonnes of controlled waste at its premises, without a Waste Management Licence.
It was the largest cumulative financial penalty ever handed out for an offence reported to the Procurator Fiscal by SEPA.
SEPA Project Manager Ed Turner said there had been a handful of cases over the last few years and at least one in the last 12 months, but the new rules will enable heavier punishments that it is hoped will act as more of a deterrent.
Turner says that it was an aspect that HMRC were not able to go after.
He added: “I would say that SEPA would have probably a better handle on where the illegal sites are and what they’re up to and even for the licensed sites that are currently making returns, possibly, we can see into the technicalities of what waste is exempt and what isn’t.
“I’m not going to say, necessarily, that we are going to be able to collect more tax than HMRC are at the moment, but certainly, we would have a better understanding of where there are loopholes and where we can close some of these loopholes.
“The idea that from speaking to operators I get is that the guide that exists currently is fairly subjective and can be interpreted in different ways. Hopefully, if we are inspecting landfill sites regularly, then the idea is that we’ll have a better understanding of these areas.”
One of the biggest issues with landfill tax is on the cost. When it was first introduced, the charge was £2.50 per tonne for inert landfill – soil and other waste that does not cause environmental harm – and £7 per tonne for active waste – those that produced greenhouse gases when they start to break down in the ground.
This cost for active waste gradually increased but it was not until 2008 that it started to rise sharply by £8 per tonne a year. Charges now stand at £72 per tonne and will rise again to £80 next year.
Martin Cracknell, Strategic Sales and Development Manager at SITA – which operates two landfill sites in Scotland as well as managing another two which are now closed to new waste, said: “In the conversations we’ve had with the Scottish Government so far, our biggest concern was if there was a different rate of landfill tax in Scotland.
“If they said instead of paying £72 per tonne, they’re going to charge £50 – potentially you could have waste migration into Scotland because it’s cheaper for companies in the North of England to ship it into places in Scotland. On the flipside of that, if the Scottish Government made it more expensive to drive material out of landfill, then you could get migration south of the border.
“Currently what the Scottish Government has said is that they are going to be consistent with rest of UK in terms of cost of landfill tax.”
A government spokeswoman said ministers were committed to setting the rates “no lower than the rest of the UK at the point of implementation.” She said: “A key concern for ministers in setting Scottish rates will be avoiding waste movement across the border, and ensuring that the investment conditions created by the tax are uninterrupted. The rates are likely to be announced in 2014.”
How much it is believed will be raised from the tax has varied, with a suggestion it could be around £140m – but this will be offset by a reduction in Scotland’s block grant, meaning the Scottish Government is not expecting a “significant net increase in revenue”.
However, there could be further benefits from schemes in Scotland as while the current UK tax incorporates a tax credit scheme, using money raised to benefit social and environment projects, the Scottish Bill wants to see all benefits kept within Scotland – and Finance Secretary John Swinney has said he wants to increase funds available to the good causes supported by the scheme. It plans to replace the current Landfill Tax Communities Fund, which allows communities nearby to directly benefit from tax credits. Projects receive 5.6 per cent of the tax, but this could be increased by a further 10 per cent, meaning a potential extra £500,000 per year.
At such an early stage in the legislation – it still has to pass through all three stages in Parliament – it is difficult to predict what further impact the tax could have. But Cracknell says there is scope for the remit to be expanded in the future.
He said: “There is capability in the future of setting new taxes for different materials.
There are places in Europe where they have taxes from energy from waste or they have taxes on other types of activities.
“The Government hasn’t mentioned this but if it has got devolved ownership of tax, it could say: ‘Actually, we now see this as a driver for becoming more environmentally conscious and could say we’re going to start looking at this now because it paves the way for making everyone very conscious of what they’re doing, when they put something in a bin.”