Cleaning up our act: reforming landfill tax for place resilience and best local outcomes
Work in progress
Over the last thirty years landfill policy has been among the most successful and singularly effective of government environmental policies. Since its introduction on 1st October 1996, the UK landfill tax has succeeded since the start of the millennium in drastically cutting local authority waste sent to landfill by 90%, encouraging waste reduction, reuse, recycling and recovery.
Amid an ever shifting and evolving national environmental policy, and the launching of initiatives such as the 25 Year Environment Pan in 2018 and the Department for Environment and Rural Affair’s Waste Strategy, the structure and operation of the Landfill tax has remained largely static as a means of imposing financial penalties on landfilling and shifting behaviour and practice toward more sustainable waste management.
However, there is a principled, place-based case for future long term policy reform to address the following challenges to successful landfill policy.
Tax gap and tax inefficiency:
Each year HM Revenue and Customs publishes its annual estimate for the tax gap – the difference between the amount of tax they should receive and what is in practice paid. For the year 2021 the tax gap for Landfill Tax was calculated at 22.7% or £200 million.
In this respect, it would be worth looking at effective international systems of Landfill Tax in other jurisdictions to see if they operate more effectively. New Zealand, for example, has a number of different bands and landfill tax rates
Serious waste crime
According to parliamentary spending watchdogs the Public Accounts Committee, antisocial waste crime such as flytipping is seriously underreported and costs the economy a minimum of £1bn a year in economic clear up costs and the situation is only worsening. The failure of Defra and the Environment Agency to implement the actions from the national Resource and Waste Strategy in a timely manner is concerning for localities given the face the cost-of-living crisis is incentivising organised criminal gangs to cash in from illegal dumping.
The number of prosecutions per year has fallen by more than 90% since their peak in 2007–08, with court delays slowing their progress and fundamentally PAC finds there is currently no strategy or plan for how to achieve the hugely ambitious target of eliminating waste crime by 2043.
Businesses which provide safe and legal routes to waste recovery, recycling and disposal, cannot compete with the waste criminals who run illegal waste dumps, or practice illegal waste acceptance at landfill sites, or misclassify wastes or who engage in fly tipping.
While every £1 invested in tackling waste crime could yield on average £4.96 back into the legitimate economy, HMRC is recouping just a fraction of that through powers it gained four years ago to collect landfill tax disposed of at unauthorised sites. The government provided funding to HMRC for additional staff to enforce this but so far, we only know that HMRC has raised just 11 tax assessments, totalling around £17.8m, including penalties. In 2021/22, just £10m was specifically ringfenced by the Environment Agency to tackle waste crime, figures that are a mere fraction of the minimum £1bn annual estimated costs of such illegal activity.
The penalties for breaking the law rarely match the gains that can be made from criminality in this context. All too often, people choose to break the law because they either think they can get away with it or they have no fear of the consequences. It is essential that the risk of being caught and prosecuted feels real and criminal penalties act as a deterrent.
Dredging of rivers and canals is vital to local resilience as a means of preventing our rivers and estuaries from flooding. However, our dredging authorities are faced with a potentially crippling fifteen-fold increase in using residues such as ash to dehydrate dredged material, around 16,000 tonnes each year, from rivers and estuaries if they become, as HM Treasury’s Call to Evidence from November 2021 suggested, subject to the standard rate of landfill tax. In this context, what is the case for designing a landfill tax which promotes good environmental stewardship and resilience in areas prone to flooding.
Environmental outcomes and classifications.
From a regulatory perspective, the massive gap that has opened up between the lower and standard rates of landfill waste, something which is a factor both incentivising waste crime and also risking environmental outcomes, should also be reviewed.
Presently there are two rates of landfill tax:
- a lower rate for the least polluting material (currently £3.25 per tonne); and
- a standard rate (currently £102.10 per tonne) for more hazardous material.
This form of tax does not drive waste up the waste hierarchy (disposal, recovery, recycling, re-use and prevention) by incentivising behaviour towards the Best Overall Environmental Outcome because of the types of waste subject to each rate. As a result substances like gypsum are disposed to landfill, resulting in scandals like Whalley’s Quarry.
We will need to ask:
- What consideration could be given for narrowing the current gap in taxation between the two landfill rates – perhaps raising the lower rate and reviewing the classification of substances subject to standard and lower rates?
- What different roads to reform could be pursued and over what time?
- Would a move towards New Zealand style different bands – something necessitating a consultation and primary legislation over two years be preferable to a one-year transition reclassifying the waste hierarchy, requiring a change the Qualifying Material order (QMO) and a formal consultation followed by secondary legislation?
Research sponsored by: