THE BIGGEST EVER RISE IN LANDFILL TAX: WHAT DOES IT MEAN FOR THE SKIP HIRE INDUSTRY?
The announcement on 12th March by the Chancellor of the Exchequer, Alistair Darling, that the landfill tax will increase from £24/tonne to £32/tonne has sent ripples of concern through the waste industry. There has also been a very positive response from many of the top-tier waste management companies who view it as a positive step towards recycling and environmental protection.
Furthermore, Mr Darling announced his intention to increase the tax by a further £8 every year to 2009/2010 where it will stand at £48/tonne. The price of inert is set to increase from £2/tonne to £2.50 and will be capped at this rate until 2010.
The initial concern to most of the skip hire and small waste management companies in the UK is how it will this affect their business. Worries that the inevitable price increases in skip hire will prohibit many domestic customers from disposing of their waste in a responsible manner are preoccupying many people in the skip hire industry. It is hard not to suspect that every time the Chancellor increases landfill tax, we witness a correlative increase in fly-tipping, particularly in the inner cities.
DOUBLE-EDGED SWORD
Steve Cunningham, of CCS Skips in Manchester, says: “It’s a double-edged sword. Nobody would complain at the government’s initiative to reduce landfill but this move is going to encourage fly-yipping for sure. It’s no longer enough to say that increasing prices will inevitably increase recycling rates. Is it not obvious that we are recycling as much as we possibly can? Landfill rates at £24 a tonne are prohibitive enough. This is going to squeeze my profit margins even more”.
Jane Pullen, from Libra Skip Hire in Surrey, is outraged: “As far as I can see, this is a tax on tax! We are forced to increase our prices and the government rakes it in in increased VAT. How are we going to benefit? It’s not as if the government will reinvest this revenue into recycling initiatives. Also this is going to have a knock-on effect on the building trade as it will inevitably increase the on-site costs.”
Another prominent skip hire company owner told The Skip: “It’s not easy trying to tell customers that our prices have to rise by over 20% overnight – how many other industries could cope with such a hike? If they really want to push a green agenda, this is not the way to do it. Our domestic customers are going to laugh down the phone when we tell them how much a skip costs now!”
BIG BOYS HAPPY
The landfill operators themselves will see a reduction in tipping which is, of course, the primary function of the tax. The other view from the large corporate waste management companies are welcoming the tax as an encouragement to further recycling. Steve Lee, chief executive at the Chartered Institution of Wastes Management, said: “Raising the tax by £8 per tonne per year to £48 by 2010 for ‘active’ waste will make a whole range of waste treatment technologies financially viable - for all wastes, not just municipal. The three-year plan for the escalator is good, too. Businesses need time to change and even the anticipation of a £48 per tonne tax - plus steadily increasing landfill gate fees - will be enough to influence many waste and resource management decisions.” True, if you are able to invest heavily in all the machinery crucial to increasing recycling rates in the first place. Mr Lee also acknowledges that the downside to the tax increase will be an increase in fly-tipping and other illegal waste management activities.
PANIC
Panic price increasing has already been seen amongst the smaller waste management operatives. Skip companies across the UK have been putting their prices up by as much as £40 per skip in many areas. London has even seen increases of £60 on an 8-yard skip. There can be no uniformity here as each individual company’s prices now depend solely on their individual recycling rates and how much they can avoid sending to landfill. But with these hefty increases, will skip hire become no longer affordable to the consumer? The short answer to this is “possibly”.
The consumer has three choices: pay the premium, seek out ways of recycling the waste themself or fly-tip. It is easy to guess which choice the scrupulous person would make, and which the unscrupulous. It is a safe bet to assume that paying the premium will not be the most attractive option.
Fears of downturns in business and increased illegal activity would be allayed if at the same time as assuring us of further tax increase, Darling could promise a greater spend on fighting waste crime.
Richard Skehens, of Grundon Waste Management, says “More of the increase should be regularly put back into the Landfill Community Fund (LCF) and some of the money should be ring-fenced and passed to the Environment Agency (EA) to assist them in dealing with environmental crime.”
This view was echoed by Jean Dominique Mallet, Veolia Environmental Services’ UK CEO, who said: “We support the government in diverting more funding than it does at present from landfill tax into fighting waste crime.” Skehens went on to say: “The upside of this approach is that it would help to push waste into licensed sites – where it will generate more tax – which could eventually make the EA’s environmental crime unit self financing.”
Let us know your views. Email pr@theskip.net
LANDFILL TAX – THE LOWDOWN
What is landfill tax?
An environmental tax levied on landfill operators which is passed on to its customers and therefore on to any waste producer. Intended to encourage recycling and reflect the non-monetary cost of landfill, such as environmental impact and leachate into water supplies.
What are the rates of tax?
Currently £24/tonne for active waste set to rise to £32/tonne on 1st April 2008, to £40/tonne on 1st April 2009 and to £48/tonne on 1st April 2010. For inert waste (rocks and soils, ceramics and concrete, unused minerals, furnace slags, ash and low-activity inorganic compounds and water) the tax is currently £2/tonne set to rise to £2.50 on 1st April 2008 and capped at this rate until 2010.
What materials are exempt from landfill tax?
Dredgings, any disposal from mines or quarries and any waste from contaminated land clearance (although the Chancellor is currently looking at abolishing this last exemption and subjecting it to the same rates of tax as active waste).
Is it effective?
From 1997 to 2003, landfill fell from 96 million tonnes a year to 80 million tonnes. In 2007, the tax brought in £0.8 billion in revenue. This is set to increase to £0.9 billion in 2008. In the two years following the introduction of the tax, household waste managed by local authorities grew by an unprecedented 5%. It is widely suspected that commercial enterprises are using household waste disposal illegally as a channel for free disposal of waste to avoid the increased disposal rates. It is widely suspected that increased fly-tipping and illegal waste disposal sites are a product of the tax and that the EA has not received sufficient funding to keep on top of the increase.
