The Exchequer Secretary to the Treasury (James Cartlidge)
It is a real privilege to respond to today’s Backbench Business debate. I congratulate the right hon. Member for North Durham (Mr Jones) and my right hon. Friend the Member for Haltemprice and Howden (Mr Davis) on calling this debate. I have only responded to one of these Backbench Business debates before, and it was when I was a Justice Minister, and, sure enough, one of the proponents was my right hon. Friend. It was on the subject of strategic lawsuits against public participation, so he does cover a diverse range of issues, but that is a credit to him.
The shadow Minister, my regional neighbour, referred to the fact that the right hon. Member for North Durham had called himself an anorak on this subject. I agree with the shadow Minister that, what the right hon. Gentleman has shown—as have the hon. Member for Blaydon (Liz Twist) and my hon. Friend the Member for Newcastle-under-Lyme (Aaron Bell)—was a clear passion for this subject. He raised some very serious and important constituency matters.
I want to assure all hon. and right hon. Members that we do agree that landfill tax fraud and wider waste crime is an important concern in itself, but it also has a distortive effect on legitimate waste management businesses and the waste management sector, causes significant environmental damage and seriously impacts on local communities. Every single Member who has spoken today—with an emphasis, it should be said, on quality rather than quantity of colleagues participating—has clearly emphasised, above all else, the impact on their communities. I totally understand and sympathise with that point.
I will just canter through the history, as the shadow Minister did, because it is very important. We had a long established habit of landfilling our waste. As recently as the 1990s, more than 90% of household waste went to landfill, with only 5% of household waste being recycled. As he said, a landfill tax was introduced in October 1996 to help remedy that. The idea was to encourage the diversion of waste away from landfill and towards more environmentally friendly waste management options, such as recycling, reuse and recovery.
Having introduced the tax, it is also true, as the right hon. Member for North Durham pointed out, that successive Governments have applied escalators to that standard rate. These escalators increased the rate but also provided lead-in time and certainty that was welcomed by the sector, which was looking to invest in more sustainable waste management options. The tax has been widely recognised as being successful in contributing to the fall in landfill waste.
Where are we now? Since 2000, local authority waste sent to landfill in England has fallen by 90% and household recycling rates are now at around 45%. The tax collected in the last financial year was £667 million, which is in many ways a successful tax. Obviously, I am speaking primarily from the Exchequer’s point of view, but we have achieved a substantial policy goal there. We should think of a parallel universe in which we did not achieve that reduction in landfill—imagine how many square miles of our wonderful countryside would now be taken up by landfill. It is a striking thought.
David Linden (Glasgow East) (SNP)
I do not want to intrude too much on this debate, but the Minister is right when he talks about the importance of moving more towards recycling and less to landfill. Will he join me in calling on Glasgow City Council to reject the planning application from Patersons of Greenoakhill, a landfill site that blights communities in Mount Vernon, Carmyle, Baillieston and Broomhouse?
James Cartlidge
It is fair to say that the hon. Gentleman has got that on the record, but he will appreciate that I am not going to comment—it is devolved, but beyond that it is a planning matter and not a matter for the Exchequer. He has got it on the record, though.
It is true that landfill tax has inevitably been relatively difficult to enforce, and non-compliance is high. The right hon. Member for North Durham is absolutely right that this is partly due to increases in the standard rate but, obviously, as the tax has increased, it has become more effective at incentivising disposal other than landfill. In parallel, there has inevitably been an increase in abuse and non-compliance.
Mr Jones
Listen, as I said in my contribution, I have no problem with the actual policy. It has been effective. I question the figures because, frankly, nobody knows what they are. The Environment Agency does not know what they are. What I cannot get my head around is this: the Minister says the tax has been difficult to enforce. Talk to people in the industry—they have known that for years. They have known every scam that has been going on for the past 27 years, and nothing has been done. That is what I just do not understand.
James Cartlidge
I was just being frank with the right hon. Gentleman. It is a relatively difficult tax to enforce, compared with others, but that does not mean we are not determined to do everything possible to deal with non-compliance. Let me turn to some of the specific points that he and other colleagues raised.
James Cartlidge
I will make a bit of progress first and turn to Operation Nosedive, which I think every single colleague raised. First of all, I have no information whatsoever on the etymology—it is fair to say it is striking. As right hon. and hon. Members know, the legal obligations in relation to taxpayer confidentiality mean that it would be inappropriate for me to discuss the specific details of Operation Nosedive. However, the Public Accounts Committee acknowledged in its report that HMRC had been frank about the challenges associated with investigating these types of cases and that a high standard must be met for any criminal investigation to reach the prosecution stage.
The right hon. Gentleman for North Durham mentioned the operational independence of HMRC, to which I would just add—perhaps referring back to my previous role as Justice Minister—that perhaps the most fundamentally independent institutions under our constitution are the judiciary and, of course, the Crown Prosecution Service as independent prosecutors. It is ultimately its decision whether to prosecute, based on the evidential threshold.
Liz Twist
Of course I will ask why it happened and ask for details, and of course I got the reply about confidentiality. But does the Minister not accept that after this period of time—six and a half years that we know about, and time before that—it is just not reasonable to say, “We can’t tell you how much it costs”, because that is a matter of public interest.
James Cartlidge
As I understand it, the figure is public—[Hon. Members: “It is now!”]—following robust campaigning by colleagues present in the Chamber.
Turning to the linked point about decriminalisation, I emphasise that most of HMRC’s work to tackle fraud makes use of civil powers. HMRC does use criminal powers selectively to focus on criminal investigations at the top end of the highest harm and the most complex organised crime and serious fraud. Just to underline that, in 2021 HMRC closed 700 illegal waste sites, including 200 high-risk sites—I say HMRC, but it might have involved the Environment Agency as well. Significant action was taken, but it was primarily civil in nature.
My hon. Friend the Member for Newcastle-under-Lyme continues to raise Walleys Quarry—
James Cartlidge
I am now on Walleys Quarry, so I will stick with that. My hon. Friend the Member for Newcastle-under-Lyme will have anticipated that I cannot comment on ongoing investigations, but I can confirm that, as I understand it, the Environment Agency continues to regulate the operator closely and to consider appropriate action, in accordance with its enforcement and sanctions policy. While it sounds like there has been some progress, my hon. Friend is being a stalwart constituency MP and is a credit to his constituents. It is difficult for Ministers to go into the data at the Dispatch Box. He made points about the mental health impact and so on, and I sympathise with those who have experienced the impact at first hand.
I will now give way to my right hon. Friend.
Mr Davis
In a way, the Minister’s comments on Walleys Quarry reinforce the point. He says it is a difficult area to enforce in tax terms. I do not actually agree. I think a great deal more could have been done on the ground with Operation Nosedive in terms of physical investigation. Such things would not normally be undertaken, but that should have happened for something as big as this.
I reiterate the point I made earlier to my hon. Friend the Member for Newcastle-under-Lyme (Aaron Bell). The costs of the failure to enforce are financially enormous and socially disastrous, and serve to completely invert the purpose of the policy. The hon. Member for Cambridge (Daniel Zeichner) quoted the industry association and talked about an environmental catastrophe waiting to happen. No, it is an environmental catastrophe waiting to be discovered, because much of it lies underground in our constituencies. This is an area where a huge amount of resource is at play, and a huge amount of effort should be put into dealing with it.
James Cartlidge
I understand where my right hon. Friend is coming from. Speaking generally about all these cases and issues—I will go through all the points that have been raised as best I can, because he also talked about joint working and co-ordination—there is point of principle that we have to accept. We have a tax with a rate that incentivises a behaviour that is a positive policy goal, and that has been achieved to an extraordinary degree in the substantial reduction in waste going to landfill. Precisely because of that mechanism of a financial disincentive, there are some rogue actors—there will always be some—who want to take advantage.
All right hon. and hon. Members raised the point about data. I can confirm that the Government are committed to publishing an annual framework of indicators to track progress towards the objectives set out in the resource and waste strategy, including indicators of illegal waste sites, fly-tipping and littering.
The right hon. Member for North Durham and my hon. Friend the Member for Newcastle-under-Lyme both made points about what constitutes a fit and proper person. DEFRA recently consulted on reforms to the carrier, broker, dealer regime, and those transporting or making decisions about waste must demonstrate that they are competent to make those decisions. DEFRA anticipates phased implementation of the reforms from 2023-24.
James Cartlidge
The hon. Lady will appreciate that that is a DEFRA consultation, but I strongly encourage her to engage with it. She is an assiduous campaigner and contributor to these debates—I think she has been at every debate I have attended—so I pay tribute to her for that. I am sure she will pursue that consultation with interest.
I will talk briefly about the tax gap. My hon. Friend the Member for Newcastle-under-Lyme made the point that there was a spike with the inclusion of unauthorised sites. The latest figures we have, which are for 2020-21, show a gap of 17.1%. That was a fall, but that was partly because the year before was impacted by covid and the year before that we had the spike because of the inclusion of unauthorised sites.
Of course we want to make progress on that, but I speak for the Treasury as a whole when I say that we should be judged as a Government on the totality of the tax gap, because it will vary between taxes; some taxes are fundamentally easier to collect and some are easier to evade. As my hon. Friend the Member for Newcastle-under-Lyme said, the total tax gap was 5.1% in the last year for which we have figures available—a fall from about 7.5% in 2005-06. That is one of the lowest published tax gaps in the world and it has been in decline, which is very positive and shows that overall we are making effective progress, although I agree that we need to make more progress specifically in relation to landfill tax.
Matt Rodda
Will the Minister write to me on the related matter of trying to quantify the scale of fly-tipping costs to local authorities, residents and businesses? I appreciate that it is not the subject under discussion, but it is of enormous concern to many people across the country. In my area of Reading, we have huge problems in the town centre and on other sites, often on private land, with enormous cost to neighbouring properties.
James Cartlidge
The hon. Gentleman is right that it is not within my bailiwick, but I am happy for my officials to get in touch with him and let him know who is the appropriate Minister.
On waste incinerators, we should acknowledge that energy-from-waste plants have made an enormous contribution: the biggest factor in the reduction in landfill is the use of energy-from-waste plants. In my county of Suffolk, we have a very successful operation. When what would have been landfill is burned, it is used to create energy for homes. That is a joined-up operation and it has made a massive difference.
On joint working, I think it was my right hon. Friend the Member for Haltemprice and Howden who made the point that there was a failure of co-ordination. As he knows, in 2020 we established the joint unit for waste crime in the Environment Agency, in partnership with HMRC, the National Crime Agency and others, to tackle organised waste crime. Through shared intelligence and enforcement, the joint unit is identifying, disrupting and deterring criminals, and I can confirm that between April 2020 and November 2022, the joint unit worked with more than 100 partner agencies and engaged in 175 multi-agency days of action, resulting in 51 arrests by other agencies.
I turn to the report by the Public Accounts Committee, which all colleagues have mentioned. As right hon. and hon. Members know, the National Audit Office and the Public Accounts Committee last year published reports on Government efforts to combat waste crime. Despite the work done to date, the Government are not complacent and recognise that more needs to be done. That is why we accepted and are implementing all the recommendations in the Public Accounts Committee report, “Government actions to combat waste crime”. Importantly, we are not going from a standing start; there are, as I have just demonstrated, a host of multi-agency efforts already under way.
The hon. Member for Blaydon mentioned the landfill tax review. I can confirm that we launched the landfill tax review in 2021 to explore how the tax’s design can continue to support environmental goals. The Government are considering responses to the review’s call for evidence, which closed in February 2022, and we hope to issue a response in due course. The Public Accounts Committee has recommended that DEFRA should work with HMT and HMRC to ensure that the review of landfill tax takes into account the incentives that the tax, as currently designated, creates to commit waste crime. We agree with that specific recommendation and we will look at that factor.
Mr Kevan Jones
This question is within the Minister’s bailiwick: as colleagues have said, the higher rates have incentivised waste crime, so will he engage with the Environment Agency to look at the test for labelling waste as inert and the way it is enforced? Frankly, it is frankly a farce. Operators are allowed to do the test themselves and put it forward as a bulk of waste. There might be some inert waste on the top, but under it there will be active waste. This is about enforcement, but it is also about whether we should just abolish it altogether.
James Cartlidge
The right hon. Gentleman makes an important point. He will appreciate that I am not going to predetermine our review, but it is important that we look at those precise points. That is why we have established the review. As I say, we will respond in due course to the responses we have received to the call for evidence.
I turn finally to HMRC, which lots of colleagues have mentioned. A further recommendation from the PAC was for HMRC to respond on how it has improved its approach to landfill tax prosecutions. It did that in December. Briefly, HMRC’s approach to landfill tax compliance aims to collect the right amount of tax and support the Government’s aim to create a better environment. Most of its work to tackle tax fraud makes use of civil powers, as I said earlier, but it also uses criminal powers selectively.
HMRC has learned lessons from previous operational activity and is developing a number of criminal investigations into those involved in waste crime—[Interruption.] Yes, there are ongoing investigations to confirm that for the right hon. Member for North Durham, who is chuntering away in his invisible anorak on the Labour Back Bench. The investigations are at an early stage of development, and the House will understand that it is not appropriate to provide further detail at this point.
Lastly, colleagues on both sides of the House have raised the point about resourcing, including the hon. Member for Cambridge (Daniel Zeichner). HMRC has deployed more resources to increase the number of civil investigations of landfill tax non-compliance. Actions between 2018 and 2021 have already secured £110 million of additional tax revenue, and in future we expect at least £50 million of extra tax to be paid annually. HMRC increased the operational compliance resource dedicated to landfill tax in 2017 and 2018, doubling capacity to 50 people. It is deploying a further 10% more resource specifically to increase the number of civil investigations of landfill tax non-compliance. That was funded in the spring Budget of 2022.
To conclude, I thank the “Landfill Four” for their excellent contributions, and my right hon. Friend the Member for Haltemprice and Howden and the right hon. Member for North Durham for securing the debate. Landfill tax has helped to transform the approach to waste and resource management, with reductions in waste to landfill and increases in recycling rates. However, there is and will always be more work to tackle criminals looking to take advantage of the system. Finding that balance and achieving both those things is crucial, and I am determined that we will.