Landfill Tax Fraud

Jim Shannon Excerpts

Thursday 12th January 2023 Commons Chamber

[Mr Kevan Jones (North Durham) (Lab)]

I beg to move,

That this House has considered the matter of landfill tax fraud.

I want to say how pleased I am that the Backbench Business Committee agreed to this debate and thank hon. Members from across the House for their support in securing it.

After I secured the debate, a journalist asked me, “What’s landfill tax fraud?” I said, “Yes, I do accept it’s quite a niche subject.” It might be seen as an anorak subject, but it is something that I have been involved with, along with the right hon. Member for Haltemprice and Howden (Mr Davis), for nearly 10 years now. I think he would agree that we are both proud anorak wearers when it comes to this matter, because it is a serious issue for the UK.

I have dug into the issue. There are solutions to it, but blind eyes have been turned by various Government agencies. There is no political will to really grasp the issue and the devastating effect it is having on our revenue collection, but also in various communities.

Have we made progress? Slightly, but there have been missed opportunities over the years. The right hon. Gentleman, who has been involved in this for as long as I have, and I cannot understand why the problem has not been grasped when there are clear solutions, some provided by the industry and some by me, the right hon. Gentleman and other Members.

Landfill tax was introduced in 1996, with the quite honourable aim of reducing the amount of domestic and other waste going into landfill and of pushing recycling—no one could disagree with that. It could be argued that it has worked in reducing the amount of waste going to landfill, but its effectiveness is questionable, because we do not know what is going into landfill.

The industry is worth some £9 billion a year—not a small part of our economy. Like anything generating large amounts of revenue, it attracts criminals and others who want to exploit the system. I suggest that the way in which the Government have dealt with this area, with a lack of regulation and oversight, has allowed criminals and others to benefit. As the Public Accounts Committee report recently said, waste crime in this country has basically been decriminalised because of the lack of action.

People may ask, “Why is this important?” Well, there is a cost to the public purse through uncollected tax revenue that could support all the things that our constituents want. However, it also funds serious and organised crime gangs, which undercut the legitimate businesses that pay their taxes and follow the regulations. The other factor is the future environmental cost. We do not know what is being disposed of at some sites, so there will be a cost relating to their future degradation, with some requiring remediation. Who will pick up that cost? It will be the taxpayer.

[Jim Shannon (Strangford) (DUP)]

I commend the right hon. Gentleman for securing this debate, because such problems also affect Northern Ireland. I am ever mindful of what he is saying, and I think others will reinforce his points, so is it his intention to ask the Minister to look at legislative change to ensure that the criminal gangs who break the law face punitive fines and imprisonment at a level commensurate with the activity? In other words, do the punishments need to be increased?

[Mr Jones]

I am grateful to the hon. Gentleman for this intervention. The frustration is that we do not need new legislation; we just need Government action to fund and implement the existing powers.

My next point, which will also affect the hon. Gentleman’s part of the United Kingdom, is about the effect on local communities. I know that my hon. Friend the Member for Blaydon (Liz Twist), the hon. Member for Newcastle-under-Lyme (Aaron Bell) and the right hon. Member for Haltemprice and Howden will mention specific examples from their constituencies of where local communities feel powerless to stop the huge environmental damage being done to the area. However, this is not down to any lack of trying by those right hon. and hon. Members, who have campaigned for change for many years.

The PAC report estimates that the cost of landfill tax fraud and waste crime is about £1 billion a year. However, that figure is just like me sticking my finger in the air, because basically no one knows. That is a conservative estimate, and the reason for that, as the report says, is that we have basically given up trying to monitor what is happening.

How does landfill tax fraud work in practice? There are strands to it. The first is the way in which the tax was implemented. There are two rates, and those rates went up between 2008 and 2014. The rate for inert or inactive waste is currently £3.15 a tonne, and the standard for ordinary waste is £98.60 a tonne. The first element of criminality involves saying that waste is inert when it is not. There is no monitoring at all, so people are instantly making a fortune by avoiding taxation. The incentive for misdescription of waste is the huge gap between the two rates. The Environment Agency does not really enforce this, and I am sure that boreholes would reveal that inert-waste only sites will contain other waste. The problem is that we do not know what is in such sites, which is a future environmental problem.

The second strand is illegal sites without a licence, for which there are no real sanctions. People can buy a field or an old quarry and keep filling it, and they do not pay any landfill tax.

The next method is far more sophisticated, whereby criminal elements buy or set themselves up as legitimate waste operators. Is that easy? It is, because there are no restrictions on who can become a waste operator. If someone buys an existing business or a quarry, they can label it and say they are going to collect waste, but who is checking? People can run two scams. They can declare active waste as inert, and they can just declare half of what they are putting in.