Landfill Tax Fraud

Liz Twist Excerpts

Thursday 12th January 2023 Commons Chamber

[Liz Twist (Blaydon) (Lab)]

I congratulate my right hon. Friend the Member for North Durham (Mr Jones) and the right hon. Member for Haltemprice and Howden (Mr Davis) on securing the debate and on their commitment to exposing this issue over the last decade.

Let us start by stating the obvious: living near a landfill site is not pleasant. In fact, it is very unpleasant, and no one wants to do it. Our ultimate aim through the waste hierarchy must be to ensure that we do away with landfill sites, but the mismanagement of existing landfill sites is an issue that has affected my constituents a great deal over many years.

In 2019, I secured an Adjournment debate to raise the issue of the Blaydon Quarry landfill site, which was then located in the village of Greenside and surrounded by the communities of Winlaton, Barlow, Stargate, Ryton and Blaydon Burn. The site was, thankfully, closed to waste deposits in September 2021, but not before these proud former mining communities had endured years of foul odours, and litter and dust from the site scattered over our fields and trees. It would be a challenge to overstate the sheer amount of correspondence that I and my predecessor received about the site and the persistent upset caused to communities who were unable to enjoy and take pride in the beautiful environment surrounding the site.

Before the site’s closure, multiple enforcement notices concerning management of the site had been given, following repeated breaches of regulations on planning and environmental grounds. A particularly nasty breach in 2015 involved a huge escape of litter from the site during a period of high winds, which amounted to nothing less than environmental vandalism. Despite the scale of the devastation, the Environment Agency legal team told us that it would not be possible to make a prosecution, and we saw that pattern several times over the years. I can only thank the Environment Agency officers who worked on the site in my constituency for the great efforts they made, pushed continually by the community and by ourselves, but there were still no prosecutions.

The site has had a number of operators, all with different problems. The most recent was Octagon Green Solutions; previously it was Niramax, and before that it was Premier Waste.

In 2015, there was huge coverage in our local newspapers and broadcast media of the HMRC-instigated co-ordinated raids on a number of sites across the north-east, including the Blaydon landfill site, as part of the ill-fated Operation Nosedive. The raid involved 180 HMRC officers and many others, and it was widely publicised—trumpeted, even—across the region, with HMRC estimating an alleged fraud of £78 million. I reviewed some of the media reporting on it as I prepared for this debate. Everyone was there in full gear, and there were photos from the site and television reports, all because of HMRC trumpeting this great investigation. Although different from the environmental issues, it was welcomed by people in the community, who were fed up with the operation of these sites.

Given the damage that these companies inflicted on our local communities, my constituents took great interest in Operation Nosedive and did not forget about it over the years. They took great interest in the alleged potential landfill tax fraud, and they continued to write to me throughout the period to inquire about the outcome of the investigation, until HMRC quietly—very quietly—slipped out the news that Operation Nosedive had not resulted in any prosecutions after six and a half years and what we now know was £3.5 million of public costs.

These families invested faith in HMRC to bring about justice. Having worked fastidiously with our local landfill liaison committee, Gateshead Council and the Environment Agency to hold the companies to account on waste management issues, we hoped that HMRC’s lengthy criminal investigation would deliver on the issue of alleged financial crime, if it was found. But we have heard that six and a half years produced nothing, at a huge cost.

When HMRC revealed that no prosecutions would be brought after that time, I wrote to the chief executive—twice—asking for an explanation. I was told that this could not be given and nor would there be any clarification on whether civil action would be taken. I wrote first in April 2021 and the response was:

“Unfortunately, I am…unable to provide details of the costs incurred in this specific operation as HMRC does not report the costs of individual cases.”

I wrote back on that and a number of other issues about the failed action, and again the response was:

“As per my response dated 30 April 2021, I am unable to provide details of the costs incurred in this specific operation as HMRC does not report the costs of individual cases.

I hope this helps you to respond to your constituent’s enquiries and explain why we are unable to provide more details.”

Well, frankly, no, it did not—it did not help me at all.

So I really congratulate my right hon. Friend the Member for North Durham and the right hon. Member for Haltemprice and Howden on proceeding with their efforts to get this issue investigated and to reveal the true costs. This is public money—it is taxpayers’ money—and people are entitled to know what has happened to it and why this six-and-a-half-year operation has failed. I think we are now clearer, as we have heard about what happened with the lack of co-ordination and the lack of joint work, but, frankly, it just is not good enough for my constituents.

I am pleased that the National Audit Office and the Public Accounts Committee have looked at this and reported on the financial aspect of Operation Nosedive, but it remains absolutely vital that the Government take decisive action to address the issues it raises. We have to take the necessary steps to tackle the ongoing abuse of the landfill tax system—and other waste crime—which is estimated by the Environmental Services Association to have cost the taxpayer about £120 million in 2021.

[Mr Kevan Jones]

I am grateful to my hon. Friend, who has been pursuing this for many years and we have had lots of discussion as parliamentary neighbours. Would she say that her communities are worried about the future? Although the site she refers to—I know it well—is now closed and possibly the initial blowing of rubbish and so on has stopped, because we do not actually know what is in that site, there could be a ticking timebomb of environmental damage. Ultimately, if it has to get cleaned up, it will come back to the taxpayer to do it.

[Liz Twist]

I most certainly agree with my right hon. Friend. Of course, we have had a history of such sites in previous years; we have no idea what is in them. It is vital that we do know what is in those sites, and it is vital that efforts are made and action is taken to ensure that landfill operators behave responsibly. I hesitated before saying “responsibly”: they need to behave in accordance with the law, treat waste properly and respect the local communities and our environment.

As I was saying, I am pleased that the Public Accounts Committee published its report on waste crime in October 2022. In their response, the Government acknowledged the slow progress on the wider issues of waste crime. I believe we are now awaiting the outcome of the landfill tax call for evidence, which we have not yet seen.

Of particular concern are reports of serious and organised crime in the waste sector. The establishment of the Joint Unit for Waste Crime in 2020 suggests progress on that issue, and we have heard reassurances that the unit will promote co-ordination between HMRC, the Environment Agency and other bodies. I am glad that Members have been able to speak to and meet that body. I will certainly be keeping an eye on its progress. That is a positive move. That co-ordination would go some way to remedy the difficulties in discharging responsibilities between different bodies that have been held responsible for the failure of Operation Nosedive.

However, the National Audit Office reported in April 2022 that the unit does not receive any dedicated funding from Government, and that the Environment Agency’s previously ring-fenced funding for waste crime will be incorporated into its core funding from 2022-23. Furthermore, the report highlights the need for improved data on waste crime, as we have heard, so that resources can be targeted more effectively and progress more accurately assessed. It is vital that resources are available to make that co-ordinating work effective and to protect communities.

If we are to learn lessons from the failure of Operation Nosedive—I cannot imagine who thought up that name, which in itself has caused a lot of issues—and make a difference, the Government must establish a more stable footing for the investigations. Our environment is precious to local communities and waste management is a vital part of its preservation. It must not be placed in the hands of criminals or fraudsters. It must be managed to the highest standards.

--- Later in debate ---

[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—

--- Later in debate ---

[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.

[Liz Twist]

It is good to hear that there will be some progress, but the issue lies with the operators and permit holders of landfill sites. Will there be any action on the fit and proper person test?

[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.