Landfill Tax Fraud

Matt Rodda Excerpts

Thursday 12th January 2023 Commons Chamber

[Mr Davis]

I agree. Exporting from Scotland to England will not help at all, so the right hon. Gentleman is exactly right.

We have a ridiculous co-ordination problem in the midst of all this. The NAO told me that Operation Nosedive failed for a variety of reasons, but ultimately it was felt that defence lawyers for the criminals would be able to exploit all the weaknesses of co-ordination and data in the system. Frankly, it is galling that criminal charges could have been held back by the bureaucracy and box-ticking approach of Government Departments effectively, which were stepping on each other’s toes rather than working together.

Waste crime and landfill tax fraud are cheating the taxpayer out of hundreds of millions of pounds a year, and it is time we got serious about that. Thanks to the NAO, we know that every single year, waste crime in general costs £900 million—the PAC said £1 billion—which is a very, very large number. We should not lose track of the fact that that is an annual cost. And that is without, as it turns out, the costs in Scotland, Wales and Northern Ireland. We do not have the hon. Member for Strangford (Jim Shannon) in his place to raise a point about Northern Ireland, but there are costs there, too. In the current climate, I can only imagine the uproar if that occurred in any other situation.

The right hon. Member for North Durham touched on the importance of HMRC’s joint unit for waste crime. The Government would like to claim it has been a success—indeed, after the first year they said it was a success—but I have to tell Members that I cannot see a single sign of success. It is shameful, frankly. This is where I agree with the hon. Member for Bristol East (Kerry McCarthy) that this is a resource issue. We absolutely need to ensure that, unlike at HMRC before, there is the right legal advice at every stage, the right data at every stage and the right investigative capability at every stage, so that, rather than saving £10,000 here and £10,000 there only to lose £3.5 million on a failed case or £1 billion a year on the system as it is, we actually deal with the issue. The current strategy is penny wise and pound foolish, and in that respect she and I agree.

[Matt Rodda (Reading East) (Lab)]

The right hon. Gentleman is making an excellent speech. Does he agree that the same principle applies—on a much smaller scale, admittedly—to local authorities, which are often inundated with nuisance fly-tipping? I realise that that is on a different scale to the issues he is describing, but it can nevertheless be very distressing for residents and small businesses across many parts of England.

[Mr Davis]

The hon. Gentleman is right. There is almost a generic problem with local authorities. They very often face problems that look intimidatingly large to them, and the temptation always is to penny-pinch—to spend just a little money to see if they can stop it. They fail, and the problem invariably grows. We see that time and again, particularly in this area. This is a separate issue really, but concerns about fly-tipping among the public are as great as they are about waste crime in general. The hon. Gentleman is dead right. My advice to local authorities is always to try and nip it in the bud, because if they are seen as a weak responder, the crime will come to them. That is what will happen.

[Matt Rodda]

I was not seeking to be overly critical of local authorities. I was trying to illustrate the wider point about the Government’s funding of them and some of their powers. We have had an issue with waste on many plots of land in the areas that I represent. Some of that is deposited by people just passing through. The powers seem to be a real challenge for local authorities. Perhaps he will say something about that.

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[Aaron Bell (Newcastle-under-Lyme) (Con)]

It is a pleasure to follow the hon. Member for Blaydon (Liz Twist), whose constituents experienced many of the same problems mine have, albeit a few years before, and to follow two excellent contributions from my right hon. Friend the Member for Haltemprice and Howden (Mr Davis) and the right hon. Member for North Durham (Mr Jones). I was pleased to go with them to the National Crime Agency last year to try to get these issues taken more seriously. I pay tribute to all the work the three Members who have spoken today have done over the years, before I was a Member of this place, to try to get this issue taken more seriously.

It is a serious issue. It is not just the cost to the public purse—that has been spoken about many times already—but the cost to our constituents, and to their lives and physical and mental health. That is what people in Newcastle-under-Lyme have been suffering, as I have repeatedly brought to the House’s attention over many years.

The failure of the investigations and of the ill-named Operation Nosedive only emboldens the people in this space. The firm that operates Walleys Quarry, Red Industries Ltd, had a failed prosecution against them, regarding a separate site of theirs, by the Environment Agency over an incident in which cyanide leaked into the River Trent in October 2009. After many years, the Environment Agency conceded the flaws in its case, which were probably caused by insufficiently advanced legal advice, to which the right hon. Member for North Durham referred. That only emboldened the firm—we can see that if we look at the press releases crowing over the failure of the EA’s prosecution—to think that it can get away with things and that it will not be held to account by those who should hold it to account.

We need to learn all the lessons of Operation Nosedive, the incident in the Trent, and all the other occasions where we have failed to prosecute landfill tax fraud, or other forms of waste crime. The fact that there has never been a successful conviction for landfill tax fraud is astounding when we consider the depth of criminality that we have exposed in the waste industry. I exposed some of it in the Westminster Hall debate that I led on 1 February last year—the right hon. Member for North Durham and my right hon. Friend the Member for Haltemprice and Howden both spoke in that debate and referred to it in their speeches.

Perhaps I can briefly update the House on where we are with Walleys Quarry, because it is germane to the debate—I will not repeat the full history, Mr Deputy Speaker, having already secured Adjournment debates, multiple Westminster Hall debates, a ten-minute rule Bill and all the rest of it. What my right hon. Friend said about the Environment Agency’s fear that action might make the problem worse is well founded. It did monitoring and said, “Nothing to see here.” It was reluctant to do further monitoring until eventually it was forced into it by a combination of me and the council leader, Simon Tagg. Once it conceded there was a problem, the idea that we might take the permit away from these people, who continually fail, was barely even discussed, because it wanted to ensure that the company managed the site. I understand that as a strategy, but it sticks in the craw of all the local residents, who can see what is happening. They can see the trucks coming from hundreds of miles away—from Scotland and the Lake district—to bring waste to Walleys Quarry. They are monitoring trucks going in at the wrong times of the day, dumping before they are supposed to. There are so many little breaches along the way that stick in the craw of people. They know that the site is under investigation, yet the company is continuing to make money from its operations. I know how painful that is for my constituents, who have suffered with living with the odour. Walleys Quarry is particularly notorious for its odour. We have had by far the single worst odour problem in recorded history—I believe that the previous record belonged to a site in Chorley, Mr Speaker’s constituency. Our site has broken all records. We have had four Environment Agency monitoring stations ringed around the site for the last couple of years.

I am pleased to report that the odour is diminishing. That is because of the work that the Environment Agency has compelled the operator to do. As far as it goes, that strategy is fine. However, the second part of the strategy needs to be to throw the book at the operator. It has been issued with multiple breaches in the last few years, all of which have required it to do work and said, “We reserve the right to take further punishment action later.” We are waiting for that punishment action to happen.

In fact, in Newcastle-under-Lyme, we have two investigations going on into Walleys Quarry. There is the criminal investigation, which was announced in December 2021. I understand that that will take a long time because it is complex and many counterparties are involved. It is all about misdescription of waste, which is a much wider problem and investigation for the EA. There is also the regulatory investigation announced in September, which I raised with the Secretary of State at Environment, Food and Rural Affairs questions shortly before Christmas. We need to get some results on that more quickly because regulation should be the EA’s bread and butter. It needs to start holding the company to account for the failures.

The odour problem has been getting better. We are catching more than twice as much gas as we were—we have the figures—and the EA has mandated capping in additional wells. That is not to say that it never smells. It did smell a bit in December, particularly when the temperature fell below zero; those are the conditions where the odour gets a lot worse.

I congratulate Newcastle-under-Lyme Borough Council, under the leadership of Councillor Tagg and chief executive Martin Hamilton, who took the bold step—it was almost unprecedented for a local authority—of pursuing an abatement notice against the operator. It is difficult to do that because prosecuting an abatement notice needs the consent of the Secretary of State; it is a regulated site and it has the permit with the EA. However, the impact on our residents in Newcastle was so severe that the council felt it had to do that. It was able to bring that to a successful conclusion with the operator, who initially appealed but ultimately accepted the decision, following consultation and discussion. I think that was the first proper concession that Walleys Quarry Ltd and its parent company Red Industries has made that its site has been responsible for the unacceptable odour.

We need to get those investigations pursued with all deliberate speed. I am grateful to the EA for giving me a briefing on them on Monday. I appreciate that the Minister is from the Treasury and not from DEFRA, but we do need to see all pressure put on the Environment Agency to get those investigations brought to a conclusion as soon as possible so that my constituents can start to see some justice, some accountability and potentially some compensation, whether through Government or through the class action lawsuit that a number of them are considering, because of the impact on people’s quality of life and health, exacerbating pre-existing conditions such as chronic obstructive pulmonary disease and asthma and exacerbating pre-existing mental health conditions of anxiety and depression. It has been phenomenal. I laid all that out in the Adjournment debate, so I will do not so again today. However, even in the most recent month, there have been more breaches of the permit.

[Matt Rodda]

Does the hon. Gentleman want to say a little about the disruption and concern caused by heavy vehicle movements near the site? That is of huge concern around the country. In my area, we recently had planning permission granted for an incinerator in West Berkshire. The road access is likely to be through Reading town centre. Many of my residents are concerned about that. I would be interested to learn how his colleagues have helped to tackle the problem in Staffordshire.

[Aaron Bell]

I thank the hon. Gentleman for his intervention. That has been a significant problem in Newcastle. There have been accidents on the road outside the landfill caused by lorries backing up along the road. Firms opposite have complained that people have had problems accessing their businesses. An arrangement has been recently made through a variation to the planning permission to allow vehicles on to the site before the 7 am opening time so that they can at least queue on the site rather than on the road. There is also state of the road and the mud that some vehicles have left on it. There is a wheel wash that vehicles are supposed to go through when they leave. It is clear that it has not always been working. The county council has had to write on more than one occasion to the operator demanding that it cleans up the local roads as well. Traffic and the state of the roads are significant issues, and I wish the hon. Gentleman well with his efforts to represent the people of Reading in the situation with the incinerator to which he refers. The impact is not just about odour; it is about the whole operation and its interference with people’s quality of life in the surrounding villages.

As I was saying, there have been far too many breaches and they are still ongoing. Even under intense scrutiny, with four monitoring stations and regular Environment Agency visits—including unannounced visits, which I welcome—the operator is still being found responsible for more and more breaches. I pay particular tribute to Stop the Stink campaigner Dr Mick Salt, who has brought several such breaches to the public’s attention via freedom of information requests.

The operator’s continual failure to comply with the conditions of its permit, even under such intense scrutiny, is staggering. It surely only strengthens the case for stripping it of the permit altogether when the investigation concludes. I will continue to fight for my constituents and fight to ensure that the operator and the EA are both fully held to account and that we get some appropriate action in response to the misery that the landfill has visited on Newcastle-under-Lyme residents, particularly those who live closest.

Let me turn more specifically to the subject of today’s debate: landfill tax fraud, to which I referred in the Westminster Hall last February. The problem, as I said in my intervention on my right hon. Friend the Member for Haltemprice and Howden, is that bad firms are driving good ones out of the industry. I have spoken to legitimate operators in Stoke-on-Trent who are upset that they are trying to do an honest job but cannot compete with the firms undercutting them.

Fundamentally, most people will take assurances from firms that say, “Of course we’ll handle your waste legitimately, don’t worry about that—and here’s a nice price for you.” A lot of people will be guided by that, so the regulator needs to step in. People need confidence that a regulated firm will be regulated. They should not need incentives to go to one firm or another because of ethical considerations; they should be able to trust that any firm in a regulated space is operating honestly and ethically.

As we heard from the right hon. Member for North Durham, the landfill tax differential has gone up to more than £95 per tonne. When the charge was first introduced in 1996, there was only a £5 differential; the rates were £2 and £7. I welcome the fact that landfill tax has reduced the overall amount of waste going to landfill, but it has obviously created strong incentives for misdescription.

Not only is standard waste being misdescribed as inert, but waste is going to landfill that should not be there at all. In the debate last February, we heard examples from a journalist’s research that included cavity wax, arsenic, zinc and even rat poison going into Walleys Quarry. I know that those allegations have been put to the Environment Agency and I am sure that they will be part of the criminal investigation, so I do not want to comment further on them today, but the problem is that charging £100 a tonne for waste is increasingly incentivising misdescription.

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[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.