Plenary, 15 Nov 2001

Meeting date: Thursday, November 15, 2001

Official Report 658KB pdf

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Rural Economy

The final item of business today is a member's business debate on motion S1M-2260, in the name of Annabel Goldie, on the rural economy. The debate will conclude without any question being put.

Motion debated,

That the Parliament notes the economic challenges confronting the rural and more remote parts of Scotland and recognises the specific implications of the Aggregates Tax for the quarrying industry in those areas.

On behalf of members, I welcome the representatives of the British Aggregates Association and the quarrying industry in Scotland, who are in the public gallery.

Local economies do not come much more fragile than those that support the rural and more remote parts of Scotland. Fuel tax, transportation costs and fewer economic levers combine to make those economies less tough and robust and more vulnerable than economies elsewhere. Many of those remote and rural areas depend on tourism and agriculture, but 2001 has been a bleak black year for those sectors.

The foot-and-mouth epidemic was particularly devastating in south-west Scotland and the Borders; it directly killed off some businesses and was a body blow for the rest. Tourism was a casualty and although the Scottish Executive's measures were welcome, there are continuing concerns over whether help is going directly to where it is needed.

I do not doubt that the terrorist atrocities of 11 September have had a further effect on tourism, which is the industry that many people in rural and remote Scotland hope might be the life-blood of their survival. Today's edition of The Scotsman states that Sir Walter Scott's home in the Borders underwent

"a disastrous decline in visitor numbers during the 2001 season"

as a result of foot-and-mouth disease and the terrorist attacks in the United States.

Against that sombre and depressing backdrop, something lurks that sends a chill through those areas—the aggregates tax, which comes into force in April 2002. The tax will pound Scottish quarries, the majority of which are in rural and remote parts of Scotland. The tax is meant to help the environment by reducing demand for quarried aggregates and by encouraging aggregate consumers to recycle existing materials. However, the result will be the opposite—in my judgment, it is a tax on the environment.

The aggregates levy masquerades as an environmental measure that is aimed at promoting sustainable development, but it has no environmental justification. It assumes that Scotland has adequate materials for recycling, but there are serious concerns about the basis for that assumption. The aggregates that are produced in Scotland are needed and the tax will make them too expensive to buy. The tax will not benefit responsible operators; it will clobber them and it will not reward operators that work to high environmental standards.

There are more anomalies. Aggregates that are dug out of the ground for export will not be subject to the tax, but aggregates for use in this country will be. Opencast coal mining will be exempt from the tax, despite the fact that it is regarded by some people as being environmentally damaging.

Ironically, the aggregates tax will damage the environment, because many small quarrying companies will undoubtedly be forced to close. That will inevitably force companies to transport aggregates over longer distances as the number of supply quarries decreases. That can only exacerbate the harm that is caused to the environment.

The economic argument against the tax is even more conclusive. Scotland has 224 quarries; many are hubs of economic activity in rural communities. The livelihoods of about 1,500 employees depend upon a thriving aggregates market. Quarries are also indirectly responsible for many other sources of employment, such as engineering, fabrication and plant hire. It is vital that the aggregates levy is viewed in that context.

There is an economic argument—I am sure that it will be stated by the minister—that the resultant redistribution of the tax will create a neutral effect. It will not. In Scotland, which is far more vulnerable to the implications of the imposition of this tax than any other part of the United Kingdom, essential sectors of activity within our rural remote areas will decrease—some might close and all will suffer—and there will not be a net benefit left for those areas. The redistribution element of the tax is, in my opinion, morally highly questionable. The revenue is simply to be returned in a universal random distribution of national insurance contributions, which reaffirms the view that this is not an environmental measure, but yet another stealth tax.

Not only will the tax have devastating implications for rural employment, it will increase the cost of essential investment in our wider economic infrastructure. I submit that Scotland is more vulnerable in that respect than are other areas of the United Kingdom, because we have very long stretches of roads infrastructure in sparsely populated areas. Investment in areas such as the improvement of our roads and our rail networks will have to be increased to pay for such a tax. The much more probable consequence, of course, is that investment will either be curtailed or, in some cases, cease altogether.

I submit that our rural and remoter economies, which are already battered—nobody can dispute that—will not cope with the aggregates tax. In Northern Ireland, attempts are being made to exempt Northern Ireland from the application of the tax. A very strong argument exists for Scotland's seeking to do likewise. I hope that that is something on which the minister will be prepared to comment.

I take pleasure in commending the motion in my name and I look forward to the speeches of other members, who I hope will be able to use more detailed instances to support the arguments that have so concerned me.

I warmly congratulate Annabel Goldie on securing the debate, and on her typically informative and persuasive speech.

The main justification for an aggregates tax is that it will be good for the environment. It is my belief that it will not be good for the environment, but it will harm the environment. It is abundantly clear that it will do so in a number of specific ways. First, it is accepted that many small companies and small quarries are almost certain to close because of the burden that the aggregates tax will impose on them, which is not just £1.60 per tonne. There is a compliance cost of 30p per tonne to do the paperwork and complex compliance work that is involved. If those businesses close, I ask the minister what will be the upshot? It will be that instead of aggregates being obtained in areas such as the Highlands from smaller locally based quarries, aggregates will have to be delivered from larger quarries that are further away. That will lead to increased road transport, with heavy lorries travelling longer journeys, which we are all supposed to be signed up to reducing. I hope that the minister will respond to specific charges such as that.

Secondly, much has been made of the justification for the tax on environmental grounds, on the basis that it will somehow encourage recycling. However, the experts tell us that the scope for the recycling of additional aggregates is at best limited to about 1 per cent to 3 per cent. Indeed, outside the central belt of Scotland, even less material is available for recycling. The environmental—or so-called environmental—research upon which the Chancellor of the Exchequer's decision to impose the tax from April next year was based has been challenged frankly by the various trade associations as being ridiculous. It does not stand up to scrutiny and it has been seriously challenged. I have raised the issue in correspondence with ministers, but in every case they have refused to respond.

I have one more point to make. The tax is levied at £1.60 per tonne of aggregate, but the cost of a tonne of aggregate varies substantially. It can be as low as £2.50 per tonne in rural areas and as much as £12 per tonne in London. It has been put to me that as a simplification, the cost of aggregates in greater London is twice as much as it is generally in Scotland. That means that the real burden of this tax is twice as high, generally speaking, in Scotland, or even more so.

That brings to mind—I am sorry to bring back a memory that is painful to the Conservatives—another tax that was not related to ability to pay; namely, the poll tax. The aggregates tax is a kind of poll tax on quarriers; it is crude, unfair and entirely unjustified. The burden and effect of the tax will be felt by quarriers and, as Annabel Goldie said, by the rural economy as a whole. It will also affect every individual because it is plain that the cost will be passed on to users and purchasers. Local government will have to pay more. Peter Peacock has made it plain that there will be no extra money for local governments, which will therefore have to increase council tax or seek an increase in business rates. People will pay the cost of the aggregates tax, but the Executive refuses to acknowledge that.

The Northern Ireland Assembly had the guts to debate the issue and all parties were unanimous in agreeing that the tax is unfair to Northern Ireland. That has resulted in the possibility of some concessions being made to Northern Ireland. It has also led to the Northern Ireland Affairs Committee of the House of Commons launching an inquiry into the issue.

If the Labour party and Liberal Democrats in the Scottish Parliament had the gumption to stand up and speak for rural Scotland, perhaps we would be further ahead than we are. No steps have been taken to ameliorate the bad effect of the aggregates tax or, better still, to scrap it altogether.

Until recently, I was not aware that Annabel Goldie had secured a debate on the rural economy. I wondered whether we would debate yet again the aftermath of foot-and-mouth disease or other problems with tourism. I am therefore slightly surprised that the debate is concentrating on this particular piece of United Kingdom legislation and taxation.

I concur with Annabel Goldie's remarks about the problems faced by the rural economy over the past year, particularly those of rural tourism. However, I believe the dreadful events elsewhere in the world have presented opportunities in tourism to promote Scotland to the UK and northern Europe. I hope that VisitScotland and the area tourist boards will make every effort to cash in and promote tourism in Scotland wherever possible.

I have a bit to say about the history of the aggregates tax. Sometimes, the impression is given that it appeared from nowhere, that the Chancellor of the Exchequer did not listen to anybody and that the views of the producers were not taken on board. That is not the case. As members have described, the aggregates tax was intended to make some reparation for the environmental impact of quarrying. It was first announced in the budget in 1997 and a formal consultation was launched in June 1998.

Will Dr Murray explain why she thinks that the tax will lead to environmental improvement, which seems to be the basis of her argument?

That is not the basis of my argument. The legislation was introduced in recognition of the fact that quarrying has significant effects on the environment—it creates noise and dust, for example—and tends to take place in areas of scenic beauty. Although there are economic benefits, there are environmental disadvantages and that is why the taxation was brought in.

The Quarry Products Association offered a package of voluntary measures in 1998, but the Government at Westminster did not feel that that went far enough. However, in March 1999, the Government invited the QPA to come back with another series of voluntary measures that might fit the bill. It was not until later in 1999 that the Government indicated that the suggestions that the producers had made did not address sufficiently the environmental concerns and not until the budget in 2000 that it produced legislative proposals, which eventually received royal assent on 11 May 2001.

The Westminster Government has suggested that it is still interested, in principle, in a differential rate—so the door to that is not absolutely closed.

By giving some of the background, I hope to indicate that there was a dialogue on the issue over four or five years and that the aggregates tax was not just about political correctness or stealth taxation or any of the other allegations that are often levied at Government. Having said that, we must recognise that there are several concerns in Scotland. Fergus Ewing referred to the impact on Scottish local authorities, which has concerned me. When the issue was raised originally in the Enterprise and Lifelong Learning Committee, I was interested in learning about the views of local authorities, because they are responsible for most roads in rural Scotland. We must go into more detail on issues that relate to their budgets.

I, too, am indebted to Annabel Goldie for the opportunity to have the debate. It gives us a fresh opportunity to consider the economic problems that affect much of rural Scotland. We all agree that those problems have been varied. They have also been severe and, unfortunately, prolonged.

The decline in our agricultural economy has had a devastating effect on many of our already fragile rural communities, where, historically, the slightest variation in the external marketplace has too often been quickly reflected in job losses and economic decline.

I need not tell members about the problems that were brought by BSE, foot-and-mouth disease and other events. They have all contributed to and aggravated the situation. That is to say nothing of the steady decline in tourism, which was and still is a main social and economic generator of viability in much of rural Scotland.

We must ensure that supportive measures to restore the well-being of those areas are not impeded. Any suggestion that additional burdens are to be imposed must be restricted, particularly in current circumstances. We have heard often how the areas involved suffer from peripherality, remoteness and the high cost of services; we should not forget that those areas have the highest fuel cost in western Europe, which leads to many problems, not the least of which is the extreme cost of transport.

The proposal to introduce an aggregates tax on quarry products is absurd in the extreme. Its implementation will lead to immediate job losses, not only in the quarry industry, but in the whole building and construction industry, whose viability depends on a ready and affordable supply of sand and aggregates, as everyone knows. The quarry industry must comply with strict planning and environmental controls in its operations and, ultimately, in site restoration. We should not make its operations and survival impossible by agreeing to impose another punitive tax.

My constituency contains a few small quarries. They do not provide many jobs, but any number of jobs in a small rural area is of great significance.

In the four years since I was elected to Westminster, I have received no complaints from constituents about the operation of the quarries. My constituents seem to carry on blithely unaware that their environment needs protection from the quarries to which they have been accustomed for many years.

When I first heard about the tax, I thought, in my naivety, that some rational assessment had been made of the environmental damage that quarries cause. It was only after considerable probing that I found the study on which the level of the tax is based. The study was carried out by the Department of the Environment, Transport and the Regions on the environmental costs and benefits of the supply of aggregates.

The study was conducted using the contingent valuation methodology, which sounds impressive, but is actually a glorified opinion poll. As the pollsters wandered up and down the leafy lanes of the countryside, they said to people, "Supposing that we gave you some money, how much of that money"—which is not the respondent's anyway, and which they will not be able to spend because it is not real—"would you spend to get rid of the local quarry?" They even asked visitors to national parks how much they would be prepared to spend to get rid of the quarries that are in the national parks. The questions asked were not about real money—people were asked, "Imagine that you had as much money as you wanted. How much money would you be prepared to spend?" Then the researchers added up all the amounts, divided the figure by the number of tonnes and arrived at a figure of £1.60 per tonne.

That is a ridiculous way to develop a tax. More important, no survey was done in my constituency. No one asked any of my constituents how much of their real money they would pay for the real quarry up the road from them. The pollsters even came up with fatuous remarks such as, "We included some quarry workers in this scheme and they were prepared to pay less to get the quarry removed." Surprise, surprise—none of my constituents was ever asked what they felt about the environmental costs that were to be inflicted on them. In fact, only two quarries in the whole of Scotland were included in the survey. We have been told how different the situation is in Scotland when compared with the rest of the United Kingdom.

The small, local quarries to which I refer produce mainly for local consumption. The aggregates that are produced in my constituency are not trucked long distances, unless the distances imposed on them by the constituency being about 100 miles wide are considered to be long. If those quarries were closed, the same materials would have to be brought in from outside the constituency at greater damage to the environment because of the extra and longer-distance lorry movements that would be required.

Where environmental benefits are to be gained, we should encourage that to happen. There are clear environmental benefits from having small, local quarries. Those are precisely the quarries that will be put out of business by the aggregates tax. The best way of ensuring environmental benefits in my constituency would be to keep open the constituency's small quarries and at the same time preserve the jobs that contribute to the local economy.

The tax is deeply flawed. It is time that the Government examined it. We should be told exactly how the alleged fiscal neutrality of the bill is going to be proved in years to come. The whole point about hypothecation—in the case of this tax, as it relates to national insurance contributions—is that it is visible for the first year, but thereafter gets lost in the sum total of the Executive's budget. I will be interested to see how that point is argued.

I also hope that the minister addresses the sustainability fund, because I suspect that we will not see that implemented in Scotland in a clear manner either.

I congratulate Annabel Goldie on securing a debate on a subject that is of huge concern to rural Scotland. I agree with everything that Alasdair Morgan said.

The Scottish Conservative party is totally against the imposition of an aggregates tax. There is no need for the tax and, as has been pointed out, it will not be effective in improving the environment. That is better achieved by locating small quarries near to points of delivery and not by having a few large units, as that will only increase the number of lorries on the roads.

The tax is liable to affect 1,500 jobs in Scotland, take £48 million out of the Scottish economy and produce increases in council tax. The Executive has stated that no additional funding will be made available to councils to compensate for the extra costs that will be incurred due to the introduction of the tax.

My main worry is for the small quarries and especially for those on islands, which keep islands self-sufficient in materials that are needed for local projects. It is incredibly important for local people to be able to go to a quarry and pick up a load of aggregate. I should point out that, on islands, there is usually one quarry. If that goes, everything has to be imported by ship.

I recently visited one such quarry, Ballygrant, on the isle of Islay. At the moment, some of the people there have jobs that relate to the Dunlossit estate. The quarry is run with old machinery and produces materials that are probably not up to mainland standards. Nevertheless, the quarry meets the urgent requirements of the islanders. The quarry also supplies council projects, but its main client base is composed of farmers, the tourist trade, eight distilleries and other small industries. Much of the client base would go if an increase of £1.60 per tonne were levied.

Things are difficult enough at the moment in the rural economy. Potholes will not be filled in and will be driven round with subsequent damage to car and tractor suspensions. The Ballygrant quarry might close with a loss of local jobs.

There will be an impact on the other facets of the business. Quite apart from the quarry products, the tax will produce a bookkeeping nightmare that will be comparable to VAT. That will decrease any possible profitability. Sand, gravel and rock quarries are highly regulated. They do not impact much on the public.

Because the sale price of products is much lower in Scotland than elsewhere in the UK, the tax represents a huge 35 per cent increase in prices. The tax will mean that less will be spent on roads in the Highlands, which are already falling apart. If local quarries close, more pressure will be put on those same roads by lorries importing the aggregates from elsewhere. There is no sense in the tax, which will only increase the burden on those who live in the countryside. As there is no environmental benefit to be derived from it, I urge the minister to ensure that it is not imposed in Scotland.

I congratulate Annabel Goldie on securing this debate.

As Elaine Murray declined to explain how the environment will benefit from the tax, allow me to do so. The answer is simple: quarries will close in rural areas of Scotland, which will remove the inconvenience of having people work in them. If we clear people off the land, we will not damage the environment in those areas. That is not a helpful way of protecting the environment.

I turn to a matter that affects my constituency, Banff and Buchan. The Peterhead Bay Authority has a project, which is in the late stages of planning, to construct a breakwater for the harbour. We are talking about 1 million tonnes of new aggregates. We cannot reuse the aggregates that are already in circulation, as we require a particular specification for the breakwater, which will dissipate the energy of the waves in a particular way. A solid wall will simply reflect the energy into the harbour and do more damage than good. As a result of the tax, my constituents will pay £1.6 million plus VAT of additional tax. The national insurance reduction is 0.1 per cent of the employers' national insurance contributions, so in my constituency we will receive in return—thank you very much—£50,000 to £60,000 per annum.

The effect of the tax is to transfer £1.6 million from the Banff and Buchan constituency. The constituency is not overburdened with advantages. Peterhead and Fraserburgh are, respectively, the largest and second largest towns in Scotland that have no railway station—we have no railways. With the closure of quarries, we will have even more traffic on our inadequate roads as aggregates are brought to the breakwater project. That is if the project goes ahead at all, because the £1.6 million in tax has to be paid upfront and may destroy the whole rate of return.

If the project does not go ahead in Peterhead bay, we will lose a further £25 million project that the local authority is likely to sponsor in the area. The economic effect of the tax in one constituency is dramatic and totally adverse. I am confident that that situation will be repeated throughout Scotland. Money is being transferred from a rural area simply to pay for bankers to create new jobs in Edinburgh and other cities.

What of the sustainability fund? The House of Commons library tells me that it will be £35 million—less than 10 per cent of what is raised. There will not even be the opportunity to transfer back into rural areas a reasonable amount of the money that is raised by the new tax.

To put it simply, we have to follow the Northern Ireland model. Politicians should stand up for Scotland and look for a derogation that will not damage the economy. Let us encourage the Executive to talk to its colleagues in Westminster and to get the same for Scotland.

I am pleased to have the opportunity to restate the Executive's commitment to sustaining a healthy and vibrant economy in rural and remote areas of Scotland. We recognise the difficulties that many in the rural economy have suffered this year as a result of foot-and-mouth and the effects of 11 September on sectors such as tourism. The Executive's aim is to develop the rural economy to be successful and sustainable. The quality of Scotland's environment is a key asset for many rural businesses.

It is important that we do not talk down rural Scotland, which has a diverse and dynamic economy, with many areas for potential growth. Agriculture and tourism continue to play a pivotal role in the development of rural society, not only economically but socially and environmentally.

Will the minister examine the impact caused by the removal of the subsidy for spreading limestone on fields, as a result of which limestone quarries closed all over rural Scotland? The same will happen to local quarries if the aggregates tax is levied.

The Executive is absolutely committed to supporting the rural economy. Indeed, £70 million will be made available over the next five years for initiatives to support farmers who want to restructure or diversify their businesses. That demonstrates a clear commitment to farm businesses in Scotland. The Scottish Executive's agriculture strategy contains a number of initiatives aimed at revitalising the industry, underpinned by the need for a sustainable approach.

A good example of action in more remote areas is the partnership that is being established by Western Isles Enterprise with the farming and crofting communities to improve the prosperity of farming businesses and to develop alternative sources of income. The Executive has also provided support for rural transport and infrastructure improvements. The creation of the rural transport fund brought new investment of more than £14 million between 1998 and 2001. There has been investment in new airport terminals at Kirkwall and Stornoway and two new vessels for Caledonian MacBrayne. We have built on that in the spending review 2000 by allocating an extra £60 million to enhance transport in the Highlands and Islands. The rural transport fund has already backed many crucial initiatives for isolated communities and will expand by £4.5 million over the same period—

On a point of order, Presiding Officer. When is the minister going to get around to the topic of the aggregates tax?

I think that the minister will take that point on board. Please continue, minister.

If Mr Ewing cares to read the motion, he will notice that it says:

"That the Parliament notes the economic challenges confronting the rural and more remote parts of Scotland".

That is exactly what I am addressing. I hope that Mr Ewing recognises the importance of addressing wider issues facing rural communities.

I shall specifically discuss the aggregates tax. The aggregates levy is a UK taxation measure, so the lead department is HM Treasury. Quarrying provides employment in many rural and remote areas of Scotland, but it can also have serious negative impacts on communities in terms of noise, dust and visual intrusion. In remote and sparsely populated areas, the impact on communities may be lower, but those are also often the areas with the greatest natural heritage value, where an unspoilt landscape is the key to attracting visitors.

On the activities of existing quarries, does the Executive have any substantive data about the number of complaints registered against quarry operators in Scotland?

Obviously, a number of letters come to ministers during the year, but I have raised the issue in discussions and debates that I have had with people in different parts of Scotland. I do not know whether the issue affects Miss Goldie's constituency.

We have to ensure that the visual impact and potential nuisance caused by dust and noise is addressed. As I said, the impact may be lower in remote and sparsely populated areas, but those areas can have the greatest natural heritage value, so there could be an impact on attracting visitors.

The quarrying industry was given the opportunity to devise a voluntary scheme to minimise its impact on communities and the environment, but its proposals fell short of Government expectations. The result has been the proposal to introduce a levy.

The Executive is keen to avoid a disproportionate impact on smaller quarries, which are prevalent in rural and remote areas and often provide the most sustainable solution, minimising transport distances and other adverse effects.

The tax will be revenue neutral. All the revenue raised will be returned to the economy through a cut in employers' national insurance contributions and the creation of a sustainability fund, as has been mentioned.

Will the minister give way?

If the member does not mind, I will get on with my speech.

Agriculture and forestry sectors have been granted a partial exemption from the levy for aggregates extracted from their own and adjacent land. That will offer protection to two key sectors of the rural economy.

The Executive is committed to taking forward rural development in a sustainable way by balancing the need for economic development with measures to protect our environment. The aggregates tax provides a practical means of encouraging development schemes to use materials from more sustainable sources. Developers can reduce the amount of tax that they have to pay by using recycled aggregates or alternative materials.

The Executive is aware that recycled aggregates will not replace all uses of primary aggregate. However, we believe that there is scope for increased use of recycled materials; that view has been backed up by research published earlier this year.

Will the member give way?

No—I am just winding up.

Although the rural economy has had a difficult year, the Government has created an economic climate of low interest rates—

On a point of order, Presiding Officer.

Are you sure that it is a genuine point of order?

Yes. As the minister will, I know, want to respond to all the other points that were raised in the debate, is it in order to extend the period of the debate to give her an opportunity to do so?

I am not inclined to accept that point of order. However, the minister can have another two or three minutes if she so wishes.

To repeat, although the rural economy has had a difficult year, the Government has created an economic climate of low interest rates and low inflation, which should allow businesses to move on from these problems and flourish in future. Indeed, the Executive supports rural and remote areas in several ways from support for rural transport services to support for diversification in the agriculture sector.

Before I finish, I want to cover the question that Annabel Goldie and Fergus Ewing raised of a supposed exemption for Northern Ireland. The Treasury has taken no decision on such an exemption. Furthermore, the situation is slightly different in Northern Ireland, as the main argument centres on the land border with the Republic of Ireland. Clearly the same argument does not apply in Scotland. As a result, the issue is a little more complex than the Opposition implies.

In conclusion, the Executive's commitment to rural development is balanced by a desire for progress that is achieved in a sustainable way and that does not damage the environment, which is one of the rural economy's main assets.

Meeting closed at 17:13.