The UK Government has confirmed that it will not proceed with transitioning to a single rate of landfill tax by 2030, following pushback from the construction industry.
A consultation launched in April proposed abolishing the lower rate of landfill tax and significantly restricting exemptions.
The Environment Agency has argued that loopholes in the current system are being exploited, with some operators allegedly misclassifying waste to qualify for the reduced rate.
The reforms faced significant criticism from the construction industry, with FCC Environment warning that they could make nationally significant infrastructure projects and major housing projects unviable.
The National Federation of Builders (NFB) said the proposals could be ‘industry-breaking’.
FCC Environment claimed the changes could have seen a tax rise of ‘almost 3,000%’ for developers and major construction firms.
Under the current scheme, the removal of 1,000 tonnes of unusable or recyclable soil from a building site costs the developer, or the waste producer, £4,000. Under the new proposals, this could have increased to as much as £126,000, FCC Environment said.
In September, the Treasury reopened its call for evidence on the changes to give stakeholders time to outline their potential economic impacts.
The Treasury said it has listened to stakeholders’ arguments and revised its approach to ensure the reforms to Landfill Tax are proportionate, do not impose unavoidable costs on businesses and do not undermine the government’s target of building 1.5 million new homes in England.
As well as maintaining the two rates of landfill tax, the government will also retain the exemption for quarries with disposal permits.
Instead, the Treasury promised to prevent the gap between the two rates of Landfill Tax widening over the coming years by maintaining the differential between the two rates in cash terms.
As part of the Autumn statement, Reeves also announced funding for the Department for Environment, Food and Rural Affairs (Defra) to provide public bodies with grants to remediate land where landfill tax is making developments unaffordable.
The Treasury said the Land Remediation Grant is expected to increase land available for development and lead to a net increase in remediation-associated landfill tax receipts.
The government also promised £48 million over the next three years to boost capacity and capability in the planning system. The funding will be spread across Defra, the Ministry for Housing, Communities and Local Government (MHCLG), and the Department for Science, Innovation and Technology (DSIT).
Reacting to the budget, Michael Topham, Biffa’s Chief Executive Officer, said: “The government’s decision not to converge the two rates of Landfill Tax before 2030 is a good outcome for the industry.”
“Ministers have listened to stakeholders and made the best choice for the industry, avoiding potential worsening of waste crime and tax evasion. Retaining the exemption for backfilling quarries will help housebuilders and the construction sector deliver much-needed homes while avoiding unnecessary costs.”