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Why landfill tax hikes could encourage fly-tipping
Contract Journal; 8 April 2008

by Mark Smulian

It's a safe bet that if income tax rose by 25% in one go there would be demonstrations in the streets. Yet that is the increase that demolition contractors face in the landfill tax, and with the promise of a similar rise next year.

The tax rose this month from 24 to 32 per tonne, and its lower rate, which applies to inert materials like rock and soil, also underwent a hefty percentage increase, from 2 to 2.50 per tonne.

On top of that, the demolition industry is set to lose the exemption from the tax that has applied to waste that arises from remediation of contaminated land, and it will also have to hold site waste management plans that show inspectors how it will dispose of the waste from each site.

These will not just be forms to be filled in and forgotten - there will be 300 fixed penalties or prosecutions for those that are missing or ignored.

Cost and regulation

Taken together these measures mean demolition will become a more costly and more regulated business, with effects that reputable contractors welcome, but also have some concerns about.

Broadly, site waste management plans (SWMPs) should do harm to cowboys, since they will be liable to spot checks to find out what they are doing with waste. On the other hand, the sharp tax increases could provide an inevitable incentive for some unscrupulous contractors to fly-tip waste.

Howard Button, national secretary of the National Federation of Demolition Contractors (NFDC), says: "Landfill tax is to increase by 8, and again in 2009, and it is a very large percentage increase.

"Some of our members are concerned that it will increase fly-tipping, which would help cowboys who do that to evade the tax and so harm reputable firms that have to charge this cost to clients.

"Other members, though, think it will encourage people to recycle. Companies will complain about it, but the principle is that the polluter pays, and this should be passed down the line to the client."

Gary Bishop, managing director of Bromley Demolition and the federation's junior vice-president, thinks the tax rise will "put all the prices up and that's bound to have an effect, it will definitely mean that fly-tipping will increase".

The federation's senior vice-president Dave Darsey, managing director of Erith Demolition, thinks the landfill tax increase will create "a problem for the industry that the not-so blue chip developers will employ toe-rag contractors to fly-tip in the streets, as they did in the early 1990s. "Every developer should be employing contractors that use the correct disposal methods they have a duty of care."

Tax increase

Darsey is concerned about this effect of the tax increase but says a less noticed change in the tax's application could hit workload if the end of the exemption for contaminated land makes some projects uneconomic.

He explains: "You are talking a large amount of money and I wonder if some developments will go ahead if developers have to pay that bill.

"We have recently finished a project where the client was able to claw back 700,000 in landfill tax and national companies such as pharmaceuticals that have huge landbanks of contaminated sites may well be clobbered.

"We have warned clients, but there seems to be a lack of knowledge about this."

A document published by HM Revenue & Customs following this year's budget says the exemption will be phased out and applications for exempt status will not be accepted after 1 December. Those then in force will be valid until 31 March 2012 by which time the waste concerned must have been disposed of.

In theory, at least the money saved by the government from ending the exemption will be used to support reductions in corporation tax, though it's unclear whether the demolition industry would see a tangible benefit overall.

It is also rather unclear when, and in what circumstances, a site waste management plan must be produced for inspection. These began life as matter of government-encouraged good practice, but from this month became mandatory for sites where the value of demolition work exceeds 300,000.

The NFDC plans to provide a model plan specifically for the demolition industry, though other organisations, including the semi-official recycling body WRAP, will also have model templates available.

According to WRAP, the plans offer the industry a number of benefits including cost savings, because fewer wasted materials will be ordered, resulting in lower disposal costs and better public relations for firms that adhere to the plans' good practice.

A plan will record the amount and type of waste produced on a construction site and how it will be reused, recycled or disposed of.

WRAP's project manager for site waste management plans, Phil Wilson, says: "The demolition sector is already very good at recycling materials, but the key benefit of SWMPs is that they will be a catalyst to improve.

"They will ensure that clients and main contractors take the demolition process as an integral part of project planning and demonstrate what they are doing. Although their original purpose was to combat fly-tipping, they are now about efficient use of resources."

Environment Agency

Environment Agency officials will be able to check that plans are both appropriate and are being followed on larger sites, while local councils will enforce the legislation on smaller ones.

A spokeswoman for the Department of the Environment, Food and Rural Affairs says: "The emphasis, at least in the first months, will be on encouraging people to have plans and use them, it's early days and we want to get it right.

"There will be powers to impose 300 fixed-penalty fines, or for prosecutions for more serious cases, and eventually those powers will be used."

Darsey says the plans mean, "the not-so blue chip firms will be forced to comply, as it will be enforced by spot checks and the Environment Agency says it will be very vigilant. "It gives total transparency about what is on a site and where it is going, there is a paper trail there."

Erith Demolition has experience of the plans, as they are used on a framework contract it has held for the past two years with National Grid for remediated land. "Our experience is that they are a good thing," he concludes."

Bishop agrees. He says that his company already uses the plans and "it will mean more paperwork for some, but I think they will help reputable contactors".

The landfill tax rise and the coming of site waste management plans will mean that the industry has two more powerful incentives to increase the amount of material that it recycles or re-uses.

Contractors will be hoping that they work as intended, and do not instead encourage fly-tippers, something that would be a perverse outcome for the government's efforts to cut the amount of materials sent to landfill.

Contractors will have to pass on landfill tax increases to clients, which could affect developments on contaminated land.

Site Waste Management Plans will encourage recycling. If SWMPs aren't employed, contractors face fines or prosecution.

Problem products: how to dispose of plasterboard and fiberglass

Plasterboard is one of the problem materials for recycling in demolitions, since manufacturers' take-back schemes tend to apply only to their own materials, and it would be very difficult to separate these out in a demolition.

WRAP has set up a plasterboard project to try to encourage recycling, and new markets for its re-use in insulation.

The organisation says that up to 1.3m tonnes of the materials is generated as waste each year from both construction and demolition, and that its use is increasing rapidly, with some three million tonnes used each year.

Since 2006, plasterboard has been classified as a non-hazardous waste, but not as an inert one, which means that it must normally be disposed of in cells segregated from other materials in landfill sites, which is a costly process.

WRAP's project manager Dave Marsh explains: "The take-back scheme is only for construction waste because the manufacturers prefer to receive back their own type of material.

"If it comes from somewhere they supplied in the first place they know what is there, but you cannot do that with demolition, and there is likely to be physical contamination from other materials."

There are six facilities that accept plasterboard for recycling, though each has its own terms for what it will take.

Marsh says that while plasterboard recycling has increased it has only recently become commonplace because there are too few recycling facilities and "there is the need for onsite materials segregation, which is an issue in demolition since the nature of the work makes it difficult.

"We urge the industry to carry out more soft strips of buildings before demolition.

"That is happening more frequently to get copper cabling, and while getting that they could get the plasterboard too."

Pressure for recycling of composite materials may be the next headache for the industry. As NFDC national secretary Howard Button points out, "You can recycle timber easily enough as chipboard or pulp but once it becomes chipboard, there's very little you can do with that, or with plywood - there is no market there."

Fibreglass may yet catch the government's eye as a material that could contribute to its recycling targets, a possibility that worries Erith's Dave Darsey.

"Fibreglass may be the next hot potato if regulations come about recycling it," he says.

"It's not economic to do so as the problem is that it is in lofts and ceilings and it's hard to separate it out of third-party contaminants. I don't see how it could be done."