Doing the right thing is rarely the cheapest option, especially in terms of the investment needed for new buildings and plant. But when it comes to waste management facilities, there are more than asset and construction costs to consider.
While the Government is advocating modern, undercover facilities, there is a huge disincentive to do so in the form of increased business rates for undercover facilities. These can add as much as £10 per tonne to the cost of waste handling. This could result in a less than positive impact on the development of strategically sited and environmentally progressive infrastructure.
It is worth considering the effects of the ‘one-size fits all’ business rates structure. It is clear that the variation in annual charges is putting a brake on the progression of the waste management industry. After all, it is an understandably difficult decision to commit to an annual rates charge of more than £800,000 when an uncovered alternative comes with an equivalent cost of £280,000 a year.
The best illustration of this inequity is from an industry peer who owns two sites of fairly equal size, one fully undercover and the other largely open. Both are in densely populated areas, close to the source of commercial and industrial waste generation, and with a real need to be a good neighbour.
The newest facility is situated on a 10-acre site. From the outside, you would not be able to differentiate it from any other industrial building. It could be a warehouse or a pharmaceutical manufacturer – instead it has a capacity to handle thousands of tonnes of waste a year, diverting a large percentage away from landfill, most going to UK reprocessors.
The higher business rates of undercover facilities are a disincentive to infrastructure development
Environmentally, it ticks all the boxes in terms of noise, odour, dust prevention, vermin control and litter because everything is carried out inside. The annual cost of being so compliant in terms of business rates is £800,000. By comparison the second site, of which the 10-acres are mostly uncovered, has an annual rates bill of £280,000. Ideally, both sites would be covered but the huge rise in annual costs is a real consideration.
Rightly, the Government advocates that, where possible, waste management and treatment facilities in urban areas should be covered. But it is becoming increasingly apparent that doing so puts companies at financial disadvantage. This may be seen as a disincentive, so due consideration to ensure that progress towards covered facilities does not stall must be given.
One solution would be to consider a five-year period where these business rate anomalies are realigned. Business rates for open-air sites could be increased while those operating or developing covered sites could benefit from a five-year reduced rate to encourage the development of the new infrastructure so needed. On completion of the five-year incentivised period, business rates for covered facilities would then return to the normal level. Rates for uncovered facilities would remain at the same higher level, so putting both on an equal footing.
This is not a plea for waste treatment facilities to enjoy reduced business rates ad infinitum: simply a move to incentivise infrastructure development. If we want the industry to move forward, we need some sort of incentive to encourage companies to cover their sites. At the moment business rates are a
major disincentive that may be seen as a form of taxation which ultimately encourages the continuation of bad practice.
David Rumble is strategic development director at Bywaters