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Treasury looks to legislate over unspent cash in Landfill Communities Fund

The Treasury is consulting on reform of the Landfill Communities Fund (LCF), whereby some of the proceeds from landfill tax are diverted to environmental good causes.

Two of the biggest changes would be a requirement that contributions from the fund to an environmental body (EB) must be spent within 18 months and the EB’s administrative costs cannot exceed 7.5% of the cash they are given.

Priti Patel, secretary to the Treasury, supported the principle of the LCF but said the Government had been disappointed by a build-up in unspent funds, despite two warnings in the past four years to reduce the kitty.

Some of that spare cash was diverted by chancellor George Osborne to add £4.2m to the fund to tackle waste crime – a move announced in the Budget.

Figures from September 2014 indicated the waste sector did not meet the Government’s second challenge to reduce unspent funds by 25%, with funds being reduced only by 17% overall at the end of March 2014. But the Treasury pointed out that individual EBs did meet the challenge, demonstrating that it was possible to tackle unspent funds.

“It was clear that things needed to change to ensure that as much funding as possible reached the community projects it was intended for, as quickly as possible,” Patel writes in the forword to the consultation document.

Her department is proposing that LCF contributions given by a landfill operator to an EB must be spent within 18 months.

It is also concerned that 11% of the LCF has been claimed as administrative costs by EBs, and believesd that a legislative solution is required. Its preferred cap of 7.5% would require a change to the Landfill Tax Regulations 1996.

The fund has delivered more than £1.4bn to local projects across the UK since its introduction in 1996. In 2013-14, 77% of it went on public parks and amenities, 16% on conservation of biodiversity and 7% on restoration of culturally important buildings.

The consultation closes on 10 June. Landfill tax will be devolved to Scotland from April, as will the LCF. As such, the proposals in the consultation do not cover Scotland.

Summary of Consultation Questions

  1. What impact do you envisage an 18-month spending requirement having on your organisation’s ability to fund or complete projects using LCF funds?
  2. At what point should LCF funds be considered ‘spent’?
  3. Would reducing the landfill operator’s entitlement to a tax credit in line with the amount of unspent funds held by an EB have a significant impact on the likelihood of the landfill operator to continue to contribute to the LCF? Would this also impact EBs’ incentives to spend funds?
  4. How would a 7.5% cap on administrative costs affect your organisation’s involvement with the LCF?
  5. What is an appropriate threshold below which the 7.5% cap on administrative costs should not apply?
  6. What should administrative costs be comprised of?
  7. Should monies put aside for wind-up costs be included within the 7.5% cap on admin costs? If not, why not?
  8. How should the cap be applied to EBs which are in the process of winding up?
  9. Do you think licensing would place a significant burden on your organisation? If so, why?
  10. What set measurable standards should EBs which receive funds directly from a landfill operator be required to meet?
  11. Have you made significant use of investments using LCF funds? If so, please provide details.
  12. To what extent would removal of the LCF investment provisions hamper your ability to deliver LCF projects? Please give details.
  13. Would the removal of Object F from the Landfill Tax Regulations1996 cause significant problems for your organisation? If so, why?
  14. What are your views on the requirements to monitor and keep records on assets purchased through LCF funding in perpetuity?
  15. Are there any other LCF policy areas that need simplifying or reviewing?
  16. Are there any further reforms of the LCF you think are required? If so, please give details.

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