Waste infrastructure investors have called on the Chancellor to bring clarity over the future of landfill tax in this month’s budget.
Investors told MRW they need to know whether the landfill tax escalator, introduced in 2007, will continue beyond next year, and that continuing uncertainty could damage investment in alternative treatment facilities.
The Environmental Services Association (ESA) has warned last year that extending the escalator “would be a mistake - raising costs for waste producers while achieving little environmentally”.
Calls to announce an extension on 20 March have been backed by Barry Sheerman MP, co-chair of the Associate Parliamentary Sustainable Resources Group, who called on George Osborne (left) to seize the opportunity.
Paul Levett, who holds non-executive positions with several companies in the sector told MRW that infrastructure investors wanted longer term visibility on landfill tax from the budget.
With waste projects taking up to four years to come on stream, Levett said economic clarity over the medium to long term was important. “Landfill tax is a major driver of landfill diversion and it underpins demand for new plants”.
Former chancellor Alastair Darling set the current escalator in 2010, adding £8 per tonne every year until 2014. Osborne previously suggested the tax would not fall below £80 per tonne before at least 2020.
Managing director at environmental investment firm Turquoise International, Francis Wright, called for clarity: “Investors are very conservative”, he said. “They’re not going to believe that it’s going to keep going up and up and up until the Government write in blood that’s what’s going to happen.”
Wright said without Treasury assurances there would be nervousness about putting money into waste projects and called for an announcement “sooner rather than later”.
A director at specialist waste investments firm Eternity Capital, Alon Laniado, said the tax should at least rise with RPI in order to ensure treatment infrastructure maintains its relative cost advantage. “I don’t necessarily think it should rise above RPI, but it mustn’t rise below. It’s about knowing that the steady state that exists today will remain”, he said.
Sheerman agreed that clarity was essential to guarantee investment and meet environmental targets: “The Government should seize this opportunity and announce an extension on the landfill tax escalator beyond 2014 in the Budget.”
But industry commentator and former Biffa director, Peter Jones, said he thought the current costs of landfill were sufficient and that the Treasury would be sensitive to falling tax yields as treatment capacity increases.
He said investors who thought rising landfill tax would mean increased gate fees for their projects were in “cuckoo land”.
“As the number of facilities expands, gate fees will fall in response to rising demand for feedstock supply”, he added.
ESA economist Jacob Hayler said he did not think there would be any announcement in the budget and that investment would continue on the assumption that a U-turn on the current policy trajectory was unlikely.