Landfill tax hike bolsters case for recycling

Pressure on businesses to reduce waste levels is set to intensify after the government confirmed that landfill tax rates would continue to rise at above inflation rates for at least the next four years.

The Budget report said that the standard rate of landfill tax would rise by £8 per tonne on 1 April each year until 2013.

As a result, the tax will rise to £48 for each tonne of waste sent to landfill from 1 April next year, then climb to £56 in 2011, £64 in 2012 and £72 in 2013.

In addition to increases in the standard rate of landfill tax, the Treasury also moved to increase the number of waste types that will be covered by the levy. It said that from September it would reverse a Court of Appeal ruling that allowed certain engineering materials to be exempt from the tax, and would also reclassify certain inert wastes that currently qualify for a lower tax rate of just £2.50 a tonne so that they too will be charged the full £40 rate.

Michele Hood, from the environmental tax team at accountant Deloitte, said the changes would lead to "significant" increases in the cost of disposing of waste for businesses, particularly in the manufacturing and engineering sectors. She added that just the move to reclassify inert wastes would generate £160m in extra revenue for the Treasury.

The tax increases are intended to provide firms and councils with a financial incentive to reduce the amount of waste they send to landfill as the government seeks to avoid imminent EU fines as a result of its failure to meet landfill reduction targets.

The move will also strengthen the economic case for recycling and waste-to-energy technologies, such as anaerobic digestion, which will become more attractive to investors as the cost of sending waste to landfill increases.

In related news, the chancellor also announced an additional £10m in funding for composting and anaerobic digestion facilities designed to process more than 300,000 tonnes of food waste every year. The new funding, which comes on top of the £10m announced last year by environment secretary Hilary Benn, was welcomed by Liz Goodwin, chief executive of WRAP, who said the projects "help to stimulate a greener economy by creating skilled jobs in construction, collection and reprocessing".

The tax increases were announced as a new study from consumer group Which? revealed that 230,000 tonnes of recycling and composting material collected in England last year was rejected and sent to landfill, costing taxpayers £12 million.

The report found that on average about five per cent of waste put out for recycling is rejected due to contamination of the material, although the worst-performing councils rejected as much as 10 per cent of recyclable material.

Jess Ross, editor of Which.co.uk, said cuts in council tax bills could be delivered if consumers, councils and businesses improved recycling processes to ensure materials are properly separated.