Breaking New Ground? Developing a Scottish tax to replace the UK Aggregates Levy: consultation

The Programme for Government 2022 to 2023 sets out a commitment to introduce a Scottish Aggregates Levy Bill. To help inform the Bill, this consultation invites views on how a new and distinctive Scottish aggregates tax, replacing the current UK levy, should be structured and operate.

Chapter 1: The Context for a Devolved Aggregates Tax

The aggregates sector in Scotland

1.1 Aggregates make an important contribution to Scotland's economy, providing materials for housing, construction, road-building and other uses, and supporting employment, including in rural and remote areas of the country. Aggregates are also required as construction materials to support the ambitions for the environment, including for diversification of the energy mix. They are used both in and of themselves and mixed with other materials to produce new products used in construction such as mortar, tarmac and concrete.

1.2 Aggregates are sourced across most of Scotland. Operating quarries which produce crushed rock, or quarries and wharves where sand or gravel is extracted or landed, are found in nearly all 32 local authority areas. Crushed rock is produced predominantly in the north of Scotland and along the west coast, whereas sand and gravel are likely to be extracted in southerly areas.

1.3 The British Geological Survey (BGS) UK Minerals Yearbook 2021 estimates that Scotland produced 4.8 million tonnes of sand and gravel and 19.1 million tonnes of crushed rock in 2020. These figures are slightly less than those for the previous few years, most likely due to the impact of the Covid-19 pandemic.

1.4 These materials are generally referred to as virgin, primary or naturally occurring aggregates, which are being used as aggregates for the first time. Throughout this consultation, they will be referred to as primary aggregates.

1.5 Although the currently available data indicates that most aggregates produced in Scotland are retained within the region of their extraction, an evidence review conducted by Eunomia for the Scottish Government suggests that around 30-40% of crushed rock produced in Scotland is exported to the rest of the UK and further afield. This is predominantly but not exclusively transported from Glensanda on the Morven Peninsula of the west coast of Scotland. By contrast, only a small amount of crushed rock, sand and gravel is imported.

1.6 The Scottish Government has commissioned the BGS to complete a survey of Scottish aggregate production based on 2019 data. The report from the survey – which will provide important national and regional level data about the production, sales, reserves, and transportation of aggregates in Scotland – is due to be published in autumn 2022. This will complement a similar UK Government commissioned survey undertaken for the rest of the UK, the collated results report of which was published in 2021.

1.7 In addition to primary aggregates, secondary and recycled aggregates also contribute to the available supply of aggregates in Scotland.

1.8 Secondary aggregates arise as a by-product of other quarrying and mining operations, such as china clay waste, slate waste and spoil from collieries, or material which arises as unavoidable consequence of construction works.

1.9 Recycled aggregates result from the processing of inorganic materials previously used in construction. This is also known as construction and demolition (C&D) waste.

1.10 The research by Eunomia referred to above estimated that in 2017 the recycling rate of relevant construction and demolition waste was around 87%. The research also showed that C&D related aggregates waste generation was forecast to grow from 1.2 million tonnes in 2017 to 1.28 million tonnes in 2030. Based on the current recycling rate of C&D waste the supply of recycled aggregates may grow from 1.05 million tonnes in 2017 to 1.12 million tonnes in 2030. However, these figures reflect circumstances then, and may not reflect the impacts of Covid-19.


A1 – Are there any aspects of the aggregates sector in Scotland to which the Scottish Government should give particular consideration in developing proposals for a tax?

Strategic context for a devolved tax

1.11 As set out in the Introduction, the UK Aggregates Levy currently applies in Scotland, and there are a number of businesses currently registered for this. It is paid mainly, but not exclusively, by quarrying and sand and gravel extraction businesses.

1.12 In general, the levy applies to the commercial exploitation of primary aggregates – in essence, crushed rock, gravel and sand – where it is used for bulk fill in construction. Recycled aggregates, produced by reprocessing material already used in construction, are excluded from the scope of the tax to encourage the use rather than disposal of these materials. Similarly, there are exemptions for various categories of secondary aggregate that use by-products of other industrial processes. These arrangements are considered in more detail in Chapters 3 and 4 of this consultation.

1.13 When introduced, a devolved tax will replace the UK levy in Scotland. The provisional date for introducing the new Scottish tax is 1 April 2025.

Financial context

1.14 In designing the arrangements for a devolved tax, the Scottish Government will carefully consider the potential impact of revenues on the overall Scottish Budget position and the level of funding available to support vital public services. We will take into account the taxation arrangements in other parts of the UK and the Scottish Fiscal Framework implications, outlined below in 1.16.

1.15 Whilst it should not be taken as a guide to the potential revenue impact of a devolved tax, the illustrative forecast produced by the Scottish Fiscal Commission estimates that the 2022/23 Scottish share of revenue from the UK Aggregates Levy is £59 million. Based on data from the BGS UK Minerals Yearbook 2021, HM Revenue and Customs (HMRC) estimate that around 15% of levy receipts in recent years can be apportioned to Scotland, though this will not take into account the potential impact of devolution on the treatment of exports from Scotland to other parts of the UK.

1.16 At the time that the new tax is introduced, there will be a corresponding reduction of the Block Grant (called a Block Grant Adjustment (BGA)), to reflect the devolved power and resultant revenues foregone by the UK Government, which is consistent with the Fiscal Framework agreement between the Scottish and UK governments. This agreement determines how the Scottish Government is funded and underpins the powers set out in the Scotland Act 2016. The funding model agreed intends to deliver a fair and transparent mechanism for adjusting the block grant to reflect the introduction of devolved tax raising powers and the transfer of responsibility for social security expenditure to the Scottish Government. BGAs are separately indexed each year and applied to the overall Scottish Block Grant. The Fiscal Framework will shortly be subject to an independent report on the BGA arrangements, followed by a joint review by the Scottish and UK governments.

1.17 The Fiscal Framework arrangements relating to the tax will be agreed by the Scottish and UK Governments, prior to introduction.

Supporting a circular economy

1.18 In policy terms, the Scottish Government will place particular importance on considering how this future tax aligns with our overall ambitions for sustainable economic growth and our transition to a circular economy.

1.19 As recognised in our National Strategy for Economic Transformation, Scotland has a unique opportunity over the next ten years to increase our economic and social wellbeing, whilst respecting environmental limits and becoming one of the most prosperous nations in the world.

1.20 Our ambitions for the circular economy are key in this regard. As set out in our recent consultation on proposals for a Circular Economy Bill, the circular economy provides an opportunity to minimise our demand on primary resources and maximising the re-use, recycling and recovery of resources, rather than treating them as waste. Our Waste Route Map consultation recognised that the Scottish Government will need to work closely with industry to identify barriers to change, drive innovation, and accelerate adoption of best practice in order to achieve our objectives.

1.21 Recognising the environmental impacts associated with the use of new materials, we intend that a devolved tax will support those goals and continue to encourage a shift in demand from primary aggregate towards recycled aggregate, wastes and other by-products. We also want to encourage innovation and the development of new products which might substitute for aggregates in future and help to support this shift.

1.22 This is reflected in the consultation on our Waste Route Map to achieving our ambitious waste and recycling targets to 2025 and beyond. This sets out actions under way and proposes new actions to embed circular construction practices to reduce resource needs, reduce waste and carbon, and encourage refurbishment and reuse. The proposed actions explicitly recognise the potential role that a future aggregates tax, alongside the Scottish Landfill Tax and a wider package of measures, might play in embedding circular construction practices.

1.23 We acknowledge the progress that aggregates producers and the construction industry have already made in developing circular economy practices. However, it will be important to ensure that we continue to encourage this and embrace opportunities to do more.

1.24 This will also be supported by our approach on planning. Our Draft Fourth National Planning Framework (NPF4), sets out policies which guide our planning system, helping to ensure we can make best use of our mineral assets. Through the framework, we are updating our planning policies to protect mineral assets, local communities and to recognise the opportunities that can arise from the shift towards a circular economy. Planning can support development which better reflects the waste hierarchy, prioritising the reuse of materials, and facilitating the infrastructure we need to make this possible. We are pleased with the wide interest shown from across society on our draft NPF4 and will carefully consider the broad range of views shared with us before finalising NPF4 for Scottish Parliament approval.

Collection and management

1.25 In addition to policy considerations, the introduction of a devolved tax also presents an opportunity to refine and enhance the collection and management and arrangements for the tax.

1.26 Revenue Scotland was established as a Non-Ministerial Office on 1 January 2015 and is the tax authority responsible for the collection and management of Scotland's devolved taxes – Land and Buildings Transaction Tax and Scottish Landfill Tax. These came into effect on 1 April 2015, replacing their UK equivalents – Stamp Duty Land Tax and UK Landfill Tax respectively. Collection and management of tax is carried out in accordance with legislation passed by the Scottish Parliament and the four founding principles underpinning the Scottish Approach to Taxation.

1.27 The Revenue Scotland and Tax Powers Act 2014 sets out the legislative basis for some of the expectations about the relationship between the taxpayer and the tax authority, and provides for a Charter of Standards and Values. This charter sets out the behaviour expected from all organisations and individuals to achieve this. It applies equally to taxpayers, agents and representatives as it does to Revenue Scotland and partner organisations, the Scottish Environment Protection Agency and Registers of Scotland, when they are acting on behalf of Revenue Scotland.

1.28 Revenue Scotland will be the tax authority responsible for the management and collection of the new devolved aggregates tax. This would build on its experience in collecting and managing the existing fully devolved taxes, and ensure we harness the outputs of their work in areas such as data and digitalisation, modernisation and continuous improvement, and more. The potential collection and management arrangements for the devolved tax are considered in more detail in Part B of this consultation.


A2 – Do you consider that a devolved tax has the potential to support Scotland's overall circular economy ambitions? Please provide commentary for your views.

A3 – What other considerations should Scottish Government take into account in terms of the rationale for a tax on the commercial exploitation of aggregates?



Back to top