Scottish Aggregates Levy: evidence review and policy options

Research reviewing, modelling and analysing illustrative options for a Scottish specific Aggregate Levy.

Appendix 5: Northern Ireland Case Study

The case study on Northern Ireland was developed based on literature review and expert interviews. The literature review included media articles, industry reports and Government documents. We then interviewed a few industry experts in both Northern Ireland and Great Britain. The interviewees were:

  • Gordon Best, the Regional Director of the Quarry Products Association Northern Ireland (QPANI) - the trade association representing quarry operators in Northern Ireland;
  • Richard Bird, Executive Officer of the British Aggregates Association (BAA), which represents independent quarry operators in Britain;
  • A former policy lead for aggregates at HM Revenue & Customs (HMRC); and
  • An official who previously managed the Aggregates Levy Credit Scheme (ALCS) team at the then Department of the Environment Northern Ireland (DoENI).

These four were chosen as they represent those responsible for the implementation and operation of the Aggregates Levy, and the businesses affected by it. HMRC introduced the Levy, DoENI administered the ALCS, the QPANI was instrumental in the development of the ALCS, and the BAA led the court challenges to the Levy and the ALCS.

The following sections outline the impact of the Aggregates Levy in Northern Ireland; the reasons for introducing the ALCS; the ALCS's impact on the aggregates industry and quarry standards; and the circumstances surrounding the suspension of the ALCS.


Following the introduction of the UK Aggregates Levy in April 2002, the Aggregates Levy Credit Scheme (ALCS) was introduced in Northern Ireland in April 2004. This was due to Northern Ireland's unique position within the UK (sharing a land border with a separate country) and a recognition that the Levy's dual aims (reducing the negative environmental impact of quarrying and increasing the recycling rate of construction materials) were "unlikely" to be met in Northern Ireland, as discussed in the following sections.[83]

The ALCS enabled companies in Northern Ireland to claim an 80% relief on the levy, providing they met specified environmental conditions and registered with the Northern Ireland Department of the Environment. The UK Government sought approval from the European Commission prior to introducing the ALCS, and the Scheme was due to run until 2011.

The Aggregates Levy, including its associated exemptions and reliefs, has been subject to repeated court challenges, led by the BAA. As a result, the ALCS was suspended in December 2010.

Special Circumstances in Northern Ireland

Prior to and following its introduction, concerns were repeatedly raised about the impact of the Aggregates Levy on Northern Ireland. These primarily related to:

  • The 300 mile land border and ease of trade with the Republic of Ireland;
  • The easy availability of aggregates due to the island of Ireland's geology;
  • The lower average market price for aggregates in Northern Ireland, relative to Great Britain; and
  • The importance of the industry for the Northern Irish economy and the relative reliance on Northern Ireland for the supply of aggregates in the UK.

Stakeholders have also emphasised the preponderance of small, independent quarry operators in Northern Ireland that did not have large profit margins.

In December 2000, the Northern Ireland Assembly agreed to lobby the UK Government for an exemption due to the potential economic consequences. The Northern Irish Finance Minister, Mark Durkan, cited the average price of £2.50 per tonne for aggregates in Northern Ireland, meaning that the levy of (at the time) £1.60 per tonne represented a 60% tax rate. The higher price for aggregates in the mainland UK meant that the levy was just 23% of the average price.[84]

Members of the Northern Ireland Assembly were amongst those raising concerns that the levy would promote illicit imports from the Republic of Ireland. Imported processed aggregates were exempt from the levy; while it was intended that the levy would apply to imported aggregates, there were doubts about whether this would be enforced for aggregates imported from the Republic of Ireland.

According to the QPANI, 75% of Northern Ireland's territory is within 25 miles of the border, and a levy of £2 per tonne would easily equate to the cost of transporting aggregates this distance. As such, they claim that delivery is "free" for companies within 25 miles of the Republic of Ireland that import their aggregates without the levy.[85] It has also been suggested that the level of the Levy was determined by the impact of quarrying in urban areas, so was not necessarily set at an appropriate level for more rural areas in Northern Ireland.

The QPANI additionally claimed that the Levy would have a disproportionate impact on Northern Ireland, as the province accounts for 3% of the UK population, but produces 12% of UK aggregate.[86]

With the public sector procuring 60% of construction materials in Northern Ireland, and the Aggregates Levy being paid to the UK Treasury, it was also suggested that the Northern Ireland Executive could incur disproportionate costs.[87]

Finally, QPANI has suggested that self-build projects are very common in the Northern Irish countryside. As these are not commercial projects, the aggregates would not be subject to the levy if imported from outside the UK.[88]

When drawing lessons for a Scotland specific levy, it is important to note additional factors in Ireland that will not necessarily be relevant when considering the Scotland-England border. For instance, while Scotland and England use the same currency, a weaker Euro exchange rate against sterling would make imports from the Republic of Ireland cheaper for users of aggregate in Northern Ireland.[89] The tendency for diesel prices to be lower in the Republic of Ireland would also reduce the cost of transporting the aggregates to the North.

Impact of the Aggregates Levy

Due to the concerns about the particular impact of the levy in Northern Ireland, HM Customs and Excise (HMC&E) commissioned the Symonds Group in May 2003 to provide data on the production and use of primary, secondary and recycled aggregates in Northern Ireland.[90] They reported that:

"The overall demand for 'non-black market' aggregates has indeed been reduced by the Aggregates Levy. In the absence of data on the extent of the 'black-market' for aggregate, we are unable to estimate how great the overall reduction has been."[91]

Their report led the UK Treasury to conclude that:

"the specific circumstances in Northern Ireland mean that we are unlikely to meet the environmental aims of the Levy-to increase the use of recycled or alternative materials to primary aggregates and also to reduce the environmental impact of quarrying".[92]

As summarised below, this was due to a combination of factors, including:

  • The prevalence of illegal quarries within Northern Ireland;
  • Un-registered imports from the Republic of Ireland; and
  • Limited recycling opportunities.


A survey by the University of Ulster in September 2002, commissioned by the QPANI, indicated that an average of 89 lorries a day were importing aggregates to Northern Ireland at eight border crossing points. The Symonds Group cautioned against drawing conclusions from this, in the absence of data pre-dating the introduction of the levy, but highlighted that the official recorded imports of 4,847 tonnes that year would equate to less than one truck per working day from the Republic of Ireland to the North.[93] While it is not necessarily a result of the Aggregates Levy, this would suggest that there were imports on which the Levy, and VAT, were not paid.

Anecdotally, industry representatives claimed that the price differentials - as a result of the Levy and the weakness of the Euro relative to sterling - "led to substantial import of aggregates".[94]

While HMRC investigated and pursued reports it received from the QPANI and others of illegal operations, it did not necessarily have the resources to actively enforce the Levy as much as some in the industry would have liked. Investment in enforcement activity is often dependent on the potential revenue losses and the Aggregates Levy represents a relatively small percentage of HMRC's revenue compared to most other taxes.

Nevertheless, industry representatives report that, as a result of the Levy, communication improved between the various regulatory authorities.

Illegal operations

According to the QPANI, "legal and illegal operations sprang up" as a result of the "imbalance" created by the Aggregates Levy and the strength of sterling.[95]

The Symonds Group similarly noted reports that "unauthorised and unregulated quarries" had "grown in prominence" "beyond the ability of current enforcement regimes to address them adequately".[96] They could not corroborate the QPANI's claims that there were at least 3 million tonnes of illegal aggregates in Northern Ireland and 38 illegal quarrying operations, but the Symonds report for the UK Government did confirm that "unlicensed sites exist, [and] that they appear to operate quite openly".[97] These would not, however, be solely attributable to the Aggregates Levy, especially given the VAT requirements and the health and safety regulation associated with licensed sites.

Anecdotally, there are suggestions that aggregates suppliers could have listed aggregates as a different product on invoices to avoid charging the Levy. Such avoidance practices, if they were used, would not necessarily be exclusive to Northern Ireland.


Industry groups note that there was a 10% fall in official recorded stone production in 2002, despite construction spending increasing by almost a third.[98]

The Symonds Group report concluded that "sales of quarried products in the year ending 31 March 2003 were lower than two years before (i.e. they have declined since the introduction of the Aggregates Levy)", with quarries reporting that they were no longer able to see all their 'scalpings' and low-grade materials.[99]

It is, however, worth noting that several quarry operators reported that their exports to the Republic of Ireland had increased to help meet demand in counties neighbouring the border, where the local quarries had increased their exports to Northern Ireland. The trade figures reported to the then HMC&E in the years preceding the introduction of the Aggregates Levy and the year following are included in Table 11.

Table 11: Northern Ireland's aggregates trade with the Republic of Ireland (tonnes)
Year Exports to the Republic of Ireland Imports from the Republic of Ireland
1998 295,888 1,470
1999 325,194 3,569
2000 709,700 4,333
2001 621,751 4,748
2002 1,891,748 4,847

Source: Symonds Group (2003)


Prior to the introduction of the Aggregates Levy, members of the Northern Ireland Assembly warned that Northern Ireland did not have the same opportunities to use recycled aggregates, because the Province "did not have the same level of urban regeneration" as Great Britain.[100]

There were, therefore, concerns about the level of supply of recycled materials, while the Symonds Group found that opportunities to increase the use of recycled aggregates were limited by insufficient incentives and regulation to deter landfilling or fly-tipping. Nor were there many facilities for crushing and sorting C&D waste, and they reported that there was "a long way to go" before recycled materials were accepted in Northern Ireland as an alternative to primate aggregate. Accordingly, their four conditions needed to have a reasonable prospect of developing the aggregates recycling industry were not met in Northern Ireland.


The ALCS offered an 80% rebate to aggregates producers in Northern Ireland up to 2011. To qualify for this, and to satisfy the European Commission's State Aid rules, they were required to register with the Northern Ireland Department of the Environment, with an agreement to improve environmental standards.

On a commercial level, the QPANI has claimed that the ALCS "levels the playing field", citing the fact that companies must be registered with the scheme if they are tendering for Government contracts.[101]

The industry body also claims that "the ALCS significantly raised standards within the Northern Ireland quarry industry".[102]

The agreement with DoENI committed quarry operators to site audits, site-specific targets and compliance with a Code of Practice, with continuing eligibility for the relief depending on regular monitoring and reviews.[103] Quarry operators that registered for the ALCS commissioned their own audits, which were reviewed by a Government-appointed auditor.

The Department of the Environment Northern Ireland operated the ALCS on behalf of the UK Government, and was reimbursed for their costs. There are indications that this assisted the regulatory activities of the planning authorities, Natural Heritage and water management. The Code of Practice and Audit Protocol covered 16 areas which were:

1. Air Quality;
2. Archaeology & Geodiversity;
3. Biodiversity;
4. Blasting;
5. Community;
6. Dust;
7. Energy Efficiency;
8. Groundwater;
9. Landscape & Visual;
10. Noise & Vibration;
11. Oil & Chemical Storage;
12. Restoration;
13. Surface Water;
14. Transport;
15. Waste Management;
16. Secondary Aggregates Usage / Recycling.

Using environmental audit data from the DoENI, the QPANI reported, in 2010, that since 2004, non-compliance scores had reduced by over 80%. The performance audit rates each of the 16 criteria on a scale of 1 to 5, with 1 indicating "Issue of potential high impact significances has not been recognised or improvement action taken. All mandatory issues are deemed to be of high significance". A scoring of 5 means "Works undertaken to a standard that indicate that no further practical action can/need be taken to reduce impacts." Between the first and second audits, the total number of 1 scores reduced from 856 to 58, while the 5-ratings increased from 2,124 to 3,484.[104]

The ALCS was supported by both the industry and the Northern Ireland Executive. According to Connor Murphy, the then Northern Ireland Minister for Regional Development, abolishing the relief

"would mean an average price increase to Roads Service for resurfacing reconstruction activities of some 2.5%. Consequently, if Roads Service budget was not increased to cover this rise in aggregates levy, then the amount of resurfacing / reconstruction undertaken by Roads Service would be reduced to 97% of its output … an increase in aggregates levy would, therefore, only lead to an increased maintenance backlog."

The then Northern Irish Minister for Finance and Personnel, Sammy Wilson, commented that

"The 80% derogation on the Aggregates Levy has benefited both the industry and the local economy significantly since it was introduced. It has ensured that quarry product manufacturers are able to compete fairly with imports from the Republic of Ireland…. The derogation has also resulted in significant investment in environmental improvements and the industry is to be commended for its achievements. It is vitally important that the derogation is extended for a further ten years".[105]

Amongst those interviewed, there was general agreement that the ALCS had had a positive environmental impact, although this did not necessarily mean that standards in Northern Ireland consequently exceeded those in Great Britain. The QPANI estimated that implementation of the standards cost approximately 30 pence per tonne.

Some stakeholders suggested that the environmental gains could have been achieved through procurement policies. Interviewees also commented that the ALCS might not have been needed if the Levy had been set at a "realistic" level.

State Aid

The environmental conditions were a necessary part of the ALCS, as they were used to demonstrate to the European Commission that Northern Ireland's aggregates producers were not benefitting from preferential treatment.[106]

The Government received state aid clearance from the Commission on 7th May 2004.[107] The Commission's reasoning, documented below, was based on the evidence of the impact on the Northern Ireland industry's ability to compete, the illegal activity linked to the introduction of the Levy, and the fact that producers in Northern Ireland were still required to pay a proportion of the tax (20%):

"According to the UK authorities, the 2002 AGL has put firms in the Northern Ireland aggregates industry in a more difficult competitive position than initially anticipated. After the gradual introduction of the levy in Northern Ireland, there has been an increase in illegal quarrying, and an increase in undeclared imports of aggregates into Northern Ireland from the Republic of Ireland, without the Aggregates Levy being paid in either case. Consequently, the legitimate quarries paying the Levy are being undercut by illegal sources operating outside the levy and therefore losing sales to these illegal sources. The findings in a report commissioned by the UK authorities from specialist consultants in the quarrying/construction sectors and other evidence available to the UK Customs and Excise authorities - responsible for enforcing the Levy - confirm this development.

According to the EU environmental aid guidelines, firms eligible for a reduction from environmental taxes that are imposed in the absence of harmonisation at the Community level must still even after the temporary reduction, pay a significant proportion of the national tax. In the present case, the UK proposed to maintain the tax at the level of 20 per cent of the full rate, which the Commission considers significant.

In light of the above, the modification of the Aggregates Levy in order to take account of the difficult competitive situation of quarries in Northern Ireland fulfils the conditions set out in the environmental guidelines. Therefore the tax exemption scheme can be approved."[108]

As a result of appeals and further legal challenges brought by the British Aggregates Association, the European Commission's decision was annulled by the General Court in 2010, after finding that the Commission failed to examine "the question of possible tax discrimination between the domestic products in question and imported products originating in Ireland". The ALCS was consequently suspended, pending further European Commission investigations, from 1 December 2010. The Commission reported on 7 November 2014 that the scheme generally complied with state aid rules, but raised concerns that the ALCS did not apply to aggregates commercially exploited in Northern Ireland but imported from other EU Member States. The UK Government was consequently required to address the disadvantage and subsequently introduced the Special Tax Credit Scheme.[109]

Suspension of the ALCS

Since the 2015 European Commission decision on the ALCS, Northern Ireland operators have paid the full rate of £2 per tonne. According to the QPANI, this represent nearly 40% of the selling price for stone in Northern Ireland. They claim the increased levy "has and continues to cause significant loss of business to imports from the Irish Republic and to the growing black market across Northern Ireland. The Aggregates Levy is also a major drain on the construction budgets of the NI Executive."[110]

Table 12 shows the fall in Levy revenues from Northern Ireland after the ALCS was introduced in April 2004, and the increased levels following its suspension in 2010.

Table 12: Aggregates Levy Revenues from Northern Ireland
Year Aggregates Levy per tonne, after ALCS (£) Levy Revenues (£million) % of UK receipts
2002-03 1.60 16 6.4
2003-04 1.60 26 7.7
2004-05 0.32 9 2.6
2005-06 0.32 9 2.8
2006-07 0.32 9 2.9
2007-08 0.32 11 3.3
2008-09 0.39 9 2.7
2009-10 0.40 9 3.2
2010-11 0.40; 2.00 8 2.7
2011-12 2.00 35 12.1
2012-13 2.00 32 12.2
2013-14 2.00 34 11.8
2014-15 2.00 34 9.8
2015-16 2.00 35 9.8
2016-17 2.00 40 9.8

Source: HMRC -

Special Tax Credit Scheme

In response to the Commission's November 2014 decision, the UK Government introduced the Special Tax Credit Scheme in 2015. This enabled importers to retrospectively claim the relief the Commission ruled they should have been eligible for on aggregates imported from another EU member state between 2004 and 2010. Importers had to demonstrate that the aggregates was sourced from a quarry that met the environmental standards comparable to the ALCS requirements.[111] Aggregates imported to Northern Ireland from other UK countries are not eligible for the scheme.[112]

Several interviewees indicated that the take-up rate for the Scheme had been very low. This may in part have been because imports to Northern Ireland were not that high (and it is not possible to determine whether, or to what extent, the ALCS affected demand for imported aggregate), and it may also indicate that some people had already found loopholes to avoid the Levy.

When applications were made, there were difficulties in retrospectively corroborating the environmental standards of the supplying quarry, particularly as the quarry operator had little incentive to co-operate, as it was their customers (not them) who paid the levy.

The Northern Ireland Aggregates Industry

Table 13 provides indicative data on the size of the quarrying industry in Northern Ireland throughout the period covering the introduction of the Levy, the introduction of the ALCS and the suspension of the Levy. It is difficult to draw firm conclusions from these data, given that they will include figures from companies unrelated to the Levy and it does not take account of effect of the recession on the construction industry.

Table 13: Key data for the Combined Mining/Quarrying Industries in Northern Ireland
Year Turnover (£ million) GVA (£ million) Employment
2000 158 54 1,928
2001 221 75 1,800
2002 224 70 2,009
2003 269 77 2,021
2004 249 78 1,995
2005 284 95 2,023
2006 266 92 1,938
2007 317 84 2,271
2008 337 100 2,309
2009 301 106 1,939
2010 377 88 2,352
2011 355 118 1,984
2012 380 109 2,150
2013 363 110 1,883
2014 395 113 2,294
2015 407 142 2,491
2016 387 151 2,286
2017[113] 372 122 -

Source: NI Annual Business Inquiry (2005 - 2017)[114]



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