Scottish Aggregates Levy: evidence review and policy options

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


Eunomia Research & Consulting Ltd was commissioned by the Scottish Government to analyse and appraise some illustrative policy options for implementing a Scottish Aggregates Levy. The work was commissioned before the UK Government review of the Aggregates Levy was announced in March 2019[1] and does not take into consideration any outcomes of the review.

Background and Context

The UK Aggregates Levy was introduced in 2002 with the dual aims of reducing the negative environmental impacts of quarrying and increasing the recycling rate of construction materials, by reducing the rate of primary material extraction.[2]

The scope of the UK levy includes all sand, gravel and rock that has either been dug from the ground, dredged from the sea in UK waters or imported into the country.

The levy was first introduced in 2002, at a flat rate of £1.60 per tonne of aggregates. In 2008, the rate was increased to £1.95 per tonne to account for inflation since the introduction of the levy, followed by a further increase to £2.00 per tonne in 2009. The levy was expected to continue to increase in line with inflation. However, a planned rate change for 2010 was cancelled due to the ongoing global economic crisis at that time and shifting political priorities of a new Government.[3] The rate has remained at the level of £2 per tonne of aggregates since 2009.

Under the heading of "Strengthening accountability and finance", the final report of the Commission on Scottish Devolution (The "Calman Commission"), published in 2009, recommended that the Stamp Duty Land Tax, the Aggregates Levy, the Landfill Tax and Air Passenger Duty be devolved to the Scottish Parliament.[4] The Stamp Duty Land Tax (subsequently the Land and Buildings Transaction Tax) and the Landfill Tax (as the Scottish Landfill Tax) were devolved through the Scotland Act 2012 and both have been in place since 1 April 2015.[5]

Following the Scottish independence referendum in September 2014[6] and the subsequent Smith Commission,[7] the Scotland Act 2016 devolved powers to the Scottish Government for the Aggregates Levy and Air Passenger Duty (APD). The devolution of the Aggregates Levy has been delayed by ongoing European Court procedures over the exemptions for secondary aggregates. Although a European Commission decision in 2015 ruled that all but one of the exemptions could not be construed as State Aid, there were ongoing appeals by the British Aggregates Association. The litigation against the UK Government and the European Commission has now been withdrawn. Following the conclusion of this longstanding litigation, the UK Government undertook a comprehensive review of the UK Aggregates Levy, working closely with the Scottish Government, the Welsh Government and Northern Ireland Executive throughout the review process.[8],[9]

In anticipation of a resolution of the legal proceedings, Scottish Government wanted to establish the current role of the Aggregates Levy in Scotland, with a view to designing and implementing a Scottish Aggregates Levy. This project has investigated the historical complexities and impact of the Aggregates Levy in the UK and used these findings to develop some illustrative future tax policy options for a Scottish Aggregates Levy, with modelled associated scenarios and potential impacts.

As the history of the introduction of the UK Aggregates Levy shows, reducing the impact on aggregates extraction through the use of tax policy measures is a complicated matter. At the time when discussions of the UK Levy began in the late 1990s, the Campaign to Protect Rural England (CPRE) was focused on pushing forward better planning regulations, while the industry proposed voluntary agreements to tackle the growing issue.[10] Although the government ultimately decided to introduce a levy, and fixed the rate based on the estimated externalities[11] associated with aggregates extraction, as highlighted in other reviews of the policy landscape, the Levy cannot be viewed in isolation. The Scottish Aggregates Levy should therefore also not be developed without due consideration of these interacting policies. The most obvious interaction is with the Scottish Landfill Tax whose objectives in promoting recycling overlap, to an extent, with those of the Aggregates Levy.

Furthermore, Scotland aims to achieve a Zero Waste society and has a number of policies in place which focus on waste reduction and on promoting a circular economy that might influence the effectiveness of the Scottish Aggregates Levy.[12] There are also potential fiscal policy impacts of the devolution of the Aggregates Levy to Scotland as detailed in the fiscal framework agreement between the UK government and the Scottish Government.[13] This implies that the revenue-raising potential of the Aggregates Levy and its role in the wider fiscal framework is of some importance in the future design of the tax.[14]

Modelling these policy options will require, first, an in-depth understanding of the aggregates extraction market in Scotland which forms the tax base. Only then can the Scottish Government start to build the policy options for a Scottish Aggregates Levy including changes to levy rate, structure, exemptions, reliefs and definitions relating to the point of application.

With the outputs from the illustrative policy options modelling of the Scottish Aggregates Levy, Scottish Government will be able to consider, in broad illustrative terms, the advantages and disadvantages of each option.

Project Objectives

Notwithstanding the UK Government review of the Levy, based on the above background and context, we identified the following objectives for this project for each of the two delivery phases:

Phase 1

  • Review existing literature on UK Aggregates Levy, and similar environmental taxes in other European countries, including modelling studies and environmental planning policies;
  • Development of the Business as Usual (BaU) illustrative model for Scottish Aggregates Levy based on aggregates market behaviour in Scotland and the rest of the UK;
  • Prepare a case study examining the impact of adjustments to levy exemptions in Northern Ireland (NI) and their impacts on the aggregates industry in NI and the Republic of Ireland given the obvious parallels for Scotland and RUK between potentially having two different tax regimes either side of a land border;

Phase 2

  • Develop a broad set of illustrative policy options varying the levy rate and structure as well as changing other relevant policies (e.g. landfill tax for inert materials);
  • Model and analyse the economic and environmental impacts of these illustrative policy options including impacts on import and export of aggregates between Scotland and the rest of the UK, as well as between Scotland and the rest of the world;
  • Understand and model the interaction of the levy with Scottish Government policies such as the Scottish Landfill Tax; and
  • Develop a report on the aggregates market in Scotland setting out the current demand, production, distribution and reserves of aggregates from Scottish quarries within the currently restricted level of Scottish data that is available to anyone with an interest in the subject.

Scope of the Scottish Aggregates Levy

Currently the scope of the UK Aggregates Levy includes two broad types of materials:[15]

  • Crushed rock; and
  • Sand and gravel.

It was discussed whether the scope of the Scottish levy could include differential rates based on the type and/or quality of aggregates. As well as being somewhat arbitrary, it was decided that this approach could involve potential state aid issues, and was thus excluded from the scope of this study.



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