Aggregates levy goes back to court

The legality of the aggregates levy is again at the centre of a legal wrangle following a judgment by the European Court of Justice in December

The levy was introduced by the government in 2002 to encourage the use of recycled materials. It currently stands at £1.95 per tonne of virgin aggregate and nets the Treasury £600 million a year.

But the tax has long been subject to legal challenge by the British Aggregates Association which says it is unduly selective and gives an advantage to businesses that fall outside it. The tax does not apply to materials like shale, low quality slate or china clay that can be used as aggregates. It also does not apply to aggregates that are exported.

The association originally challenged the tax’s legality in the British courts on the grounds that it constituted illegal state aid. In 2002 the European Commission refuted this, leading the association to take the case to the European courts. In 2006 the Court of First Instance (CFI) held that the Commission had acted correctly (ENDS Report 381, pp 53-54).

But at the end of December, the European Court of Justice overturned the CFI’s decision, saying it had failed to undertake a “comprehensive review” of the Commission’s decision as to whether the levy is state aid. It had therefore “committed an error of law which vitiates in its entirety the analysis of the substance of the contested decision.”

The Court has sent the case back to the CFI to reconsider.

Robert Durward, the BAA’s director, said: “It would appear that the CFI will now have little option but to declare that the levy… constitutes illegal state aid and must be modified or scrapped. For the levy to comply [with European rules] it would have to be extended – retrospectively – to all currently exempt minerals such as coal, slate and china clay.”

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