The Chancellor announced plans to remove £100 million per year from the landfill tax credit scheme to create a new public spending programme in his pre-Budget report last November (ENDS Report 335, p 24 ). The change, to take effect from April, will leave only £47 million per year for landfill firms to distribute as tax credits - and only "local community environmental projects" are to be eligible for such funding.
The debate in Westminster Hall was secured by Barry Sheerman, the Labour MP who is also chairman of Urban Mines, a not-for-profit business which has received significant funding under the landfill tax credit scheme and now employs 30 people.
Mr Sheerman said he had observed initiatives under the tax credit scheme from the early days. "They take time to develop, to mature and to become effective."
He said the Government had underrated the effectiveness of the organisations concerned. "Unless the Government change their mind, we will lose that environmental innovation and the people who have been brought on."
Treasury Ministers did not understand community groups, Mr Sheerman suggested. "They say, 'Oh dear. They're not a bureaucracy. I can't get the Audit Commission to look into them.'"
Mr Sheerman also emphasised the potential "multiplier" effect, under which landfill tax credits can lever in public money from other sources.
However, Economic Secretary John Healey gave little ground in his response to the MP. Mr Healey ran through the catalogue of criticism that had been piled onto the scheme from the National Audit Office and parliamentary committees.
The Public Accounts Committee had identified "a lack of overall accountability for the scheme and a lack of transparency". The Environment Committee had described the scheme as a "convoluted and, to date, ineffective method of funding sustainable waste management."
Mr Healey pointed out that money under the scheme was "essentially tax revenue forgone...It would have been wrong to take such weighty criticisms lightly." He added that current arrangements did not deliver a coherent approach to funding waste projects.
The Minister agreed one concession - to examine the transitional arrangements "to see what support may be appropriate from the public spending stream post April."
Mr Healey noted that schemes receiving funding from tax credits in 2002/03 would be free to spend this money until it runs out. He also promised to make announcements soon concerning the reduced ceiling for landfill tax credits in 2003/04, "and outlining plans for continuity of contributions to support waste projects that are up and running.