April 2015

UK Support to Secondary Aggregates is not State Aid, EC Finds

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Information supplied by Eunomia has helped bring an end to almost 13 years of litigation over exemptions to the UK Aggregates Levy that support environmentally preferable secondary aggregates.

An investigation by the European Commission has concluded that all but one of the exemptions, exclusions and tax reliefs from the Aggregates Levy introduced in the United Kingdom in 2002 are free of State Aid. The decision is a major economic boost for producers of secondary aggregates, as it allows the exemptions to be reinstated.

The Aggregate Levy’s aim is to deter the use of primary sources of aggregates from sources such as rivers and quarries and encourage the use of recycled or secondary materials instead.

The Commission commenced its investigation in 2013, following a successful legal challenge to a previous Commission decision by the British Aggregates Association, a representative body for large primary aggregate producers. The Levy exemptions were suspended while the Commission carried out its work, damaging the economic interests of secondary aggregate producers. A consortium of UK companies that operate under the exemptions was assembled, led by Harworth Estates and Welsh Slate Ltd., to provide a unified voice for secondary aggregate suppliers.

Working for the consortium, Eunomia set out to provide information to HM Treasury to assist in making the case to the Commission that the exemptions are justified on the grounds that they contribute to the environmental objective of the levy. Eunomia was commissioned to provide analytical support to the consortium and liaise with and present evidence to, HM Treasury on the consortium’s behalf.

The Commission found that the evidence presented supported the case in respect of all the exemptions under which members of the consortium operate. The Commission found that only the exemptions for shale and spoil for shale extraction, which were not used by consortium members, were not justified on environmental grounds. It is estimated that several million pounds in Levy payments will now be rebated to consortium members.

Owen Michaelson, Chief Executive of Harworth Estates said:

Eunomia did an excellent job in marshalling the evidence and presenting the case in a way that responded appropriately to the terms of reference of the Commission’s investigation. All consortium members affected by the suspension of the exemptions from 1st April 2014, from which point they incurred the levy, will now be repaid in full. More importantly, we can get back to business selling environmentally friendly secondary aggregates.

Chris Allwood, Managing Director of Welsh Slate Ltd. said:

The formation of the consortium and the appointment of Eunomia were two critical elements in helping ensure that the complex issues raised by the aggregate levy investigation were clearly understood and fully addressed.

Mike Brown, Managing Director at Eunomia said:

Whilst the evidence presented to HM Treasury and ultimately the European Commission was compelling, I firmly believe that it was only listened to because of the consortium assembled by Harworth Estates was able to speak as one.

In a press release Commissioner Margrethe Vestager, in charge of competition policy, said:

We have made sure that exemptions from the British aggregate levy will benefit only those materials and extraction processes that contribute to an environmental objective.