The little-known tax tweak proposal that could bury the government’s housebuilding dream
While ministers champion planning reform and infrastructure investment, changes to Landfill Tax could cripple the quarrying industry, inflate construction costs, and derail both housing and environmental goals
The government has made no secret of its ambition to build more houses. Angela Rayner remains resolutely committed to building 1.5m new homes by 2029, despite admitting that the target is ‘stretching’.
Rachel Reeves started her tenure as Chancellor by saying that more housebuilding and infrastructure, facilitated by planning reform, were essential to the economic growth Britain needs, and ministers have followed up with a series of planning reforms, including their flagship Planning and Infrastructure Bill.
These are tangible steps, and it’s hard to doubt the government’s determination to get Britain building again. But for these reforms to bear fruit, ministers need to be careful not to unintentionally thwart them with changes in other areas.
Unfortunately, the Treasury’s proposed tweaks to Landfill Tax risk doing exactly that.
The proposals, which were recently subject to consultation, would create a single rate of Landfill Tax from 2030, currently £126 per tonne, and remove the quarry exemption – which exempts inert waste materials used to restore former quarry sites to nature, agriculture or other uses from the tax – in 2027.
This would pile billions of pounds onto the cost of operating many of Britain’s quarries, including active as well as former sites. The Mineral Products Association (MPA), which represents the British quarrying industry, has estimated that over 50 of its members’ quarries in England alone could be at risk of being mothballed due to the proposed changes.
This would trigger a series of hammer blows to the government’s ability to deliver 1.5m homes, let alone its ten-year infrastructure strategy.
The supply of aggregates – crushed rock, sand, and gravel, which are essential for housebuilding and infrastructure projects – would immediately take a hit to productive capacity. This would compound the already ongoing decline in permitted reserves of aggregates. For every 100 tonnes of sand and gravel sold in the last ten years, only 61 tonnes of new permissions have been granted, and for crushed rock, that figure is just 33 tonnes. A nationwide shortage of aggregates would be a very real possibility.
What is certain is that affected quarry operators would have no choice but to pass their dramatically increased costs down the supply chain, such as housebuilders or other construction projects.
The increased costs would be a blow to construction businesses trying to deliver the government’s ambitions, especially as they, too, would face higher direct costs from the proposed tax tweak. Much of the inert waste used in quarry site restoration consists of chalk, clays, and soils from construction sites that have no other economic use – so the proposed changes would increase the cost of disposal.
The MPA has calculated that the proposed tax tweak would, just by piling waste disposal costs onto housebuilders, add as much as £28,000 to the cost of building a new house. At a time when ministers are trying to break the cycle of infrastructure projects going over budget, the changes could add tens of millions of pounds to the cost of some projects. And that’s before higher construction material prices are factored in.
The Treasury’s current proposals would be a triple whammy against the government’s own ambitions for housebuilding and infrastructure: a potential shortage of construction materials, higher construction material prices, and higher waste disposal costs for construction businesses.
But the chaos doesn’t end there. It’s likely that, if these proposals went ahead unchanged, businesses that currently benefit from the quarry exemption would be driven to switch en masse to recovery permits, which would protect them from the tax bombshell. There is no regulatory route to do this, however, so there is no guarantee that this is possible.
Even if it is possible, the volume of applications would likely overwhelm the already hard-pressed and underperforming Environment Agency, potentially impacting its ability to conduct its other duties, which are themselves essential for allowing housebuilding and infrastructure projects to go ahead. It is, frankly, impossible that the regulator would even come close to dealing with all these applications by the 2027 deadline.
The irony is that these changes would even backfire from an environmental perspective. An even more overloaded Environment Agency aside, the proposals would dramatically drive up the cost of restoring former quarry sites to nature.
The British quarrying industry has a proud, decades-long record of delivering real biodiversity net gain through ambitious and innovative site restoration schemes. Many of this country’s nature reserves and most treasured beauty spots are former quarry sites, and the best restoration work is regularly commended at industry awards.
Making site restoration so much more expensive, as these proposed changes would do, would dramatically slow the pace of restoration work, potentially leaving some quarries unrestored for decades, undermining the government’s nature recovery ambitions.
Landfill Tax is in need of reform, and alternative solutions are available. For example, the government could grandfather the quarry exemption for sites already operating under it, or it could redesignate them all as recovery permits. In their current form, however, the Treasury’s proposals would be damaging for the natural environment, the economy, and especially the government’s ambitions for housebuilding and infrastructure.
If ministers truly want to boost economic growth, restore our infrastructure, and come even remotely close to building 1.5m homes in this parliament, then these proposed changes cannot be allowed to go ahead. In order to avoid upending the progress the government has made over the last year towards getting Britain building, the Treasury must go back to the drawing board.
