Reforms to the landfill tax were put out to consultation earlier this year, proposing the abolition of the reduced rate by 2030.
The cost for non-contaminated waste from new build sites is currently priced at 拢4 per tonne. Under the proposals, landfill tax would have risen to 拢126 per tonne.
House-builders warned that it would add an average of 拢15,000 to the cost of building a new home. It was also calculated to add 拢1.26bn to the cost of development projects in London and 拢437m to the ballooning HS2 bill.
Many responses noted that the proposed reforms could encourage more visible forms of waste crime such as illegal dumping by making this more financially attractive than disposal to landfill.
Given the uproar, plans to abolish the lower rate have now been dropped. Instead the government will increase the standard rate of landfill tax by Retail Price Index (RPI) inflation and the lower rate by the cash amount of the increase in the standard rate, maintaining the differential between the two rates in cash terms.
Budget documents release by the Treasury state: 鈥淭he government will not be proceeding at this time with converging the two rates of landfill tax, as consulted on earlier this year. The government has listened to stakeholders鈥� arguments made in response to the consultation, and revised its approach to ensure the reforms to Landfill Tax are proportionate, do not impose unavoidable costs on businesses and do not undermine the government鈥檚 target of building 1.5 million new homes in England.
鈥淭he government will instead prevent the gap between the two rates of landfill tax getting any wider over the coming years. The government will also retain the tax exemption for backfilling quarries to ensure that housebuilders and the construction sector continue to have access to a low-cost alternative to landfill.鈥�
David Gudgeon, head of external affairs at Reconomy Connect, commented:聽 鈥淚t鈥檚 encouraging to see the government respond to industry concerns by stepping back from converging the two rates of landfill tax and instead committing to prevent the gap between them widening in the years ahead.
鈥淗owever, the planned uplifts to the lower rate 鈥� forecast to raise an additional 拢420m in revenue over the period to 2030/31 鈥� underline the need for a balanced approach. Policy must continue to drive circularity and reduce incentives for waste crime, while also supporting essential sectors like construction as they transition toward more sustainable models in a challenging economic climate.
鈥淯ltimately, the most robust way for businesses to shield themselves from future tax rises is to accelerate circularity. Keeping materials in use for longer, maximising reuse and recycling, and designing out waste not only strengthens environmental performance but also reduces operating costs and mitigates tax and compliance risks over the long term.鈥�
Mineral Products Association (MPA) executive director Mark Russell said: "The chancellor鈥檚 welcome decision to retain the quarry exemption and not proceed with reform to the landfill tax is a real relief and follows a significant campaign by MPA. The proposed changes would have had a severe impact on the mineral products industry, with a knock-on effect for the UK economy, construction and nature conservation.
"Beyond this sensible decision, we have concerns over the new higher rate of business rates for large quarries, cement plants and asphalt plants. The tax burden on business is holding Britain back, placing British industry and British jobs at risk."
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