From April 2002 there will be an aggregates levy to address the environmental costs of aggregates extraction. This will provide £29.3 million a year which the Government proposes to disburse through existing grant distribution bodies and programmes,...
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Aggregates levy sustainability fund (AP01/46)

Principal Manager Responsible: Paul Walshe Lead Board Member: Pam Warhurst

FOR DECISION

  • to support the concept of the Aggregates Levy Sustainability Fund and the proposed role for the Agency as one of the bodies which will offer grants (expected to be around £5m per annum) under the fund;
  • to establish a small central team in advance of detailed scheme arrangements being made available from DEFRA to ensure we can go live from April 2002.  

Relevance to Strategy and Corporate Plan:

  • This is a new activity which can help deliver our Strategy but was not included in the Corporate Plan. The scheme will be managed by the Countryside on your Doorstep Implementation Team.  

Staff and financial implications:

  • We plan to deploy around 12 staff (4 in a central team, 8 carrying out regional activity) to manage the scheme, but with all direct and indirect costs recharged to the Fund.  

Main issues to concern the Board:

  • This scheme represents a new type of activity for the Agency and, if successful, could be followed by similar new hypothecated taxes. Are the Board content to use this type of funding source to advance our strategy aims?
  • Are we right to become involved in this particular scheme which is likely to be controversial (from an industry perspective), relatively tightly focused and will be reviewed by Treasury after two years operation?
  • Are the Board content to accept risk that this new scheme will distract us from other delivery priorities? To the Executive, the benefits of a further £5 million a year to help deliver strategy objectives outweighs the dangers posed by the current lack of detailed guidance , the need to launch in April 2002 and future uncertainty about the Fund's size and continued operation? 

Background

1. The Finance Act 2001 introduced an aggregates levy from April 2002 to address the environmental costs of aggregates extraction. The Fund will provide for a scheme worth £29.3 million a year in England for 2002/03 and 2003/04. This amount is guaranteed irrespective of the revenue actually raised by the levy. In the interests of efficiency the Government proposes to disburse the Fund through existing grant distribution bodies and programmes, including the Countryside Agency.

2. The size and operation of the Fund will be reviewed for 2004/05 to take account of the impact of the scheme and future Government Spending Reviews.

The Government's consultation and its proposals for the Agency 

3. In October the Government issued a national consultation document on how it proposed to operate the Aggregates Levy Sustainability Fund, with a request for responses by 27 November. A detailed Agency response is currently being prepared through consultation across the organisation and with the relevant Board team. We recommend that the Chairman clears the final response, welcoming the proposed scheme and involvement of the Agency. 

4. The consultation proposes that the Fund should operate under three headings: minimising the demand for primary aggregates; promoting environmentally friendly extraction and transport; and reducing the local effects of aggregates extraction.

5. The proposed involvement of the Agency (along with that of English Nature and English Heritage) relates to the third purpose above. Specifically under that heading, the Agency would support:

Projects which address the effects of old mineral planning permissions, including :

  • restoring abandoned sites where no mineral operator has any residual liability;
  • helping mineral planning authorities to buy out aggregates extraction sites, including so called 'dormant' sites and permissions, in areas of special environmental importance, notably National Parks and AONBs;
  • enabling mineral planning authorities to improve, through compensation payments, the environmental performance of old mineral planning permissions.  

6. The consultation document proposes that the Agency would: ''distribute grants for projects to help conserve and enhance nationally important landscapes where quarrying has occurred or could be expanded, particularly in AONBs and National Parks; and to help remove, manage or mitigate the impact of quarrying on sites and communities across rural England''. English Nature would target grants at projects related to SSSIs and Special Areas of Conservation. There may be occasions when the two organisations would need to jointly support projects which cover landscape, community and biodiveristy interests. 

Projects in local communities.

7. The consultation document anticipates that the Agency would support "...further local projects to reduce the impact of extracting and transporting aggregates, improving access to land from which aggregates have been extracted and improving such sites and the surrounding areas. Specific examples for this type of project would be funding the improvement of and access to open spaces and watercourses in the surrounding areas to aggregates extraction sites, or tree planting to increase amenity". 

Resources and the Agency's operation of the Fund

Allocation of resources to the Agency

8. The Government is proposing to allocate £16.5 million to 'reducing the effects of local aggregates extraction' in 2002/03, and £14 million in 2003/04. The final allocations between the Agency, English Heritage and English Nature have not yet been agreed but we anticipate receiving about £5m a year. 

Next steps: Preparations for administering the Fund

9. The Government cannot finally confirm the Agency's role in disbursing the Fund until it has completed its consultation. But if the Fund is to open fully for business from 1 April 2002 we need to prepare now. Consequently we propose to establish a small core team (two posts in January, four from April ) to produce and action an implementation plan, and co-ordinate preparations with and through the regional offices. 

10. The core team will need to be supported by a small allocation of staff in regional offices from April 2002 . The numbers and locations of those posts will need to be decided on the basis of the likely distribution of demand for grant-aid. But all regions will have access to the Fund and officer support.

11. We have asked the National Parks and Areas of Outstanding Natural Beauty for details of existing, planned and potential projects which might be eligible for support from the Fund. Their responses will be followed up when the Agency's role in disbursing the Fund is confirmed. The Agency's regional offices have also been asked for the same information. 

12. This exercise should identify some large grant aiding opportunities. But we also need an efficient and cost effective means of delivering grant-aid to community based groups and projects. One option could be to establish partnerships with the relevant local authorities. The letter at annex 1 highlights this possible need. 

13. The Agency normally applies grant aid to a maximum level of 50%. But with DEFRA approval we can apply a larger percentage. Without the benefit of any pilot scheme, we have no evidence to show what sort of percentage grant may be needed to secure rapid take up of grants from the Fund. Local authorities alone may not be willing to find 50% match funding for schemes which whilst very desirable are not a local priority for them. The letter at  annex 1 seeks a dispensation from DEFRA to exceed 50% grant aid when applying the Fund, but we should always try to secure a sufficient local contribution to encourage local community buy in and any aftercare.

Risks and mitigation measures 

14. The main risk is that there will be insufficient time to work out scheme details , bring partners on board and achieve spend targets Our main mitigation measure is to establish a dedicated team three months before the scheme goes live, a robust project plan including a promotional strategy and to warm partners up in advance of the official guidance becoming available .

These monies must be managed and accounted for separately from other Agency budgets and so any under spend cannot be absorbed by other elements of our work.

15. A second risk is that we may not be able to identify sufficient quality projects to support and not therefore achieve the desired outcomes. The main mitigation measures are to identify partners (eg. NPs, AONBs etc), devise simple to use forms and rules (including the ability to offer grants of more than 50%) and involve local authorities. Monitoring procedures will be built in from the outset and used to help evaluate the success of the programme. 

 

Annex 1 

Date



 

Tim Judson

Head of Waste Recycling Branch

DEFRA

Ashdown House

123 Victoria Street

London, SW1E 6DE

John Dower House, Crescent Place

Cheltenham, Gloucestershire, GL50 3RA

Telephone

01242 533

Switchboard

Fax

01242 521381

01242 228914

ewen.cameron@countryside.gov.uk



aggregates levy sustainability fund: the countryside agency's RESPONSE TO THE CONSULTATION 

Please find enclosed the Countryside Agency's response to the Government's consultation proposals for its Aggregates Levy Sustainability Fund. My Board welcomes the proposal to involve the Agency in distributing these monies. 

We will of course need to draw our setting up and running costs from the Fund. Those costs will necessarily be incurred in planning and managing the operation of the Fund throughout England, and in accounting for our expenditure. We propose to ensure that our set up and running costs account for about 10% of the Agency's final allocation of funds for this work. 

We appreciate that the Government cannot finally confirm the Agency's role in delivering the new scheme, or its budget allocation, until the current consultation has been completed. But we would welcome an indication now of when those decisions will be made. In the meantime we are preparing on the basis that we will be part of the scheme and will be allocated an annual budget of circa £5 million (ie. roughly one third of the budget provisionally allocated to that part of the Fund to be operated by the Agency, English Nature and English Heritage). 

The aggregates industry will doubtless press the Government for regular reports on what the levy is achieving. To deliver the best results and to reduce the risk of an operational and politically awkward underspend , the Agency will seek the following flexibilities in how it applies grant aid from the Fund:

  • The Agency needs the flexibility to apply grant aid at a level above 50%, and where it is clearly warranted, we may need to fund some projects at up to 75% of total cost. Local authorities and voluntary groups are unlikely to be in a position to fully match fund projects which, whilst highy desirable are not current spending priorities for them This is particularly relevant to the first year of a new scheme which won't have been reflected in the forward spending plans and budgets of likely grant-aid candidates.  
  • Should they arise, we would like to support projects which are fully in keeping with the objectives of the Fund but fall outside of the categories identified for the Agency or any of the other distributors. We would of course appraise the Department of any especially unusual cases.

  • We would like flexibility in how we deliver grant aid. For example, in order to reach smaller community groups it may be both more efficient and effective for us to operate in collaboration with local authorities or other intermediaries (eg.National Park Authorities, Rural Community Councils etc) and the Agency retaining decision making responsibility.  

These issues must of course be settled before the scheme opens for business on 1 April 2002 . We will seek approval for the flexibilities outlined above in the normal way from our sponsor in DEFRA.