Although the aggregate tax, which is expected to add 20% to the cost of aggregates, failed to make it into the budget, environment minister Michael Meacher said it had not been abandoned.
The government is thought to be preparing draft legislation on the tax as a means of encouraging materials producers to agree to far-reaching commitments on environmental reform.
Quarry Products Association economist Jerry McLaughlin said: "It's like a big stick hanging over us. If the negotiated settlement approach doesn't work, the government will resort to a tax."
It’s like a big stick hanging over us. If the negotiated settlement does not work, the government will resort to a tax
Jerry Mclaughlin, Economist, Quarry Products Association
A new energy tax
On the energy measures, which will come into force in April 2001, Building Material Producers economist Allan Wilén said: "The levy is not a major surprise, but it's a big concern for us because it will place our producers at a competitive disadvantage to overseas firms. Intensive energy users on the heavy side of the industry will be most affected. We will be working hard with the government over the next two years to try and mitigate the effects." Wilén said producers of steel, cement and clay products were most likely to be hit.
Another unpopular measure was the £3 a tonne increase in landfill tax. Paul Pedley, group managing director at Redrow Homes, said the tax would do nothing to help the move to redevelop brownfield land.
The energy levy is not a major surprise but it is a big concern as it will place our producers at a competitive disadvantage to overseas firms
Allan Wilén, Building Material Producers
He said: "This is effectively a tax on the materials taken off brownfield sites. If they were really interested in recycling brownfield land, they wouldn't raise the tax. It sends a mixed signal." The government did introduce measures that benefited the industry, including a cut in employers' National Insurance contributions and tax breaks for research and development. It also brought in a package of measures affecting the housing industry.
Brown announced the end of mortgage tax relief, which will cost homeowners an extra £208 a year when it comes into operation in 2000. Dennis Brant, chief executive at Wimpey, Britain's largest housebuilder, played down the effect of its demise. He said: "With the phasing out of MIRAS we see the death of an old friend. However, it has had less impact over recent years and we do not believe that its phasing out will have a significant impact." He said the slight increase in stamp duty on homes over £250 000 would also have little impact and welcomed the budget overall.
New housing policy
There was a lot in there for small firms. Cuts in employers’ NI contributions and reductions in corporation tax are good news
Ian Davis, director-general, federation of Master Builders
Deputy prime minister John Prescott announced a review of housing policy, leading to the publication of a green paper later in the year.
He said the aim of the review was to ensure the opportunity of a decent home for everyone.
The Construction Confederation's hope for a hint that Brown was considering a reduction in VAT on repair and maintenance was dashed.
The DETR has been lobbying the Treasury on the idea of harmonising VAT on new build and repair and maintenance work, but the chancellor's silence shows more work still needs to be done.
Construction Confederation public affairs director Stephen Ratcliffe said: "We were hoping that the chancellor would say he was prepared to talk to Brussels about a VAT reduction but it didn't happen.
