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Contractors could benefit from aggregate tax cut

Rock and sand manufacturers have told Construction News the freeze in aggregates levy announced by chancellor George Osborne in the Budget would benefit contractors.

The Mineral Products Association, which represents makers of products including cement and asphalt, said manufacturers may have passed the increase cost onto their customers had the tax not been frozen in 2014/15.

According to the Budget documents, the tax rise would have coste about £25m had it gone ahead, which is £5m a year from 2014/15 for five years. The aggregates levy rate will remain at £2 per tonne in 2014/15.

Steel producers will be able to benefit from help in the Budget for energy intensive industries, but the cement industry is not yet able to do so. This is because the cement sector is not yet on the European Commission’s list of energy intensive industries which can be compensated from the effects of the carbon price floor. The steel sector is already on the list.

A spokesman for the department for business, innovation and skills said the department would be making an application for cement to be included in the list of energy intensive industries elligible for compensation. BIS will make the case for cement after the EU publishes revised guidlines on the issue in the spring.

The policies announced Budget are an extension to the compensation for energy intensive manufacturers from the cost of the carbon price floor and EU emissions trading system for four more years to 2019/20.

There would also be an extra £1bn of compensation to reduce the impact of green levies – the renewables obligation and small-scale feed-in tarifs for renewables generation – on the bills of energy intensive manufacturers from 2016/17.

Additionally, the chancellor said he would cap the carbon price support rate to £18 per tonne of carbon dioxide from 2016/17 for  the rest of the decade. He told parliament that the move would save a mid-sized manufacturer almost £50,000 a year.

He also said electricity from combined heat and power plans would be protected from the carbon price floor.

Tata Steel welcomed the help for energy intensive manufacturers.  

Karl Koehler, chief executive officer of Tata Steel’s European operations, said: “The government’s introduction of relief against the rapidly rising costs of carbon levies is welcome. Mitigation of the Renewables Obligation is a particularly good step forward, as it poses a very real risk to Britain’s foundation industries.

“We remain concerned that the mitigation being offered will not come into effect for two years and we will be urging the government to investigate whether it can be introduced earlier. UK foundation industries are under real pressure and unilateral carbon levies are a significant factor restraining their ability to compete internationally.”

Clay used in soil stabilisation will be bought withint the £2 a tonne aggregates levy. Contractors who stabilise clay by mixing it with othe rproducts, liek cement and lime, will have to pay the tax from 1 April, the MPA said.

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