A waste of a tax?

The Landfill Tax will be paid for by economising on roads and other amenities.

The cost of the new Landfill Tax is coming from an almost pound- for-pound reduction in spending on roads and public transport, according to an analysis of local government spending. A range of other tough new environmental regulations are being paid for by closing swimming pools and neglecting parks and public spaces.

Individual council budgets are so complex that it is virtually impossible to argue that extra spending on one function is at the expense of any existing activity. But when council budgets are analysed across the country a much clearer pattern emerges.

In a full year, the Landfill Tax will cost local authorities pounds 143m. The figure this year is pounds 74m, because the tax started operation last week, half-way through the financial year. A similar figure, pounds 73m, has been cut this year from councils' highway and transport budgets.

Stricter environmental regulations are costing pounds 25m this year, rising to pounds 64m in 1997, taking into account new obligations in monitoring contaminated land and air pollution, promoting home energy conservation and implementing better management practice and land disposal sites. A pounds 15m reduction in spending this year on parks and leisure facilities and pounds 9m slashed from planning department budgets have been two major cuts in spending this year.

Phillip Ramsdale, executive director of the Institute of Public Finance (the commercial arm of the Chartered Institute of Public Finance and Accountancy), who oversaw the research, says that though linking the cuts to new environmental spending commitments is simplistic, it does give a reasonable overview. "It may well be that this is not a conscious approach in individual authorities, but in overall terms that seems to be what is happening," he says.

Authorities themselves are reluctant to make similar connections. Newcastle said the Landfill Tax is costing it pounds 400,000 in the current half year, which has been found from a general range of service reductions. Birmingham has had to find pounds 600,000 this year, also funded by a range of cuts. In Liverpool the cost is pounds 1m this year, which has had to be found as part of a total of pounds 44m in cuts. Manchester still does not even know how much the tax will cost it this year.

Bristol became a unitary authority from the beginning of April and has had an even more complex budget-setting process this year as a result. It had to find a total of pounds 18m in cuts, leading to the closure of two old people's homes, a swimming pool and staggered reductions to its housing, education and social service budgets. The authority made a 15 per cent cut in central personnel and a 10 per cent reduction in spending on planning and transportation.

Ironically, Bristol is about to increase the amount of waste going to landfill because an existing waste incinerator will have to close next month as it fails to comply with stricter pollution regulations.

Mike Taylor, a senior financial officer at Surrey County Council, says the Landfill Tax will cost it pounds 1.7m in the current financial year and pounds 3m next year. He explains: "We are rethinking our whole waste reduction strategy to reduce landfill and increase recycling. It is difficult when we are not controlling disposal policy, a lot of which the district councils are responsible for."

The extra costs of the Landfill Tax will be partially offset from next year, when national insurance will be reduced by 0.2 per cent per employee, but councils will get back only 15 to 20 per cent of the costs of their Landfill Tax obligations.

Although the Government argues that the Landfill Tax will act as an incentive to recycle waste, any benefits are unlikely to be felt until early next century.

Mr Ramsdale says that the burden of the Landfill Tax will not reduce rapidly. "Two-thirds of landfill disposal contracts have more than five years to run, and half of those have more than 10 years to run. The general view is that in 70 per cent of waste disposal authorities 85 per cent of the waste will still have to go to landfill by the year 2000, because of existing contracts for disposal and the slowness in developing the recycling of waste."

While councils are keen to take action to clean up the environment, they are unhappy at doing so when it becomes another financial weapon to hit them with. Mr Ramsdale comments: "Authorities do not have a huge amount available to invest in recycling. Normally when you want to encourage someone you use a carrot and a stick, but here is a lot of stick" n