R (on the application of British Aggregates Associates and Others) v H M Treasury

JurisdictionEngland & Wales
Judgment Date19 April 2002
Neutral Citation[2002] EWHC 926 (Admin)
Docket NumberCO/0703/2002
CourtQueen's Bench Division (Administrative Court)
Date19 April 2002

[2002] EWHC 926 (Admin)


Royal Courts of Justice

The Strand



Mr Justice Moses


The Queen on the application of
(1) British Aggregates Associates
(2) Cloburn Quarry Company Limited
(3) Sherburn Minerals Limited
Her Majesty's Treasury

MR GERALD BARLING QC and MISS KELYN BACON (instructed by Messrs Herbert Smith, London EC2A 2HS) appeared on behalf of THE CLAIMANTS

MR JONATHAN PEACOCK QC and MR FRANCIS FITZPATRICK (instructed by Customs & Excise Legal Department, London SE2 9PJ) appeared on behalf of THE DEFENDANT


This is an application for permission to move for judicial review, and, if I grant permission, an application for judicial review. Those applications concern a tax known as aggregates levy.


On 11 May 2001 Royal assent was given to the provisions of the Finance Act 2001 which introduced a levy on aggregate. Proposals to introduce such a tax had been announced in March 2000 following earlier discussions in 1999. The provisions were not, however, implemented until 1 April 2002, pursuant to a power conferred on the Treasury to appoint the commencement date by statutory instrument. General regulations made under the Act were laid before Parliament on 21 March 2002 and came into force on 1 April. Amendments to the primary legislation were announced in the Budget three days ago on 17 April 2002, although they had been announced shortly before and were brought to my attention at the hearing.


Aggregates are used in engineering and building. The Government by the imposition of the levy seek to incorporate within the market price paid for such aggregate the environmental costs of securing aggregate from natural rock. In so doing the legislation distinguishes aggregate from such a source (called by Government witnesses “primary” or “virgin” aggregate) from other material which may be used as aggregate such as certain mineral and industrial waste (“secondary” or “recycled” aggregate). Such material is exempt from the levy. By exempting such material the Government hopes to promote its use as aggregate.


The levy is designed to be revenue neutral, but it is not an hypothecated tax. Receipts from the levy form part of the general account of the Customs and Excise or, if from Northern Ireland, part of the consolidated fund. But, as I have said, it is designed to be revenue neutral. A 1% reduction in employer's National Insurance Contributions has been allowed and a portion of the revenue goes into a sustainability fund designed to provide benefits for the environment.


The first claimant, the British Aggregates Association, is an incorporated association representing smaller and independent quarrying companies in the United Kingdom. It has about 55 members operating over 100 quarrying sites.


The second claimant is the Cloburn Quarry Company Limited which operates a quarry in Lanarkshire in Scotland.


The third claimant, Sherburn Minerals Limited, is the parent company of a quarrying and minerals processing group based in the North East of England.


I have had the benefit of a very large volume of evidence from Mr Durward, the director of the first and second defendants, Mr Allison, the director of Sherburn Minerals Limited, and from Mr Whitehouse, the director of Castle Granite Limited which operates a quarry in Penzance.


There are about 400 private quarrying companies in the United Kingdom producing aggregates. In 1999 it appears there were 1,400 operational sand, gravel, limestone and other mineral workings employing just under 15,500 people. It is estimated that 20,000 are directly employed in quarrying and a further 20,000 indirectly employed, all of whom depend upon the quarrying industry for their livelihoods. It is to be noted that many of these quarries are in rural areas where there are limited employment opportunities.


The total annual aggregates’ output within the United Kingdom is said generally to exceed 200 million tonnes; but five major companies now account for around 80% of the output as well as the products of the aggregate downstream; they control some 90%, for example, of the markets in ready-mix concrete and asphalt. Over 90% of the quarry products are used by the construction industry, and a large proportion in public sector products.


The evidence in reply to the claimants comes from Mr Knight, Head of Policy in Customs and Excise, charged with management of the tax, who advises the Treasury; Mr Maxwell, Head of Environment Tax at the Treasury; and Mr Riley, Chief Economist at the Department of Transport and Local Regions. In their evidence they deal with the history, the nature of the scheme and its purpose.


The claimants contend that the scheme is muddled and arbitrary, stemming perhaps from the fact that, as they say, there is no satisfactory definition of “aggregate”. They contend that the levy will have disastrous effects, particularly on small quarries in areas dependent upon employment by such quarries. It is submitted that there is no sensible environmental justification for the levy since the damage caused by, for example, exported aggregate which is exempt from the levy, and from recycled aggregate which the Government is determined to encouraged, will be at least equal to the damage caused by those processes which are subject to the levy. Exported aggregate and aggregate used in certain industrial and agricultural processes, which the Government seeks to promote, are exempt.


This deeply-felt and strongly-argued antagonism of the claimants to the levy has given rise to the challenges to the legislation mounted in this case.


The matter came first before me on 13 March 2002 for an oral hearing for permission and an application by the claimants for an interim injunction preventing the Treasury from exercising their power to implement the levy. One day was allotted for the time in which to argue those matters—a period in which Mr Peacock QC said he could not do justice to the arguments as to why the claim was not arguable. He told me that he was prepared to accept arguability and sought only to argue that the application was out of time and assist me on whether an interim injunction should be granted. It did not seem to me to be sensible to devote time to the not altogether easy question of whether an interim injunction should be granted in the field of public law, relating to the imposition of a tax, since the substantial issues raised had, at least, to be considered in relation to the question of the interim injunction. Rather, as it seemed to me, it was in the interests of everybody that the resolution of the important issues raised in these applications should at least get under way by my hearing argument at the end of term and reaching a conclusion. Accordingly I heard argument on the last three days of term between 25 and 27 March. The hearing was a hearing as to whether permission should be granted and, if so, as to the substantive application. Thus it was not necessary to consider the question of an interim injunction. But all parties acknowledge the urgency of resolution of these issues. I have sought to meet that urgency today with a judgment that is considered but not written.


There are seven issues raised by the claimants:

(1) Is the imposition of the levy on imported aggregate a charge having equivalent effect to a Customs duty contrary to Article 25 of the Treaty establishing the European Community in its consolidated version (The Treaty)?

(2) Are the charges on imports and repayment of charges on exports prohibited by Article 90, if Article 25 is not applicable?

(3) Are such charges and exemptions prohibited by Article 90 (a question which turns on whether the levy is a direct or indirect tax)?

(4) Is the system of exemptions state aid which has not been notified to the Commission contrary to Article 87(1) read with Article 88(3)?

(5) Is the imposition of the levy a breach of Article 1 of the First Protocol of the European Convention on Human Rights?

(6) Is it a breach of Article 14 read with Article 1 of the First Protocol?

(7) Was the implementation premature to the extent that it was irrational or an abuse of power?

Legislative Provisions


I set out those sections of Part 2 of the Finance Act 2001 relevant to my decision. Amendments are to be made, should Parliament so decide, in what is at present the Finance Bill 2002. Those amendments are underlined and the passages I set out show the deletions. Such amendments were already made known at the time of the hearing. Section 16(1) introduces the tax which is chargeable whenever taxable aggregate is subject to commercial exploitation in the United Kingdom (see section 16(2)). The person charged is the person who commercially exploits the aggregate (see section 16(3)). The levy is charged at £1.60 per tonne (see section 16(4)). The commencement date is to be such date as the Treasury appoints by statutory instrument (see section 16(6)).


Section 17 reads:

“17Meanings of ‘aggregate’ and ‘taxable aggregate’

(1) In this Part ‘aggregate’ means (subject to section 18 below) any rock, gravel or sand, together with whatever substances are for the time being incorporated in the rock, gravel or sand or naturally occur mixed with it.

(2) For the purposes of this Part any quantity of aggregate is, in relation to any occasion on which it is subjected to commercial exploitation, a quantity of taxable aggregate except to the extent that—

(a) it is exempt under this section;

(b) it has previously been used for construction purposes (whether before or after the commencement date);

(c) it is, or derives from, any aggregate that has already been subjected to a charge to aggregates levy;

(d) it is aggregate that was...

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