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On-shore sand processing site and suction-dredging barges at Toome Chris Scott

Investigation opened into NI tax scheme described as 'rehearsal' for cash for ash scandal

The ‘cash for ash’ scandal led to the collapse of the Northern Ireland Assembly in 2017.

A MULTI-MILLION POUND scheme in Northern Ireland that gave tax relief to quarrying and sand dredging firms – granting up to 80% relief on the Aggregates Levy tax – has never been properly investigated, environmental campaigners have alleged.

The Aggregates Levy Credit Scheme (ALCS), which only operated in Northern Ireland, ran between 2004 and 2010.

After investigative news website The Detail raised a number of questions around the ALCS’s alleged failings with a Stormont government department, a fresh investigation was launched.

Representatives for the quarrying industry had argued that the Aggregates Levy tax, which all UK quarry operators are required to pay, encouraged a ‘black market’ in border areas and threatened the commercial viability of firms in Northern Ireland. The ALCS was subsequently introduced in April 2004.

However, the scheme has been described by Friends of the Earth’s Northern Ireland director, James Orr, as “a dress rehearsal for RHI” – the ‘cash for ash’ scandal which led to the collapse of the Northern Ireland Assembly in 2017.

He and other campaigners allege that:

  • the scheme was mismanaged by the then-Department of the Environment (DoE), which in 2016 was subsumed into the Department of the Environment, Agriculture and Rural Affairs (DAERA),
  • sand extraction firms at Lough Neagh – Ireland’s largest inland water body – were awarded between £9.6 and £16.3m in tax credits, despite there being question marks over some of the companies’ planning and environmental consents,
  • a series of environmental improvements, which firms had to sign up to as part of the scheme, were not adequately monitored or enforced,
  • and a previous departmental probe into the scheme and an unpublished review exercise carried out by the Northern Ireland Audit Office (NIAO) were inadequate.

It is estimated that ALCS claims amounted to between £150m and £175m, although the overall cost of the scheme may be higher.

At least six companies involved in the extraction and processing of Lough Neagh sand received tax credits through ALCS.

The industrial-scale activity at Lough Neagh – one of Europe’s largest freshwater bodies and most important habitats – was unregulated until planning controls were introduced in early 2021.

Not all of the firms in receipt of ALCS tax relief held all of the consents stipulated by the scheme – which included planning permission, water discharge consents and consents for industrial facility emissions.

ALCS documents show that, for applicant firms, such consents were a “prerequisite” for entry to the scheme.

Files obtained under FOI legislation reveal that senior Stormont officials who administered ALCS had serious questions about a lack of formal consents for some sand extraction firms.

Dean Blackwood, a former DoE official, complained to the NIAO in 2014 about alleged breaches of the scheme and of environmental law.

He alleged that DoE sought to get around some Lough Neagh firms’ lack of planning consents by granting tax credits for comparatively minor on-site activity – even if the overall operation did not have planning permission.

P1003357 Dean Blackwood, ex-senior DoE planning official turned whistleblower, at Toome, by the shore of the lough Chris Scott Chris Scott

Blackwood said: “Only when it [the DoE] could not legitimately issue certificates because no permissions existed for the extraction did it seek a way around compliance with EU and planning legislation by looking to use on-shore sites as the basis for issuing ALCS certificates.

“In doing so it circumvented its lawful obligations under European directives and requirements to protect the public purse.”

A departmental probe that concluded in 2015 found that DoE officials had complied with the scheme. However, documents contained in the obtained ALCS files contradict a number of the review’s findings.

The NIAO’s report into unregulated Lough Neagh sand extraction, which included consideration of the tax relief granted to sand dredging firms through ALCS, reached an advanced stage – but was shelved in 2016, after a third draft of its report was presented to the department.

The NIAO cited developing legal proceedings as its reason for suspending the review at the time.

All of the scheme’s files held by DAERA were destroyed between December 2021 and August 2022.

IMG_8352 The Department of the Environment, Agriculture and Rural Affairs (DAERA) Tommy Greene Tommy Greene

Orr argues a lack of accountability over ALCS helped pave the way for the Renewable Heat Incentive (RHI) scheme’s controversies a number of years later, with ALCS acting as a “dress rehearsal” for the subsequent ‘cash for ash’ scandal.

“Like RHI, this scheme cost the taxpayer many millions of pounds,” he said.

“But the key difference is that, while RHI has cast a shadow on renewables – which we should be moving towards – this is something of a completely different scale.

“The ALCS scandal has not only brought the planning system into ridicule but has exposed a profound weakness in the regulation of the state’s finances. A question now begging to be asked: who will regulate the regulators?”

A spokesperson for DAERA said: “The Department is investigating the allegations.”

“We are not in a position to comment until that due diligence is complete.”

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