Probe launched into tax credits scheme which campaigners claim ‘brought planning system into ridicule’

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A MULTI-MILLION pound scheme that gave tax relief to quarrying and sand dredging firms 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.

The scheme was administered by the Department of the Environment (DoE), now the Department of Agriculture, the Environment and Rural Affairs (Daera), on behalf of the then HM Customs & Excise (HMC).

After The Detail raised concerns about the scheme earlier this month, Daera confirmed it is investigating.

A spokesman for Daera said: “The Department is investigating the allegations.”

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

ALCS was set up after representatives for the quarrying industry 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.

ALCS was subsequently introduced in April 2004.

It granted up to 80% relief on the Aggregates Levy tax.

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

Environmental campaigners have alleged that:

  • the scheme was mismanaged by the DoE
  • sand extraction firms at Lough Neagh – the largest lake in Ireland and Britain – were awarded between £9.6 and £16.3m in tax credits, despite 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
  • a previous DoE probe into the scheme and an unpublished review carried out by the Northern Ireland Audit Office (NIAO) were inadequate.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.

James Orr, director of Friends of the Earth Northern Ireland

James Orr, director of Friends of the Earth Northern Ireland

The industrial-scale activity at Lough Neagh – one of Europe’s most important habitats – was unregulated until planning controls were introduced by the then Infrastructure Minister Nichola Mallon 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.

One DoE official suggested that consents should be formalised to avoid any question marks over compliance.

“Although I understand that unapproved development can be deemed to have been approved if unchallenged over a period of time, it is appropriate that, when examples come to light, they are regularised in some way so that the operators can demonstrate that they are in compliance,” he wrote.

The same official wrote: “I wouldn’t like to have it said publicly that the Department considers a site ‘immune from enforcement’.”

Former DoE official Dean Blackwood. Photo by Chris Scott

Former DoE official Dean Blackwood. Photo by Chris Scott

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.

Mr 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, campaigners have branded that review as inadequate.

Lough Neagh is the largest lake in Ireland and Britain. Photo by Greenjellyfish25, Creative Commons

Lough Neagh is the largest lake in Ireland and Britain. Photo by Greenjellyfish25, Creative Commons

A separate NIAO report into previously unregulated sand extraction at Lough Neagh, which included a review of ALCS, was drafted several times in 2015 but never published.

An NIAO spokesman said it had been advised that publication could have prejudiced legal challenges brought by Friends of the Earth over Lough Neagh sand extraction.

Following the end of legal proceedings in 2017, the office said it “determined that there was limited value in proceeding with the report”.

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

Mr Orr argued that a lack of accountability over ALCS helped pave the way for the Renewable Heat Incentive (RHI) scheme’s controversies several years later.

“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?”

  • Tommy Greene, the journalist who wrote this article, is a Bertha Foundation fellow. His recent work has appeared in The Guardian, The Irish Times and the Bureau of Investigative Journalism
  • All of the work which he will be completing as a Bertha Foundation fellow will be focused on environmental issues
  • This is the first in a series of publications which Tommy will produce as part of the Bertha Challenge
  • To find out more about the Bertha Foundation, please click here
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