The landfill tax hike is dead
But people still lost their jobs
In yesterday’s Budget, Rachel Reeves made one undeniably sensible call: she scrapped the plan to hike landfill tax for builders by 3,000%. The idea had been to “equalise” the lower rate for construction waste with the much higher rate paid on general landfill, even though construction waste is far less harmful. More importantly, it would have slapped at least £22,000 onto the cost of every new home. Some estimates put it at £52,000.
After enormous pushback, including from Britain Remade supporters, the Government chose sanity. Good.
But this policy has already done serious damage, despite never being implemented.
Whitehall will claim this is the system working. It isn’t.
Inside the government, the story will be simple: officials drafted a policy to nudge down landfill use, stakeholders were consulted, stakeholders said it was mad, the government dropped it. End of story.
But that story is incomplete.
For the seven months between the consultation in April and the Budget, every builder in England has had to plan for the possibility they were about to be hit with a 3,000% tax rise. So did their lenders. That uncertainty alone has slowed decisions, paused investments, stalled recruitment, led to lay-offs and in some cases pushed firms to the brink. The already dire housing crisis has been made worse.
Seven months of uncertainty. Seven months of slowing housing delivery. Seven months with the brakes on the government’s own 1.5 million homes target.
That is not a system “working.” It’s a system incapable of spotting an obviously self-defeating idea.
The Civil Service should have stopped this at the first hurdle
Civil servants are meant to “see the bigger picture”. They are meant to know their policy areas. And anyone with even a passing familiarity with housing policy should have seen the problem: raising a major cost on builders directly undermines the government’s goal to dramatically increase housebuilding.
Dozens of officials will have seen this consultation before it was published. Any of them could have said: this contradicts one of the government’s top priorities. If they did, ministers ignored them. But even if officials missed it, ministers should not have.
Ministers should have stopped it instantly
A consultation like this requires ministerial sign-off. Ministers who spent an election campaign promising 1.5 million new homes in England should have binned this idea the moment it crossed their desks. Instead, it was allowed out into the world to spook an entire industry.
And once ministers finally realised the tax hike was a terrible idea, they should have scrapped it immediately, not let it drag on for months, right up to Budget day. Treasury insiders have been aware for some time that the policy was unworkable. Everything else in the Budget seemingly leaked early. Why not this?
Every extra day of uncertainty meant fewer homes built and more jobs at risk.
A good decision doesn’t erase months of damage
The government made the right call in the end. But ending a bad idea doesn’t undo the harm caused simply by floating it. This policy uncertainty is not harmless. I’ve been told by several small house builders that uncertainty has led to many projects being delayed, and in some cases workers being laid off. Let’s be clear about what’s happened here. Because civil servants and ministers can’t do their jobs properly, the housing crisis has got worse and working class people with good jobs have been made unemployed.
And this isn’t a one-off. The rumoured “exit tax” on business owners leaving the UK, which the Treasury eventually ruled out, has already encouraged some people to leave, without raising a penny. Bad ideas, even when abandoned, have consequences.
How can ministers promote the government’s priorities, like building 1.5 million homes, if they aren’t even aware when their own decisions contradict them? If ministers aren’t clear about the government’s aims, how can the public be?
Scrapping the landfill tax hike was the right outcome. But the fact it got this far, and caused this much damage, shows a government machine that still isn’t aligned with its own goals.
The exit tax put the fear of god into me. It wasn't in the budget, but with such low growth - and no positive vision for the economy nor any explicit ruling out of an exit tax - you can only work on the basis that it might come back next year.
The government is achieving the downsides of an exit tax, by encouraging entrepreneurs to leave, without actually generating any tax revenue. Worst of all worlds.