Opposition leader slams council over £16 million landfill tax dispute

Ted Peskett, local democracy reporter

The leader of the opposition at Cardiff Council called a landfill tax dispute set to cost the local authority millions of pounds the biggest financial catastrophe it has faced in decades.

Leader of the Liberal Democrats at Cardiff Council, Cllr Rodney Berman, made his comments at a full Cardiff Council meeting on Thursday, September 26, where his group presented an amendment to plans by the council to move ahead with a proposed settlement with HMRC.

The dispute, which dates back to 2017, came about when HMRC said the council had not been charging companies the correct amount for bringing soil and other material to its Lamby Way landfill site.

Cardiff Council said the change in landfill tax rules at the time caused confusion, arguing that rules and rates around certain materials were not always clear.

£45 million

It also said the local authority faced a liability of £45m before bringing this down to £12m, rising to £16m with interest, through negotiations.

Cllr Berman said: “Let’s be honest, this is the biggest financial catastrophe to have hit the council in the 20 years in which I have served as a member of this authority.

“Having read the papers thoroughly, the judgement of my group is that this is clearly a tale of incompetence, but also a tale of years of secrecy despite what we have heard here.

“For a number of years, the council has hid behind obfuscatory language. You have heard it here tonight.”

The Liberal Democrats’ proposed amendment to the council’s plans called for an independently chaired enquiry into the landfill tax dispute and for confidential documents about it to be made public.

Cardiff Council said it has never hidden the dispute and that it has been noted in multiple reports over the years.

Regulations

However, Cllr Berman said the council had played down the extent of the issue, adding: “The question is how do we get to the point where the council didn’t seem to know what it was tipping into Lamby Way and what weight of tax it should be paying on it?

“Why weren’t we on top of that? Why weren’t we on top of the change in regulations considering just how much was at stake here?”

The issue initially related to two companies that brought material to the Lamby Way landfill site.

Lamby Way landfill site was closed in 2015, but Cardiff Council said soil was needed to help contour, cap and remediate it.

Bridgend Biomass/South Wales Wood brought material to the site which was taxed at a lower rate.

HMRC disputed the categorisation saying it should have been taxed at a higher rate. This dispute was eventually resolved.

The other company, Neal Soils, delivered soil to the site which was charged as unprocessed soil and at the lower rate, but HMRC said this soil was processed and should have been taxed at a higher rate.

Cardiff Council said there is no suggestion of any impropriety or illegality here, only a dispute over definitions and categorisations.

Neal Soils is owned by David Neal, the same man who runs Dauson Environmental Group which donated £200,000 to Vaughan Gething’s Welsh Labour leadership campaign.

The donation was controversial at the time because Mr Neal had previously been convicted of environmental offences – once in 2013 and again in 2017.

Cllr Berman said opposition groups at the council were not aware how “staggeringly high” the amount of money at stake was.

‘Huge hit’

He added that the reduced amount in liability is still a “massive” amount and that this will be a “huge hit” to services in the city.

Cardiff Council will pay the full amount owed in total through capital borrowing.

The amount borrowed will be paid over time, with the council leader, Cllr Huw Thomas, saying the local authority will “vigorously pursue” the outstanding tax owed by the company involved.

Earlier on in the discussion, Cllr Thomas said: “I know colleagues will understand and share my frustration that an operational and highly technical dispute has resulted in a financial outcome for the council that feels disproportionately punitive and I do intend to raise this matter with the relevant UK minister once the settlement is concluded.”

Conservative councillors supported the amendment put forward by the Liberal Democrats, which eventually lost by 49 votes to 23.

The former leader of the Conservatives group, Cllr Adrian Robson, called the situation a mess and his colleague, Cllr Joel Williams, said the issue “reeks of gross incompetence”.

Cllr Williams added: “We are now, as politicians, being asked to approve a settlement of over £16m that is going to be funded through borrowing and paid for by the people of Cardiff to the tune of £2m a year, likely funded through cuts to frontline services.”

Cllr Williams also criticised the Labour-run council for having spent millions of pounds on legal fees and accountancy fees which would have gone towards negotiations.

He later went on to add: “Until I read these confidential appendices, I did not know how bad the situation was.”

Inappropriate

Cardiff Council’s cabinet member for finance, Cllr Chris Weaver, said it would be inappropriate for the council to publish the information that was kept confidential, adding that they must be careful not to prejudice the council’s position and be mindful of HMRC’s expectation of confidentiality.

The cabinet member also said he shared many of his fellow members’ feelings on wanting the issue to be thoroughly examined.

Cllr Weaver said: “I and the local authority absolutely welcome any involvement of Audit Wales in relation to this, or indeed any other matter and that can be done at the instigation of the independently-chaired governance and audit committee.

“Opposition councillors sit on it, but independent members do too. It is not the authority’s own homework being marked.”

He later added: “What I am suggesting however is that the recommendations in the report are the appropriate way to do so whilst protecting the council’s position and maximising the council’s opportunity of a successful outcome for the tax payers of Cardiff.”