The LCF is a tax credit scheme allowing landfill operators to give money to environmental bodies enrolled with ENTRUST, which then distribute the funds to communities that live near the landfills for use on environmental good causes.
It has funded more than 50,000 community and environmental projects across the UK, to the tune of some £1.2bn. In 2013-14, 77 per cent of the money spent was on public parks and amenities, with projects ranging from historic garden restorations to new eco-friendly visitor centres.
But the Government announced in 2014 that the fund was to be reformed, due to concerns that the environmental bodies were accumulating large sums of money and not giving the money to communities in a timely manner. As a tax credit scheme the LCF also reduces the overall tax intake, and the Government felt it should offer better value for the taxpayer.
In November's Comprehensive Spending Review the Government announced changes to the fund. The draft proposal has now been published, with changes to come into law in April. The Government says these changes will "improve the flow of funds to communities by removing barriers that prevent funds reaching projects".
- The cap on contributions by landfill operators will be set at 4.2 per cent
- Qualifying contributions can no longer be invested to generate interest, meaning the money will go directly to communities much faster
- Environmental bodies can no longer use funds to provide financial and other services to other environmental bodies
- The length of time records need to be retained will be restricted to six years
One unexpected change is that the provision for contributing third parties will be removed, and landfill operators must pay 10 per cent of qualifying contributions. At present landfill operators can claim a tax credit on 90 per cent of their donation to an environmental body, and third parties can make up the remaining 10 per cent.
The Government says this often means the community group has to find a third party contributor, or raise the funds themselves, which delays the start of projects. After 1 April 2016, third parties will no longer be able to make up the 10 per cent shortfall, removing this delay.
However the Environmental Services Association (ESA), which represents the waste management industry, has expressed its "deep concern" about the changes.
According to the ESA this will cost the industry around £4m each year, and could put the fund at risk of closure.
ESA executive director Jacob Hayler said: "The Government’s proposed change is likely to jeopardise the future of the scheme, thereby removing this vital funding source for local projects whilst also leading to job losses at the environmental bodies.
"A mere four months’ notice provides landfill operators with little time to budget, particularly when their planning timescales tend to be around five years in advance, and when some individual operators are facing unforeseen annual costs of over £500,000."