A new tax proposed on the cleanup of waterways could negatively impact essential industrial projects, potentially leading to job losses, government officials have been cautioned.

The Treasury is considering implementing a landfill tax on substances known as “stabilisers” used in the decontamination of ports, rivers, and canals when they undergo dredging starting from April next year. However, recent analysis suggests that this tax could result in a significant increase in project costs, posing a major challenge for coastal communities.

Concerns about the tax have been raised by Labour MPs in private discussions, with the British Ports Association (BPA) expressing worries that the tax could impede the cleanup of polluted waterways and heighten the risk of flooding.

According to a report by research firm Oxera, there is a possibility of a substantial rise in capital project expenses, potentially making certain projects economically unfeasible. The maritime sector in the UK, which supports numerous jobs and contributes significantly to the economy, could be severely impacted, particularly affecting coastal and regional economies where ports play a crucial role in local development.

The BPA has reached out to Dan Tomlinson, the exchequer secretary to the Treasury, urging a reconsideration of the tax proposal. A spokesperson emphasized the potential negative effects on jobs and crucial projects, calling for an urgent change in direction to avoid detrimental impacts on investment in the nation’s ports.

In its pre-election manifesto, Labour had committed to direct investments in ports, following up on its Green Prosperity Plan in April 2024, which aimed to secure £1.8 billion in funding to stimulate private investments.

Responding to the concerns, a Treasury spokesperson clarified that the intention behind the tax change is to prevent hazardous waste from incinerators, which currently avoids landfill tax by being disposed of with dredged materials. The spokesperson highlighted that only a very small percentage of dredged material in England requires stabilization and falls under the scope of the proposed tax. Discussions with industry experts have indicated that there are alternative, environmentally friendly, and cost-effective methods available for dealing with the affected materials. The spokesperson reassured that businesses will have a year to adapt to the upcoming reforms.