The Environment Agency has been accused of a major financial and regulatory failure after a damning report revealed it missed out on collecting nearly £300 million in landfill tax from illegal waste operations.
The investigation, conducted by the independent watchdog the Office for Environmental Protection (OEP), found systemic weaknesses in how the agency tackles waste crime. The lost revenue, which could have funded vital public services, stems from the agency's inability to correctly classify and tax waste at illegal sites.
A Systemic Failure in Waste Regulation
The OEP's report, published in December 2025, centres on the agency's handling of landfill tax, a levy designed to discourage dumping and encourage recycling. The tax is a significant source of revenue, but the watchdog found the Environment Agency consistently failed to apply it correctly at illegal waste sites.
Instead of classifying material at these sites as taxable waste, the agency often recorded it as "non-waste" or inert material, which is not subject to the tax. This incorrect classification allowed operators to avoid the levy entirely. The OEP estimates this practice led to a staggering £294 million in lost tax revenue between 2018 and 2023.
Dame Glenys Stacey, the chair of the OEP, stated the findings point to a significant failure in the agency's legal duties. "The Environment Agency is not meeting its responsibilities," she said, highlighting that the lost funds represent a direct hit to the public purse.
Environmental Harm and Regulatory Gaps
The financial loss is compounded by serious environmental damage. Illegal waste sites are often linked to pollution, fire risks, and harm to local communities and wildlife. By not properly regulating these sites and collecting due tax, the agency has effectively allowed these harmful practices to become more profitable for criminals.
The report criticises the agency's overall approach to enforcement, noting it has been too slow to use its full range of powers. This includes the failure to issue stop notices promptly, which would halt illegal activities. The OEP concluded that the Environment Agency's performance in this area is "not achieving what the law requires" and is contributing to the persistence of waste crime across England.
In response to the findings, a spokesperson for the Department for Environment, Food and Rural Affairs (Defra) acknowledged the report and stated that the government is "carefully considering the recommendations."
Recommendations for Urgent Reform
The OEP has issued a set of recommendations demanding immediate action from the Environment Agency. The watchdog has called for a comprehensive review of all illegal waste sites to ensure correct tax assessments are made. It also insists the agency must improve its staff training and internal guidance to prevent future misclassification of waste.
Furthermore, the report urges the agency to adopt a more robust enforcement strategy, utilising its legal powers to their fullest extent to shut down illegal operations faster. The overarching goal is to close the regulatory gaps that have allowed waste crime to flourish and to recover millions in lost public funds.
The findings place significant pressure on the Environment Agency to reform its practices. With £300 million missing from the Treasury and ongoing environmental damage from illegal sites, the call for effective and lawful regulation has never been more urgent.
