Second Standing Committee on Delegated Legislation
Monday 6 December 1999
[Mr. Jim Cunningham in the Chair]
Draft Producer Responsibility Obligations (Packaging Waste) (Amendment) (No. 2) Regulations 1999
The Minister for the Environment (Mr. Michael Meacher): I beg to move,
That the Committee has considered the draft Producer Responsibility Obligations (Packaging Waste) (Amendment) (No. 2) Regulations 1999.
Hon. Members have before them today proposed changes by the Government to packaging regulations that complete the review that I set in hand in June 1997. However, as I said in answer to a question from my hon. Friend the Member for Elmet (Mr. Burgon) on 28 January, I am keeping the recovery and recycling targets for 2001 under review, so that we can assess them in the light of further work on packaging data and returns for 1999.
Hon. Members would be forgiven for thinking that the regulations are no more than a set of detailed provisions on packaging, but they are rather more than that. They form part of the Government's broader environmental objectives, which include sustainable development, climate change and the forthcoming waste strategy for England and Wales. They will contribute to more sustainable consumption, more prudent use of natural resources and the achievement of the Government's tough climate change targets, particularly in respect of certain materials. They will also form part of our broader waste strategy, which includes implementation of the landfill directive.
As hon. Members will know, the regulations set target levels for the recovery and recycling of packaging waste. They are designed to enable the United Kingdom to meet mandatory targets set by the European Community directive on packaging and packaging waste—50 per cent. for recovery and 25 per cent. for recycling—for 2001. When I announced the review of the regulations in June 1997, I made it clear that the resulting system should be expected to deliver the nation's objectives, including the directive targets for 2001, but that it must also be equitable, particularly in respect of the percentage activity obligations for each sector. The system must not allow competitive advantage to be taken by some businesses at the expense of others, and must ensure that all businesses need to plan the discharge of their obligations. The proposed amendments will contribute to achieving those objectives.
The mandatory 2001 targets are particularly challenging for the UK because of the low base from which we start. On 1998 figures, the UK's packaging waste recovery level was some 35 per cent., of which recycling provided 30 per cent. Although that represents an increase on our 1997 starting point, which was around 30 per cent. recovery, that level must be increased to 50 per cent. by mid-2001.
We want to work with business towards achieving those targets. That means continuing to consult business and to take account, as far as is possible, of its views. It also means avoiding the introduction of unnecessary regulatory provisions and taking whatever decisions are necessary to create a system capable of delivering the UK's mandatory targets.
Ensuring that consumers play a more active role is one way of increasing collection rates. I know that you, Mr. Cunningham, have a particular interest in that issue, and I have great respect for that. Consumers are not always sure about what they can do to help, so we must provide them with the necessary information. The directive also requires that, so the proposed regulations introduce provisions to inform consumers about a range of recycling issues, including their role in increasing recycling.
To comply with their obligations, businesses can join a compliance scheme or carry out their legal obligations themselves. In 1998, a number of individual compliers did not supply the required certificate of compliance. I understand that Environment Agency monitoring has resulted in a number of those now being produced, but some 90 businesses have still failed to comply with their obligations. They will be pursued in the courts.
It is only fair to those who are playing their part that we should make it clear that there is no easy route to compliance under the regulations. That is the clear message that has been emphasised to me by the Advisory Committee on Packaging and by individual businesses. The system underlying the regulations relies on producers sharing the burden of recycling, and success will be dependent on all taking part who should take part.
The increased agency registration fee in 2000 is designed to ensure that the problem of free-riding is addressed. In addition, businesses with a turnover of more than £5 million will be required to provide a compliance plan to the Environment Agency, or, in Scotland, to the Scottish Environmental Protection Agency, showing that they have a convincing plan for discharging their legal obligations. As requested by industry, this places individual compliers on a more equitable footing with those in schemes, and is designed to ensure that all obligated parties contribute to the development of the infrastructure that will be needed to meet the directive targets.
The Government also propose to require the agencies to publish their monitoring programmes and to provide that the agencies are not hindered in their attempts to monitor possible free-riders. These measures should ensure a fairer system, which will deter free-riders more successfully than before.
A further change proposed by the Advisory Committee on Packaging is the reduction in the ``percentage activity obligation'' used by obligated convertors, or packaging manufacturers, to calculate their tonnage recovery and recycling obligations, and the increase by one point each in the obligation of packer fillers and sellers. The Committee also recommended that an independent cross-sectoral audit of compliance costs be carried out. I strongly support that proposal and the audit will be carried out as soon as possible.
The Government want—despite the complications that hon. Members may perceive as they listen to me—as simple a regulatory system as is compatible with delivering the directive targets. That objective will not be easy to achieve. We therefore propose to remove from the regulations the wholesaler obligation, in which wholesale businesses took on the selling obligation of small retail customers. We also propose to remove the data form, which will now be issued by the environment agencies and will provide more guidance and assistance than was possible in a statutory instrument. Additionally, from 1 March 2000, we shall remove the competition scrutiny regime for compliance schemes seeking registration.
The Government also propose to raise the 2000 turnover threshold from £1 million to £2 million, thereby excluding an estimated 9,000 smaller businesses from the regulations. Despite the apparent complications, the UK appears to have the least costly system in Europe by quite a margin. For example, the cost of implementing the directive can be two to three times more expensive in Germany than in the UK, the relevant figures being approximately £600 million and £1.8 billion.
The regulations will ensure the maximum amount of recycling and give the UK the greatest chance to meet its mandatory targets in 2001. As I explained, we have excluded additional numbers of businesses from the regulations, we have minimised the burden on business and, where we can, we have removed provisions from the regulations.
The regulatory system will enable obligated businesses to meet targets in 2001, allow the UK to meet its mandatory directed targets and allow it to do so in a manner that is, in our view, as efficient and cost-effective as possible. On that basis, I commend the regulations to the Committee.
Mr. Damian Green (Ashford): I have declared my interest in the Register, although it of course has no bearing on my remarks.
I welcome the Minister's explanation of the regulations, but I have various questions for him which I hope that he will answer when he sums up. I shall try to be brief because I am sure that many Committee members want to contribute.
We share the Minister's concern about producer responsibility, which we accept is necessary to reduce waste and to increase the amount of recycling. We also accept that well structured schemes are needed to carry out the proposals. I am sure that the Minister is aware of the concerns that have been expressed by those who will be affected by the regulations.
The first and most important concern involves cost. The Minister attempted to explain how the proposed system was especially cost-effective in comparison with Germany, although I note that he quoted a gross rather than a per company figure. His explanation cannot disguise the fact that the regulations will involve an increase of 27 per cent. in fees for registering producers and schemes. The Committee is entitled to ask why such a steep increase is necessary.
I accept what the Minister said about the Environment Agency, which stated that it was harder for it to chase those who are free-riding on the system. However, the fact that that job is more difficult than the agency initially expected is not an excuse for putting up the prices to those in the private sector whom the agency regulates. The people who are being regulated no doubt have to absorb unexpected cost increases as they go about their business. Uniquely for Government regulators, the agency can say, ``Life is a bit more difficult than we expected when we started, so we shall increase our fees by 27 per cent.'' Many of those who will be affected by the cost increases feel that rhetoric about a business-friendly Government rings hollow when they are faced with such problems. The Minister admitted that such problems stem from the behaviour not of those who are happily complying with the rules but of those few people who try to evade the rules. In that situation, it is sensible for the Government to seek to minimise the additional costs and burdens that they place on business.
On a separate issue, the Minister will be aware that the question whether individual compliance is a soft option lies at the heart of much of the debate on the subject. Can the Minister clarify whether he thinks that that is so? During his introductory remarks he said that he intends that it should not be the case. I therefore assume that he believes that under the current system, registering individually instead of registering for one of the collective systems is a soft option. Does he think that that is jeopardising the country's ability to meet the 2001 targets? As he rightly said, those targets are challenging, and it would be interesting to discover, at this stage of our progress towards them, if he fears that we shall not be able to meet them. Given that possibility, perhaps tinkering with the percentage activity obligations between the various sectors is not the most important focus of the regulations.
As the Minister will be aware, some industry groups are disappointed that the quarterly requirement for packaging recovery note reconciliation does not feature in the regulations, despite having been part of the consultation process. I can see that the arguments are finely balanced, because one would not want to disadvantage small operators. However, the Minister did not specifically address the problem in his opening remarks, and I hope that he will do so when he sums up.
It is not clear how the regulations will encourage the necessary increase in this country's recovery and reprocessing infrastructure. Many of those in the industry who genuinely seek to help us to meet our obligations under the directive say that the lack of a big enough infrastructure for the recovery and reprocessing of waste is one of the main obstacles to achieving that. Indeed, many of them say that the infrastructure is currently being reduced rather than increased—in other words, capacity is going down rather than up. Does the Minister accept that analysis? If so, what action are the Government taking to rectify the problem?
Does the Minister believe that the regulations provide enough long-term stability to enable the kind of long-term planning that the reprocessing industry requires to bring about a growth in the reprocessing and recycling infrastructure? Without such long-term planning, many people believe that the Minister is whistling in the wind if he believes that we shall meet our targets. That situation causes many individual problems, perhaps the most long-lasting of which is that of local authority involvement. I understand that the Local Government Association is recommending that local authorities do not get involved unless they can ensure long-term contracts of a type that simply are not available under the current arrangements. If local authorities will not get involved, it is extremely unlikely that the national targets will be met in the way that we would all hope them to be met. In many cases, the underlying problem is the lack of any end-use markets for the recyclates that are produced. If those are not present, the targets that the regulations are intended to bring about will not be met. Will the Minister give us his views on that?
People in many industries feel that the Minister should be bringing together industry, Government and the regulators to develop an agreed view of packaging flows around the whole packaging chain and the steps that are required to meet the 2001 targets. The success of the regulations will be judged by whether we reach those targets. While Conservative Members genuinely wish the Minister well in that endeavour, several legitimate doubts remain about whether these regulations, and others that he has laid before Parliament, will be sufficient to meet the targets. I should be grateful if he would respond to the points that I have raised.