Fifth Standing Committee on Delegated Legislation
Wednesday 29 November 2000
[Mr. Bill O'Brien in the Chair]
Draft Producer Responsibility Obligations (Packaging Waste) (Amendment) (England and Wales) Regulations 2000
The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Mr. Chris Mullin): I beg to move,
That the Committee has considered the draft Producer Responsibility Obligations (Packaging Waste) (Amendment) (England and Wales) Regulations 2000.
In 1999, when these regulations were last reviewed, my right hon. Friend the Minister for the Environment explained that while recovery and recycling targets for 1999-2000 would be announced immediately, he wanted to keep under review the targets for 2001, in order to assess what they should be in light of further work on packaging data and returns for 1999. That has been done, and the proposed targets for 2001 are 56 per cent. recovery and 18 per cent. material-specific recycling of packaging waste. Those targets are expected to deliver recovery of about 4.7 million tonnes of packaging waste in 2001.
The packaging regulations form part of the Government's broader environmental objectives, but the regulations contribute in particular to more sustainable consumption and more prudent use of natural resources and are central to the Government's waste strategy. If we can improve the United Kingdom's performance on waste minimisation, re-use, recovery and especially recycling, we can contribute to improving the quality of life in the UK.
As the Committee will know, the regulations set target levels of recovery and recycling of packaging waste that are designed to enable the UK to meet the mandatory targets in the European Union directive on packaging and packaging waste next year50 per cent. recovery, 25 per cent. recycling and 15 per cent. recycling for each packaging material. The proposed targets of 56 per cent. recovery and 18 per cent. material-specific recycling replace targets of 52 per cent. and 16 per cent. respectively, which were originally planned for 2001. A domestic recovery target of 56 per cent. is expected to result in recovery of 51 per cent., while the directive target is 50 per cent. It is only prudent to provide a small safety margin to allow for error and minor changes in reporting. We estimate that the safety margin of 1 per cent.it amounts to about 96,000 tonnesshould be sufficient, provided that the underlying data and assumptions are broadly correct.
In 1999, the UK's packaging waste recovery was 38 per cent., of which recycling was approximately 33 per cent. Those levels are expected to be higher in 2000, and it is important to note that the UK already meets the directive's recycling target of 25 per cent. However, the overall recovery target is especially challenging for the UK
Sitting suspended for a Division in the House.
Mr. Mullin: As I was saying, the overall recovery target is particularly challenging for the United Kingdom because of the low base from which we started. We acknowledge that the increase in targets for 2001 is steep. However, the need for such an increase now builds on the approach to interim targets taken in 1997. At that time, the clear message from industry was that there should be a slow and gradual build up towards meeting the 2001 targets, so that the necessary infrastructure could be developed. However, in 1998 the Government decided that that approach would not adequately prepare the United Kingdom to meet the 2001 targets. Following the review of the regulations, therefore, higher targets for 1999 and 2000 were announced.
In retrospect, it is clear that the original very gradual approach was not the best way in which to provide the momentum needed to produce a steady increase in recovery and recycling, and avoid the need for a steep increase in activity in the final year. We are now left with no alternative but to increase the targets to the level necessary to meet the requirements of the EU directive. However, it should be noted, particularly by those who comment that there is inadequate infrastructure to meet the 2001 targets, that the impact of the target increases is mitigated by a reduction in the estimate of the total amount of packaging flowing into the United Kingdom waste stream. The earlier estimate of 10 million tonnes falls to an estimated 9.3 million tonnes in 2001 in the estimates provided by the materials organisations. In practical terms, that means that the amount of recovery that the infrastructure needs to be able to deliver in 2001 has fallen from 5.1 million tonnes to 4.6 million tonnes.
At the same time, we have received comments from industry that there is an excess of reprocessing capacity, which has kept packaging waste recovery notePRNprices depressed. The most direct method of influencing PRN prices and introducing a better balance between PRN supply and demand is to increase the recovery and recycling targets. The increases in targets that the Government propose for next year are expected to tighten the market and produce an increase in prices. That should, in turn, lead to an increase in the resources available for investment in new collection and reprocessing infrastructure.
A consequence of the increase in targets is the need to collect and reprocess increasing amounts of packaging waste from the household waste stream. That means developing relationships between industry and local authorities, so that both can benefit. The Government have put in place a favourable environment for that co-operation to take place. As stated in the waste strategy, local authorities will for the first time be subject to statutory recycling targets. The performance standards are being supported through extra funding from the spending review, with ring-fenced funding of £140 million dedicated to local authority waste and recyclingby no means the only extra money being made available for that purpose. Some £220 million is available for local authority waste management projects through the private finance initiative. The Government are also providing significant fundsalmost £30 million has been committed so farfor a waste and resources action plan. That planotherwise known as WRAPwill overcome market barriers to the re-use and recycling of waste.
The WRAP project will be important to those involved in meeting packaging waste recycling targets, as the development of end-use markets has from the outset been seen as a necessary step in the drive to meet the targets under the packaging regulations. Packaging compliance schemes will have an especially important role to play in the process; some are already working closely with local authorities.
The regulations have been designed to be transparent, to treat different business groups as equitably as possible and to meet the objectives of the directive. The system underlying the regulations relies on producers sharing the burden of recycling and success is dependent on all taking part who should take part. It is only fair to those who are playing their part in increasing packaging waste recycling to make it clear that the Government and the Environment Agency will continue to take the necessary steps to highlight the fact that non-compliance is unacceptable.
Hon. Members will see that, in amending the statutory instrument before them, the Government propose to change the mechanism according to which the registration fee paid each year by members of the compliance schemes is determined. We propose that, from January next year, an annual flat registration fee of £460 should be paid by each compliance scheme member, regardless of the size of the scheme. That will replace the sliding scale mechanism, according to which, the higher the number of members in the scheme, the lower the fee. The flat fee more accurately reflects the enforcing authorities' monitoring costs and takes account of the fact that most compliance scheme members perceive the present system to be unfair and anti-competitive. There is greater merit in a registration fee based on an equal-for-all principle, which will provide for competition between schemes on the grounds of performance and operational efficiency, rather than a regulatory fee differential.
Mr. Damian Green (Ashford): I am grateful to the Minister for his full and cogent explanation of the thinking behind the two significant changes made by the regulations. However, his explanation gives rise to several important questions. I would characterise the tone of his remarks as descriptive of a system that needs some tweaking but is fundamentally working well. I am not sure whether anyone actually affected by the packaging waste regulations, either at the industry or the processing end, would describe that system in that way. Deep-seated problems exist, which the changes in the regulations may even exacerbate. In the long run, Governments may have to take a more radical look at the problems caused by the system.
Mr. Mullin: The scheme is that broadly established by the hon. Gentleman's Government.
Mr. Green: I am aware of that. However, in a Committee such as this we should be able to have an honest debate about the problems that have emerged from the scheme. When it was set up a few years ago, it was a revolutionary and unique system. We are all in favour of increased recovery and recycling of packaging waste, and the system is an innovative way in which to achieve that. As time goes on, though, it has become increasingly apparent that it needs radical changes, but those proposed here are not they.
A new problem introduced by the regulationsand this is the first detailed issue that I hope that the Minister can addressis that, as he knows, they were originally designed as a market-based way of encouraging those involved in producing this packaging waste to reduce it. However, we are seeing an increasingly non-market-based solution. I agree with the Minister that the flat fee will be extremely welcome, particularly among smaller reprocessors, and it may well be more sensible than the present system. However, it is impossible to deny that that removes a significant market-based element from the system. If the Government establish by fiat the fee that a reprocessing company can impose, it will be hard to argue that this remains a market-based system.
Similarly, the Minster said that he wanted the regulations to drive up the cost of the PRNs. Again, it is hard to argue that this is a market-based system, given that the Government are interfering with prices at every stage of the process. The Minister has already moved towards some quite significant changes, but not within a coherent framework. He is trying to stick with one framework, while applying methods that would be more appropriate to another. In doing so, he may be storing up problems for those involved in the system in future.
Will the Minister say whether the increase in the targets is realistic for the industry? Given that you wear other hats, Mr. O'Brien, you will be interested to know whether the packaging industry can reach the targets easily in the time allowed. The Minister said that the estimate of tonnage has been reduced. Can he say how accurate those estimates have proved in the past, and whether they are falling for the good reason that people are generating less waste? Is some factor causing the reduction? He also said that there is too much reprocessing capacity. How will those changes contribute to an equilibrium between the on-stream reprocessing capacity and what will be needed over time?
The Minister said that the regulations are intended to bring more people into the system. What is his current estimate of the number of free riders who are evading the regulations, particularly among the smaller companies that have recently been brought into the scheme? There may be hundreds, possibly thousands, of companies that do not know that they are covered by the regulations, and are not subscribing to an approved scheme.
Finally, can the Minister give a general assessment of the future of the whole system, in light of some of the complaints that he surely receives? I have a copy of a letter, addressed to the Minister's predecessor, from someone who runs a shopping centre in Cornwall. In complaining about the system, he stated:
The Regulations target the wrong sector in the chain (retailers like ourselves), impose a massive burden upon us in compliance and achieve very little indeedproof of this being our company that turns over in excess of £100 million per annum, purchased PRNs to a value of just £2,850 last year.
Clearly, that person, who is heavily involved in the system, feels that it is unsatisfactory. Can the Minister offer general reassurance to such retailers, who obviously feel that the whole system is failing?