Select Committee on Environmental Audit Appendices to the Minutes of Evidence


Memorandum from Biffa

  Thank you for your invitation to submit evidence. Biffa Waste Services is the largest waste management company operating in the UK—it is the largest wholly British owned waste management company and can justifiably claim to be the most diverse in terms of its spread of interest in industrial/commercial and domestic collection, landfill, liquid waste stream and specialist hazardous waste management systems. The company has a turnover of £500 million at a current annualised rate and is also in the top three waste management companies operating in Belgium. We are a wholly owned subsidiary of Severn Trent Plc with over 110 operating centres throughout the UK. We handle 12 million tonnes of material which is treated, landfilled or recycled on behalf of our extensive customer base exceeding 58,000 in the public, commercial and industrial sectors.


  It is clear that environmental issues are now rising up the Treasury's agenda, to the point where a separate section is now justified as part of their budget planning process document. Nevertheless, our overall impression is that we are still in the foothills of understanding as far as the Treasury is concerned and that generally this document is something of a missed opportunity, given the recent manifestations - in terms of climate, health and planning issues. While seeking to be macro economic the document is in fact micro insofar as it tends to relate to specific threats as perceived by the Treasury. It is still difficult to detect that the Treasury sees resource use and pollution externalities as the warp to the weft of Great Britain's financial internality economy. There is sparse reference to the strategic rate of shift from taxing labour and capital to pollution and non renewable resource use.

  The environment appears as something that is not part of their perceived financial "planet"—it seems to sit like a moon orbiting them on the outside—a moon which was previously invisible to the naked eye but whose presence somehow has to be acknowledged on the basis of its very obviousness.

  (i)  In general terms the five key strands of the strategy document appear to have been written in neatly compartmentalised sections with little inter-relational cross reference. This seems typical of the approach one might expect from a financial accountant or mathematically trained economist. It reflects the rather mechanistic, input/output approach where outputs can be derived with reasonable accuracy based on past mathematical experience of the interaction between input factors and outcomes. The problem with environmental issues is that there is very little data, interaction between the various elements is little understood and there is no historic track record other than the suspicion that narrow, functionally driven approaches may work. Considering the first six key strands:

  (a)  Macro-economic stability. There is no mention of future investment implications in response to global warming challenges in terms of flood defence, the health costs of pollution and the inflationary pressures arising from the internalisation of externality pollution costs on specific supply chains or the structural impact on agriculture. The economic analysis is developed on the basis of conventional subsets—it would have been interesting to see a rather innovative approach whereby the identified costs of pollution burdens (such as flooding, contaminated land, Producer Responsibility, compliance costs, urban renewal, etc) were collated as a single entity together with a commentary on future trends in these areas on a combined basis in terms of future GDP impact.

  We could find no reference in the document as to whether there is any commitment to or acceptance of the notion of fiscal neutrality with regard to environmental taxation. As the level of environmental taxation in the economy continues to grow, some views in this area would have been useful - or at least an understanding as to how the increased financial burdens arising out of environmental taxation were to be redirected in the general economic spending plan. At corporate level we have analysed the impact of taxation in general to our business and our current figures suggest that 12.7 per cent of turnover is committed to environmental taxes in addition to 15 per cent of our turnover committed to other taxes which can be aggregated as "social and ethical". See page 66

  (b)  Productivity Challenge. Five key drivers are mentioned but there is no reference to resource productivity or how budgetary and fiscal instruments will be developed to foster resource efficiency.

  (c)  Employment. There is no environmental cross referencing in terms of the Treasury view of perceived threats to jobs which arise from the closure and export of polluting activities in the UK in response to the impact of regulatory, budgetary and fiscal instruments in terms of IPPC, Producer Responsibility, virgin input taxes and so forth.

  In our experience significant reductions in the pollution burden in the UK have arisen as a result of the transfer of pollution elsewhere in the world, either by the direct closure of facilities in this country (steel and plastic) or by the transfer of primary production activities which shift the direction of raw material resource flows on the planet (paper and agriculture).

  Conversely, there is no reference to the job creation opportunities arising in the new environmental economy. Most obviously those jobs arise at fairly low level in terms of initiatives associated with recycling but the Treasury do not appear to see the linkage between the way in which strong regulatory regimes attract new technology initiatives and manufacture of sophisticated process and control equipment in the water, gaseous and solid waste production phases. Again, our experience underlines the necessity to consider Norwegian gasification equipment, Italian and German landfill gas monitoring equipment, US logistics technology in terms of trucks and software and French or German process control equipment.

  We have, over many years of submissions to various Select Committees, made the point that environmental and regulatory regimes are dispersed between three areas of Government - the Environment Agency, the DETR and the Treasury. More than a dozen different types of instruments are now impacting across the board in industry but there is little coordination in terms of understanding their combined impact at the level of the firm, or specific industry sector. One would have expected the Treasury to begin thinking about this approach in terms of the development of their environmental strategy and the employment implications of the process on a sectoral basis (public as well as private).

  (d)  Fairness for Families. This section appears to be purely financial. There is little reference to those issues relating to fairness to families in terms of the consequences of global warming (flooding), pollution (in terms of diffused chemicals, airborne particulates and ground water protection), health, amenity (biodiversity) or quality of life (planning policy).

  There is reference to some of these in the "Protecting the Environment" section, but not in a linked up way. They appear to be presented as inevitable end pipe outcomes from a system which has to be regulated or priced up to reduce the scale of future impacts. A more comprehensive and holistic approach would have been welcome.

  References made (in terms of contaminated land and redundant housing) are one small part of a much wider canvas. In some cases there even appear to be dubious environmental claims being made—for instance that lower car fuel prices reduce car journeys or ULSP will reduce carbon dioxide emissions.

  (e)  Supply Chain Economics. There is little evidence of ideas for integrated supply chain (sector driven) packages of instruments through mechanisms which relate the impact of eco-taxation (externality cost) to the current (internality cost) turnover profiles of specific sectors. Such work would require much closer integration with the DETR and DTI. The impact of fiscal instruments on the aggregates sector is of a substantial order of magnitude in relation to the current market value when compared to that for tyres or electrical/electronic equipment and pharmaceuticals (marginal).

  It would have been useful to see an analysis of future Treasury strategy on environmental instruments to cope with these significant differences. The pollution cost and burden associated with agricultural practices, for instance, is probably in excess of its existing turnover value to the internalised economy. There is no macro economic framework suggested for data capture and assessment which could develop such approaches and the Treasury does not appear to have it on the agenda. This despite references by a leading insurance group that property costs of global warming would exceed global GDP by as early as 2065.

  (f)  The Environment. Landfill taxes are referred to in the document but only in general terms. In our experience landfill taxes need to be raised significantly if the objectives of improved end of pipe waste stream resource efficiency are to be met. Under the umbrella of the generalised data for landfill taxes there are also fundamental shifts occurring which reflect the way in which industry and commercial sectors are responding totally differently from local authorities. The net effect is that the local authority contribution to gross income streams from the landfill tax has risen from 40 per cent to over 60 per cent. A tax which merely involves circulation of money from one Government department to another does not seem to be too fruitful a long term exercise, yet the effectiveness of the tax depends on an interlinking relationship with those other departments in terms of regulatory control and the development of transparent data capture systems. If cooperation between those other departments does not exist then the tax will be less successful than it might have been.

  (ii)  There appears to be no emphatic statement that the thrust of fiscal and budgetary strategy in relation to the environment will be developed by product or service supply chains. In our view this needs to be said to send a clear signal to British industry. Thus far we have seen the development of end of pipe taxes (landfill tax and discharge consents), production taxes (IPPC and regulatory costs) and virgin input taxes (aggregates tax, carbon tax, Tradeable Permits etc). All of these are being developed via industrial and commercial supply chains yet households are significant polluters - particularly in terms of domestic energy, waste and transport. The statement is made that "polluters should face the true costs which their actions impose on society" yet there is little reference as to whether the Treasury believes that in the long term society should be taxed for pollution at the householder level. An unequivocal statement from the Treasury that these costs will be recovered through the pricing strategy of corporate UK Plc would send a clearer message to main board directors of those large companies.

  (iii)  There is significant emphasis on the "sticks" by which end of pipe emissions pollution will be controlled but there is no mention of the "carrots" which might be made available—particularly in terms of offsetting short term financial costs of developing Producer Responsibility and IPPC.

  (iv)  It would have been useful for the Treasury economists to lay out a clearer policy on an integrated approach to Tradeable Permit regimes. Our suspicion is that the Tradeable Permit framework should operate in a reasonably consistent manner regardless of the material stream, industry sector or product. At the moment we have Tradeable Permit issue rights in the hands of material reprocessors (the packaging industry), intermediate agents in waste management (county councils for municipal waste) and independent not for profit organisations/trusts (carbon).

  (v)  The logic of these tailored solutions to specific areas may be undeniable and (given the likelihood of more Tradeable Permit regimes) will act as a significant economic driver in the environmental area in years to come. An early explanation of the Treasury's view as to how these instruments will operate at the level of a single major firm or industry sector would be useful. The danger is that in 10 years or so major international corporates will be confronted with very complex and fundamentally different sets of Tradeable Permit systems which vary by region or material passing through their business. This would clearly not be in the interests of international competitiveness as far as UK Plc is concerned.

  (vi)  In relation to the landfill tax issues, I append relevant comments from a note to Stephen Timms of 23 November which expands further on the detail of the points referred to in relation to the landfill tax.

November 2000

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