Select Committee on Environment, Food and Rural Affairs Minutes of Evidence

Examination of Witnesses (Questions 120 - 139)



  120. Do you agree with the Local Government Association's assessment as to how long it might take to clear the fridge mountain because I suppose having seen some rather lurid film on the television of these things, you wonder what state those that are in the current mountain are going to be like when they come to be sorted out by this new equipment?
  (Mr Bellingham) We estimate arisings in the UK of two and a half million fridges a year. Each one of these big pieces of equipment can realistically process about 250,000 units a year, (although I have heard estimates of 300,000). In that case we need ten pieces of fixed kit in the UK before we break even. Once you exceed ten pieces of fixed kit you can then start working on the backlog but until you have ten pieces of kit the backlog is growing.

  121. So this problem could be here for quite a long time?
  (Mr Bellingham) If we do not stimulate sufficient investment.

Mr Lepper

  122. I want to ask a bit more about the lead authority scheme, but before I do that could I take you back to something that you said, Ms Smith, much earlier about correspondence with Customs & Excise about exports. Do I remember rightly that this confusion over whether the foam was covered by the Directive as well in terms of export was something that seemed to exist in the minds of Customs & Excise?
  (Ms Smith) No, no.

  123. It did not?
  (Ms Smith) I think it existed in everybody's eyes and then not. The initial letter we received on 21 November 2000 said that prospective exporters must be satisfied that the equipment contains no CFCs or other substances, and they should be aware that if they export a refrigerator the foam or refrigerant of which contains CFCs, they are in breach of Article 11. This was from the DETR Global Atmosphere Division. Customs & Excise are the police and they have to enforce what DETR tells them. The second letter from DETR seemed to withdraw the foam from the instruction. The third letter was one from Customs & Excise which said from January 2001 "the export of pre-1996 refrigeration equipment must have a declaration that all CFC refrigerant gases have been removed". At that point they were only advising us that the gas from the compressor had to be removed, they were not saying the foam had to be removed. That was a lesser instruction than the original instruction from DETR in November. The first instruction was take it all out, foam included, the two subsequent instructions did not go as far as that, they said, no, just take out the gases.

  124. Thank you. I wanted to clarify that in my own mind. You have heard what representatives of the LGA have said to us this afternoon about this lead authority scheme. It does not suggest that it is much of a runner, does it?
  (Ms Smith) They did say they are consulting on it.

  125. True.
  (Ms Smith) The truth is that at the end of the day we did it because we felt somebody has to come up with some ideas. We would not say this is the best solution in the world, however it was done in response to an initial proposal from DEFRA of a recycling credit scheme which would require every fridge to be returned categorised by its original local authority of origin, and we felt that that was not practical or achievable, either for us or our contractors because most of our distribution centres cover an area of eight or ten or however many local authorities and we would have to log every fridge by local authority keeping an administrative paper chain for it as would our contractors. So what we looked at was an existing scheme. There are existing waste disposal schemes and we tried to say could there not be a parallel to that.

  Chairman: Can I ask you to curtail your answer at that point. Colleagues may want to go and vote. I am sorry about this. This is one of the vagaries of doing business in the House of Commons.

  The Committee suspended from 6.24 pm to 6.35 pm for a division in the House.

   Chairman: I think part of Lesley Smith's replies may well have been okay for you but to the rest of us were drowned out. If you want to wind the clock back and go over a bit of the lost ground, I think it would be helpful.

Mr Lepper

  126. The response we heard today from the LGA representatives did not show a great deal of enthusiasm for the lead authority scheme. I think you were telling us why Dixons had proposed that scheme. Perhaps if you are going to recap, could you tell us whether it was a suggestion solely from Dixons or was it done, for instance, in conjunction with the British Retail Consortium or other retailers?
  (Ms Smith) It was with the British Retail Consortium and RETRA.

  127. The small retailers.
  (Ms Smith) The small retailers society and Comet reviewed the paper before we submitted it. That paper was a response to a paper which was produced by DEFRA in November and they produced a paper which outlined a third party recycling credit scheme which would pay credits to local authorities which they would in turn pay on to contractors. We or the contractors would have to link each fridge back to its local authority of origin under that scheme. There was quite a difficult audit trail. In response to that we worked out that if in an average year you have two and a half million fridges back, each fridge would need some sort of docket that would need to go through three different sets of people—the local authority, the contractor and us—and be linked back. We were not confident of a proper verification scheme that enabled local authorities to be sufficiently confident about where that fridge had come from in order to pay a credit. We could foresee a situation where if we had one local distribution centre that covered ten local authorities and it had fridges from Haringay, Hackney, Islington and Enfield, any one of those authorities might say, "We do not think it is 25 fridges, it was 25 from Enfield and 30 from Haringay", so we could foresee lots of logistical problems. We felt to try and eliminate the two and a half million bits of paper and a tracking system that we would look at existing models. There are existing models under the Local Government Act 2000 best value regime. Hampshire Council have an integrated waste management strategy where it covers 13 district councils and also there are waste disposal authorities in East London, North London, Western Riverside, Greater Manchester and Merseyside, and what we would like to do is to think of a scheme that replicated that as closely as possible just to make the whole thing simple and easy to manage. None of us claim to be expert in local government management so that is why we brought it to the meeting chaired by Michael Meacher at which local authorities and retailers and waste contractors were present really as a paper for discussion. None of us would say that this is the only route but it seemed helpful to contribute a route.

  128. When was that meeting?
  (Ms Smith) That was on 24 January.

  129. What is in it for the lead local authority, could you clarify that, assuming after consultation there does seems to be some enthusiasm or this might be an inducement to local authorities?
  (Ms Smith) Our thought is that in any system where you are going to be buying and procuring systems often you get a discount for volume, so they are incentivised to buy at volume and that is going to give them some sort of discount for cash. They would be drawing down funds from Central Government based on the volume of fridges that were processed but actually they are then incentivised to collect as many fridges as possible because in terms of reducing the costs of their contracts and potentially, if they wish to do so, making money out of it they do that by maximising the number of fridges that they collect. So in terms of efficiency, it incentivises both them and the contractor to collect as many fridges as possible. Also, if you are doing that on a collective basis where you are drawing down money centrally and you are being paid by volume rather than by origin of the fridge then it does not matter, we have not got to verify whether they come from this street or that street because it is the number of units that you process that matters.


  130. In terms of the resurrection of some kind of disposal system, if you like, to take the place of the current undisposed mountain that is growing, is the only model that you think will work one where you have this lead authority network to then feed the volume of fridges into recyclers, reprocessors, who have made the investment in the model plant, or could you see the old system being resurrected, albeit with fewer players, where you would still carry on taking the refrigerators to the private recyclers and disposers?
  (Mr Bellingham) I think the issue with the existing infrastructure is that there is no one player large enough to lay down a contract for the 300,000 fridges that someone would need before they would invest £2.5 million. That is another benefit of the lead authority scheme, it gives you that buying power, if you like, to place a contract to give you confidence to go out and buy a big fridge munching machine.
  (Ms Smith) It also minimises the costs because at the moment those players who are trying to bring in these fridge munching machines, for want of a better expression, are going around picking off individual local authorities and if local authorities have not got the confidence, they do not know how much weight they will have, they will place very short-term contracts. Because they are all placing their contracts individually, fairly short-term, the unit cost goes up, as these contractors are having to charge, leaving aside as to why they are doing it, a higher unit cost in order to guarantee they are going to get payback, whereas if they were dealing with one big authority who knew they had a bulk stream and also that authority was incentivising the collectors to deliver volume to them then the whole exercise becomes cheaper right the way through because you have got volume being pulled through.

Patrick Hall

  131. From what you know of all this business so far, what do you think the key lessons to be learned are from the point of view of all the main players?
  (Ms Smith) We should all have been around the table a lot earlier. We felt that our concerns were not taken seriously from the very word go. Not only our concerns but our contractors and those of the industry were not taken seriously from the word go. I have absolutely no doubt that that situation is very different today and I think there are better relationships between Government and industry and Government and local authorities around this issue as a result. It is very unfortunate it happened this way but I think these relationships have improved a great deal and the dialogue has improved a great deal.

  132. Do you think that that situation will help us avoid problems when the Waste Electrical and Electronic Equipment Directive comes into force?
  (Ms Smith) I think there is certainly a far greater understanding now how the industry and the infrastructure works. At the beginning of this process neither local authorities nor Government understood that we were taking so many fridges out of the waste stream on their behalf. Local authorities basically said "we do this" and because the fridges that we handled were invisible as far as they were concerned they did not realise what the size of the problem was. I think people are now much more aware of the structure of the industry and how we work together.

  133. Do you think we can avoid the problems of the forthcoming Directive?
  (Ms Smith) Yes.

Mr Martlew

  134. This is a question I thought perhaps Austin would have asked. What we have got now is the EU banning the export of fridges throughout Europe to the Third World cutting out a cheap source of refrigerators for Africa. Did anybody think of that? Obviously we talked to the Commission but did anybody think about the consequences of that before this Directive came in?
  (Ms Smith) You say "did anybody", you mean—

  135. Did anybody? Did the EU? It is obvious from your evidence that the Government did not know it was taking place but I presume that we are not the only country that does this. What we seem to be doing is helping to save the ozone layer at the expense of Africa, to some extent.
  (Ms Smith) I think you are right. I think you get into quite big picture questions there, to be honest. I hesitate to say that we are just humble shopkeepers but we tend to look at these things when they leap up and affect us, to be completely honest with you. I think it is true that a lot of the provision that was made for African countries through this has now been lost and I have no doubt that is an unintended consequence of the regulation.

  136. You do not think that anybody sitting in Brussels was looking at the big picture?
  (Ms Williams) I think from the letters we had from DETR and the ones we have given you copies of, it does say that they perhaps were not aware of the full extent of the export or volume of products that were exported. They did recognise that come about October time 2000 but whether Brussels have noticed it, I do not know, we have not really been too involved.

  137. It certainly did not come up in our discussions with them when we were talking to them in Brussels.
  (Mr Bellingham) I cannot say about the start of the regulations but back in September 2001 I went over to Brussels myself and I met with members of the European Commission, I met with Peter Horrocks and Tom Batchelor, and I did raise the issue of the social need in Africa for a cheap source of refrigeration. We did make the point that the cost of refurbished refrigeration is a fraction of that for new. I cannot remember the exact figures, I am afraid, but we calculated it in terms of a year's salary for a typical man out there. We did make the point but it was relayed back to me that the issues were with the ozone layer and the problem was that when you dispose of this product in Africa it will not go through one of these environmentally friendly fridge munching machines, and therefore the ban on exports was to remain.
  (Ms Smith) It goes back to the discussion on the Montreal Protocol, to be honest, rather than the EU because it was at that stage that the decision was taken that you had to prevent developed countries offloading their responsibilities for CFCs on undeveloped countries and it all flows from that discussion as far as we can see.

  138. Has this affected the sale of refrigerators in this country at all?
  (Ms Smith) It is quite early to tell because we only withdrew the service in November and fridges by and large are distress purchases, you buy one when your old fridge runs out. Despite our best efforts to make it a fashion item, by and large people buy them when their old fridge runs out. Also what happens in January is you have the January Sales, so whereas fridge sales may have been depressed they will have been stimulated again by the fact that we slash prices in January. It is quite difficult to tell also because we have had the situation where with low interest rates there have been more house moves and as a result of that white good sales have been up in the last year. We would not expect to see the results until the peak time for sales which is in June, July, August when it is hot weather. That is when we may see a more serious effect.

  139. You should be able to compare them with last year's figures for the same months. What does that show?
  (Ms Smith) We have year on year figures. In this January fridge sales, as a segment of white goods, was lower than in the previous year.

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