Examination of Witness (Questions 200
- 219)
TUESDAY 26 MARCH 2002
MR PETER
JONES
Mr Borrow
200. From your last couple of comments I get
the distinct impression that your company is somewhat reluctant
to make an investment decision in terms of the plant.
(Mr Jones) There is no way we are going to invest
in a plant under the current circumstances, because we have no
guarantee. We are delighted now that we have standards that are
issued, but these will not be effective for maybe another month
and even then we have no guarantee on our own experience that
the organisational structure in the Agency will guarantee a level
playing field on enforcement.
201. Your criticism initially was about the
delays within the DTI and DEFRA and DEFRA's predecessor in agreeing
what the regulations meant?
(Mr Jones) Sure.
202. Since we have been aware of what the regulations
mean, your criticism now is whether or not the Agency that is
responsible for enforcing the regulations can do so in a competent
way which allows your company as a waste management and disposal
company to operate properly in the market place?
(Mr Jones) Yes, in terms of the regulatory framework.
The third dimension is on the financing. There are grave issues
on how this is funded.
Mr Martlew
203. Biffa used to collect our bins in my constituency
and their performance is not half as good as yours, but you lost
the contract.
(Mr Jones) It happens.
204. On a technical point, we are talking about
the foam. There are two-thirds the amount of CFCs in the foam
as there is in the coolant. Does it get into the atmosphere the
same or is it kept in the foam?
(Mr Jones) Historically, before all this came along,
the foams tended to go through car fragmentation plants which
are very large, rotating drums with ball mills. You have very
large balls and flails inside these rotating drums and the foam
is basically pulverised. If you imagine the foam enlarged, it
is like a whole series of balloons and as those balloons pop the
gases are emitted as it is crushed. The whole point of car fragmentation
plants is that you take an 800 or 900 kilo object, a car, and
you beat the living daylights out of it into tiny fragments and
pass them over magnets. You are left with the foam in a material
called flock or fluff which is very tiny and the gas is squeezed
out physically. In the new plants, the best standards which are
envisaged by these process are that all this happens but it is
in a plant specifically designed for fridges, either physically
or through thermochemical processes, and the fridge is dealt with
in a contained atmosphere. There are no emissions to the atmosphere.
205. In a situation where the fridge goes to
landfill, you have taken the coolant out; what happens to the
gas and the foam then? Is it going to stay in the landfill?
(Mr Jones) Very few fridges went to landfill. If you
stuck them in a hole in the ground or in a warehouse indefinitely,
yes, the foams would stay there just as they do in your kitchen.
It is only when you start physically beating the thing to bits.
206. The coolant goes straight into the atmosphere;
the CFCs in the foam, if you left them in landfill, would stay
in the ground or get released when being destroyed?
(Mr Jones) Yes. Because ferrous scrap had value, they
were a useful adjunct to the cash flow of car fragmentation plants
and they tended to go through that route. As a result, most of
the 1,500 tonnes of CFCs each year went up into the sky, although
some of it would have been recovered by draining out. The liquid
would have been recovered in a number of local authority civic
amenity sites.
207. Originally, you started to look at this
as a business opportunity and you got the translation or whatever.
You have now decided that it is not a business opportunity and
Biffa is not going to build one of these plants even though some
of your competitors are. Is that correct?
(Mr Jones) Yes. We are working in partnership with
European Metals Recycling, which has about 60 per cent of the
United Kingdom's ferrous scrap market. They are investing in the
technology but my latest information is that they have substantially
scaled down the number of plants that they are planning to invest
in because they, like us, have growing uncertainty as to whether
or not they are going to get an economic return.
208. It is a question of risk really?
(Mr Jones) It is entirely about risk.
209. Can we come to the costs of disposal? Who
do you think should bear the costs of this in the long term?
(Mr Jones) We have maintained for six or seven years
now that the most just, strategic way of approaching not just
fridges but all of these consumer goods in the environment, whether
it is tyres, electronics and electrical goods, pesticides, household
hazardous goods, is that the cost of end life management for these
products that are now deemed to be polluting should be incorporated
in their selling price at the front end of the process. Having
said that, we have also suggested that manufacturers would think
that is about as sensible as turkeys voting for Christmas. We
have lobbied hard with DEFRA and the DTI and the Treasury for
suggesting that these costs cannot suddenly be dumped on industry
out of the blue and that there should be some pre-agreed mechanism
where the government helps those industries to transfer that cost
in gradual stages. The mathematics of that for fridges is that
the value of United Kingdom fridge sales in the economy at the
retail stage at the moment is about £700 million a year.
That is what the value of fridges is to the GDP. The VAT on that
is about £130 million. That is what the government gets from
the whole supply chain. The cost of having a fully auditable,
well run, transparent, end life retrieval system using state of
the art, probably European technology is between 50 and 60 million.
With that, I mean call centres, entries in Yellow Pages, guidance
notes for local authorities, payment to local authorities. We
are talking about a ten per cent increase in the price of fridges.
The decision in this whole process between DEFRA, the DTI and
the Treasury is do we react on a back foot basis, as has been
happening, and just throw money to local authorities, give them
the 50 million and say, "Get on and manage it as best you
can" to about 480 different bodies; or do you instead marshal
that money and say to the manufacturers, "I will give you
that money but I will chop it down by 10 or 15 per cent progressively.
You sort the problem out and from 1 January you come up with your
solution. I will make sure, as government, that that system is
overseen by the Office of Fair Trading, that it is seen to be
subject to open and fair tender."
210. You know the waste disposal industry very
well. You have been referring to cowboys, where they will take
a landfill site, fill it full of rubbish and toxic waste at that,
and then go into liquidation. If the consumer pays at the beginning,
how can they be assured that when the fridge, in this case, has
to be disposed of in 10 or 15 years' time the company that had
the money in the beginning is still in existence?
(Mr Jones) You make it immediate. It would be perfectly
feasible to make all fridge manufacturers liable from 1 October
and to say to them, "We agree that the cost of processing
fridges from 1 October next is £20 per fridge, so we will
allow you to drive through a £20 increase in the cost of
fridges through the retail supply chain."
211. Where does that £20 go?
(Mr Jones) That would have to be held in a sinking
fund.
212. Basically, what we are talking about in
reality is government imposing another tax.
(Mr Jones) These are taxes that are coming from Europe.
In my submission, I suggested that the total cost of the looming,
extant European legislation for electronic goods, packaging regulations
and so on is somehow going to cost this country about £4
billion to £8 billion a year. At the moment, going back to
the wood for the trees parallel, nobody is having this strategic
debate as to how those costs are going to get translated through
to us as private consumers.
213. I am still not convinced. When I buy that
£200 fridge and I pay the extra £20, I am not convinced
that that money will be there at the end of it unless that money
either goes into some sort of bond or is collected by government,
who then say at the end of the cycle, "We are responsible."
I just do not trust businesses to have the money at the end of
10 or 15 years. They may not be in existence.
(Mr Jones) You are quite right. It is not for me to
put forward a precise suggestion as to how it might operate but
it is a bit like the National Insurance fund, in a sense. Maybe
you would say, "As a politician, I do not agree that the
private sector would keep that money." The private sector
will say, "If it comes through as a tax, equally have we
the certainty that the government will fund the process?"
Maybe we need to look at it in the context of people like the
Waste Resources Action Plan and those sorts of organisations.
Without coming up with a solution, I am urging that there should
be the debate because if we have that debate I am absolutely convinced
we would end up with a body that would deal with it a heck of
a lot more successfully, transparently and efficiently than the
mess we have at the moment. Bearing in mind that we are going
to have another mess, is the government going to give local authorities
probably about 150 million to sort out end life cars until 2007
when the manufacturers become liable for the costs? Is it going
to do the same thing for tyres? Is this the due responsibility
for government to do these things? Maybe it is a buffer body in
the middle that is an environmental sinking fund to manage this
transition.
Chairman
214. The current way of disposing of fridges
is effectively self-financing because the retailers told us they
have this take away policy. They give them to people who are in
the recycling business and nobody seemingly has to pay a bill
for getting rid of fridges at the moment.
(Mr Jones) That was the case up until November.
215. Who do you think should pick up the bill
for these piles of fridges that are mounting up from November
and what about a resolution of the discussion you have just had
with Mr Martlew about who pays in the future? We seem to have
an immediate disposal problem for which we do not have any cash.
(Mr Jones) Correct. You have £6 million I believe
on offer in the form of short term subsidies but that £6
million, on our calculations, simply represents maybe about six
weeks' funding of this problem. If you look at the best technology
in line with these operating standards from the Environment Agency
together with the logistics costs, the truck movement costs, I
think people now recognise this is going to cost UK plc about
£40 million to £50 million a year. It is a good question:
who is going to pay? At the moment, there are people out there
getting £20 a fridge. I understand that our friend in Michael
Meacher's constituency is charging £20 a fridge. Where is
that money when the day of reckoning comes? That is why Mr Martlew's
comments are entirely justified if indeed he comes to knock on
the private sector door and somebody has thrown away the key.
It has happened on tyres, nappies and medical incontinence waste
in the past. That is why we believe that companies like us are
not in that game. I am not suggesting that those people in the
north west are either but I am suggesting that they should be
subject to the same levels of scrutiny that we would expect to
be subject to.
Patrick Hall
216. We seem to be in real difficulties, do
we not?
(Mr Jones) Yes.
217. In looking ahead at this issue and the
possibility that you will be involved commercially, have you had
discussions with waste management companies that are operating
elsewhere within the EU? If so, is not the picture a more coherent
one in some parts of the EU commercially as well as in terms of
government action?
(Mr Jones) Yes. We do operate in Belgium. Belgium
is interesting because it is a cockpit of both the commercial
as well as the technological processes that different European
countries use for the management of different products in the
waste system. The tendency over there is for local authorities
to be paid by the manufacturers for their share of the holding
operation in the end life management of processes. Indeed, it
is recognised that the end life price for the new product incorporates
the end life management cost. Every month that slips by, we are
ratcheting up £4 million of costs for somebody and most local
authorities think somebody is the Treasury. I am not sure whether
the Treasury would agree with that but at the moment we have a
pool of fridges out there. Some local authorities have realised
that the people they have been giving them to are maybe not quite
able to give the assurance they would like about where their money
is going or what is going to happen. Some are shipping fridges
back to Germany. They are using the money. Again, I think I said
in my submission it is quite an erratic process because the funding
formula for the six million has been operated under the Barnett
formula, so it is quite random. It does not bear any relationship
to the way that fridges are necessarily being produced.
218. You have a company in Belgium but is your
trade association in contact with other players on the continent,
some of whom do not seem to be embroiled in the enormous difficulties
that we are discussing this afternoon? Is there better practice
that you are aware of and are researching?
(Mr Jones) Yes. The trade association is certainly
doing that on our behalf, not just in relation to fridges but
in relation to a whole raft of other things. In some countries,
those costs are charged through. If you look at the charging structures
for waste in Europe for domestic rate payers, generally, they
are three, four or five times higher than they are in this country:
£50 a year per household in this country for collection and
disposal of refuse. In Europe, you are talking about rates of
the order of £200 to £250, about £400 to £500,
so it is of an order of magnitude where consumers accept that
local authorities will manage that waste but also get paid for
it.
219. In terms of being prepared to implement
the regulations that we are talking about, there are different
standards across the EU, are there not? There are places like
Germany perhaps where there was already a high standard and maybe
then it was easy to implement the regulations. There are other
places, not just the United Kingdom, where there have not been
high standards and perhaps the regulations are causing problems
there as well. Are you able to look at that, to learn from it
and try and advocate better practice here?
(Mr Jones) Yes. It is part of the reason why we are
saddened that it has taken us a year of lost time because most
of the focus in that intervening period has been looking at technical
specifications. Very little time and effort has been spent on
looking at the funding implications, whether it is Mr Martlew's
fund held by the government or by a quango or a neutral body,
or whether it is administered purely through producer responsibility.
No in depth research has really been undertaken on a communal
basis. We have done our own work; our trade association is doing
some work, but when you look at the trade associations for fridges,
electronics or the automotive industry, it tends to be binocular
vision. They tend to be looking in the context of their own products.
Nobody is addressing this macro issue of how the United Kingdom
could benefit itself by reviewing these different European methods
of funding and coming up with our own integrated solution.
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