Examination of Witnesses (Questions 360-379)
RT HON MR MICHAEL MEACHER MP, MS SUE ELLIS AND MS MARIA NOLAN
MONDAY 15 APRIL 2002
Paddy Tipping
360. You told us that industry wanted certainty and you have told us twice that you did not want to gold-plate the Regulations.
(Mr Meacher) Yes.
361. Is it not a fact that the delays, and the fact is maybe they are not gold-plated, the cost of disposal is going to be pretty immense? Will you give us some figures? What are the total costs of getting rid of refrigerators?
(Mr Meacher) I entirely accept your premise, and this is one of the lessons which we believe need to be learned, we need to take a more proactive view if we can to see these things as a business opportunity and less of a business burden. I think that is one of the morals coming out of this episode. However, we are where we are and the answer to your question is that we have awarded £6 million through the RFG for the period up to the end of fiscal 2001 and I am committed to making a statement, which I hope will be very shortly, about further funding available. Until I am able to make that statement I am afraid I cannot get into detail. Our best estimate, in answer to your question, is that the cost to the UK this year might be somewhere around £40 million. That will decrease over time as plant is commissioned, more plant is commissioned. I have indicated, I think, the Environment Agency has had applications for three mobile plants and nine fixed plants. Not all of those may materialise but they are serious applications to the Agency in regard to licences and planning permission. I think the costs will decrease as competition becomes established. I think it will reduce too as more fridges that do not need treatment enter the waste stream because, of course, the industry moved away from the use of CFCs and HCFCs in the mid-1990s and, and this is very important which has not been mentioned so far, my very considerable concern to restore retailer take-back, if at all possible. That, plus the refurbishment of a proportion of take-back fridges, would certainly reduce the cost to the waste stream. With regard to the last issue, which is the only one probably in my power, I am very keen of course to ensure that take-back is restored. That does depend of course on the agreement of all the parties, it does depend of course on the question of financing, that is entirely understood, but I do believe from the several stakeholder meetings, at least the three or four I have chaired, that all parties are anxious for that to happen. At least 10 to 20 per cent of the take-back fridges we believe, on historical evidence, should be able to be refurbished and sold on and not put into the waste stream. I do believe the 40 million is a ceiling rather than a floor, and I am working on it.
362. You told us a minute ago that you had a high regard for Peter Jones at Biffa. Peter wrote to you on 30 July 2001 and he put the cost of new processing machinery per fridge at £30 and came to a total cost of £72 million. That is a good deal at variance with your £40 million although you did say your 40 million was for the current year only.
(Mr Meacher) Yes.
363. What about the total cost, to compare against Mr Jones' £72 million?
(Mr Meacher) First of all, Mr Jones, I repeat for whom I have regard, is nevertheless of course a member of Biffa and part of the waste industry, and you would not expect him to produce the lowest conceivable figure, you would expect him to produce a generous figure. I would dispute his figures and I believe ours are soundly based.
364. Tell me what your figures are. £40 million for this current year. What about the following years?
(Mr Meacher) That depends, of course, on how quickly the stockpile is cleared. Of course that depends on the amount of new investment and new plant which is put in place, and it also is highly relevant to the number of fridges which are exported. The evidence I have on exporting is that the Environment Agency has authorised the export of 95,000 fridges to Germany, of which about 3,000 have already been shipped, 10,000 are in the process of being shipped and there are applications received to ship a further 170,000. Those are quite substantial figures. Our belief is that if the level of investment in new plant materialises as we expect in line with the figures, and there are nine applications and some of those are much more certain than others, I would hope the stockpile could be cleared by the end of 2003.
365. What is the cost of storage to local authorities? What proportion of the 40 million is that?
(Mr Meacher) I do not want to go into details and I hope it will be understood, it obviously is sensitive, we have to discuss this of course with the LGA, and I would prefer to do that before we make an announcement. I think I am right in saying, I hope they would not disagree with this, that the £6 million we provided for the period from 1 January to 31 March 2002 is adequate for storage alone. But, of course, you have to add for all those a processing cost and we have been looking very carefully into that. I would rather not go into figures at this point.
366. Let me go into the figures. A three month cost of £6 million equates to a £24 million storage cost and that implies the mountain does not grow significantly more, does it not?
(Mr Meacher) Obviously three months at £6 million is £24 million for a year. As I say, I do not think you can just simply make a straight line assumption (a) because of the increasing level of exports (b) because if retail and take-back could be restarted, refurbishment and selling on will make a significant impact on that total and (c) there is another source of disposal which has not been widely used and that is incineration. There are two incineration plants, one in Ellesmere Port and one I think in Southampton.
367. The £6 million clearly is a direct result of the delays?
(Mr Meacher) The total cost of £40 million or whatever it turns out to be is a direct result of us not being able—I say "us" but I include the industry, all the stakeholders—to put provision in quickly enough to deal with this and have it ready before 1 January 2002, yes.
368. Have the local authorities had the £6 million yet?
(Mr Meacher) I am not sure if they have actually had it because we have just passed the fiscal year. If they have not actually had it yet, they will have it very, very shortly. It will be paid in the form of SSAs, that is the way they prefer it to be paid, and the Government rather shares their view that grant should be paid in that more flexible form.
369. Finally, you have stressed the take-back responsibility, clearly you think there is some responsibility on the retailers, can you tell us what you are doing to encourage that or what has been done to encourage that?
(Mr Meacher) The retailers organised their own take-back prior to November 2001 when they stopped it. They stopped it for two reasons. One was the lack of the export trade because, I have no idea of the figures but they clearly made a profit out of the export trade. Secondly, on the other side of the accounts, they were then having to incur a loss because of the increased cost of disposal. They said, perfectly reasonably, they could not continue without adequate treatment facilities becoming available. Now the facilities are coming on stream, the main barrier is the increased cost of disposal. We are trying to resolve this through recycling credits for processors, but of course the system has to be very carefully designed so as to not fall foul of state aid rules, to prevent any abuse of public monies, but we are, I hope and believe, very close to being able to come forward with a statement on that. I have done everything I can to facilitate this re-starting. I have had meetings, three or four which I have chaired, and I have had private discussions with a number of them about blockages, what needed to be done. I believe they want to continue it but it has to be a system in place in which all the partners are playing their role and in which, let me be honest, the Government is providing sufficient money to oil the wheels.
370. So in conceptual terms, you believe there is a responsibility on the retailers to take back but you are trying to set up discussions where one company is not disadvantaged against another?
(Mr Meacher) Clearly if it were to be set up, all the companies would have to agree. I have no reason to doubt that they would all be willing to, I do not think there is a difference between them. On the question of whether I regard it as a responsibility, I think the retailers themselves would say that this was a facility that they offer to their customers, it is one of course which was beneficial to them because someone buying a fridge is only too pleased if the company says, "We will install it and take away your old one", so it helps sales, but I would not regard it as a responsibility, it is a commercial opportunity which they regret losing and which I am keen to see restored.
371. When do you hope it will start?
(Mr Meacher) As soon as I can get agreement to the system which in the end hinges on the question of money and being able to make a statement about the availability of funds for next year, and I repeat I hope we will be able to do that fairly soon.
372. Is it the same timescale as having plant available to dispose of fridges "into the spring"? Is it a flexible season?
(Mr Meacher) I hope not and I believe not.
Diana Organ
373. In answer to a question from Mr Tipping you mentioned the money that Government has made available to the local authorities who are now bearing the burden of the storage. One of the big complaints when the LGA came in front of this Sub-Committee was that local authorities had not had the money, the £6 million which was to cover the period from January to March. I believe, having spoken to my local authority, they have not had the money and we are now into the financial year April 2002. When you say there will be more money to help with storage, when do you envisage that local authorities are going to get anything, because they are hard-strapped for extra cash to cover the cost of this extra storage? You will appreciate there is an extra cost on them because they have had to be using other monies to support storage. Do you have any plans for when the local authorities are going to get their first tranche of money and when will they get the second tranche of money?
(Mr Meacher) My view has always been—my understanding has always been—that they would be paid at the end of the fiscal year. Now I agree, we are just past that. Maybe the best way I can answer the question is to write to the Committee and set out exactly those dates. I am sure we can answer the first question. I can only answer the second question when I am in a position to make a broader statement.
Chairman
374. If you are going to do that, that would be very helpful. Could you include an element of the dynamic in it, because we have at the moment a large number of unprocessed refrigerators in various states in various locations around the country. Some authorities will have incurred debt already in dealing with that. What we really need is a cashflow to show how they will be recompensed for what they have done so far, how they will be recompensed in the future for so long as they have responsibility for the expenses, and then perhaps in formulaic terms how you envisage the system working in the future. At some point, if the take-back system kicks in again, it ought, if your optimistic scenario is to come true, to begin to be self-financing, but I am not clear whether it will be self-financing in terms of what you can then use, the recycled part of the refrigeration equipment, in the new world of controlling the emittable substances from them; that is not clear to me. Is it self-financing or will somebody have to pay?
(Mr Meacher) No, it is certainly not self-financing. I was not suggesting that. Something of the order of half of all fridges—the industry may have a more accurate figure—were subject to take-back before November 2001, so that is, I think, the most that we could expect to re-institute. Of that, perhaps up to 20 per cent may be able to be used by the waste management industry, refurbished and sold on, so we are talking about probably at best 20 per cent of 50 per cent. The only point that I was making was that that does significantly reduce the waste stream and reduce the cost, but it is certainly nowhere near self-financing; there will be a continuing significant cost for one year at least, and there will be some cost, I am almost certain, into next year, but it may be much lower.
375. You have given me the impression that perhaps after a year or two the problem begins to diminish. Who is going to pay the difference between what you can get back and what the bill is?
(Mr Meacher) Until the stockpile is cleared, Government is going to have to pay. I do not think it is reasonable to expect any other party to pay. When we come to look for the key period after the stockpile has been cleared, which I am saying I am hoping to achieve by the end of 2003, obviously we then have to consider what are the appropriate arrangements beyond that point. I cannot add to what I have said today, but obviously that is an important consideration.
376. Do you, in general terms, envisage that in future, to meet the demands for recycling, consumers are going to have to pay something up-front to somebody to cover the eventual costs of the disposal of a whole raft of items which are going to be covered by the points which colleagues will raise later in our questions?
(Mr Meacher) Obviously that is for consideration. The fact is that under the WEEE Directive that is how that is going to be financed. There are proposals under the end-of-life vehicles which are along similar lines, and of course the question is how that should be financed once, as I say, the stockpile is cleared in respect of fridges. Of course, the WEEE Directive does kick in statutorily in 2005, therefore the question you are quite properly asking me, Chairman, concerns the period of 2004 and part of 2005. It is not a long period, but how we meet obligations financially in that period has yet to be decided.
Mr Martlew
377. Coming back to the point that some European countries are actually implementing it, some are not, was there any debate and discussion amongst Ministers on a way forward, or did each individual country just take its own decision? Whom did you consult before you took the decision?
(Mr Meacher) There was, of course, discussion amongst Member States which very largely reflected their economic self-interest. The countries that had their own technology were very keen that there should be mandatory recovery of foam from domestic fridges right from the start, because they knew they could manage it and they knew they had a market for fridges from other countries. Then there were other countries like France and Finland who were saying that they needed to seek clarity about what was meant by "if practicable"; and, of course, there were countries—again France is part of this and some of the southern States—who simply did not want the Regulation to go through, did not want to take action. So there are different attitudes, but the fact is, I repeat, it is a Regulation, it is directly applicable from day one, and Member States that have not taken action face the consequences.
378. So did you have the evidence of what the other Member States were going to do, before you took the decision?
(Mr Meacher) I think we had a pretty good idea, yes.
379. So you knew that some were going to ignore it, some were going to implement it and we were going to have a stockpile of fridges?
(Mr Meacher) I would not say that we knew that some of them were going to ignore it. Indeed, I am quite surprised that some of those countries are allegedly ignoring it. I expect them to make more effort. We have been caught with the problem, we have done everything possible to meet it, and I expected them to do the same, but it appears some of them have not. As I say, the financial consequences in the end will be greater.
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