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20 Mar 2003 : Column 1160—continued
Dr. Alan Whitehead (Southampton, Test): I warmly support and endorse the Bill. Unlike the hon. Member for Mid-Bedfordshire (Mr. Sayeed), I do not believe that the Bill should deal with everything. Indeed, I congratulate my right hon. Friend the Minister for the Environment on ensuring that time was obtained for the Bill in this Session. If the Bill had dealt with everything, several Sessions would have passed before all the various inquiries had reported and we actually had a Bill. Time is of the essence in taking action to reduce the amount of waste going to landfill.
Some people claim that the Bill has been introduced only to implement the EU landfill directive. Some hon. Members have suggested that during the debate. It is certainly a Bill to implement the EU landfill directive, but it is substantially more than that. Essentially the directive is a series of targets with penalties. It is clearly desirable to meet those targets, but the key question that we have to ask ourselves is how we do that.
Targets in UK waste management have a habit of not being met. The hon. Member for Aylesbury (Mr. Lidington) noted that Governments of both colours have failed to get their targeting spot on, and that is true. The environment White Paper of 1990 set a target of 25 per cent. recycling by 2000. That target was re-emphasised in the 1995 strategy, "Making Waste Work", but it was not met. The 1999 document, "A Way with Waste", recognised that and set a new target of recycling or composting 17 per cent. of household waste by 2003–04. The performance and innovation unit report states that that is unlikely to be met as performance in 2001 was under 12 per cent. The target of 25 per cent. has now re-emerged, this time for 2005–06. The PIU report states that, given current progress, that will be very difficult to achieve. So we need more than targets, and the Bill strongly achieves that.
It is vital to tackle landfill. Hon. Members have referred to the fact that we are the country in Europe that commits by far the largest amount of our domestic waste to landfill. We are running out of holes—not only in Bedfordshire, but in the country as a whole. Methane escapes from landfill in a form that is 21 times as potent a greenhouse gas as carbon dioxide. It is, above all, a lazy way in which to dispose of waste. It buries millions of tonnes of material that could be used or recycled. It is absolutely right that it is right at the bottom of the waste hierarchy.
The mechanism in the Bill essentially does two things. It caps the total amount of waste going to landfill and provides a mechanism whereby it can be reduced in line with targets. It sets up a trading scheme so that local authorities that have exceeded their targets can earn income by trading permits with local authorities that have not reached their targets. As we have heard, there are mechanisms that allow local authorities to plan ahead by banking their credits or permits. Altogether, that creates a mechanism to track and to achieve targets that has real bite.
I have two questions about the effect of that mechanism. In order to answer those questions, the Bill, important though it is, must be accompanied by other measures, possibly in a legislative form. The first question relates to the relationship between waste collection authorities—district councils—and waste
disposal authorities: counties, unitary councils, metropolitan borough councils or consortiums of various authorities. Mets and unitaries are both collection and disposal authorities. At present, waste disposal authorities are required to dispose of whatever waste collection authorities give them for that purpose. There is no clear mechanism that requires waste to be supplied in a form that enables waste disposal authorities to manage it in a way that facilitates diversion from landfill, although many better waste collection authorities already do that.My right hon. Friend the Minister referred to a partial mechanism to resolve that issue in the Bill. I must admit that I tend towards the option suggested by my hon. Friend the Member for Stroud (Mr. Drew)—that waste collection and waste disposal authorities should move together. Nevertheless, there are mechanisms that can substantially resolve the problem. My hon. Friend the Member for Lewisham, Deptford (Joan Ruddock), who is not in her place, addressed that in her private Member's Bill, which was recently given an unopposed Second Reading. The Bill requires waste collection authorities to provide waste in a suitable form. I hope that the Government will give the Bill a fair wind through Committee.
My second question is more fundamental. It relates to the overall effect of the mechanism in the Bill on the actions of local authorities and the extent to which the outcome of those actions will bring about the required result. There is, of course, the initial problem of the quantum of the mechanism—that is, the extent to which the trading mechanism will secure the overall shape of the amount of waste that goes to landfill in the intended way. The problem, of course, is exacerbated by the annual increase in waste arising. Hon. Members have already mentioned that it is increasing by 3 per cent. per annum. The effect is that although the percentage of waste going into landfill is reducing, the total amount of waste going into landfill continues to increase.
The mechanism assumes that local authorities act rationally—that they take positive actions to avert penalties that might arise from exceeding their targets, or, in the longer term, cause them to have to go into the market for permits to mitigate their position. A perverse incentive exists already for local authorities in the structure of the landfill levy. Every time that the gate price for landfill increases, local authorities pay more, which comes out of the environmental, protective and cultural services budget, which, in this instance, as the hon. Member for Lewes (Norman Baker) mentioned, is allocated within the overall budget for waste disposal. Of course, that is the same budget that funds revenue measures to divert waste from landfill. Therefore, the more that is charged, the less likely, in theory, that local authorities will be able to provide the revenue support to set up the mechanisms for waste diversion.
I was pleased that, in the pre-Budget statement, the Treasury announced a new method of dealing with the landfill tax. A large part of the tax forgone will be put into precisely those measures of diversion—large waste management diversion, reuse and recycling projects—which partly overcome the perverse incentive. The mechanism does not, however, provide a clear way of dealing with market imbalance within local authorities.
In that situation, acting rationally, more local authorities are chasing permits than are supplying them. The assumed corrective is that the cost of doing that, or the penalties involved in non-compliance, will make local authorities act. That is by no means certain, however, because without the capital finance available to invest, a relatively long-term revenue hit may be an acceptable way of dealing with the situation.There is another way of dealing with the situation, which is to secure capital means through diverting waste from landfill that does not cost capital to the local authority. The revenue hit can be taken and the waste diverted at the same time. That is the PFI route: entering into a deal with a private company to build the waste management plant. The problem, however, is that deals involving digestion, waste diversion through sorting or arrangements involving creating markets for recycled materials are complex, incremental and provide uncertain returns for the private companies involved. Acting as a rational authority, to tackle the problem with certainty and to know that a guaranteed impact will made over a period—for example, to hit the targets set a number of years in advance by the Department under the Bill—something far more certain will be needed. That, of course, is incineration.
I do not decry incineration because it poisons the atmosphere. Modern incineration plants, by and large, do not do so. There is, of course, resistance to their siting by local residents, often understandably, but they are a relatively clean method of waste disposal, if we discount for a moment the increase in CO2 emissions arising from widespread waste burning. Nor do I claim that incineration has no place in the waste hierarchy: it does, and there are items of waste for which the best outcome is incineration.
My concern is different, and it follows from the logic that I have just set out. Those who decide to go for incineration will want to get the most incineration for their money. They will therefore contract for the largest incineration plant that they can get. A 400,000 tonne plant, for example, is only three times as costly as a 100,000 tonne plant. We can see the effect of that on the development of incineration plants already commissioned or agreed. On 7 November, I asked the Department about incineration plants already under way. On the basis of the written replies to my questions, 11 of the 14 plants listed are over 100,000 tonnes and six are over 200,000 tonnes. It will be essential to attract the investment of a private company to build and run a larger incinerator, as that is the only way to make the impact required with the money available. The company will want to get a return on its investment.
For example, a company would not want to start running a large incinerator that was agreed with a local authority only to find eight years down the line that policy had changed and it was stuck with a huge redundant plant. It would want to strike a long-term deal over 25 or 30 years. Part of the deal would involve knowing that it would have feedstock for the incinerator because an incinerator without waste to incinerate is not much good. The company will, therefore, strike a deal for a guaranteed waste stream, which is the same waste stream that a local authority is supposed to be diverting to recycling.
The Department of Trade and Industry has made it easier to manage the waste stream into incinerators by exempting the putrescible element from the climate change levy, which means that energy produced from incinerated waste is more competitive. That means that incinerators become less viable generators of heat and power if they receive less recyclable and compostable waste. If local authorities are engaged in such a process, they will logically reach a point when their success at diverting waste and dealing with putrescibles starves large incinerators of their feedstock. They would then incur penalties as a result of their contracts which could be in excess of the penalties that they would have incurred by not meeting their landfill targets in the first place.
I imagine that the response to that line of logic is that it is precisely that: a line of logic with no salience in the real world—the sort of stuff that a former academic might come out with. I decided to test the logic empirically. I asked two parliamentary questions in response to which the Department set out several developments that demonstrate the preference for large incinerators on long contracts. The answers also revealed explicitly that the Department does not know what local authorities are planning for the future. However, it is generally assumed that a relatively small percentage of domestic waste is disposed of using incineration and that that will continue in the future. I wondered how viable that assumption was so I wrote to all waste management authorities to ask their medium and long-term plans for waste management. The results were a little unsettling, to say the least. I have not entirely completed the work, and I am indebted to Hratche Koundarjian for his assistance in collating the results obtained from the 130 councils that provided substantive replies.
Of those councils, 45—35 per cent.—are contracted to private incinerator firms individually or as part of a consortium. Thirty-six councils, which is 28 per cent., could start using incinerators by 2018, while only 49 councils have no plans to use incineration. Nineteen of the 36 councils considering incineration have relatively short-term plans, 12 have medium-term plans and five have long-term plans. The overall cumulative trend shows that 45 out of 130 councils are involved in incineration, which will become 64 by 2008, 76 by 2013 and 81 by 2018. Incineration will play far from a small role because local authorities may well make rational choices to make a substantial amount of incineration a key element of their waste disposal policy.
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