Examination of Witnesses (Questions 263-279)
MR DIRK
HAZELL, MR
MICHAEL MORRIS
AND MR
MICHAEL GREEN
WEDNESDAY 29 JANUARY 2003
Chairman
263. Welcome to the Committee, Mr Hazell and
your colleagues. Thank you very much indeed for your memorandum.
Is there anything you would like to add to that briefly before
we begin to cross-examine you?
(Mr Hazell) No, there is not. Would it
help if I introduced us?
264. Yes, indeed.
(Mr Hazell) My name is Dirk Hazell. I am the chief
executive of the Environment Services Association. On your left
is Mr Michael Green, who is the managing director of G&P Batteries
Ltd, which is an SME based in Wolverhampton. His company is the
largest collector of waste batteries and prepares more than 99
% of the batteries he collects from various waste streams for
recycling. He is a member of ESA's Materials, Recovery and Supply
Committee. On my other side is Mr Michael Morris who is a senior
solicitor based in the Sheffield office of Nabarro Nathanson,
which has a prominent practice in the waste management sector.
Mr Morris is a member of ESA's Resource Management and Treatment
Committee.
Chairman: Welcome to both of you. Thank you
for coming along this afternoon; we are grateful.
Mr Ainsworth
265. Is it reasonable to say that unlike most
industries in this country you have vested financial interests
in more regulation in order to enable your market to develop?
(Mr Hazell) We certainly have an interest in a high
standard of consistent regulation. Waste is almost the exact opposite
of capital in one sense, which is that capital will flow wherever
it is allowed, around the world if it can, to wherever it achieves
the highest rate of return. Waste is a distress purchase and will
go to the cheapest outlet the law will allow. It is certainly
the case that in this country the driver for the development of
this sector is the legal framework which emanates from the European
Union, which is very prescriptive in terms of waste management
compared with the regime which has existed in this country. At
all levels, in terms of the basic law and in terms of what the
regulator itself receives, the answer to your question is "yes,
we do".
266. You heard the previous witnesses talking
about the way that once you get over certain targets for recycling
it begins to get incredibly expensive and to yield a smaller result
in terms of benefit to the environment. Do you share that view?
Presumably you do not mind if it gets terribly expensive because
you presumably benefit from the money which is spent by the taxpayer.
(Mr Hazell) Our industry takes the view that what
it is right to be decided as public policy should be decided by
those who are elected ultimately to whichever level of government
it is which is responsible for it. It is our job as an industry
to provide the solution. It is certainly the case that it would
not be right to think that the best environmental outcome is necessarily
to achieve all diversion from landfill by recycling, because there
are other inputs which have to go into materials when they are
recycled and you do get to a stage, for example, where the use
of energy simply does not justify recycling a particular substance
to a particular standard or quantity. The basic requirement in
the Landfill Directive is to pre-treat and to divert from landfill
and recycling is incredibly important, but the basic framework
is not a matter for us to decide.
267. When you talk about £1 billion which
you have said your industry would happily put in to this sector
tomorrow if you had the right regulatory structure, where would
that £1 billion be apportioned? To which forms of waste treatment
would you see it go?
(Mr Hazell) As of today, and it is rather frightening,
we do not know. We know, because the handful of companies which
are responsible for most of the turnover in this sector operate
in other Member States of the European Union, the type of ranges
which might be available if we go down the same paths those countries
have already followed. The infrastructure which goes into place
must follow the regulation and the great failing of regulation
in this country, (which in some ways is good: the Environment
Agency is good at making sure that the facilities are well run)
is that our regulators are extremely bad at directing waste into
infrastructure which has been provided. Indeed if you take the
hazardous waste stream, we are actually facing the scenario of
diminishing rather than increasing infrastructure, simply because
the regulatory structure is allowing hazardous waste to bypass
the infrastructure which is already provided. When we get regulatory
certainty, we know the standard to which specified waste streams
must be pre-treated and then you can put the infrastructure in
place.
268. I am fascinated to know where this figure
of £1 billion comes from. If you do not know how it is going
to be spent, for the reasons you perfectly reasonably set out,
how on earth do you know that it is £1 billion and how on
earth do you know that you would spend it?
(Mr Hazell) We know in very broad terms what it would
cost to achieve the European average rate of recovery for the
municipal waste stream. What we have said is that to fund that
waste stream you have to double from about £1.5 billion a
year to £3 billion a year for that waste stream. We know
in very broad terms from our members and competing technologies
they have on offer, that that is the amount which is needed to
fund that waste stream and up to £1 billion a year in infrastructure,
whatever particular formula this country chooses for compliance
with the Landfill Directive. The assumption of up to £1 billion
a year in infrastructure does assume compliance with the Landfill
Directive.
269. I am still not quite sure that I understand
how you would spend this money. If I may, I shall ask you a slightly
different question. We also heard from the previous witnesses
that there was incompatibility in terms of the way that waste
is defined between different European countries and the United
Kingdom. You make a point of saying how much better places like
Denmark and Austria are doing than we are, but do you accept the
point they were making that in fact we are talking chalk and cheese
here, we are not talking apples and apples?
(Mr Hazell) Certainly the international comparisons
of waste are barely worth your Committee looking at. Where the
British Government deserves the fullest credit—and this
was not brought out in the last evidence—is the basis on
which recycling is defined. That is one of two points. The British
Government, in its best value performance indicators, has gone
for an output, not an input based definition of recycling—at
least the British Government's figures, although they are always
going to be lower than some of our competitors are at the moment
because of that different basis of defining—has tried to
go for an environmentally legitimate definition of recycling and
that approach was vindicated in the Waste Statistics Regulation
which the European Union agreed at the end of 2002. Again, the
definition of waste is a matter for those responsible for public
policy to define. It is for you as political representatives to
form a view based on specialist advice which you get on what matters
have to be treated as waste and what matters it is safe not to
treat as waste. Our industry has to operate in a context of the
European Union definition of waste. That is what we do.
Gregory Barker
270. Does any of your figure of £1 billion
include an amount earmarked roughly speaking for investment in
new incinerators? If so, how much and how many?
(Mr Hazell) That is precisely why I did not answer
the last question with total precision. It is true, that if you
look at different forms of waste management there is a bit of
a trade-off between relatively labour intensive forms of waste
management, such as manual picking lines on the one hand and very
capital intensive forms of waste management and the traditional
large-Œscale incinerator is probably the best example of
that. Whatever happens, the country is going to need to invest
in a lot of infrastructure if we are going to comply with European
Union law. The Environment Agency says about 1,000 pieces of infrastructure.
We actually think it is a rather larger amount than that. Whichever
mix you get, you are looking at very substantial investment and
you can talk to an individual waste company like Biffa, which
was before you last week, which does not favour the incineration
route. They will come to a very similar global figure to companies
like Onyx or SITA which rely very heavily on incinerators. If
you, our political masters, tell us you do not want to have incinerators,
our members can provide alternatives. You will not get to compliance
with the Landfill Directive unless there is some form of extraction
of energy from some part of the waste stream. That is not to say
you have to have a particular route. At another meeting in this
building yesterday, the Minister of State made it very clear that
there is no firm commitment by anybody to a specified number of
facilities at a particular time. It is relatively permissive legislation
from that point of view.
271. As an association, you are obviously best
placed, knowing your members, to understand what the current anticipation
mix of projected build is. I am not trying to tie you to a particular
figure, but I am trying to get a feel for where it lies at the
moment.
(Mr Hazell) If I were speaking perhaps a little too
candidly, I would say that those who are responsible for the investment
decisions in this country, if we are not very careful, will actually
just look elsewhere for their business opportunities. This country
has taken such a long time to go such a little part of the way
down the journey of complying with an agenda which has been known
for several years, that with such low rates of return on invested
capital anyway for our members—it is not a profitable industry—it
is fair to say that some of the larger companies put us in the
third world bracket rather than the developed world bracket as
a market.
Mr Thomas
272. In your evidence to the Committee, one
of your key points is that the Government has failed to create
the necessary conditions or put in place a framework to deliver
the waste strategy 2000 in order to comply with the Landfill Directive.
DEFRA is the Government department which takes the lead on these
matters. Can you give us some examples of where those failings
have been?
(Mr Hazell) If you were to take any of the principal
levers under the direct control of government at the moment, none
of them is pointing towards the direction of compliance with the
Landfill Directive. The three principal ones are regulation, funding
and the general state of planning law.
273. Funding and planning are more Office of
the Deputy Prime Minister.
(Mr Hazell) There are three general levers which are
under the control of Government as a whole. If you are looking
to DEFRA, that is certainly regulation and to an extent it is
funding, although the Treasury is increasingly important on funding.
274. How do you, as the Environmental Services
Association, view the Strategy Unit's study itself? Do you see
that can deliver the objectives of the Landfill Directive if the
Government were to get its policies right on these three points
you mentioned?
(Mr Hazell) If the government were to act within about
the first quarter of this year on critical areas of policy, the
Strategy Unit might in retrospect be seen to have played a useful
part, yes.
275. In that context may I ask you about press
stories which have been circulating this week, for example one
in The Independent on 20 January? It said that DEFRA is
about to be punished for overspending in the foot-and-mouth crisis
and that civil servants are braced for spending reductions of
up to 14 % across the department. Does that fill you with encouragement
that they are going to address these issues in the first part
of this year?
(Mr Hazell) I am not encouraged by any reference to
the foot-and-mouth emergency because ESA played a central part
in helping the Government to deal with it and I know perfectly
well that our members were not particularly well reimbursed, contrary
to press publicity, for what was actually done. There has to be
a climate of certainty if this country is going to achieve compliance
with European law. Regulation is probably the single most important
component of that but funding the municipal waste stream is also
critical. BIFFA made this point very well last week, if I may
say so. It is not just a question of saying that a certain amount
is necessary. It is a question of making sure that it is a reasonably
co-ordinated amount of money which allows our industry to respond
in a reasonably sensible way. There does have to be a planned
structure and following on from one of the points which was made
in the last evidence, regional co-ordination would be helpful,
enhancing the role of the RTABs would be helpful. There is so
much which could obviously be done which is not being done and
as an audit committee you might wish to ask why it has not been
done because it is extraordinary that it has not.
276. Within the Government department itself
and perhaps particularly DEFRA, but it might be other departments,
do you as an association feel that there is sufficient expertise
in these matters to deliver the four strategies outlined in the
waste strategy? Or do you come across examples where you think
that any government department could be beefed up in terms of
knowledge of what you are trying to achieve as an industry and
what you are offering the Government in terms of investment, if
they made some key decisions?
(Mr Hazell) The investment will be forthcoming if
the right decisions are made; that is clear. Biffa made it very
clear last week that as a British company they are still very
eager to be strong players in their home market. If the conditions
are right, the investment will be forthcoming. There is a bit
of a debate about which government department should get the critical
mass. One of the problems is that it is spread about so many departments
and it is complicated further by devolution. Where DEFRA is very
strong is in terms of its relationship with local authorities.
Where the DTI is a bit stronger is the fact that it does have
a mandate to speak for industry as a whole and takes the lead
in the European Union in terms of negotiating producer responsibility.
If DEFRA were to get a single strengthened mandate, we would certainly
be hoping for a lot more high quality expertise focused on the
sector, but also the humility within DEFRA to learn from departments
like the Treasury and the DTI about how you interact with the
private sector. The Landfill Directive is not going to be delivered
without ESA's members, including my friend Mr Green.
277. I was just going to ask whether Mr Green
had any particular points on that. I believe as an SME you have
a direct relationship with the regulator.
(Mr Green) Very much so; yes.
278. Do you have anything you would like to
add to those comments?
(Mr Green) Yes. The Landfill Directive and other directives
are potentially very helpful to us because there is an awful lot
of material which is currently being landfilled, which is hazardous
material, which could be recycled. The only reason we cannot get
hold of that material is because the legislation is not in place
for that material to become available. It comes back to the point
which has been made earlier, that companies with waste tend to
take the least cost option. They do not necessarily think the
best environmental option and that unfortunately means that in
our particular case with batteries there are something like 25,000
tonnes of non lead acid batteries which end up in landfill every
year. This country manages to collect and recycle about 2 % of
the total available, the rest goes into landfill.
Ian Lucas
279. I thought Mr Hazell said something very
interesting when he said that waste will go to the cheapest outlet
the law will allow. The history of the landfill tax is very relevant
to that. Do you think the increases in the landfill tax indicated
by the Chancellor are going to be sufficiently steep to raise
the cost of landfill and make your business benefit?
(Mr Green) Of itself, I do not think so. The sort
of increases in landfill tax which are being talked about are
not enough to divert the sort of material I was just referring
to away from landfill. Unfortunately the recycling cost of that
material is higher than the level the landfill tax credit will
cover. There are other directives which are being talked about
in Europe which would help and the Batteries Directive in particular
is one. The Landfill Directive itself ought to help. In our interpretation
of the directive a lot of this material should not go into landfill,
but it is still going into landfill.
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