Memorandum submitted by the Association
of Distributive Environmental Bodies
INTRODUCTION—OVERVIEW
1. Whilst there are many important issues
relating to the future of waste management in the UK, the Association
will focus this submission on one key recent development. In the
November 2002 Pre-Budget Statement, the Chancellor announced that
two thirds of the funding currently going to the Landfill Tax
Credits Scheme (LTCS) would be redirected to the Department for
Environment, Food and Rural Affairs to fund a public sector spending
programme on sustainable waste management (SWM).
2. This fund (roughly £100 million
per annum) will be DEFRA's main additional source of funding for
its programmes to help the UK meet its targets under Waste Strategy
2000 and the Landfill Directive. However, whilst this is new money
to DEFRA, it is not additional funding for SWM—the equivalent
money and more was already focused on this area through the LTCS,
in line with previous Government direction. Indeed, the £100m
will be a reduction of the total funds going towards SWM, if the
Government is unable to match the LTCS's record on drawing in
third party funding.
3. It is to be decided by DEFRA, between
now and the beginning of April this year, what form of scheme
or schemes will be put in place. How capable the scheme(s) will
be in helping to deliver a stepchange in SWM will be a key factor
in the Government, and the UK as a whole, meeting its targets.
The LTCS's contribution to Sustainable Waste Management
4. The LTCS was established in 1996 to re-direct
a portion of the funds raised by the Landfill Tax towards Government
set environmental goals, via independent not-for-profit Environmental
Bodies. As the Scheme has matured, the majority of the funds (approximately
80%) have been allocated to Distributive Environmental Bodies
(DEBs) to award on to individual projects. These DEBs oversee
these schemes, evaluating and ensuring value for money, financial
probity and effectiveness.
5. Under a Government directive of May 2001,
the DEBs have directed over 65% of the funds raised under the
LTCS towards SWM projects.
6. The Scheme has proved successful in promoting
and managing effective projects in SWM, and in particular in raising
third party funds. The Scheme's status as private sector funding
has helped in this regard, allowing it to attract match funding.
Typically, overall LTCS projects funded by DEBs attract four times
their original funding in additional monies.
NEW DEFRA SPENDING
SCHEME
7. There are various public sector spending
schemes already in place, both at central Government level (eg
the Waste Resources Action Programme, WRAP) and at the Local Government
level. All of these have merits, but also drawbacks—the
new DEFRA scheme should not simply add to or replicate any of
these current programmes.
8. One of the great potential weaknesses
of the spending schemes currently in place is over research and
development. There are many local projects aimed at encouraging,
for instance, kerb side recycling. Work needs to continue on developing
economically viable uses of the material gathered—creating
economically sustainable markets is the only way to promote long
term, self-sustaining, recycling.
9. Due to Government regulations preventing
the LTCS investing in actual recycling projects, the LTCS has
had to focus its resources on R&D and pilot projects. Hence
there is a danger that if the replacement DEFRA scheme does not
address these areas particularly, this key element will be severely
under funded. A similar situation may relate to educational SWM
projects.
FUTURE ROLE
OF DEBS
IN ACHIEVING
SUSTAINABLE WASTE
TARGETS
10. Under the LTCS, the DEBs have developed
into a highly effective network of fund distributors and project
managers in the environmental and SWM fields. Administrative costs
of the DEBs (prior to the Government's changes) averaged around
5%. Given that this network has matured and developed over the
last six years, it would make sense for the new scheme to be able
to utilise the expertise and experience of the independent not-for-profit
bodies that wish to continue with such projects.
11. It should be possible for DEBs (along
with all other appropriate organisations) to bid for funds for
projects fulfilling the Government's priorities.
12. An example of the important work DEBs
have done is FORWARRD—the Forum for Waste & Resources
Research and Development. FORWARRD is a not-for-profit body established
and funded by the leading DEBs. FORWARRD aims to provide a national
focus for the discussion and definition of a broad strategic and
prioritised framework for waste related research programmes. It
will set minimum standards for meeting participant need in its
delivery and assist in effective dissemination of research output.
This co-ordination has been missing in UK efforts in this area,
and is vital to achieving success in the future. With the recent
changes to the LTCS the future of FORWARRD is now unclear. However,
its Board would be prepared to see its funding and control become
part of a Government Department and integrated into the overall
SWM strategy and resources. Further details on FORWARRD are attached
at the end of this submission.
13. Valuable expertise and systems have
been developed by the DEBs on SWM issues—it would be a retrograde
step if these resources were lost. This would be the consequence
of the DEBs only being allowed to operate in the reformed LTCS—which
has only one third of the previous funding levels and is not empowered
to fund SWM projects.
14. No one doubts that other bodies, both
public and private, have valuable contributions to make, but where
DEBs are able to provide a better system for delivering SWM projects,
it would not make sense for the new scheme to be unable to make
use of their capabilities.
CONCLUSIONS—SUGGESTIONS
15. The Government's scheme must be able
to draw in as much third party funding as possible—as with
the LTCS before it.
16. The priority for spending should be
R&D for to have a SWM strategy that does not include R&D
would not make sense
17. The scheme should make use of all those
bodies able to contribute and not be restricted to purely public
sector bodies which would reduce the scheme's ability to deliver
on the Government's targets and likely increase costs.
APPENDICES—BACKGROUND
INFORMATION
ADEB
18. The Association of Distributive Environmental
Bodies brings together the larger, independent Distributive Environmental
Bodies (DEBs). Its members are responsible for the initial distribution
of approximately 80% of all tax credits generated by the LTCS
in the United Kingdom, and almost without exception take the responsibility
for ensuring compliance with LTCS regulations of the projects
that they assist. Most DEBs have sponsoring landfill operators
which look to them to provide a good service and independent decisions
on the applications made to them for assistance.
19. The Association's role is to promote
best practice within the LTCS and to engage in stakeholder dialogue
on behalf of its members as a group where appropriate.
FORWARRD
20. FORWARRD was established to provide
a forum for organisations, individuals and waste professionals
to contribute to achieving a national focus for the discussion
and definition of a broad strategic framework for waste related
research programmes. It identifies and develops synergies and
enhances the output, applicability and relevance of secondary
resource use, waste management research and development initiatives.
21. FORWARRD is managed through an independent,
not-for-profit, company limited by guarantee which has EB status
under the Landfill Tax Credit Scheme. Having established its administrative
base, the Forum is building up its membership and developing an
active programme of work.
22. The Forum debates issues, investigates
new developments, instigates initiatives and manages projects
which have a direct relevance to its purpose. It sources funding,
appoints project managers and reviews performance and outputs
against agreed targets and objectives. It engages stakeholders
and disseminates the results of its work widely.
23. FORWARRD was established at the instigation
of ADEB and is funded by members of the Association.
Criticisms of the LTCS
24. It has been said that one of the prime
reasons for the changes to be made to the LTCS on 1 April are
the criticisms of the Scheme made by the Public Accounts Committee
and other bodies some time ago. From correspondence, discussions
and published records it is fair to point out that some of the
criticisms have been based on misunderstandings and misinformation
about the LTCS. Some of the comments made and the responses they
have elicited are as follows:
(a) That the LTCS has not achieved a
step change in SWM. The Association believes this was a quite
unrealistic assumption if in fact it was ever made. The original
objectives of the LTCS were, firstly to offset the adverse impact
of landfill operations on neighbouring communities and environments;
and secondly to reduce input to landfill. The assumption was unfair
as the LTCS has had less than one tenth of the resources conservatively
estimated to be facing local authorities in meeting the recycling
targets set out in Waste Strategy 2000. Under the LTCS regulations
recycling projects per se cannot be funded, only pilot
schemes. Until May, 2001, no directives or emphasis on SWM had
been provided by the Government. The Government's directive in
May 2001 that 65% of the LTCS's resources be allocated to SWM
and recycling was not only met by the DEBs and indeed the LTCS,
but the target was actually exceeded.
(b) It was said that the LTCS lacked
accountability. DEBs are accountable to independent boards
of directors, subject to independent audits and many of them to
inspections by the Charities Commission. They are of course subject
to audit and compliance checks by Entrust, the regulatory body.
(c) It was said that the LTCS lacked
transparency. Whereas sponsoring landfill operators can give
guidance to DEBs as to the types of project they wish to see supported,
they leave to their sponsored DEBs the decisions as to which projects
actually receive support. LTCS Regulations debar Local Authorities
or landfill operators from controlling DEBs.
(d) Concern was expressed about unspent
reserves within DEBs. Such reserves occur for several reasons.
Firstly, up to two years are allowed before credits have to be
committed to projects. Secondly it often takes time to get projects
in to a state where they can be commenced and this is one area
where the DEBs' appraisal and VFM processes come into play and
not infrequently, their project management skills too. Thirdly,
where funds are not allocated they earn interest that is ploughed
back into the LTCS so nothing is lost.
(e) It has been said that in earlier
days LTCS did not support enough SWM and recycling projects.
In the earlier days, many rather pointless projects were received
and rejected by DEBs as they provided neither useful outputs or
VFM. DEBs' appraisal processes weeded out these projects.
(f) There has been reference to a mythological
number of church roofs that the LTCS is said to have supported.
There has been little appreciation of the hundreds of innovative,
facilitating SWM projects that have been supported, many of which
have been beneficial in working towards the attainment of recycling
targets facing the UK and would not have started without the help
of the LTCS.
(g) It has been said that the LTCS did
not provide value for money. DEBs' management costs to income
ratios range from between 4% in the case of larger organisations
to nine or possibly 10% in the smaller units. It is understood
that these costs compare more than favourably with schemes operated
by Government Departments and agencies. Under the arrangements
from 1 April, cost-to-income ratios will be forced upwards through
reduced income before it is possible to down-size operations in
order to reduce costs again.
(h) The LTCS worked on a pan-UK basis,
as it was based on Treasury taxation scheme. The new public sector
SWM schemes will have to be split between the four nations. The
operation of four different schemes in England, Scotland, Wales
and Northern Ireland will increase management costs and reduce
the potential for a coordinated, singular impact to be made on
the drive to attain the recycling targets.
Association of Distributive Environmental Bodies
14 March 2003
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