Oral evidence

Taken before the Environment, Food and Rural Affairs Committee:

Environmental Directives Sub-Committee on Tuesday 11 November 2003

Members present:

Mr David Drew

Mr Austin Mitchell

Joan Ruddock

Paddy Tipping

 

In the absence of the Chairman, Paddy Tipping was called to the Chair.

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Memorandum submitted by the Society of Manufacturers and Traders

Examination of Witnesses

Witnesses: MR PAUL EVERITT, Head of Policy and Economics, and MR STEVE FRANKLIN, Team Leader, Environment, Society of Motor Manufacturers and Traders, examined.

 

Q1  Paddy Tipping: I am delighted to welcome Paul Everitt, Head of Policy and Economics, and Steve Franklin, who is a team leader, both from the Society of Motor Manufacturers and Traders. Thanks for coming. As you know, this is the beginning of an inquiry into how the Government implements European environmental Directives, particularly the WEEE Directive and the End-of-Life Vehicles Directive. Maybe you could, to start the inquiry, just tell us what effect it is going to have on your members and whether there will be different effects on different members within your association.

Mr Everitt: Obviously we are most, I think, experienced and equipped to deal with the End-of-Life Vehicle Directive rather than the WEEE one. I think from our perspective the ELV Directive is perhaps one of the most challenging pieces of legislation that we in the automotive sector have had to deal with certainly in recent times. That is mainly because it affects a wide variety of our activities and operations, so it sets recyclability standards and design standards for new vehicles, it bans the use of certain hazardous materials and it requires us to start marking components. It requires us to produce dismantling information and documentation as well as obviously the take-back and recycling of all end-of-life vehicles, so it impacts on our operations very much from cradle to grave and introduces to us activities that we had not been involved with before now. If we look at the scale of impact, clearly it does vary greatly depending on the organisation concerned both in terms of the different size of organisation operating in the UK, but I guess the traditional view is that all vehicle manufacturers are these sort of global monoliths that operate in every part of the world and it is true that they do, but in each Member State and certainly in the UK the corporate structure is going to be very different. There are those which are the UK branches of these global organisations and there are others which are essentially independent companies that distribute certain brands.

 

Q2  Paddy Tipping: What is the specialist car maker?

Mr Everitt: Again that would be a slightly different category and one of the areas I was going to deal with. You have certain brands and obviously where the market share is relatively small there will be small independent companies. All they do essentially is they are the UK distributor for a particular brand and they are, if you like, much akin to an SME. In addition, you will have a whole series of small-volume vehicle manufacturers whose products are obviously of a very different order, the volumes they produce, et cetera, et cetera, so all of these will have perhaps a variety of different impacts. Now, clearly there has been a lot of attention focused on the take-back requirements and the fact clearly is that if you have had a market share which has fallen in recent times, then you are going to find yourself, if you like, picking up a large park of end-of-life vehicles compared with new vehicles you are actually selling. That has been problematic, but it is probably not the biggest issue and many of the issues that we are dealing with are organisational and administrative issues. As I say, the size of organisation and the back-up they will have varies greatly and it is the access to information and support on a lot of quite detailed and technical areas which in actual fact have been some of the most demanding issues.

 

Q3  Paddy Tipping: So in general terms the bigger the company, the better it is prepared?

Mr Everitt: It is the better they are likely to be prepared and the better able they are to deal with some of the issues that arise, yes.

 

Q4  Paddy Tipping: But surely manufacturers want to get in front of this, so a lot of it is about good design and making sure that your future designs are going to meet the requirements of the Directive? Is that right?

Mr Everitt: I would say that certainly the vehicle manufacturers have been working on improving the recyclability of their products and design for recycling for many years and yes, from that perspective, if you like, the new product end of the market is one with which we are familiar with dealing because the new regulations apply to new products and new models, so there is a process for handling those issues which is much more secure and much more tried and tested. I think it is the areas into which this Directive strays where there is no experience, particularly dealing with the sort of retrospective elements of the Directive, that created more significant problems.

 

Q5  Paddy Tipping: We are going to spend a lot of time with you about the older end of the market in a minute or two, but let me just ask you this before we move on: you are looking to the future, you are preparing new designs, you are building in value for money, so there must be a cost in that, but who is going to bear the cost? Is it the manufacturers or would it be passed on to the consumer, the customer?

Mr Franklin: As Paul said about the design for recycling, one of the other things that the Directive has said is that we have got to eliminate certain materials from the vehicle and that is where some of these costs have accumulated in vast measure. First of all, if you have the sum of the parts of a vehicle, they now have to be expanded for everyone to know exactly what is in them, so it has had to go right down to the suppliers which once again does start to impact on SMEs, so you go down from tier one to two and three. The supply base has then got to feed that information back up, saying whether or not these substances are in the product, so there is a big cost implication there. In fact a whole database has been set up, an international materials database, to try and monitor that and it has not been easy. There are still materials that have not been successfully eliminated and Annex 2 of the Directive has extended the time period for those to be eliminated, so there are problems and massive costs from that. In the UK we estimate it is something like £500 million for that type of implementation, such as changing paint shops where there is lead paint. One example for a car company is that even if their lifespan is very reduced, there is only another year or so to go, they have still got to change components and in the case of fuel tanks, which has affected quite a few people, it is a major cost. Therefore, we arrived at a figure of something like £500 million. You ask the question as to whether that will be passed on to the customer, it is a very competitive market out there and cars are not cost plus ----

 

Q6  Paddy Tipping: That is a no then, is it?

Mr Franklin: It will creep through, but basically it will be a cost reduction exercise through the piece and that will not automatically just go on the price of the car.

 

Q7  Mr Mitchell: It is surely a yes. It will end up as a yes, but that is not my question. The question is this: here you are incurring these costs for cars produced for the European market, but you also export cars on to the international market, so is that going to be a competitive disadvantage to you? Other manufacturers in Japan who export on to the world market, not Europe, and America will not be bearing a similar cost increase and adding it on to the price of their cars. Are these requirements going to be a competitive disadvantage on the international market?

Mr Franklin: No, they will not, the reason being of course that Japan, Korea and even the States are importing into Europe, so they have to comply with the Directive anyway, so it probably will not put us at a competitive disadvantage in that respect. It is fair to say that most vehicle manufacturers around the world are responding to the design requirements of the European End-of-Life Vehicle Directive.

 

Q8  Mr Mitchell: But they are not meeting necessarily the same requirements for their market.

Mr Franklin: There will be small differences, but they will still need to comply in Europe, so they will have to take those measures. Japan has its own ELV legislation. America does not, but it is tracking ours very closely because it knows that if it wants to sell into this market, as it does in Germany, for instance, where it is quite a reasonable market, then it has to comply with the EU Directive. In fairness, some of these engineering costs are shared. We manufacture cars globally and across Europe, so some of those development costs and engineering costs are shared over not just the UK market.

 

Q9  Joan Ruddock: I want to go on to your members' responsibilities post-2007 and look at the problems of disposal. I think all MPs are very conscious of how many cars are disposed of on our streets all of the time and I really want to look at how you anticipate that end-of-life vehicles are going to be disposed of post-2007. What sort of mechanisms have your members thought of in terms of funding that disposal?

Mr Everitt: Obviously we are still awaiting the Government's consultation on proposals for post-2007. Our understanding is that it will be based on what is termed an 'own-mark' model which basically means that each individual vehicle manufacturer will take responsibility for the vehicles that it has placed on to the market and we anticipate that will be done through each individual vehicle manufacturer contracting with a network of authorised treatment facilities so that last owners can take their vehicles back to one of those contracted facilities so that they can have the car disposed of free of charge.

 

Q10  Joan Ruddock: How convenient do you think the placing of those facilities is going to be?

Mr Everitt: Again it is a key issue and one I guess we are still in dispute on and in discussion with the DTI on. I think from a vehicle manufacturer's point of view, we support an own-mark approach and we are meeting our responsibilities to do it in a fair, reasonable and equitable manner. What we have said is that because of the nature of the market, there are some mass- volume vehicle manufacturers who have many hundreds of thousands of end-of-life vehicles that will turn up each and every year and the kind of network that they would be expecting to put in place will be very different from, let's say, a vehicle manufacture who has either a very small percentage of the market or has a very niche product which means that there are likely to be relatively few vehicles turning up every year. What that means is that we have to have a system that is reasonably flexible. Equally, as we have mentioned earlier on, market shares are shifting, so we would expect to see or we would require the network and its coverage to be flexible so that we can expand as market shares grow and diminish as is necessary. I think our undertaking is that we will be putting facilities or contracting facilities in the places where those end-of-life vehicles are arising and our undertaking is to make them as accessible as possible. What we have said as well is that in certain areas of the country where population densities are very low and where there are not very many end-of-life vehicles arising, we would like to come up with what we have termed 'more flexible' approaches which may be a number of vehicle manufacturers clubbing together to provide a facility, it may be that it will be a collection facility or a number of collection facilities, it may be a Freefone number. We have not at this stage said that that is how it is going to be because obviously the legislation is not set, but I think our undertaking is very much that we will meet our responsibilities. We will have the networks that are appropriate to the number of vehicles arising and the places where they are arising. Clearly we are going to require far more facilities in a metropolitan area than we are in the more rural areas simply because there are far more vehicles pitching up.

 

Q11  Joan Ruddock: Given those uncertainties, are you able to make any calculation about what the additional costs are going to be on disposing of vehicles?

Mr Everitt: I think there are two phases being the period up to 2007 and then after 2007. Our contention throughout this process has been that there is value in an end-of-life vehicle both in terms of materials and in terms of parts. We believe that the market can release more effectively some of that value to ensure that costs are minimised. I have to say at the moment that we have tried to avoid bandying around, "It's going to cost this, that and the other" because there are a whole series of issues that are unknown at the moment. Our contention is very much that post-2007 we believe those costs can be minimised and in some cases there will be no cost, but that depends again on how actively the market operates, how innovative some elements of the marketplace which are not within our control adapt to new circumstances and indeed how the regulations are actually enforced. I think one of the key issues at the moment is that there are a lot of what we might call marginal or informal operators who perhaps do not abide by all of the regulations that currently exist and clearly are unlikely to be able to meet the requirements of the more demanding environmental standards that facilities will need to meet. We believe that if those facilities are able to operate effectively, which means they are not being undercut by people who do not meet the same high standards, we believe that process will mean that we will have some very professional businesses out there who will be able to focus on improving their own productivity and maximising the value from the vehicles that they are able to take in.

 

Q12  Joan Ruddock: You have suggested that perhaps there will not be any additional costs, but were there to be additional costs, is the consumer going to have to pay in the price of a new vehicle?

Mr Everitt: I think the points that Steve made earlier on apply. We would love to be able to think that we could put up the prices of cars to cover these additional costs. Sadly for us, in the real world there is a price for cars that the consumer is prepared to pay. What we have to do is find ways and means of absorbing those costs in the most effective manner and I think we need to look at the whole supply chain. One of the reasons why there is pressure on suppliers in the UK, why people are opting to source from outside of the UK and indeed outside of the European Union is that we need to cut costs to be able to absorb this kind of additional cost.

 

Q13  Paddy Tipping: Let's go to pre-2007 as this is where the problem is going to be. Just take us through how you see the scenario there. Is it fridges piled up all over the place again?

Mr Everitt: Again I think we have been around the abandoned vehicle problem a few times and I have to say that the reason there are currently abandoned vehicles bluntly is because the last holder of that vehicle, firstly, is irresponsible and, secondly, there is not an effective mechanism of tracking, identifying and penalising them. Now, we believe that the steps that both the Government and DVLA and other operators are taking will reduce that problem, but we suspect that there will be some increase in the number of abandoned vehicles almost as a success measure because the more pressure there is to track registrations effectively, the less attractive it is for last holders who have not got their vehicles taxed, insured and licensed to keep hold of them.

 

Q14  Paddy Tipping: We have been given a figure of 340,000 dumped cars each year. You are saying it might go higher, but continuous registration will help. Would you like to put a prediction on how far that 340,000 is going to grow per year up to 2007?

Mr Franklin: I think Alun Michael made a statement in the House last October that it was 238,000. Now, Terry Barnard, the Head of Enforcement at the DVLA, has put a lot of these measures into place and I have asked him the question, "How will you measure the success of these measures?" One of the measures of it looking successful is that there will be a small increase in abandonment as people, who do not want to declare, who are holding on to cars which are attached to some criminality, need to get rid of them because we hope, we feel fairly sure that these measures will take effect quite well. You are going to have to have an electronic certificate of destruction and if you do not have that certificate, you have got continuous taxation of the vehicle, so I think it will narrow down. There will always be abandonment of some form, but it will be at a reduced level. I think it will go up for a short time and then it will come down and it will be fairly constant at a low level.

 

Q15  Mr Mitchell: I think that is a pious hope. Indeed it seems to me that you are going into this on a wing and a prayer in many respects, but let's just take the disposal of current vehicles. It seems in Grimsby that there is a habit of going along to the pub with an old vehicle and flogging it to an asylum-seeker for £30 who then drives around in it untaxed, uninsured, or to anybody else in need of wheels. I am not going to slur asylum-seekers, but there have been a number of cases. People will do anything really to get rid of a vehicle without paying. They will drop it in a ditch, they will flog it to some naive person, they will encourage kids to steal it, joyride in it, dump it and burn it. As soon as a charge comes in, whether it is in your machinery of disposal after 2007 or it is in the chaotic situation we are now in, there is going to be cheating on an enormous scale.

Mr Franklin: You are absolutely right and I am pleased that you agree with me on one thing, that they are used for criminal purposes and there is illegal transfer of ownership, all of which will be tightened up in the future, in 2004. Now, obviously the motor industry is not responsible for enforcing that and as long as these measures are enforced properly, we believe that will go down. Yes, people are abandoning today and one of the things that is always widely said is that the price of scrap, having fallen, is why they are not being collected. Now, I live in Buckinghamshire and the Council for free take back vehicles. In the back of my local paper you can see adverts to take back cars at no cost to a local dismantler. What has happened when people have abandoned cars is that there have been these itinerant traders who pick them up and take them to recycled metal dealers. Now, the Directive and the legislation will not cater for people like that and cars will have to be treated properly so they have got to go to authorised treatment facilities. It is an effect of the Directive that this itinerant person, who has been taking up dumped vehicles for the price of the scrap, will not be able to operate at whatever level the scrap price reaches.

Mr Everitt: I think the key point is that abandoned vehicles are a current problem and have been a problem for a significant period of time. The entering into force of this Directive is not suddenly the key off to making the problem worse ----

 

Q16  Mr Mitchell: But there are charges involved. It is a problem now and because people are going to have to pay to get rid of vehicles, it is going to make the whole situation worse.

Mr Everitt: Certainly I would suggest that where you have responsible motorists, they tax, they insure and they will dispose of their vehicles appropriately. Where you have irresponsible people, they will not tax, not insure and, therefore, not dispose of. I do not think anything is significantly changed. From my experience of having disposed of a vehicle recently, one phone call to my local authority and it cost £25 to get the vehicle picked up and removed. Now, I do not think that is an unreasonable cost for anyone to be faced with. The only reason people do not do that is because they feel that either they do not want to or they know that there is no comeback and that is a direct consequence of the way that the transfer of registration system has operated in the past.

 

Q17  Mr Mitchell: Well, you are speaking, I am sure, as honest, upright people.

Mr Everitt: That is the only way the motor industry can speak.

 

Q18  Mr Mitchell: But a lot of people do not fit that description and are cheapjack about these things and are not prepared to fork out. Actually £25 is a small charge compared to the charges in some parts of the country. I am not saying that people in Grimsby are more disposed to cheating than anybody else; they are a noble, wise, far-sighted set of electors in Grimsby, but I do notice a growing tendency to fiddle around the issue and dispose of cars in all kinds of ways. Now, the essence of that, I would assume, is that the Government needs to be tougher both about the registration procedure and about the disposal. Would you agree with that?

Mr Everitt: Yes, certainly. I think we would make the point again that every time that the DVLA or local authorities have operated clamp-downs on vehicle taxation and licensing issues, they harvest a huge number of vehicles. Either they collect additional monies or they fine people who just hand over the vehicle and walk away. Either way, I think that is the route by which you will stem future problems.

 

Q19  Paddy Tipping: So you want to see further government action on clamp-downs?

Mr Everitt: I think basically it is a resource issue.

Mr Franklin: And it does not just impact on this, but those unregistered cars are going through congestion charge zones, speed cameras, et cetera, totally undetected.

 

Q20  David Drew: I think we subtitled this inquiry, "Not The Fridge Problem Again Inquiry" because some of us went through that and it did not do an awful lot for Michael Meacher when he was the Minister responsible. I want to look at the preparation and planning to make sure that this does not happen again. Just before I get on to that, looking at your evidence, I see that you already recycle 80 per cent by weight and I want you to explain what that actually means. Also in order to get to 85 per cent, let alone to 95 per cent, it seems to be quite a steep step change. From 80 to 85 per cent to most lay people does not sound like an enormous increase and yet you are going to take a good number of years to do that, let alone to get to 95 per cent which of course is still not 100 per cent, so there is the issue of what happens to the other 5 per cent, so can you just fill me in on this a little bit?

Mr Franklin: I will try. The figure you quoted, 80 per cent, will probably be disputed by other people in the room. It never was disputed previously but as we are getting close to the legislation and potentially uneconomic recycling has a cost attached to it then clearly the numbers are more important. The Commission has still yet to decide how the recycling protocols will work, so once that is in the public arena and it has been decided we will at least have a calculation method to work out how we are going to calculate recycling amounts. Yes, are you right, I think going from let us say 78‑80 per cent up to 85 per cent is difficult but we will be in a much more controlled environment and there will be people in there who will be able to leverage certain things. We are not particularly interested in tyres at the moment because tyres are now banned from landfill but there is an opportunity for them to be used for energy in cement kilns, etc. Now that the motor industry has to get involved in that and see these targets moved then they are going to have to start leveraging these products. Equally there has been a lot of work done on plastics, the methodology is proven, the economics are slightly uncertain and what we have to do is trim the economics. I believe we can get to the 85 per cent target by fairly conventional methods, I do believe that the 95 per cent target is going to be extremely difficult. I think the Commission recognises they may have to look at energy recovery and feedstock recycling because I do not think conventional methods are going to get us there. This is the subject on a thematic strategy on waste they have launched and I think it is going to go down that road.

 

Q21  Mr Drew: What is it that you cannot easily recycle, what is in the five to fifteen per cent?

Mr Franklin: It is not so much that you cannot recycle, you can almost recycle anything at a cost. We are looking at recycling economically. We have conflicting interests in the motor manufacturing field, we tried to lighten weight to get fuel consumption reductions so we would get less CO² emissions, that might mean using carbon fibre or glass fibre, these products are less easy to recycle. We have done university work and we do know how to recycle these, they can be done. What we have to do is find markets for them and once we find markets for them it then starts becoming a more economic process. It is not that we cannot recycle anything, we can recycle it, it is the economics that are involved, that is the thing that has to be opened up. Markets have to be found and developed.

 

Q22  Mr Drew: You have already touched on the need for this detailed information on how the Directive can be implemented, according to the evidence you have given you say that you expect that virtually any time now, what do you mean by that? Has it been promised and not delivered or is there no definite date?

Mr Franklin: It should have been delivered back in October last year.

 

Q23  Mr Drew: You were given that clear assurance, were you?

Mr Franklin: There are four drafts from the Technical Adaption Committee on Waste, the people who have discussed this. The DTI and Defra go to this meeting and they will input what they think the suggestions may be but we anticipate this and very much want to see this clearly set down by the end of the year.

 

Q24  Mr Drew: What is the latest the publications of that can be delayed before you really start bringing into question the 2006 target? I know this is all risk analysis, but when does it start to seriously impede your ability to deliver the first of those targets?

Mr Franklin: It would have been highly desirable to have it six months ago. We know we have to get to 85 per cent, it is really the method of calculation and demonstrating how we are going to do it. A suggestion from Germany is that we take a given number of say 70 per cent, we do not try and track that because we will say, "70 per cent metallic fraction is a given now we have to concentrate on the 15 per cent of the other fractions". We discussed this in the Accord meeting last week and we will probably set up the shedder trials to determine the metal content in the United Kingdom, we hope that it will be higher than 70, somewhere round 75 per cent, so then we are looking at a 10 per cent fraction. It is more the calculation rather than the recycling, we know we have to do the recycling, 3 per cent rubber up to 9 per cent plastic would get us there, rubber is probably an easier target than plastic, and there is the fluids. I think we can get there by conventional methods but we would like to see the calculation of how we get there.

 

Q25  Mr Drew: How much of a problem is it that you are dealing with three different bodies, you are dealing with DTI, Defra and the Environment Agency, is there a commonality of purpose from those three organisations? Clearly they are implementing the EU Directive, does this cause you any particular problem or is there a uniformity of voice except that they are not yet quite there in terms of publishing the document?

Mr Everitt: First of all we will have to take a step back and say we have a complex Directive which because of its scope involves not just a number of departments but a number of agencies beyond the Environment Agency, DVLA and others as well as the devolved administrations. It would be misleading to say that has all been smooth and marvellous, clearly there have been difficulties along the way. I would like to think that many of those difficulties are born of the fact that this is one of the first pieces of producer responsibility legislation that has had to be dealt with and therefore there is no proven method that you can go back to and say, "this is the way that we do it" and it is a nice easy flow. Everyone from the industry side and from the various Government agencies and the Commission are having to come to terms with issues and deal with issues they had not anticipated they would have to deal with. That is always going to be a confused and difficult scenario. Clearly timing and ensuring that things are done in a helpful order so that topics can be dealt with consequently, if that is the right phrase, is difficult and there have been hitches all of the way along, some of those are due to the fact that decisions have not been made at Commission level. Everyone is having to move along to meet a timetable, however key bits of information are always missing so you can only go so far, you find out something and you have to go back. It has been a difficult process, I do not think it was from a want and a will, if you like, just the fact that the complexity and the novelness of this type of legislation.

Q26  Paddy Tipping: Tell us about the process, do you all sit round the table and chat about this?

Mr Everitt: No, we do not shout.

 

Q27  Paddy Tipping: I said chat, not shout.

Mr Everitt: Sorry. There have been a number of fora that have been in operation for a number of years, both as a formal part of the consultation process and implementation process but also, as Steve mentioned, the Accord Group which brings together all of the industry players along with the various departments and agencies, and that has been in existence since the early 1990s, so there has been a lot of sharing of information and a lot of close working. I think with those partners and participants there has always been a degree of anxiety about various issues. In the early days before the legislation and before there was a full understanding of all of the implications of the legislation the working relationship was that bit closer, as the legislation has moved forward and the commercial implications have become clear clearly tensions begin to rise between the various industry partners and as a consequence between them and government departments.

 

Q28  Paddy Tipping: You mentioned Germany earlier on, most of these cars are now standard across Europe, there is no difference in the vehicles, are people doing same thing in Germany as in the United Kingdom or in France? Are you all adopting a similar approach or are there differences amongst partners?

Mr Everitt: I think are. One of the lessons, if you like, from environmental legislation is it does give individual Member States the opportunity to implement with a degree of licence and as a consequence we have sought, and I think that the United Kingdom has taken on board, the need to try and ensure that there is a level playing field. If the industry in the United Kingdom is faced with different implementation or more stringent implementation than somewhere else that creates a problem. Similarly we are hopeful that other countries are pushing for them to adopt as similar an approach as possible because clearly it is the same product. That is not always the case. I think going back to some of the delays that have crept into the system, they are because everybody has taken the cautious approach, a number of Member States have pushed forward and implemented and they now find themselves in infringement proceedings from the Commission.

 

Q29  Paddy Tipping: Who?

Mr Everitt: Germany has legislation and as a consequence the Commission has taken exception to a number of items within it and it is now subject to infringement. Members States have taken the view and the United Kingdom has that it is better to do it right, even if that means some delay, and I think from the vehicle manufacturing perspective we supported them in that in that we do not want them to rush into something and find it does not work. All of the discussions have featured very strongly the fridge scenario and in some cases the parallels are not necessarily as close as people would like to believe inasmuch as this is a product that has already been recycled to a very significant degree, there is an infrastructure out there, there is a group of people in vehicle manufactures who have assigned and have been prepared to take up their responsibility, unlike in the fridge scenario, some of the concerns about fridges have built in some of the delay.

 

Q30  Mr Mitchell: You surprise me because the usual tendency in this country when it comes to matters European is to gold‑plate, to demand a more heavy‑handed implementation. If you are saying that has not occurred in this particular instance, I will ask you if are you saying that, it will be one in a row.

Mr Everitt: I would say as we stand at the moment we do not feel this is something that has been gold‑plated. In the very beginning of the implementation process there were concerns about that and in fairness the Secretary of State for Trade and Industry Patricia Hewitt and the Prime Minister gave a very strong indication to the relevant Government departments that the aim was to implement the Directive in an appropriate manner with a light regulatory touch.

Q31  Mr Mitchell: Another try for New Labour! Were you consulted in the process of negotiating the Directive? What part did you play there?

Mr Everitt: I think we would say that some of the difficulties that all Member States have had to deal with are as a consequence of what is a difficult piece of legislation. I have to say that Steve and I have only been dealing with this since the beginning of 2000 so our involvement in the early stages of European discussions were limited, but my impression is there was not a great deal of weight given to industry's views in the Commission's deliberations on what would or would not be appropriate, and that was reflected in the fact that the Directive had to go to conciliation and in one of the rarest examples I can remember the European Parliament was seeking to make it less strict and a lighter regulatory touch and it is not often that the European Parliament takes that particular line. I think we would take the view that many of the problems we faced are because of a lack of engagement and a lack of consultation during the formative stages of this piece of legislation.

 

Q32  Paddy Tipping: That is extremely helpful. Can I thank you both very much. That has got us off to a good start. If there are things when you get out of the door you think you should have told us can you drop us a note.

Mr Everitt: I will do, indeed. Similarly if issues come up during the course of your investigation that you would like clarification on we would be happy to answer.

Paddy Tipping: Thank you very much.

 

Memorandum submitted by British Vehicle Salvage Federation

Examination of Witnesses

Witnesses: MR DICK SMITH, Managing Director, HBC Vehicle Services, MR GEOFFREY BRIDGES, Director, GW Bridges and MR ALAN GREENOUFF, Chairman, British Vehicle Salvage Federation, examined.

 

Q33  Paddy Tipping: Now we turn to the British Vehicle Salvage Federation, Alan Greenouff who is the Chairman, Dick Smith who is the Managing Director of HBC Vehicle Services and Geoffrey Bridges, Director of GW Bridges. You have heard what we are about because you have been in the room so you know what we are shooting at. I already feel as though I am being shot at because I come from North Nottinghamshire and there has been a small firm who contacted me recently saying this Directive which is coming in, we cannot get any clarity about it, we want to invest, we need to change our working practices and we are in a mess. Is that a true perspective?

Mr Greenouff: I think that is fair comment.

 

Q34  Paddy Tipping: Would your other members say that?

Mr Greenouff: I think so, they are very anxiously waiting nuts and bolts, if you like, in terms of guidance and what to do next. We as a trade body in the same way as any other trade body have sent to our membership all of the details that have come out as and when they have been discussed, copies of the legislation, the guide notes which have just come out from Defra, which really do not help them very much, they just tell them things they already know. What they really want to know is, what do we do next? What is really meant by an impermeable surface? When is a vehicle ELV? How much oil do we take out of a vehicle, do we leave a cup full in, a spoon full in? There are all of these details which they really do not understand. Obviously they do now know that they have to act if they want to become permitted to handle ELVs from the beginning of February next year, they have had that detail but really the way forward for them is not clear and it has not been made clear by the Government departments.

 

Q35  Paddy Tipping: Do they need to be registered by February next year?

Mr Greenouff: Yes, the companies who currently have waste management licences, as you probably know, I am sorry if I am repeating something you are already aware of, automatically become permitted to handle ELVs if that is what they are doing at present but exempt companies will have to decide whether they wish to apply by 1 February and do so, otherwise they will not be permitted to handle ELVs in the future or handle and depollute because they have to meet the new requirements.

 

Q36  Paddy Tipping: That is not very far away.

Mr Greenouff: It is a very short time scale bearing in mind this has been going on - we entered the scene in mid 1998 but we have correspondence which started just before then - six years now and we are suddenly told towards the end of 2003 that you must do this by February 2004.

 

Q37  Mr Mitchell: This seems to me to be a method of procedure by a government department which has no idea of how business works. I found talking to friends in Grimsby there has been a problem about what to invest in, what do we get, what is necessary to deal with the situation. Would it be fair to say this is a fairly widespread anxiety and the Government has not provided clear guidance as to what kind of investment is going to be necessary to deal with it.

Mr Greenouff: The straight answer is yes, all companies are the same throughout the country. I have two colleagues with me, on my left Mr Smith is one who has not moved forward because he is not sure what the business is going to be like for the future and has all of the imponderables and the gentlemen on my right Mr Bridges' company has moved forward and invested heavily. He sees a business there for the future, I have two people with me but there are many more out there.

 

Q38  Mr Mitchell: Let me ask Mr Smith.

Mr Smith: I think it is not so much we do not know what to do, we have a pretty good idea what is required, there are a lot of people out there selling a lot of equipment. As a chap who runs a business and is asked to deal with the reality of the problem and the product my problem is that if I present to my Chairman the investment on this side of the balance sheet, that is what we need to do, this is what we need to buy and spend, how much we need to commit I have nothing on the right‑hand side to balance that investment in terms of a return. I have many pressures from the Environment Agency to comply with this and comply with that. There are enormous costs involved in running one of our organisations. Alan said that we have not invested, we have invested huge amounts of time and effort in getting to where we are today, other companies have invested money and some were in that process prior to the ELV legislation being born and were using it as a part of the process to recycle vehicles parts. There has always been a recycle vehicle industry parts industry and in doing so they depolluted vehicles and parts. What we have here is not necessarily the depollution of those that are going to be recycled, it is the depollution of those that are going to be jumped. We are not talking about where we have been, we have predominantly represented the insurance industry and the write‑offs from the industry and there are probably 200,000 vehicles that need to be depolluted from that sector of the business. What we are now looking at is being faced with is two million vehicles, two million playing 200,000 is a completely different ball game. I have had manufacturers say to me, "you make a profit, Dick, you pay for it". I do not find that a particularly acceptable argument as to why I should invest, that I should use our profits if we do make profits, and they are pretty slim at the moment, to invest in a piece of legislation that is not of my making. It does not mean to say that we will not. I do not want to ramble, my problem is that I ramble, but from my point of view the origins of the legislation was that the polluter pays. I am having fingers stuck into me by Government, by the Environment Agency, by Defra by all of the agencies saying "you have to do this". Well as a businessman I do not have to do it, I can put my shutters down and say, "I will go and do something else". It is the bodies that are driving us towards that direction at the moment. I do not have to do it. I can change my business plan and I can say, "no, I am not going to get into that sector if there is no return in it". Going back to the polluter pays, well I am not the polluter, I did not make this thing. We sat and listened to a few words of the manufacturing industry, they made it and I think they should be doing what every self‑respecting dog owner should do in the United Kingdom and that is pick up their own dirt. We heard there was not going to be much cost to it, maybe not by 2007 because our industries will have had the three-card trick played on them and we will be paying all of the capital cost of installing the plant and doing the job and getting it up off the ground. About three years ago the first meeting I attended I gained from that that somebody who had first grasp of the legislation felt that they were just going to write a set of rules about something that was already being done. This is a whole new business, it is a whole new job on vehicles that have never had it applied to them before, which is the two million vehicles. The 200,000 vehicles that the salvage industry represent have been depolluted and dealt with in an environmentally friendly way, there are sectors of our market that do not but we do.

 

Q39  Paddy Tipping: Let us ask Mr Bridges why he has invested.

Mr Bridges: The legislation has been round for some time now and we saw it as a business opportunity. There is no way you can realistically expect if there is 4,000 sites in the United Kingdom handling vehicles now that those 4,000 will be handling them in the future. Whatever volume each site that goes out of business or closes does not do any more we then are hoping by becoming more professional and upping our capacity we can take up the shortfall in those businesses, that is why we have expanded to the level that we have because it is law now and we are ready.

Q40  Paddy Tipping: How many businesses are going to cease operating?

Mr Bridges: I do not want to see anybody go out of business. I would like to be sitting here today representing an industry that is fully compliant but I am not. It is in their own hands, if they all want to comply they will all be in business.

 

Q41  Paddy Tipping: It is in everybody's hands but there is a public policy issue that if too many of them go out of business there is not anybody to do this job.

Mr Bridges: I personally disagree with that. At the moment we process and depollute to the Directive's standard as we see it in our interpretation, 18,000 vehicles a year, and we now have capacity for 125,000 vehicles. If you are saying two million vehicles, I was never that good at math but if you had 20 or 30 of us in the United Kingdom there is no problem.

 

Q42  Paddy Tipping: Okay. Tell us about fly‑tipping? You heard previous evidence that there was not going to be a problem. I just simply do not believe this. I can see from the shake of your heads that you do not believe it. What is going to happen up to 2007 as you see it?

Mr Greenouff: To 2007 we see the situation as worsening, undoubtedly. The last owner is now responsible. The last owner does not want to pay, will not pay, they are men of straw very often, it is no use trying to pursue them, anything to avoid the costs involved in disposing of the vehicle is going to be the name of the game. The additional cost now must come into play because of the work that has to be done on a vehicle, so those minimal figures of say five pounds to get rid of it just do not figure, we are talking of considerably more.

 

Q43  Paddy Tipping: £50 or £60.

Mr Greenouff: Various figures have been ^ bandied round. The easy way is in the dead of night to abandon your vehicle and try and hide its identity

 

Q44  Mr Mitchell: Or report it stolen!

Mr Bridges: The majority of them are not insured so there is no point in reporting them stolen. The trouble is with own those abandoned vehicles we are talking about a majority of people who are not taxed or insured so any form of legislation is not going to have an effect on that part of it. We came up with figures and we would say that figure of 150,000 will probably double.

 

Q45  Mr Mitchell: It will be no use pursuing the last recorded owner?

Mr Smith: The last recorded owner of an end of life vehicle is probably ‑ and I think there are two classes of individual ‑ the 18 year old tearaway that drove it round for 50 miles and then threw it away, he might live in Hull, he may not live in Hull, you were portraying that you do have some there. I live in Essex and there are plenty our there in Basildon. It does not matter where you are in the nation somebody is doing something like that with them. Then there is the other end of the scale, a 57 year old man, that is how old I am, who is pretty scraped for cash and you are talking about these magical words in the legislation that there is a free take back system. Everybody knows that nothing is for free. You were enquiring earlier on about whether the consumer would be disadvantaged, the consumer is disadvantaged in every piece of producer legislation that will ever be invented I think. It goes back to where we should start, two million vehicles come on to the road every year and two million fall off that end of the table. What we should have done is put £100 charge as an environmental tax on that vehicle coming on to pay for that one going off, it would have been very, very simple, passed straight through, we would have put our hands up and invested a lot of money and said thank you very much and made a tenner on each car. Here we have a bureaucratic nightmare from three joined‑up agencies and none of them can make a joined‑up decision.

 

Q46  Mr Mitchell: Or include it in the road tax.

Mr Smith: Any form of Government structure to suck in the money and pump it back into the manufacturers and back to us, or whatever, would have far simpler then where we are going at the present time, and far clearer.

 

Q47  Paddy Tipping: I just want to clear that figure up, you said 340,000 cars per year at present, you think it will double to 680,000 or 700,000.

Mr Greenouff: That is a guesstimate. Let us say 500,000.

Mr Bridges: We deal with abandoned vehicles on a daily basis and if you go back five years to see the volumes we were dealing with then, when no one was charged, we were paying, there was still an abandoned vehicle problem when we were paying people for theirs cars. If you look at the way the situation has worsened, as soon as we start charging people significant amounts of money, getting into £40 or £50, it is going to escalate. I do not see how you can say it is not, it is going to double, if not more.

 

Q48  Mr Drew: Much of the evidence you have given us obviously reinforces what you have sent to us in your written evidence. There is just one thing I was intrigued by in your written evidence where you were talking about the regulations and the explanation regulations ‑ and as we heard with our previous witnesses you are waiting to see what the details have to say ‑ you refer in one sentence to "these have been promised for some time. It is still not clear precisely when an ELV becomes hazardous". Can you explain what the real meaning of that is? Are we talking about some of the materials within the vehicles or all of the materials for some vehicles? How do you anticipate coping with this if there is not clear guidance out fairly soon? This is obviously how we move to fridge mountain II, is it not?

Mr Greenouff: I will start, it is very clear from what we have learned that a vehicle which has not been depolluted, in other words it contains all of its fluids, oils, et cetera, is going to be designated for the future or has already been, I believe, designated as hazardous waste as a whole, the whole vehicle. If you depollute it in accordance with the requirements then it becomes waste. The problem is that we still do not know from when these things are triggered. We do not have a clear understanding as to when a vehicle, as I said earlier, becomes an ELV, when it is precisely that moment in time. Our own view is that it would be when it is taken somewhere and a certificate of destruction is provided to the person who presents it. If it is going to be in the hazardous waste legislation that a vehicle which has been abandoned and has vehicle fuels in it and is presented as hazardous waste then it presents immense problems for my colleagues here in being able to collect, transport and deal with because they have to comply with those hazardous waste regulations.

Mr Bridges: The registering of a certificate of destruction could be one point where it becomes an ELV but for the hazardous waste side of it, the storage of it has to be on impermeable surfaces, you cannot start any work on that vehicle until you have depolluted it. With the council contracts we may well collect a vehicle and store it for anything up to 28 days for the council. That vehicle will clear to us for disposal but may not be moved for another week or so. At the point we raise the CoD does that then mean this vehicle sat there held by a Government body is a nice car but then suddenly becomes the most toxic thing in the world and we have to move it and depollute it. There has to be some sort of sense as to when it is and I personally feel it should be at the point you wish to start dismantling that vehicle, because you are then taking it from its usage. Until you remove something from it it can still be used as a car. The moment you decide that will be either cubed for fragmentation or will be put into a system for parts disposal then it becomes hazardous waste because you are then removing it, you are breaking it down into its existence and then take it from there.

 

Q49  Mr Drew: There is an issue there, I do not know whether this will cause you any fears, when ELV really comes in and starts hitting the degree to which the manufacturers will change the design of their product much more dramatically that you either get the instant recyclable vehicle or you get the vehicle that you will drive for much longer and you make it worth people's while to hang on to that, are you in discussion with the motor trade on that basis or do you just have to pick up the rear end and you just have to hope there is a business there in 20 years' time, maybe a different business, I do not know.

Mr Smith: I think it is the latter really.

Mr Greenouff: We have had to cope with so much we have not focused on discussions with the vehicle manufacturers other than to say we need dismantling information and they are duty bound under the legislation to provide the information so that you can do the reverse process and we have discussed with them the way in which the new regulations are going to be applied, you have heard earlier about the ^ home mark route. We have not got into discussions in that type of detail that you mentioned.

 

Q50  Mr Drew: Do you think that you should get into those discussions? Do you think the Government has a role to encourage that or is this purely down to business itself?

Mr Greenouff: The businesses are there to deal with what is round, that is what these gentlemen do, they handled vehicles that are presented to them in the way in which the legislation requires.

 

Q51  Mr Mitchell: I am just interested in the confusion or if it is confusion the relationship between government departments, it seems to me unless you have one head department dealing with everything you are going to get difficulties and friction and conflict, what differences do you see in your approach to the issue between the departments and agencies that are involved in delivering this Directive?

Mr Greenouff: I must say that the DTI have been the most helpful and have taken a lead in the past and have done all within their power to keep us fully informed. We have had very good discussions with them. That also follows with Defra. Having sat round the table with Defra and the Environment Agency and seen the disagreements between themselves on certain aspects of what should be produced in terms of guide notes, what decisions should be taken there is undoubtedly confusion within Government departments and then this slows up the whole process and has slowed up the whole process of legislation, added to which, if I may throw this in for good measure, the DTI and others are very anxious that there should be many authorised treatment facility companies for the future. Here we have on the other hand the Department for Transport, if I can put them into the frame, introducing legislation, anti‑crime, which is very commendable but which has had a serious effect on the businesses of the salvage companies.

 

Q52  Mr Mitchell: In what way?

Mr Greenouff: Are you familiar with the salvage code? Salvage is categorised into four categories, A, B, C and D: A is scrap; B is spare parts scrap; C is seriously damaged but repairable and then you have D, which is those which are stolen, recovered, less damaged, and so on. That was put in to operation through the insurance industry some years ago and we fully support it and all of our members comply with it. The effect of the scheme introduced by the Department of Transport in recent times, April last year, has been to reduce the sales of category C, which is a very important income stream, our estimate is 33 per cent currently. This is having an effect to the extent that many companies are saying, "we are sitting on some very expensive land and property why do we not just sell it for development and move out of the business". We come back to your first question about the effect of the Directive and investment. Companies are not going to move forward when they see these things happening to their business. What does the future hold? We have four agencies and departments in the frame creating confusion and it is hardly joined‑up government, if I may say so.

Mr Greenouff: There is another area that is allied to that, the key to doing this job is going to be to have sufficient operators by numbers to do the job so that they are not too far apart. Because it is a nationwide problem commonsense might say they should be ten or fifteen miles apart to move the uninsured, immobile objects miraculously with this free take back scheme. I am probably running the second largest salvage operation in the United Kingdom, if you follow through the logic of the way the legislation is laid at the present time, the statement is there are two categories of operator, there is the fully licensed operator, that is me. I have environmental licences on all of the sites that I have nationwide and I fought hard and struggled with great difficulty to get those licences. I have those licences courtesy of an even greater battle, that was planning permission. When a salvage yards applies for planning permission all of the banners of all the people in all of the areas go up because they do really think you are only one leg up from a pikey. Through the Salvage Federation we have taken the salvage industry a long way away from that actual image but it is still the perception of anybody who lives near a salvage yard. We go to great lengths to hide them but I look at everybody who drives as a potential customer anyway. From the point of view of having obtained my planning permission, and it is the first prerogative of obtaining a waste management licence, do not forget to include your planning permission. If you have grandfather rights, if you have a permitted use certificate it is no good, you have to have planning permission. We sit here with two categories, they say licenced sites so I can fairly get this light touch job going through the system because I am licensed I can apply to BNATF and that is probably where I will go. I have to get my application in by February and I might get an easy ride. The guy who is exempt must have a full waste licence to apply to become an ATF. By making that link you are saying to him by February next year he will have to have full planning permission for his currently exempt site so that he can then make the application before February for the waste management licence. That is totally and utterly impractical and impossible. It took me 18 months and a trip to the House of Lords to get planning permission for my site.

 

Q53  Mr Mitchell: For a judicial decision?

Mr Smith: A judicial decision to get the planning permission for my site in Essex. That took 18 months, £1.5 of public money and £100,000 of our money. If anyone thinks an exempt site is going to get planning permission to enable him to apply for his waste management by February they best show me how they can do it.

 

Q54  Mr Mitchell: Has this been put to government departments?

Mr Smith: It is the lack of joined‑up government. What we have is one set of rules being made here, one set being made there and not dove‑tailing them together. As far as I am concerned we can sit here until the cows come home arguing where we are and who is going to pay and whether we can make money or cannot make money but there are not going to be sufficient people in businesses in this nation licensed and able to do it. All we ever hear is we do not have resources for this, we do not have the resources in the police, the fire brigade, the ambulance service, we do not have the resources in the EA to police it. I do maintain there is a third body, you have the licensed, you have the exempt and you have the big dog brigade in our industry.

 

Q55  Mr Mitchell: Who are they?

Mr Smith: They are the people who the Environment Agency do not get through the gate of. We are crying for a level playing field, as soon as you become licensed or you become exempt you are on the Environment Agency's database ‑ I am probably building myself up for some aggravation here ‑ and you are plagued something rotten for trying to do the job properly. If you buy a big dog, and even more so after February if you buy two big dogs you will never have a problem and you will still deal with the vehicles. The vehicle manufacturers will not want to deal with them but some way or other it will filter through, because it always will. My current philosophy is I am looking for the number of Battersea Dogs Home.

 

Q56  Paddy Tipping: My experience was that people bought big dogs to keep politicians out. Let me wind this up by asking three sharp points, first of all you, Mr Greenouff, were quite critical, you praised the DTI but said that you got the EA and Defra in the same room giving conflicting advice, why is that? Do they not have the skills? Do they not know the field? What is the problem?

Mr Greenouff: I think to be fair they have had all of the skills put in front of them, they have sought the views of industry and industry have sat round the table and provided those views, and detailed views. I am no expert, that is why I have these two gentlemen on my left and right, I do not know the business that well but the nuts and bolt have been explained to them yet we have had no detailed decisions or detailed information provided as to what standards they require. The Environment Agency are then going to enforce these requirements over the coming months and they have to issue instructions to their agencies throughout the country and unless we know what these requirements are and those instructions are almost down to precise detail ‑‑‑

 

Q57  Paddy Tipping: What is the problem with Defra and the Environment Agency?

Mr Greenouff: I think there is just general disagreement and I cannot tell you the answer to that other than harsh looks across the table and "sorry, we do not have the answers at the moment, we are still discussing behind the scenes".

 

Q58  Paddy Tipping: When did your organisation first get involved in discussions on the End of Life Vehicle Directive?

Mr Greenouff: We were established in 1998.

 

Q59  Paddy Tipping: You have been talking about this for five years?

Mr Greenouff: As soon as we established the Federation we started to discuss this Directive. May I also add we are very much in support of the legislation, we feel that it is long overdue but unless we have the proper instructions and way it should be operated it is proving very troublesome.

 

Q60  Paddy Tipping: You have been discussions for five years, it is implemented in February, three months away and some of your members are saying, "are we going to go with this or not, what do we do?"

Mr Greenouff: Yes.

 

Q61  Paddy Tipping: That is a good note to leave it on. Can you reflect on what you have told us this afternoon and if there are things that you would like to can you please write to us. Thank you very much for coming.